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During the past six decades, Congress on four occasions has approved legislation designed to regulate lobbyist contact with Members of Congress. The initial provisions, which were contained in the Legislative Reorganization Act of 1946, required that lobbyists register with the House of Representatives and the Senate and dis close certain receipts and expenditures. In 1995, Congress passed, and the President signed into law, the Lobbying Disclosure Act, which repealed the 1946 act and created a detailed system of reporting thresholds. In 1998, technical amendments to the 1995 law were passed. Finally, in 2007, Congress amended the 1995 act to further enhance disclosure and reporting requirements for lobbyists and lobbying firms. The Lobbying Disclosure Act (LDA) of 1995 provided specific thresholds and definitions of lobbyists, lobbying activities, and lobbying contacts, compared to the 1946 act. In reporting the LDA, the House Judiciary Committee summarized the need for new lobbying provisions: The Act is designed to strengthen public confidence in government by replacing the existing patchwork of lobbying disclosure laws with a single, uniform statute which covers the activities of all professional lobbyists. The Act streamlines disclosure requirements to ensure that meaningful information is provided and requires all professional lobbyists to register and file regular, semiannual reports identifying their clients, the issues on which they lobby, and the amount of their compensation. It also creates a more effective and equitable system for administering and enforcing the disclosure requirements. The technical amendments made to the LDA in 1998 clarified the definition of covered executive branch officials, more clearly defined what constitutes a lobbying contact, and provided that organizations, whose lobbying activities are limited by their Internal Revenue Code (IRC) non-profit status, could use their tax estimates to report lobbying activities. In reporting the 1998 technical amendments, the Senate Committee on Governmental Affairs explained the need for change: Once the LDA was implemented by the Clerk of the House and the Secretary of the Senate, several minor problems with the language of the statute materialized. The offices of the Clerk and the Secretary have sought to interpret the LDA with respect to these problems in accordance with the original intent of the law, but it is necessary and appropriate to conform the language of the law to intent, and that is the motivation behind the introduction of S. 758 . The most recent amendments to the LDA, the Honest Leadership and Open Government Act of 2007 (HLOGA), mandated additional and more frequent disclosures. Pursuant to the 1946 act, the 1995 LDA, as amended by the 1998 act, and the HLOGA, the Clerk of the House and the Secretary of the Senate have had joint responsibility for implementing systems to register lobbyists. Under the 1946 act, individuals, groups, and organizations involved in lobbying activities were required to keep detailed financial records and to file financial statements with the Clerk. Lobbyists also were required to register before engaging in lobbying activities and file quarterly reports with the Clerk and the Secretary. The Clerk was then required to maintain these records for two years. The 1995 act, as amended, modified the responsibilities of the Clerk and the Secretary in registering lobbyists and collecting disclosure documents. In addition to collecting registration and disclosure documents from lobbyists the Clerk and the Secretary are required to 1. provide guidance and assistance on the registration and reporting requirements of this Act and develop common standards, rules, and procedures for compliance with this Act; 2. review, and, where necessary, verify and inquire to ensure the accuracy, completeness, and timeliness of registration and reports; 3. develop filing, coding, and cross-indexing systems to carry out the purpose of this Act, including— a. a publicly available list of all registered lobbyists, lobbying firms, and their clients; and b. computerized systems designed to minimize the burden of filing and maximize public access to materials filed under this Act; 4. make available for public inspection and copying at reasonable times the registrations and reports filed under this Act; 5. retain registrations for a period of at least 6 years after they are terminated and reports for a period of at least 6 years after they are filed; 6. compile and summarize, with respect to each semi-annual period, the information contained in registrations and reports filed with respect to such period in a clear and complete manner; 7. notify any lobbyist or lobbying firm in writing that may be in noncompliance with this Act; and 8. notify the United States Attorney for the District of Columbia that a lobbyist or lobbying firm may be in noncompliance with this Act, if the registrant has been notified in writing and has failed to provide an appropriate response within 60 days after notice was given under paragraph (7). The 2007 HLOGA further refined the role of the Clerk and the Secretary in collecting and reporting information on lobbyists under the LDA. The Clerk and the Secretary are required to electronically register lobbyists and collect quarterly and semi-annual reports; make registrations and filings available on the Internet; and review each registration and filing for accuracy, notify lobbyists of a misfiling, and refer appropriate cases to the U.S. attorney's office for the District of Columbia. Pursuant to these responsibilities, the Clerk and the Secretary have chosen to use a single electronic filing system, whereby lobbyists and lobbying firms register once and documents are automatically transmitted to both the Clerk and the Secretary. The Clerk of the House and the Secretary of the Senate are responsible for implementing lobbyist registration and disclosure provisions of the LDA, as amended by the HLOGA, for the House of Representatives and the Senate, respectively. As neither the Clerk nor the Secretary have rule-writing or regulatory authority under the LDA or its amendments, but are directed in law to provide guidance and assistance, they issue a joint guidance document to inform lobbyists and the public of how they intend to carry out their registration and disclosure duties. Under the HLOGA amendments, the first quarterly reports were required by April 21, 2008, and new registrations continued to be required no later than 45 days after the first lobbying contact is made or an individual is employed to make a lobbying contact. All lobbyists and lobbying firms filing registration and disclosure statements are required to file with the Clerk and the Secretary through a joint portal maintained at http://lobbyingdisclosure.house.gov , or http://www.senate.gov/lobby . Prior to the HLOGA amendments, the LDA did not require electronic submission of registration and reporting documents. Under the 1995 act, as amended, the Secretary of the Senate provided lobbyists and lobbying firms the means to file electronically or to use paper forms. The Clerk of the House did not provide a method of electronic filing. The HLOGA amended Section 5 of the LDA to make electronic filing mandatory, except when an individual is amending documents filed under the previous system, or in instances where electronic filing is not possible for an individual with a condition covered by the Americans with Disabilities Act. Pursuant to Section 5, as amended, the Clerk and Secretary created a single electronic registration system, using the previous Senate system's user ID and password protocols, and have developed a website that provides the necessary software applications to make all filings. The website has features for use on Microsoft Windows and Macintosh operating systems. Detailed instructions on the registration and disclosure process and a summary of filing requirements are available on both the House and Senate lobbying disclosure websites. The Clerk and the Secretary are responsible for maintaining the electronic filing system website and for providing updated information in response to lobbyist questions and congressional amendments. 2 U.S.C. §1605(a)(7) and (8), as amended by HLOGA Section 210, requires the Clerk and the Secretary to notify lobbyists of noncompliance and to notify the U.S. attorney for the District of Columbia of a lobbyist's or lobbying firm's noncompliance, after giving 60 days' notice. The Clerk of the House's Legislative Resource Center and the Secretary of the Senate's Office of Public Records have been given responsibility for reviewing each filing to ensure accuracy and for issuing notices to those who have not complied. If a notice is issued to a registrant, the registrant has 60 days to respond, after which the Clerk and the Secretary may forward instances of noncompliance to the U.S. attorney's office for the District of Columbia. 2 U.S.C. §1605(a) (3), (4), and (5), as amended by HLOGA Section 209, instructs the Clerk and the Secretary to make registration and disclosure information publicly available for at least six years. (3) develop filing, coding, and cross-indexing systems to carry out the purpose of this Act, including—(A) a publicly available list of all registered lobbyists, lobbying firms, and their clients; and (B) computerized systems designed to minimize the burden of filing and maximize public access to materials filed under this Act; (4) make available for public inspection and copying at reasonable times the registrations and reports filed under this Act; (5) retain registrations for a period of at least 6 years after they are terminated and reports for a period of at least 6 years after they are filed. To satisfy the requirements of Section 6 of the LDA, as amended by the HLOGA, the Clerk and the Secretary established websites for the public to inspect registration and disclosure documents on the Internet. The Lobbying Disclosure Act Guidance (in Section 10) states that the Clerk and the Secretary will use the Internet to deliver the content of the reports. The HLOGA lobbying provisions were effective as of January 1, 2008. As required by Section 6 of the LDA, the Clerk and the Secretary on December 10, 2007, issued a joint guidance document. The guidance document is updated, as needed, to reflect changes in guidance from the Clerk and the Secretary. Table 1 lists when the guidance document has been updated since it was first issued. The guidance document was most recently updated on January 31, 2017. The guidance document is posted on both the Clerk's and Secretary's lobbying websites. The guidance document is divided into 12 sections. The LDA does not provide the Clerk and the Secretary with the authority to write regulations or issue opinions on the law. The guidance document is only meant as an interpretation of the law, and is not enforceable as law. A brief summary of the 12 sections of the guidance document follows: Section 1—Introduction . Provides background information on the LDA and the responsibilities of the Clerk of the House and the Secretary of the Senate in providing guidance to the lobbying community. Section 2— What's New? Identifies changes made to the guidance since the last update. Section 3—Definitions . Repeats terms defined in the LDA. These terms include affiliated organizations, reports of certain contributions, client, covered executive and legislative branch officials, lobbying activities, lobbying contact, lobbying firm, lobbying registration, lobbying report, lobbying, and public official, among others. Section 3 also adds the definition of "actively participates" from Section 207 of HLOGA. Section 4—Lobbying Registration . Explains the lobbying registration process, including who must register and when registrations are necessary. This section also clarifies the preparations for filing registrations, exceptions to lobbying contacts, the 20% activity threshold, the difference between a lobbying contact and lobbying activity, alternative reporting methods, and the relationship between the 20% activity and monetary thresholds. The monetary thresholds are updated periodically to reflect changes in the Consumer Price Index (CPI). For each area, the guidance document provides examples to illustrate the operation of the section for the lobbying community. In addition, this section provides guidance on when and how to report foreign entity contributions to lobbying activity. Section 5—Special Registration Circumstances . Outlines conditions that could affect the registration of lobbyists or lobbying firms under the LDA. These special circumstances include lobbying firms retained by contingent fees; registration by entities with subsidiaries or state and local affiliates; the effect of mergers and acquisitions; registration for associations, coalitions, churches, and associations of churches; registration for firms hired by churches or church associations; and the registration of professional associations of elected officials. Section 6—Quarterly Reporting of Lobbying Activities . Explains when and why quarterly reports are needed, and provides instructions on how to complete lobbying disclosure forms LD-1 and LD-2. In addition, Section 6 defines how to report firm income, indicates when it is appropriate to report income or expenses, provides examples on the type of material that should be included in a quarterly report, indicates that organizations that pay dues to other organizations must report the portion of their dues used for lobbying activities, removes previous guidance that registrants who previously filed LD-2 forms could be required to file again in the future, even if they did not meet reporting thresholds in a given quarter, reminds filers that "all expenses of lobbing activities incurred during a quarterly period are reportable," provides for a specific reporting code for lobbying on tariff bills, reminds filers that all new lobbyists must list "previous covered executive or legislative branch positions held within twenty (20) years of first acting as a lobbyist for a client," and reiterates that the "requirement to disclose a foreign interest ... is not contingent upon the entity making a contribution ... to the registrant during that particular reporting period." Section 7—Semiannual Reporting of Certain Contributions . Discusses when and why semiannual reports are needed, the basics of form LD-203; who is required to file LD-203; the required contents of the semiannual report (regardless of whether they make a reportable contribution), including examples; that third-party preparers should "retain appropriate documentation to demonstrate that they have authorization to make such filing on behalf of all filers (including lobbyist-employees of registrants) using their services, and that in-kind contributions should be reported. Section 8—Termination . Explains the procedure for the termination, for recording purposes, of a lobbyist from a lobbying firm or of a registrant's relationship with a client, including when removing a registrant is appropriate. Section 9—Relationship of LDA to Other Statutes . Briefly explains the relationship between LDA and three other statutes. These statutes are the Foreign Agents Registration Act (FARA), the Internal Revenue Code (IRC), and the False Statements Accountability Act of 1996. Section 10—Public Availability . States that the LDA requires the Clerk of the House and the Secretary of the Senate "to make all registrations and reports available for public inspection over the Internet as soon as technically practicable after the report is filed." Section 11—Review and Compliance . States that the Clerk of the House's Legislative Resource Center and the Secretary of the Senate's Office of Public Records "must review, verify, and request corrections in writing to ensure the accuracy, completeness, and timeliness of registrations and reports filed under the Act." Section 12—Penalties . Restates the civil and criminal penalties for filing incorrect or false information. Pursuant to 2 U.S.C. §1604(e), the Clerk and the Secretary created a contributions reporting system and website that allows lobbying organizations and individual lobbyists to register electronically using their existing ID and password. The website contains a help feature to assist lobbying organizations and lobbyists navigate the new form. | On September 14, 2007, President George W. Bush signed S. 1, the Honest Leadership and Open Government Act of 2007 (P.L. 110-81), into law. The Honest Leadership and Open Government Act (HLOGA) amended the Lobbying Disclosure Act (LDA) of 1995 (P.L. 104-65, as amended) to provide, among other changes to federal law and House and Senate rules, additional and more frequent disclosures of lobbying contacts and activities. This report explains the role of the Clerk of the House of Representatives and the Secretary of the Senate in implementing lobbying registration and disclosure requirements and summarizes the guidance documents they have jointly issued. Under the HLOGA and predecessor lobbying laws, the Clerk of the House and the Secretary of the Senate manage the registration, filing, and the collection of documents submitted by the lobbyists and lobbying firms. Prior to the HLOGA, lobbyists were required to file paper documents with both the Clerk and the Secretary. These forms are now filed electronically and jointly with the Clerk and the Secretary. In addition, the Clerk and the Secretary are responsible for making documents publicly available and reporting incorrect or false filings to the U.S. Attorney for the District of Columbia. Beginning in December 2007, the Clerk of the House and the Secretary of the Senate issued joint guidance documents for HLOGA implementation. The guidance document identified eight substantive changes to the 1995 Lobbying Disclosure Act, and discussed how the Clerk and Secretary interpret and implement the HLOGA's provisions. In addition, the guidance document provided direction on successful completion of quarterly registration and disclosure documents, the new semi-annual reporting requirement, and interpretation of the Clerk and Secretary's role in referring non-compliance to the U.S. attorney. Since issuing an initial guidance document in 2007, the Clerk of the House and Secretary of the Senate, pursuant to 2 U.S.C. §1605, have conducted periodic reviews of existing guidance and have issued multiple updates. Most recently, the document was updated on January 31, 2017, to update registration thresholds pursuant to changes in the Consumer Price Index; provide additional clarifications on identifying clients and covered officials; provide additional examples for filing by outside lobbyists; clarify that all income and expenditure reporting should be rounded to the nearest $10,000; clarify that all "sole proprietors" are required to file two LD-203 disclosure forms—one for the registrant [firm] and one for the individual lobbyist; and encourage filers to use the online public database for compliance purposes. For further analysis on the Honest Leadership and Open Government Act and the Lobbying Disclosure Act, see CRS Report R40245, Lobbying Registration and Disclosure: Before and After the Enactment of the Honest Leadership and Open Government Act of 2007, by [author name scrubbed]; and CRS Report R44292, The Lobbying Disclosure Act at 20: Analysis and Issues for Congress, by [author name scrubbed]. |
The Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended, 42U.S.C. § 5121 et seq. , is designed to provide a means by which the federal government maysupplement state and local resources in major disasters or emergencies where those state and localresources have been or will be overwhelmed. The Act provides separate but similar mechanisms fordeclaration of a major disaster and for declaration of an emergency. Except to the extent that anemergency involves primarily federal interests, both declarations of major disaster and declarationsof emergency must be triggered by a request to the President from the Governor of the affected state. The pertinent provisions with respect to such declarations are set forth in Section 401 of the StaffordAct, 42 U.S.C. § 5170, with respect to major disasters declarations and in Section 501 of the StaffordAct, 42 U.S.C. § 5191, with respect to emergency declarations: § 5170. Procedure fordeclaration All requests for a declaration by the President that amajor disaster exists shall be made by the Governor of the affected State. Such a request shall bebased on a finding that the disaster is of such severity and magnitude that effective response isbeyond the capabilities of the State and the affected local governments and that Federal assistanceis necessary. As part of such request, and as a prerequisite to major disaster assistance under thischapter, the Governor shall take appropriate response action under State law and direct executionof the State's emergency plan. The Governor shall furnish information on the nature and amount ofState and local resources which have been or will be committed to alleviating the results of thedisaster, and shall certify that, for the current disaster, State and local government obligations andexpenditures (of which State commitments must be a significant proportion) will comply with allapplicable cost-sharing requirements of this chapter. Based on the request of a Governor under thissection, the President may declare under this chapter that a major disaster or emergency exists. (1) § 5191. Procedure fordeclaration (a) Request anddeclaration All requests for a declaration by the President that anemergency exists shall be made by the Governor of the affected State. Such a request shall be basedon a finding that the situation is of such severity and magnitude that effective response is beyond thecapabilities 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, theGovernor shall take appropriate action under State law and direct execution of the State's emergencyplan. The Governor shall furnish information describing the State and local efforts and resourceswhich have been or will be used to alleviate the emergency, and will define the type and extent ofFederal aid required. Based upon such Governor's request, the President may declare that anemergency exists. (b) Certain emergencies involving Federal primaryresponsibility The President mayexercise any authority vested in him by section 5192 of this title or section 5193 of this title withrespect to an emergency when he determines that an emergency exists for which the primaryresponsibility for response rests with the United States because the emergency involves a subject areafor which, under the Constitution or laws of the United States, the United States exercises exclusiveor 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'sdetermination may be made without regard to subsection (a) of this section. (2) When an incident occurs or is imminent which the state official responsible for disasteroperations determines may exceed state and local response capabilities, the state will request theFEMA Regional Director to perform a joint FEMA-state preliminary damage assessment (PDA). This provides a means to determine the impact and magnitude of damage and resulting unmet needsof individuals, businesses, the public sector, and the affected community as a whole. Informationcollected in this way is used by the state as a basis for the Governor's request for a presidentialproclamation and by FEMA to document its recommendation to the President in response to theGovernor's request. The requirement for a joint PDA may be waived for those incidents of unusualseverity and magnitude that do not require field damage assessments to determine that supplementalfederal assistance will be needed, or in other situations determined by the Regional Director inconsultation with the State. An assessment may still be needed to determine unmet needs formanagerial response purposes. (3) Once a request from the Governor of an affected state is received by the FEMA RegionalDirector whose region covers that state, the Regional Director provides a written acknowledgmentof receipt of the request. Based on the joint PDA(s) and consultation with appropriate state andfederal officials and other interested parties, the Regional Director then promptly prepares asummary of the PDA findings. An analysis of this information, including an examination of stateand local resources and capabilities and other assistance available to meet the needs associated withthe emergency or major disaster, is submitted with a recommendation to the Director of the RecoveryDivision of FEMA. (4) Based on available information, the Director of FEMA makes a recommendation on the Governor'srequest to the President. A major disaster recommendation is based upon a finding that the situationis or is not of such severity and magnitude as to be beyond the capabilities of the state and localgovernments. It also contains a determination of whether or not supplemental federal Stafford Actassistance is necessary and appropriate. (5) An emergency recommendation is based on a report indicatingwhether or not federal emergency assistance is necessary to supplement state and local efforts to savelives, protect property and public health and safety, or to lessen or avert the threat of a catastrophe. FEMA will only recommend an emergency declaration if it has been determined that all otherresources and authorities to meet the crisis are inadequate and that Stafford Act emergency assistancewould be appropriate. A modified federal emergency recommendation would be made based on areport as to whether an emergency does or does not exist for which Stafford Act emergencyassistance would be appropriate. Such a recommendation would not be forthcoming in situationswhere the authority to respond or coordinate is within the jurisdiction of one or more federalagencies without a Presidential declaration. A modified federal emergency recommendation byFEMA for an emergency declaration by the President would not be foreclosed by other federalagency involvement if there are significant unmet needs of sufficient severity and magnitude, notaddressed by other assistance, which could appropriately be addressed under the Stafford Act. (6) The President may respond to a Governor's request for a declaration of a major disaster bya declaration of an emergency, a declaration of a major disaster, or a denial of the request. Inresponse to a Governor's request for a declaration of emergency, the President's options are limitedto declaration of an emergency or denial of the request. (7) A denial of a declaration request may be appealed within 30 daysof the date of the denial letter, submitted with additional information to the President through theRegional Director. (8) Anextension of the time limit may be sought within the 30 day time frame from the Director of theRecovery Division upon written request citing the reasons for the delay. (9) Once the decision is made, the FEMA Director or his or her designee must promptly notifythe Governor. If the President has declared a major disaster or an emergency, FEMA must alsonotify other federal agencies and interested parties. Following either type of declaration, theRegional Director or Director of the Recovery Division (10) is to promptly notify the Governor of the designations ofassistance and of the areas eligible for such assistance. (11) The determinations of the types of assistance to be madeavailable and the areas eligible to receive such assistance are made by the Director of the RecoveryDivision of FEMA. (12) A denial of the types of assistance or areas eligible to receive assistance may be made in writingwithin 30 days of the date of the denial letter, accompanied with justification and/or additionalinformation to the Director, Recovery Division, through the Regional Director. (13) The Director of theRecovery Division may extend the time for filing the appeal upon written request received duringthe 30 day time frame citing reasons for the delay. (14) Once a declaration of an emergency or a major disaster is made by the President, the Directorof FEMA, or, in his absence the Deputy Director or the Director, Recovery Division, must appointa Federal Coordinating Officer (FCO) who shall immediately initiate action to assure that federalassistance is provided in accordance with the declaration, applicable laws and regulations, and theFEMA-state agreement entered into pursuant to 44 C.F.R. §206.44. The FEMA Regional Directorwill designate a Disaster Recovery Manager to exercise all of the Regional Director's authority ina major disaster or emergency. Once a declaration is made, the Governor is to designate a StateCoordinating Officer to coordinate state and local assistance efforts with federal efforts. TheGovernor's Authorized Representative designated by the Governor in the FEMA-state agreement isto administer federal disaster assistance programs on behalf of the state and local governments andother grant or loan recipients and is also responsible for state compliance with the FEMA-stateagreement. (15) TheFCO's responsibilities following a declaration of a major disaster or emergency are to: (a) . . . (1) Make an initial appraisal of the types ofassistance most urgently needed; (2) Incoordinationwith the SCO,establish fieldoffices andDisasterApplicationCenters asnecessary tocoordinate andmonitorassistanceprograms,disseminateinformation,acceptapplications,and counselindividuals,families andbusinessesconcerningavailableassistance; (3) Coordinatetheadministrationof relief,includingactivities ofState and localgovernments,activities ofFederalagencies, andthose of theAmerican RedCross, theSalvationArmy, theMennoniteDisasterService, andother voluntaryrelieforganizationswhich agree tooperate underthe FCO'sadvice anddirection; (4) Undertakeappropriateaction to makecertain that allof the Federalagencies arecarrying outtheirappropriatedisasterassistance rolesunder theirown legislativeauthorities andoperationalpolicies; and (5) Take otheraction,consistent withthe provisionsof the StaffordAct, asnecessary toassist citizensand publicofficials inpromptlyobtainingassistance towhich they areentitled. (b) The SCOcoordinates State and local disaster assistance efforts with those of the Federal Government workingclosely with the FCO. The SCO is the principal point of contact regarding coordination of State andlocal disaster relief activities, and implementation of the State emergency plan. The functions,responsibilities, and authorities of the SCO are set forth in the State emergency plan. It is theresponsibility of the SCO to ensure that all affected local jurisdictions are informed of thedeclaration, the types of assistance authorized, and the areas eligible to receive such assistance. The FCO may activate emergency support teams of federal program and support personnel to bedeployed to the affected areas to assist the FCO in carrying out his or her Stafford Actresponsibilities. (16) If the Governor so requests, the Director of the Recovery Division of FEMA (17) may lend or advance to thestate, either for its own use or for the use of public or private nonprofit applicants for disasterassistance under the Stafford Act, the portion of assistance for which the state or other eligibledisaster assistance applicant is responsible under the cost-sharing provisions (18) in any case in which: (1) The State or other eligible disaster assistanceapplicant is unable to assume their financial responsibility under such cost sharing provisions: (i) As a resultof concurrent,multiple majordisasters in ajurisdiction, or (ii) Afterincurringextraordinarycosts as aresult of aparticulardisaster; (2) The damagescaused by such disasters or disaster are so overwhelming and severe that it is not possible for theState or other eligible disaster assistance applicant to immediately assume their financialresponsibility under the Act; and (3) The State and theother eligible disaster applicants are not delinquent in payment of any debts to FEMA incurred asa result of Presidentially declared major disasters or emergencies. Such loans must be repaid to the United States with interest, and the Governor must include arepayment schedule as part of the request for the advance. (19) Denial of a Governor'srequest for an advance of a non-federal share may be appealed in writing within 30 days of the dateof the denial letter accompanied by justification and/or additional information sent to the Directorof the Recovery Division through the Regional Director. (20) The Director of the Recovery Division may extend the time forfiling upon written request filed with reasons for the delay within the original 30 day timeperiod. (21) Eligibility for disaster assistance begins on the date of the occurrence of the event whichresults in a declaration a major disaster exists, except that reasonable expenses incurred inanticipation of and immediately preceding the event may also be eligible for federal assistance. (22) A major disasterdeclaration by the President opens the door to two types of federal disaster assistance: general federalassistance under Section 402(a) of the Stafford Act, 42 U.S.C. § 5170a, and essential federalassistance under Section 403 of the Stafford Act, 42 U.S.C. § 5170b. These provide: § 5170a. General Federal assistance In any major disaster, the President may -- (1) direct any Federalagency, with or without reimbursement, to utilize its authorities and the resources granted to it underFederal law (including personnel, equipment, supplies, facilities, and managerial, technical, andadvisory services) in support of State and local assistance efforts; (2) coordinate alldisaster relief assistance (including voluntary assistance) provided by Federal agencies, privateorganizations, and State and local governments; (3) provide technicaland advisory assistance to affected State and local governments for -- (A) theperformance ofessentialcommunityservices; (B) issuance ofwarnings ofrisks andhazards; (C) public health and safety information,including dissemination of such information; (D) provisionof health andsafetymeasures; and (E)management,control, andreduction ofimmediatethreats topublic healthand safety; and (4) assist State andlocal governments in the distribution of medicine, food, and other consumable supplies, andemergency assistance. § 5170b. Essentialassistance (a) In general Federal agencies mayon the direction of the President, provide assistance essential to meeting immediate threats to life andproperty resulting from a major disaster, as follows: (1) Federalresources,generally Utilizing, lending, or donating to State andlocal governments Federal equipment,supplies, facilities, personnel, and otherresources, other than the extension of credit,for use or distribution by such governments inaccordance with the purposes of this chapter. (2) Medicine,food, and otherconsumables Distributing orrenderingthrough Stateand localgovernments,the AmericanNational RedCross, theSalvationArmy, theMennoniteDisasterService, andother relief anddisasterassistanceorganizationsmedicine,food, and otherconsumablesupplies, andother servicesand assistanceto disastervictims. (3) Work andservices tosave lives andprotectproperty Performing onpublic orprivate lands orwaters anywork orservicesessential tosaving livesand protectingand preservingproperty orpublic healthand safety,including -- (A)debrisremoval; (B)searchandrescue,emergencymedical care,emergencymasscare,emergencyshelter,andprovision offood,water,medicine, andotheressentialneeds,includingmovement ofsupplies orpersons; (C)clearance ofroadsandconstruction oftemporarybridgesnecessary totheperformanceofemergencytasksandessentialcommunityservices; (D)provision oftemporaryfacilities forschoolsandotheressentialcommunityservices; (E)demolition ofunsafestructureswhichendanger thepublic; (F)warning offurtherrisksandhazards; (G)disseminationofpublicinformationandassistanceregardinghealthandsafetymeasures; (H)provision oftechnicaladviceto Stateandlocalgovernmentsondisastermanagementandcontrol;and (I)reduction ofimmediatethreatsto life,property, andpublichealthandsafety. (4)Contributions Making contributions to State or localgovernments or owners or operators of privatenonprofit facilities for the purpose of carryingout the provisions of this subsection. (b) Federal share The Federal shareof assistance under this section shall be not less than 75 percent of the eligible cost of suchassistance. (c) Utilization ofDOD resources (1) Generalrule During theimmediateaftermath of anincident whichmay ultimatelyqualify forassistanceunder thissubchapter orsubchapterIV-A of thischapter, theGovernor ofthe State inwhich suchincidentoccurred mayrequest thePresident todirect theSecretary ofDefense toutilize theresources ofthe Departmentof Defense forthe purpose ofperforming onpublic andprivate landsany emergencywork which ismadenecessary bysuch incidentand which isessential forthepreservation oflife andproperty. If thePresidentdetermines thatsuch work isessential forthepreservation oflife andproperty, thePresident shallgrant suchrequest to theextent thePresidentdeterminespracticable.Suchemergencywork may onlybe carried outfor a period notto exceed 10days. (2) Rulesapplicable todebris removal Any removalof debris andwreckagecarried outunder thissubsectionshall be subjectto section5173(b) of thistitle, relating tounconditionalauthorizationandindemnification for debrisremoval. (3)Expendituresout of disasterrelief funds The cost of anyassistanceprovidedpursuant to thissubsectionshall bereimbursed outof funds madeavailable tocarry out thischapter. (4) Federalshare The Federalshare ofassistanceunder thissubsectionshall be notless than 75percent. (5) Guidelines Not later than180 days afterNovember 23,1988, thePresident shallissueguidelines forcarrying outthis subsection.Suchguidelinesshall considerany likelyeffectassistanceunder thissubsection willhave on theavailability ofother forms ofassistanceunder thischapter. (6) Definitions For purposesof this section-- (A)Department ofDefense The term "Department of Defense" hasthe meaning the term "department" hasunder section 101 of Title 10. (B)Emergencywork Theterm"emergencywork"includesclearance andremoval ofdebrisandwreckage andtemporaryrestoration ofessentialpublicfacilities andservices. (23) The declaration of an emergency by the President makes federal emergency assistanceavailable. The pertinent statutory provision, Section 502 of the Stafford Act, 42 U.S.C. § 5192,states: § 5192. Federal emergency assistance (a) Specified In any emergency, the President may -- (1) direct anyFederalagency, with orwithoutreimbursement, to utilize itsauthorities andthe resourcesgranted to itunder Federallaw (includingpersonnel,equipment,supplies,facilities, andmanagerial,technical andadvisoryservices) insupport ofState and localemergencyassistanceefforts to savelives, protectproperty andpublic healthand safety, andlessen or avertthe threat of acatastrophe; (2) coordinateall disasterreliefassistance(includingvoluntaryassistance)provided byFederalagencies,privateorganizations,and State andlocalgovernments; (3) providetechnical andadvisoryassistance toaffected Stateand localgovernmentsfor -- (A) theperformanceofessentialcommunityservices; (B)issuance ofwarnings ofrisks orhazards; (C)publichealthandsafetyinformation,includingdisseminationof suchinformation; (D) provision of health and safetymeasures; and (E)management,control,andreduction ofimmediatethreatstopublichealthandsafety; (4) provide emergency assistance throughFederalagencies; (5) remove debris in accordance with theterms and conditions of section 5173 of thistitle; (6) provide assistance in accordance withsection 5174 of this title; and (7) assist Stateand localgovernments inthe distributionof medicine,food, and otherconsumablesupplies, andemergencyassistance. (b) General Whenever theFederal assistance provided under subsection (a) of this section with respect to an emergency isinadequate, the President may also provide assistance with respect to efforts to save lives, protectproperty and public health and safety, and lessen or avert the threat of a catastrophe. The Stafford Act includes specific provisions dealing with hazard mitigation, 42 U.S.C. §5170c; repair, reconstruction, restoration, or replacement of United States facilities, 42 U.S.C. §5171; repair, reconstruction, restoration, or replacement of damaged state, local, or private nonprofitfacilities, 42 U.S.C. § 5172; debris removal, 42 U.S.C. § 5173; federal assistance to individuals andhouseholds, 42 U.S.C. § 5174; unemployment assistance, 42 U.S.C. § 5177; emergency grants toassist low-income migrant and seasonal farmworkers, 42 U.S.C. § 5177a; food coupons anddistribution, 42 U.S.C. § 5179; food commodities, 42 U.S.C. § 5180; relocation assistance, 42 U.S.C.§ 5181; legal services, 42 U.S.C. § 5182; crisis counseling assistance and training, 42 U.S.C. § 5183;community disaster loans, 42 U.S.C. § 5184; (24) emergency communications, 42 U.S.C. § 5185; emergency publictransportation, 42 U.S.C. § 5186; fire management assistance, 42 U.S.C. § 5187; and timber sharingcontracts, 42 U.S.C. § 5188. Each of these statutory provisions specifies the circumstances to whichit applies. The Stafford Act provides for appeals of assistance decisions within 60 days after the dateon which the applicant for assistance is notified of the award or denial of award of the assistance. A decision on an appeal is to be made within 90 days of the date the official designated to administersuch appeals received notice of the appeal. (25) | The Robert T. Stafford Disaster Relief and Emergency Assistance Act, P.L. 93-288 , asamended, 42 U.S.C. §§ 5121-5206, and implementing regulations in 44 C.F.R. §§ 206.31-206.48,provide the statutory framework for a Presidential declaration of an emergency or a declaration ofa major disaster. Such declarations open the way for a wide range of federal resources to be madeavailable to assist in dealing with the emergency or major disaster involved. The Stafford Actstructure for the declaration process reflects the fact that federal resources under this act supplementstate and local resources for disaster relief and recovery. Except in the case of an emergencyinvolving a subject area that is exclusively or preeminently in the federal purview, the Governor ofan affected state, or Acting Governor if the Governor is not available, must request such adeclaration by the President. This report will review the statutory and regulatory requirementsapplicable to the affected state seeking the declaration and to the Presidential declaration, and willnote the different types of resources that may be made available in the response to the two types ofdeclarations. This report will updated as needed. |
The Community Oriented Policing Services (COPS) program was created by Title I of the Violent Crime Control and Law Enforcement Act of 1994 (the '94 Crime Act). The mission of the COPS program is to advance community policing in all jurisdictions across the United States. The COPS program awards grants to state, local, and tribal law enforcement agencies throughout the United States so they can hire and train law enforcement officers to participate in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. COPS grants are managed by the COPS Office, which was created in 1994 by the Department of Justice (DOJ) to oversee the COPS program. The COPS program was originally authorized as a multiple-grant program, and appropriations for the program were authorized through FY2000. The Violence Against Women and Department of Justice Reauthorization Act of 2005 ( P.L. 109-162 ) reauthorized the COPS program through FY2009. Along with reauthorizing the COPS program, the act amended current law to change the COPS program into a single-grant program. Authorized appropriations for the COPS program expired in FY2009. As such, Congress could consider legislation to reauthorize the COPS program. Debate about reauthorization of the program could be contentious because the COPS program is one of the primary means for providing federal assistance to state and local law enforcement, but at the same time, Congress is considering ways to reduce discretionary spending in order to shrink the federal budget deficit. This report provides an overview and analysis of issues Congress might consider if it chooses to take up legislation to reauthorize the COPS program. If Congress considers the future of the COPS program, there are several issues it might discuss, including the following: Given current trends in violent crime and research findings on the ability of additional law enforcement officers and COPS grants to reduce crime, should Congress consider changing the focus of the COPS program away from providing grants to hire additional officers and toward providing grants to support law enforcement's operations? Did the COPS Office meet its goal of placing 100,000 new officers on the street? What does this mean for oversight of the program? Are hiring grants a cost-effective way of combating crime? Is there programmatic overlap between the COPS Office of Justice Programs (OJP) grant programs? Should funding for the COPS program be appropriated as currently authorized in statute? One potential question facing Congress as it considers legislation to reauthorize the COPS program is whether the federal government should continue to provide grants to state and local law enforcement agencies to hire additional officers at a time of historically low crime rates. Opponents of the program stress that state and local governments, not the federal government, should be responsible for providing funding for police forces. They also argue that the purported effect of COPS hiring grants on crime rates in the 1990s is questionable. They maintain that it is not prudent to increase funding for the program at a time when crime is decreasing and the federal government is facing annual deficits. Proponents of the COPS program assert that COPS hiring grants contributed to the decreasing crime rate in the 1990s. They contend that with the current economic downturn, crime rates might increase and law enforcement agencies might have to lay off officers; hence it is important to ensure that local law enforcement agencies have the resources to maintain their forces and fight crime. Proponents believe that the federal government has a role to play in supporting local law enforcement because it is the federal government's responsibility to provide for the security of U.S. citizens, which means protecting citizens from crime. They also maintain that the federal government should support local law enforcement because it has become more involved in homeland security and immigration enforcement. This section of the report analyzes the arguments made by both supporters and opponents of the COPS program by evaluating recent trends in violent crime, the research on the ability of additional law enforcement officers to decrease crime, and the effects that COPS grants had on crime rates in the 1990s. Figure 1 shows data on violent crime rates from 1960 through 2012 (the most recent year for which data are available). The data are from the Uniform Crime Reports (UCR), which is collected and compiled by the Federal Bureau of Investigation (FBI). The data show that, in general, violent crime rates increased from 1961 through 1991 (see Figure 1 ). There is one notable exception to this trend: violent crime rates decreased three consecutive years starting in 1981; otherwise, violent crime increased unabated for approximately 30 years. However, starting in 1992, the violent crime rate decreased for 13 straight years before increasing in each of 2005 and 2006. Nonetheless, since 2006 violent crime rates have again resumed a downward trend and violent crime is at its lowest level, on a per capita basis, since 1970. As discussed above, the national violent crime rate increased briefly in the middle of the past decade before decreasing again in recent years. In some instances, violent crime rates in cities and towns across the country did not always follow the national trend. For example, in 2005 the national violent crime rate increased, but decreased in towns with populations between 49,999 and 10,000 residents. On the other hand, data in Table 1 also show that while the national violent crime rate decreased 1.6% in 2007, that decrease was not experienced by all cities and towns. In 2007, the violent crime rate increased in cities with populations between 100,000 and 249,999 people and in towns with less than 25,000 people. However, in the four most recent years, violent crime rates decreased across the board in cities with populations fewer than 250,000 people. The one exception to the general downward trend in violent crime rates was the increase in the violent crime rate in 2011 and 2012 in cities with populations of 250,000 or more people. The assumption that more law enforcement officers will result in lower levels of crime has its basis in economic theory. Theoretically, criminals act in rational ways, meaning that they balance the costs and benefits of different courses of action. As such, criminals will engage in criminal activity if they believe that the potential benefits outweigh the potential costs. More law enforcement officers, in theory, increase the probability that criminals will be caught and punished, thereby increasing the costs associated with criminal activity and deterring criminal behavior. More arrests can also result in more criminals being incarcerated, which could have an incapacitation effect; in other words, criminals will not be able to commit more crimes because they are imprisoned. A literature review of the research on the impact of law enforcement on violent crime found mixed results. The studies in the review confirmed all possible results—law enforcement increased violent crime, decreased violent crime, and had no effect on violent crime. The review included 27 studies published between 1971 and 1997. The studies contained 89 separate estimates of the effect of law enforcement on violent crime. Of the 89 estimates, 44 (49.4%) found that law enforcement had no effect on violent crime, 27 (30.3%) found a positive effect (i.e., more law enforcement officers resulted in more violent crime), and 18 (20.2%) found a negative effect (i.e., more law enforcement officers resulted in less violent crime). The researchers concluded that there is not a consistent body of evidence to support the assertion that hiring more law enforcement officers can decrease violent crime. The review found, however, that many of the studies suffered from flaws in design, analysis, or both, so aggregating the results could be misleading. In light of the methodological shortcoming of many of the studies considered in the review, the researchers eliminated all but the most methodologically rigorous studies. They were left with nine studies containing 27 separate estimates of the effect of law enforcement on violent crime, of which 15 (55%) found that law enforcement had no effect on violent crime, 4 (15%) found a positive effect, and 8 (30%) found a negative effect. Another review contended that more recent studies support the assertion that increasing the number of law enforcement officers is associated with a decrease in the amount of both violent and property crime. The researcher estimated that the increase in the number of law enforcement officers between 1991 and 2001 accounted for a 5% to 6% reduction in crime. The review found that most of the past research did not properly control for the simultaneity problem. Further, more recent research addressed this issue, and the results of these more rigorous studies suggest that law enforcement has a negative impact on crime. The conclusion that additional law enforcement officers can decrease crime is based on a review of four studies published since 1995 (it should be noted that three of these studies were included in the above review). The review included a smaller number of studies than the review discussed above, even after all but the most rigorous studies were eliminated. In fact, one researcher challenged the conclusions of this review because it excluded studies on the topic outside the field of economics. In all, the total body of research suggests that law enforcement may have little impact on the amount of crime. However, scholars have acknowledged that past research suffered from a series of methodological and analytical problems, which could mean that any conclusions drawn from those studies are dubious. As mentioned, some of the most recent research—which it has been argued is more methodologically sound than past research—suggest that more law enforcement officers could have a negative impact on crime. Yet, one researcher noted that the ability to study the relationship between law enforcement levels is limited by the amount of data available and the current theory about what factors affect crime rates. The researcher opines, Still, if the impact of police numbers is ever an important question, we are not well equipped to study it. Because there are few natural experiments with sharp increases in police manpower, measuring the impact of changes in police levels on crime will probably remain the domain of regression analysis. Without good and consistent models for the other factors that influence crime rates, it would be charitable to call such exercises an inexact science. Because of all the substantial problems associated with studies of police manpower over time, the best hope for reducing the margin of error on estimates of effects is a triangulation of proof, where a variety of differently imperfect methods lead to generally consistent conclusions. Three studies identified by CRS attempted to quantify the impact that COPS grants had on crime rates from the mid-1990s to 2001. In general, the studies suggest that COPS grants had a negative impact on crime rates, but the impact was not universal. It appears that some types of COPS grants were more effective at reducing certain types of crimes. The studies also suggest that COPS grants might not have been as effective at reducing crime in cities with populations of more than 250,000 people. The Government Accountability Office (GAO) used data from 4,247 law enforcement agencies to test whether COPS hiring, Making Officer Redeployment Effective (MORE), Innovative, and other miscellaneous COPS grants influenced crime rates between 1994 and 2001. The GAO's analysis found that after controlling for other factors that might affect crime rates—such as economic conditions, population composition, pre-COPS trends in police agencies' growth rate in sworn officers, growth rates in crime, and changes in state and national criminal justice policy—COPS hiring grants had a statistically significant negative impact on the total crime rate and the homicide, robbery, aggravated assault, burglary, and motor vehicle theft rates. MORE grants had a statistically significant negative impact on the total crime rate and the robbery, aggravated assault, burglary, larceny, and motor vehicle theft rates. Innovative grants had a negative impact on the total crime rate and the homicide, robbery, aggravated assault, burglary, larceny, and motor vehicle theft rates and in all instances the impact of Innovative grants was greater than the impact of hiring and MORE grants. The GAO estimated that every dollar in COPS hiring grant expenditures per capita resulted in a decrease of 30 index crimes per 100,000 people. The GAO also found that hiring grants had a negative impact on crime rates in cities of varying size, with the exception of cities of 25,000 to less than 50,000 people. Hiring grants had the largest impact in cities and towns with populations between 50,000 and 149,999 people. The GAO's analysis concluded that factors other than COPS funding accounted for a majority of the decline in the crime rate in the 1990s. The GAO estimated that COPS expenditures accounted for about 5% of the drop in the crime rate between 1993 and 2000. Two researchers used data from 2,074 local law enforcement agencies serving populations of 10,000 or more for 1990 to 2001 to evaluate the impact of COPS hiring, MORE, COPS in Schools (CIS), and Small Communities Grant Program (SCGP) funds on crime rates. Their analysis indicated that COPS hiring grants, after controlling for other factors—such as employment levels, income, percentage of population between ages 18 and 24, and percentage of the population that was African American—had a statistically significant impact on burglaries, auto thefts, robberies, and assaults, and had a marginally statistically significant impact on homicides. The researchers estimate that the average COPS hiring grant (about one officer per 10,000 people) decreased burglaries by 2.2%, auto thefts by 3.3%, robberies by 5%, homicides by 3.2%, and assaults by 3.6%. Their analysis also indicated that MORE grants had a statistically significant impact on burglaries, auto thefts, larcenies, robberies, and rapes, though the impact was not as large as the estimated impact of hiring grants. They estimate that the average MORE grant (about $1 per person per year) reduced burglaries by 0.5%, auto thefts by 0.8%, larcenies by 0.3%, and robberies by 1.5%. CIS and SCGP grants did not have a statistically significant impact on any crimes. An analyst, using data from 58 large cities (i.e., cities with populations of 250,000 or more) for 1993 to 1999, found that COPS grants had a negative impact on only a handful of crimes. The researcher's analysis suggests that, after controlling for other factors—such as percentage of the population between 15 and 19 and 20 and 29, percentage of the population that is African American, Hispanic, or of another minority ethnic/racial group; the unemployment rate; per capita income; and police expenditures—hiring grants had a statistically significant negative impact on robberies, while MORE grants had a significant impact on robberies, assaults, and burglaries. As Congress considers legislation to reauthorize the COPS program, it might want to consider whether continuing to fund hiring programs is an effective way to reduce crime. Research on the impact of law enforcement officers on crime suggests that additional officers may decrease crime, but the conclusions are not definitive. Evaluations of the impact of COPS hiring grants appear to support the assertion that hiring grants can help reduce crime, but the impact of hiring grants in large cities is ambiguous. The GAO's analysis suggests that hiring grants decreased crime in cities with populations over 150,000 people. However, Muhlhausen's analysis suggests that hiring grants were relatively ineffective at reducing crime in large cities. The different results might be the product of the different models used by the GAO and Muhlhausen. The GAO's analysis evaluated the impact of hiring grants on all index crimes in cities with populations over 150,000 , while Muhlhausen analyzed the impact of hiring grants on individual index crimes in cities with populations of 250,000 or greater . By evaluating the impact of hiring grants on all index crimes in a greater number of cities, the GAO's analysis may have been able to capture effects that Muhlhausen's research did not. However, GAO's findings may have also been the product of conducting its analysis using the aggregate number of index crimes rather than testing the affect of COPS grants on individual index crimes. Research suggests that grants that target specific problems, such as gang or domestic violence, or that allow more experienced officers to engage in community policing may be an effective method for decreasing violent crime. Congress could consider amending the current COPS program to focus grants on addressing specific issues rather than on solely placing additional officers on the street. Research by Muhlhausen suggests that putting more senior officers, rather than newly hired officers, on the street may be an effective way to decrease certain crimes in large cities. Congress could also consider amending the authorizing legislation for the program so that the focus of the COPS program is changed from hiring new officers to enabling senior officers to spend more time on patrol. Grants could be provided to hire additional non-sworn support staff, or they could provide grants for technology that would decrease the amount of time officers have to spend on administrative tasks. Another issue related to COPS effect on crime is whether the program actually increased the number of police officers hired in the 1990s. Opponents of the COPS program argue that the federal government should not invest more money in the COPS program because it failed to meet its goal of placing 100,000 new officers on the street and hiring funds were misspent. Proponents of the program, however, argue that COPS was an effective program; it met its goal of placing 100,000 officers on the street, and those additional officers contributed to decreasing crime rates in the 1990s. After years of decreasing appropriations for COPS hiring grants, Congress included $1 billion for hiring grants in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-8 ), the highest level of funding for COPS hiring grants since FY1999. In addition, Congress provided funding for hiring programs as a part of the annual appropriation for COPS in both FY2010 and FY2011. Given the interest in COPS hiring programs, Congress might want to consider the issue of whether the COPS program was effective at meeting its goal of increasing the number of police officers. The actual number of law enforcement officers hired and deployed as a result of COPS hiring grants is a debated topic. According to the COPS Office, it has provided $12.4 billion in funding to state, local, and tribal law enforcement agencies to hire 117,000 officers. However, other evaluations of the COPS hiring program place the actual number of officers hired below 100,000. The GAO found that COPS funding paid for a total of about 88,000 additional officer-years from 1994 to 2001. An evaluation of the COPS program sponsored by the National Institute of Justice (NIJ) found that under the best-case scenario, of the 105,000 officer and officer equivalents funded by the COPS program by May 1999, an estimated 84,600 officers would have been hired by 2001 before declining to 83,900 officers by 2003. Under the worst-case scenario, an estimated 69,000 officers would have been hired by 2001 before declining to 62,700 officers by 2003. What accounts for the differences in the reported number of officers hired with COPS grants? The figure reported by the COPS Office and the figures reported by the GAO and NIJ differ because they measured different things. The COPS Office reported the number of officers its grants have funded , which might not directly correspond to an officer hired and deployed. The GAO estimated the number of officer-years attributable to COPS funds by calculating the difference between actual level of officers employed each year between 1994 and 2001 and the estimated level of officers that would have been employed absent COPS funding. The total number of officer-years resulting from COPS funding is the sum of the number of officers attributable to COPS funds in each year. The GAO acknowledges that in its calculation of officer-years, an individual officer might have been counted in several different years. The GAO warns that the total number of officer-years is not an estimate of the number of sworn officers on the street as a result of COPS funds, nor is it comparable with estimates of the number of officers funded by the COPS Office. The authors of the NIJ-sponsored evaluation estimated the number of officers hired with COPS grants by extrapolating hiring, deployment, and retention data they collected from a sample of law enforcement agencies in 1998 to all COPS hiring and MORE grant awards made by May 1999. The authors of the evaluation acknowledge that at the time they collected their data, the COPS Office had not announced the amount of time that grantees would be required to retain officers hired with grant funds and many of the initial hiring grants had not expired, so their estimate of the long-term impact of COPS hiring grants could be sensitive to the assumptions they made about how many officers would be retained. The above data suggest that not all of the grant funds awarded by the COPS Office were used to hire officers. Research by Evans and Owens indicates that this might be the case. The researchers estimated that 70% of the hiring funds that went to the 2,074 agencies in their sample were used to increase the size of the police force. An audit by the Department of Justice Office of the Inspector General (OIG) provides some reasons for the discrepancy between the number of officers funded by COPS and the number of officers hired with grant funds. The OIG's findings included the following: The COPS Office was counting officers as funded even though law enforcement agencies had not accepted the grant award. The COPS Office had offered $485 million in grant funds that were not accepted by law enforcement agencies, which would have funded 7,722 officers. However, the COPS Office counted those 7,722 officers toward its goal of funding 100,000 officers. The COPS Office also counted another 2,526 officers toward its goal even though the award documents for the $96 million in grants had not been provided to the grantee for acceptance. During the first four years of the program, grantees had terminated 500 grants for 1,300 positions. Of these 500 grants, 25.4% (127) were not de-obligated, and the remaining grants were not de-obligated promptly. The OIG observed that the failure to promptly de-obligate terminated grants could make it appear that COPS was closer to achieving its goal than it really was. There was difficulty determining whether MORE grants actually resulted or would result in officers spending more time doing community policing rather than administrative tasks. The OIG found that 78% of the 67 grantees it audited that had received MORE grants could not demonstrate that the grants resulted or would result in officers being redeployed. The OIG noted that one-third of COPS projected goal of funding 100,000 officers depended on officers being redeployed as a result of MORE grants. There was a problem with grantees using COPS funds to supplant local funds. Of the 147 grantees the OIG tested for supplanting, 41% were found to have used federal funds to supplant local funds. Grantees were not required to retain through FY2000 at least 31,091 of the total number of positions COPS had funded to that point because COPS did not require grantees to retain officers under the two earliest hiring grant programs, and for the remaining programs, COPS required agencies to retain the officer for only one budget cycle after the grant was completed. DOJ has testified before Congress that it has taken steps to try to prevent the abuses noted in the OIG audit and to improve the effectiveness of the COPS program. However, the research and audit findings suggest that Congress might need to engage in more oversight of how COPS grants are awarded and monitored, especially in light of the $1 billion in hiring funds appropriated in the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ; ARRA). The hiring funds appropriated as part of the ARRA allow law enforcement agencies to hire new police officers, but agencies can also use grant funds to retain officers that would have been laid off because of budget cuts. The ability to use grants to retain these officers could provide local governments with an incentive to supplant local funds with federal dollars. Also, even though agencies are required to retain all officers for a minimum of 12 months after the grant expires, agencies may not retain the positions after the one-year period if they continue to face budget cuts. The GAO reported that between 1993 and 2000, COPS obligations contributed to a 1.3% decrease in the overall crime rate and a 2.5% decrease in the violent crime rate. The GAO also reported that from 1994 to 2001, the COPS Office obligated $4.7 billion in hiring grants. As Congress considers the future of the COPS program, it might want to evaluate whether funding additional law enforcement officer positions is a cost-effective means of reducing crime. Two cost-benefits analyses suggest that the cost of the COPS program exceeds the value of the benefits derived. Evans and Owens (discussed earlier) estimated that the total cost of hiring grants for law enforcement agencies in their sample was approximately $4.4 billion. Using their estimates of the impact that COPS hiring grants had on certain crimes and past research on the estimated cost of crime incurred by victims, Evans and Owens estimate that the net benefit (i.e., the monetary benefit resulting from the reduction in crime) associated with COPS hiring grants is $3.4 billion. If it assumed that COPS hiring grants did not have an impact on larceny and rapes (in their model, the coefficient on these two crime was not statistically significant), the estimated net benefit decreases to $2.9 billion. Using his models, Muhlhausen (discussed above) estimated that a city of 1 million people would have spent the approximately $3.1 million in hiring grants, $1.4 million in MORE grants, and $621,000 in innovative grants, for a total of approximately $5 million. The researcher estimated that these grants resulted in approximately $926,000, $1.7 million, and $1.3 million, respectively, in cost-savings to crime victims. His estimates indicate that in total COPS grants for a city of 1 million people cost approximately $1 million more than they save. However, the total negative net impact is largely the result of the lack of cost-effectiveness of the hiring grants; on the other hand, the MORE and innovative grants were estimated to actually be cost-effective. Both of these cost-benefit analyses are based on assumptions about the cost of individual crimes and the researchers' estimates of the impact that COPS grants had on crime. To the extent that the researchers did not properly estimate the impact of COPS grants on crime or previous research did not properly estimate the costs associated with individual crimes or the value of benefits gained from preventing crime, the above cost-benefit analyses might have over- or underestimated the cost-effectiveness of the COPS program. Given the apparent lack of cost-effectiveness of the COPS hiring grant program, Congress could consider whether the focus of the COPS program should change from putting additional law enforcement officers on the street to supporting law enforcement through expanding access to new technology and providing resources to address specific problems. It might be argued that in light of past research and the OIG's audit findings that if the effectiveness of hiring grants could be increased so that all of the officers funded are actually hired and deployed, it might increase the cost-effectiveness of the program. However, this would also assume that the additional law enforcement officers would have an impact on crime rates, and as discussed above, the research is ambiguous about the impact that additional officers have on crime. Nevertheless, if Congress continues to appropriate funds for hiring programs, it might consider increasing oversight of the program to ensure that funded positions are being filled and deployed by local law enforcement agencies. Over the years, COPS' funding has been used for a variety of purposes, including hiring programs, anti-methamphetamine initiatives, supporting tribal law enforcement, law enforcement technology, school safety projects, and interoperable communications programs. Since FY2005, the COPS Office has awarded grants under various programs, including the following: The COPS Hiring Program (CHP), which provides funding to state, local, and tribal governments to cover the cost of the salary and benefits for newly hired entry-level officers engaged in community policing. The COPS in Schools (CIS), which provided funds to law enforcement agencies to cover the cost of the salary and benefits for newly hired, additional school resource officers engaged in community policing in and around primary and secondary schools. The Tribal Resources Grant Program (TRGP), which provides funds to tribal governments to support the law enforcement needs of tribal communities. TRGP funds can be used to hire additional officers, provide law enforcement training, and purchase uniforms, basic-issue equipment, emerging technologies, and police vehicles. The COPS Methamphetamine Initiative, which provided grants to state and local law enforcement agencies to help reduce the production, distribution, and use of methamphetamine. According to the COPS Office, grants awarded under this program have funded "equipment, training, and personnel to improve intelligence-gathering capabilities, enforcement efforts, lab clean-up, training related to drug endangered children, and the prosecution of those who engage in methamphetamine-related crimes." COPS Technology grants, which provided funding to state, local, and tribal law enforcement agencies so they can purchase technologies to advance communications interoperability, information sharing, crime analysis, intelligence gathering, and crime prevention. The COPS Interoperable Communications Technology program, which provided grants to help communities develop effective interoperable communications systems for public safety and emergency services providers. Grants awarded under this program have been used to (1) purchase interoperable communications equipment for multidisciplinary and multijurisdictional public safety communications projects; (2) provide local jurisdictions with the equipment or services needed to participate on larger public safety, commercial, or other shared networks; (3) provide technologies to upgrade or enhance the ability of law enforcement systems to improve the timeliness, effectiveness, and accuracy of criminal justice information exchanges; and (4) purchase and deploying portable gateway solutions. The Secure Our Schools (SOS) Initiative, which provided grant funds to help cover the cost of school security measures, security assessments, security training for students and personnel, coordination with local law enforcement, and other measures that could increase school security. A Department of Justice Office of the Inspector General (OIG) audit of the COPS program concluded that grants awarded by the COPS Office for hiring officers and purchasing equipment were sometimes duplicative of grants awarded under the Local Law Enforcement Block Grant (LLEBG) program. Specifically, the OIG reported that grants awarded under the CHP, CIS, and SOS programs were sometimes duplicative of grants awarded under LLEBG. In 2006, Congress replaced LLEBG and the Edward Byrne Memorial Formula Grant (Byrne Formula Grant) program with the Edward Byrne Memorial Justice Assistance Grant (JAG) program. Any program or initiative that was eligible for funding under LLEBG or the Byrne Formula Grant program is eligible for funding under JAG. However, a wider variety of programs can be funded under JAG compared to LLEBG. JAG provides funding to support state and local initiatives, technical assistance, training, personnel, equipment, supplies, contractual support, and information systems for criminal justice, in one or more of seven program purpose areas, including law enforcement programs; prosecution and court programs; prevention and education programs; corrections and community corrections programs; drug treatment programs; planning, evaluation, and technology improvement programs; and crime victim and witness programs (other than compensation). Since programs and initiatives that could have been funded under LLEBG can still be funded under JAG, it appears that state and local governments could use JAG funds for the same purpose as CHP, CIS, and SOS grants. It should be noted that in certain fiscal years, Congress chose to eliminate funding for some of the COPS grant programs identified above (see Appendix ). However, the elimination of funding for a program in one fiscal year does not mean that it will not be funded in future fiscal years. For example, there was no funding for CHP in either FY2006 or FY2007, but Congress has funded the program in each fiscal year since FY2008. Because there is the possibility that Congress could choose to reinstate funding for a zeroed-out grant program, this discussion about overlap between COPS and OJP grant programs includes references to programs that were funded in the past but might not be funded currently. In its response to the OIG's audit findings, the COPS Office argued that COPS grants and JAG grants are complementary, not duplicative. The COPS Office noted that COPS grants must be used to advance community policing, and while JAG funds can be used for this purpose, state and local governments are not required to do so. The COPS Office maintained that COPS grants can fund law enforcement agencies that might not be eligible to receive funding under the JAG program. In addition, the COPS Office contended that law enforcement agencies want to have different grant programs to apply to because it provides them with a wider variety of funding options, which allows them to implement programs that reflect their vision of policing. The above analysis suggests that law enforcement agencies could use funds from JAG and some COPS grant programs for the same purposes, but there is no guarantee that they will use funds for the same purposes. As such, Congress might consider whether it wants to allow state, local, and tribal governments to receive grants from two different programs that could be used for the same purposes. If not, Congress could consider including additional funding for the JAG program in lieu of funding COPS programs such as CHP, the Methamphetamine Initiative, or COPS Technology grants. State and local governments could use some of the additional JAG funds to support programs that are similar to ones currently funded with COPS grants, and they could do it without applying for COPS grants, which could reduce the time state and local governments have to spend applying for and managing grants. However, the purpose of the JAG program is to allow state and local governments to fund programs and initiatives that meet their needs; therefore, if Congress chooses to increase funding for JAG in place of funding some COPS programs, Congress could lose some control over how these funds are spent by state and local governments. For example, if Congress chooses to increase appropriations for JAG by $100 million rather than appropriating $100 million for CHP, there would be no guarantee that the additional funding would be used to hire additional law enforcement officers. However, if Congress chooses to appropriate $100 million for CHP, that $100 million would be awarded by the COPS Office to state and local governments for hiring additional law enforcement officers. The OIG reported that one of the reasons why there is duplication between COPS and OJP grant programs is because statutes were enacted that created multiple grant programs to fund similar items. Congress could also consider amending the authorizing legislation for the JAG and COPS programs so that state, local, and tribal governments could not use JAG and COPS grants for the same purpose. For example, Congress could amend the authorizing legislation for COPS so that COPS grants are only used for hiring programs and purchasing technology related to law enforcement. Congress could then amend the authorizing legislation for JAG so that state and local governments cannot use funds for hiring police officers or purchasing law enforcement-related technology. As discussed above, the COPS program is currently authorized as a single-grant program, whereby law enforcement agencies can apply for a "COPS grant" that they can use for one or more of several programs outlined in current law. However, Congress has continued to appropriate funding for specific grant programs under the COPS account in the Commerce, Justice, Science and Related Agencies appropriations bill (see Appendix for a breakdown of COPS annual appropriation for FY2004 to FY2013). Appropriations for the COPS account over the past five fiscal years do not provide law enforcement agencies with the flexibility envisioned in the current authorizing legislation. Instead of being able to apply for one grant to use for one or more programs, law enforcement agencies must apply for funding under several different programs. Law enforcement agencies are also limited to programs for which Congress appropriates funds. For example, in FY2006 and FY2007, even if some law enforcement agencies determined that they needed to hire additional officers, they could not apply for a hiring grant because no funding was appropriated for it. Yet if Congress appropriated funding for a single COPS program, the agency could have applied for a grant and used the funds to hire additional officers. In addition to continuing to provide funding for specific programs, starting in FY1998, Congress began earmarking the appropriations for two COPS grant programs: the Law Enforcement Technology program and the Methamphetamine Initiative. Between FY2006 and FY2010, with the exception of FY2007, most of the appropriation for these two programs was earmarked by Congress, which has prevented law enforcement agencies that are not identified for funding for applying for grants under these programs. Congress might consider whether in the future it should fund COPS as a single-grant program or if it should continue to appropriate funds for individual programs. If Congress chooses to fund COPS as a single-grant program, it could relieve the administrative burden on local law enforcement agencies because they would have to apply for and manage only one grant award rather than applying for grants under different programs. A single-grant program would provide law enforcement agencies with a degree of freedom to expend their grant funds on programs that address the needs of their communities. However, if Congress chooses to fund COPS as a single-grant program, it would lose some control over how COPS funds are spent, and hence the impact that the grant funding has on shaping state and local policies. A single-grant program would mean that Congress could not ensure that a certain amount of funding was spent on hiring law enforcement officers or used to upgrade law enforcement's use of new technology. In addition, awarding COPS grants under a single-grant program might make it more difficult to monitor program performance because there would most likely be a wide variety of programs. For example, two different agencies might use their grants to hire law enforcement officers, but one agency might hire officers to increase the number of officers engaged in community policing, while the other agency might hire additional school resources officers. Both could be counted as hiring grants, but the agencies hired the officers for different purposes; hence measurements of their outcomes and effectiveness would be different. The COPS Office may only be able to collect data on the most basic metrics (e.g., the number officer hired or the amount of new equipment purchased), but more in-depth metrics would probably be specific to each program, which might make national evaluations of the program's effectiveness difficult. | The Community Oriented Policing Services (COPS) program was created by Title I of the Violent Crime Control and Law Enforcement Act of 1994 (P.L. 103-322). The mission of the COPS program is to advance community policing in all jurisdictions across the United States. The Violence Against Women and Department of Justice Reauthorization Act of 2005 (P.L. 109-162) reauthorized the COPS program through FY2009 and changed the COPS program from a multi-grant program to a single-grant program. The COPS program awards grants to state, local, and tribal law enforcement agencies throughout the United States so they can hire and train law enforcement officers to participate in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. Authorized appropriations for the COPS program expired in FY2009. As such, Congress could consider legislation to reauthorize the COPS program. Debate about reauthorization of the program could be contentious because the COPS program is one of the primary means for providing federal assistance to state and local law enforcement, but at the same time, Congress is considering ways to reduce discretionary spending in order to shrink the federal budget deficit. This report provides an overview of issues Congress may consider if it chooses to take up legislation to reauthorize the COPS program. If Congress considers the future of the COPS program, there are several issues it might discuss, including the following: Given current trends in violent crime and research findings on the ability of additional law enforcement officers and COPS grants to reduce crime, should Congress consider changing the focus of the COPS program away from providing grants to hire additional officers and toward providing grants to support law enforcement's operations? Did the COPS Office meet its goal of placing 100,000 new officers on the street? What does this mean for oversight of the program? Are hiring grants a cost-effective way of combating crime? Is there programmatic overlap between the COPS Office of Justice Programs (OJP) grant programs? Should funding for the COPS program be appropriated as currently authorized in statute? |
Public diplomacy is the promotion of America's interests, culture and policies by informing and influencing foreign populations. Immediately after the September 11 th terrorist attacks on the World Trade Center and the Pentagon, the Bush Administration found itself in, not only a military, but also a public diplomacy war on terrorism. An early realization of the importance of words and cultural understanding surfaced when President Bush soon after the attacks named the U.S. response "Operation Enduring Crusade," a name that was quickly changed when experts pointed out that it could be interpreted by Muslims as being inflammatory. In 1999/2000, according to the 2003 Pew survey, more than 50%, and as high as 83%, of foreign populations around the world held favorable views of the United States. Perhaps because of complacency with our position in the world and with the end of the Cold War, Congress and past administrations downplayed the importance of funding public diplomacy activities. Public diplomacy was viewed as having a lower priority than political and military functions, and received less funding, while more money went to other activities deemed more important or more popular with constituents. Funding levels for public diplomacy dropped considerably during the late 1990s, due in part to the consolidation of broadcasting entities in FY1994 and the abolishment of the U.S. Information Agency in October 1999 —signs, according to some, that public diplomacy was not highly valued. After the 2001 attacks, people around the world expressed shock and support for the U.S. government. Since then, however, negative attitudes about America have increased and become more intense, not just within Muslim populations, but worldwide. The Iraq War, begun in March 2003, exacerbated negative opinions of America in virtually every country polled—both traditional allies and non allies. Since the beginning of the Iraq War, realization emerged that strong negative public opinion about the United States could affect how helpful countries will be in the Iraq War and in the separate war on terrorism. Moreover, negative sentiment might assist terrorist groups in recruiting new members. Therefore, in recent years a sense of urgency to utilize public diplomacy to the maximum extent possible has been expressed by top level officials, think tanks, and the 9/11 Commission. The 108 th Congress weighed in on the importance of public diplomacy by including public diplomacy measures in the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) to: promote free media in Islamic countries, scholarships for Muslims to attend American-sponsored schools, public diplomacy training in the Department of State, and establish an International Youth Opportunity Fund within an existing organization such as the United Nations Educational, Science and Cultural Organization (UNESCO). These initiatives will take some time to show any impact. Whether they can generate sufficient good will to effectively counter terrorism, however, remains to be seen. The 109 th Congress has not passed any legislation authorizing any changes in public diplomacy, but has increased public diplomacy funding. (See chart below.) Meanwhile, a 2006 Pew Survey concluded that, "The war in Iraq is a continuing drag on opinions of the United States, not only in predominately Muslim countries but in Europe and Asia as well.... Favorable opinions of the United States have fallen in most of the 15 countries surveyed." The U.S. government first officially acknowledged its use of public diplomacy activities in the early years of the 20 th century when President Woodrow Wilson created the Committee on Public Information to disseminate information overseas during World War I. In 1941 when World War II broke out, President Roosevelt established the Foreign Information Service to conduct foreign intelligence and propaganda. The next year President Roosevelt created the Office of War Information (OWI) which aired the first Voice of America (VOA) program on February 24, 1942 in Europe. These activities were carried out without any authority or recognition provided by Congress. Popularly referred to as the Smith-Mundt Act, the U.S. Information and Educational Exchange Act of 1948 (P.L. 80-402) provided the first overarching legislation authorizing broadcasting and cultural activities, although they had already been going on throughout the 1940s. According to Senator Smith: This bill is an attempt to give legislative authority to certain activities that have been carried on by the State Department since the close of the war.... It is really the consolidation of the activities of the State Department's Division of Cultural Relations, the Office of Inter-American Affairs and the so-called Office of War Information. In asserting how inadequate the U.S. government had been at being understood in Europe and countering Russia's hostile information campaign against the United States after the War, Senator Smith described his intentions for the legislation: "This does not mean boastful propaganda, but simply means telling the truth." There must be a distinct set-up of the so-called informational service, on the one hand, which may conceivably have certain propaganda implications and may even become involved politically; and on the other hand, we must set apart by itself the so-called educational exchange service which, if it is to be truly effective, must be objective, nonpolitical, and, above all, have no possible propaganda implications. Over the years, several public diplomacy reorganizations and policy changes have occurred, largely for two reasons—to reduce cost or to increase effectiveness. In 1953, President Eisenhower created the U.S. Information Agency (USIA) in the Reorganization Plan No. 8, as authorized by the Smith-Mundt Act of 1948. At the time of its creation, USIA's role was primarily to administer the broadcasting and information programs (referred to by some at the time as the "propaganda activities"). The educational exchange programs remained within the Department of State to avoid any charges of propagandistic intent, as recommended by Senator Fulbright (who had already sponsored legislation on establishing cultural exchanges). At about the same time, Radio Free Europe/Radio Liberty (RFE/RL) began broadcasting in 1950 under the clandestine auspices of the Central Intelligence Agency which had been created in 1947. The Board for International Broadcasting (BIB) was created in 1973 to fund and oversee RFE/RL operations. RFE/RL thus became a private, nonprofit broadcaster receiving government grants through the BIB. The purpose of BIB was to provide a firewall between the U.S. government (the CIA) and RFE/RL's surrogate broadcasting to Eastern Europe and the former Soviet Union. The idea was that by keeping RFE/RL separate from the U.S. government, its credibility would be increased. The Reorganization Plan No. 2 of 1977 consolidated all functions of State's Bureau of Educational and Cultural Affairs and the USIA's international information and broadcasting activities into the International Communication Agency (ICA). Subsequently in 1982, Section 303(b) of P.L. 97-241 renamed ICA to be the U.S. Information Agency. In 1994 Congress removed international broadcasting from the USIA, created the independent Broadcasting Board of Governors, and authorized the phasing out of the Board of International Broadcasting. On October 1, 1999, as a result of legislation initiated by Senator Helms, Chairman of the Senate Foreign Relations Committee, to reorganize the foreign policy agencies (largely for streamlining and budget saving purposes), USIA was abolished and its remaining functions (information programs and the educational and cultural exchanges) were transferred back to the State Department, as exchanges had been prior to 1977. In an FY2004 House Commerce, Justice, State Department (CJS) Subcommittee on Appropriations hearing, Chairman Frank Wolf wondered aloud, "Maybe we made a mistake ... on the abolition of USIA.... I wonder if the reorganization ... was really a mistake and maybe somebody ought to go back.... And maybe the system we had in place that we used to defeat the Soviet Union really is not a bad system that we should have in effect now to deal with this [terrorist] issue." In 1980, the U.S. government spent $518 million on public diplomacy activities, according to the Office of Budget and Management (OMB). Funding increased over the following years and peaked in FY1994 to nearly $1.5 billion, largely due to costs associated with the consolidation of the broadcasting entities. The President's FY2007 budget request of nearly $1.6 billion, if enacted, would set the record for U.S. government public diplomacy expenditures. Significant declines in funding during the late 1990s occurred partly because of the budget savings that emanated from consolidating broadcasting in 1994 and abolishing the USIA in 1999. Actual funding levels in FY2000, FY2001, and FY2002 were higher than in 1980—$770 million, $712 million and $747 million, respectively. In constant dollars, however, funding in FY2000, FY2001, and FY2002 dropped below FY1980 levels. And in FY2006, while the estimated actual dollar amount is more than 2½ times what it was in FY1980, in constant dollars the funding level is only about 15% higher. (See Figure 1 below.) Since the terrorist attacks, new funding designated for public diplomacy within State's Diplomatic and Consular Programs account has been added through both supplemental and regular appropriations. Supplemental funding has become a standard practice for funding public diplomacy activities. Between FY2002 and FY2005, public diplomacy activities received about $190 million within emergency supplemental appropriations, including about $25 million for public diplomacy funds within the Diplomatic and Consular Programs account, $15 million for the Educational and Cultural Exchange Programs account, and about $150 million for international broadcasting activities. Supplemental funds through FY2005 are included in Figure 1 . For FY2006, the Administration is seeking within emergency supplemental funding an additional $5 million for Educational and Cultural Exchanges and $50 million for international broadcasting activities both having to do with Iran. Congress provided $5 million for exchanges and $36 million for broadcasting into Iran in the FY2006 emergency supplemental package ( P.L. 109-234 , signed into law June 15, 2006). (For more detail, see CRS Report RL31370, State Department and Related Agencies: FY2006 and FY2007 Appropriations and FY2008 Request , by [author name scrubbed].) Despite the recent increases in public diplomacy funding, critics point to what they view as meager funding levels for public diplomacy as compared to military and other expenses (in the billions of dollars) to combat terrorism. Some assert that as the world gets smaller due to information technology, being vigilant about foreign populations' attitudes of America is as important and less costly, perhaps, than a buildup of military strength. Public diplomacy primarily consists of three categories of activities: (1) international information programs, (2) educational and cultural exchange programs, and (3) international nonmilitary broadcasting. The Under Secretary of State for Public Diplomacy and Public Affairs administers the Bureau for International Information Programs and the Bureau for Educational and Cultural Affairs, while the Broadcasting Board of Governors manages and oversees international broadcasting. The Office of International Information Programs (IIP) acts as a strategic communications service for the foreign affairs community. The office puts out a variety of information in a number of languages and forms, including print publications, Internet reports, and in-person or video-conferencing speaker programs. These information products and services are designed to reach key audiences such as foreign media, government officials, cultural opinion leaders, as well as the general population in more than 140 countries. Some of the products include regionally-oriented printed and Internet reports prepared by teams of writers, researchers, and translators; issue-oriented reports on topics such as economic security, global issues, U.S. society and values, and democracy/human rights; speaker programs—over one thousand speakers go abroad annually to discuss issues of importance to particular regions, as identified by U.S. embassies; and Information Resource Centers (IRC) support both embassy staff and local populations with information on U.S. policy. The Bureau for Educational and Cultural Affairs fosters mutual understanding between the United States and other countries through international educational exchanges, scholarships, and training programs. The Bureau administers programs ranging from the Fulbright Program (which provides grants for graduate students, scholars, professionals, teachers and administrators) to the Humphrey Fellowships (which brings mid-level professionals from developing countries to the United States for a year of study and professional experiences) to the International Visitor Program (which brings professionals to the United states to confer with professional counterparts) to the Office of Citizen Exchanges (which develops professional, cultural, and youth programs with non-profit American Institutions, including voluntary community organizations). International exchange programs often are viewed as low cost, low risk, and effective ways of promoting the American culture abroad. Drawbacks include the length of time and high cost to change attitudes of a significant portion of a foreign population since the program touches only a few people at a time (as opposed to broadcasting where thousands of people can be reached instantaneously). In past years some concerns that had surfaced regarding exchanges included the lack of a tracking system to prevent exchange program participants from overstaying their visas in the United States; changes in student's study focus—students who might enroll in a U.S. exchange program to study English, for example, but would change to physics or engineering (courses associated with security concerns) upon arriving in the United States; an over-concentration on exchanges with European countries rather than developing countries where a greater potential exists for participants to learn about the United States and then go back to teach others in their own country. These issues have been, or are being, addressed so that exchanges can be more effective in addressing terrorism and security issues of exchange participants while reaching Muslim and Arab participants. International broadcasting consists of general broadcasting—the Voice of America (radio, TV and Internet), numerous surrogate broadcasting entities—Radio Free Europe/Radio Liberty (RFE/RL), Cuba Broadcasting, Radio Free Asia, Radio Free Afghanistan, Radio Farda (Iran), Radio Free Iraq, and Radio Sawa, as well as the Middle East Television Network (Alhurra). The Broadcasting Board of Governors (BBG), a bipartisan board consisting of 9 members who are appointed by the President and confirmed by the Senate, supervises and administers these broadcasting entities. In recent years, the BBG has incorporated much of its broadcasting on the Internet where it can reach significant numbers of people in Asia and the Middle East. In times of crisis, such as in Kosovo in the 1990s, after the 2001 terrorist attacks, or during the war in Iraq, U.S. international broadcasting goes into "surge broadcasting" mode which may include Expanded coverage of events as they unfold and in the languages of the populations being affected; creating a new broadcast medium, such as satellite TV, in an area where the U.S. previously did not operate one; increasing interviews with U.S. government officials, Congress and experts from think-tanks giving the American perspective of the situation; and cooperating with other countries' broadcast operations to achieve a 24 hour-a-day broadcasting operation into a region being affected. The U.S. government has always targeted public diplomacy to some degree. From its earliest years, public diplomacy was targeted to reach audiences in Europe to influence the outcome of World War I and World War II. It was later used primarily in Eastern Europe and the Soviet Union to help end the Cold War. In recent years, Congress and the Administration have sought ways to use public diplomacy tools to influence Muslim and Arab populations to combat terrorism, improve coordination of public diplomacy activities throughout the government (via the Policy Coordinating Committee, or PCC), increase funding through regular and supplemental appropriations, and better evaluate current programs to gain future effectiveness. One of the most visible examples of public diplomacy soon after the September 11 th attacks was Secretary of State Colin Powell's appearance on MTV in February 2002, reaching out to, and candidly answering questions from, young people around the world about what America represents. MTV at that time reached 375 million households in 63 countries worldwide. Other public diplomacy actions over the past three years targeted toward Arab and Muslim populations occurred in all three categories of public diplomacy, specifically emphasizing such concepts as religious tolerance, ethnic diversity, the importance of an independent media, elections and educational reform. With the help of $25 million of supplemental funding designated for public diplomacy in various post 9/11 supplemental appropriations and much more designated in the regular appropriations process, IIP developed new programs in recent years to promote America's image and reach larger Muslim and Arab audiences. For example, the Bureau tripled the publishing of text in Arabic, developed an Arabic-language magazine and started a Persian language website. IIP increased to 140 the number of overseas multi-media centers called American Corners—rooms in office buildings or on campuses where students, teachers, and the general public can learn America's story through the use of books, computers, magazines and video. Another 60 American Corners are expected to be established in 2004 with an emphasis on locating them among Muslim populations. And, IIP established Strategic Information, a counter-disinformation capability to provide rapid response to inaccurate stories or misinterpretations of fact about the United States. Since September 11 th , the Department of State has targeted toward the Middle East millions of dollars for IIP-related activities. In recent years, IIP funding for Muslim-related activities totaled $8.69 million in FY2004, $9.11 million in FY2005, and $8.76 million in FY2006. After 9/11, ECA refocused its efforts toward Muslim and Arab populations. Since then, according to the Department of State, about $175 million in funding has supported exchange programs with Muslims and Arabs. Soon after the September 11 th attacks, the Department of State began working to promote exchanges between the United States and Afghanistan. For example, in November 2002, the Bureau, in cooperation with American women CEOs, brought 49 Arab women who are political activists or leaders from 15 different countries to the United States in November 2002. They met with political candidates, lobbyists, strategists, journalists and voters and followed the American election process and election night. Also in the Fall of 2002, 14 Afghani women representing 5 ministries and the Kabul Security Court in the post-September 11 th Afghanistan government came to the United States to gain computer and writing skills, as well as how to re-enter and contribute to the civil service in a reconstructed Afghanistan government. And on December 9, 2003 the ECA brought the Iraqi National Symphony to Washington, D.C. to join in a performance with the National Symphony Orchestra. Broader programs include the Partnership for Learning (P4L) which is an effort to reach youth in Arab and Muslim countries. Since 2002, about $84 million has been spent on this program to, among other things, establish for the first time a high school program with Arab and Muslim students living with American families and attending American high schools. The Youth Exchange and Study Program (YES), also referred to as the Cultural Bridges Program, grew out of the P4L concept and led to a more comprehensive approach in which the Department now addresses all levels of education, from secondary to graduate level, within its exchange programs. Soon after the 2001 attacks and military action in Afghanistan, VOA expanded its broadcasts to Afghanistan and the Middle East, featuring coverage of events in the United States, as well as in the region. Expanded broadcasts were initiated in Arabic, Dari, Farsi, Pashto and Urdu languages. VOA estimated through surveys that 80% of adult males in Afghanistan listen to VOA and give it high marks for credibility and objectivity. An emergency supplemental appropriation ( P.L. 107-38 ) provided $12.25 million to support VOA broadcasting in Arabic, Farsi, Pashto, Dari and Urdu, and RFE/RL broadcasts in Arabic, Farsi, Tajik, Turkmen, Uzbek, Kazakh, Krygyz, and Azeri. The BBG is continuing 24 hour-a-day, seven days per week broadcasting into Afghanistan. In the Middle East, the Broadcasting Board of Governors has significantly expanded news programming into Iraq through the creation of a surrogate news and entertainment radio station—Radio Sawa—and a new television—Middle East Television Network (METN), promoted as Alhurra (the free one) . Also hoping to increase its influence in Iran, the BBG expanded TV programming, as well as programming on the surrogate Persian language radio station, Radio Farda. Expenditures for broadcasting directly related to the war on terrorism amounted to $66.9 million in FY2002, $106.3 million in FY2003, $225.3 million in FY2004, $241.1 million in FY2005, and an estimated $249.1 million in FY2006. The Administration FY2007 request for international broadcasting having to do with the war on terrorism is $274.4 million. (For more information on Middle East broadcasting, see CRS Report RS21565, The Middle East Television Network: An Overview , by [author name scrubbed].) Despite all that has been accomplished in revamping U.S. public diplomacy in the last three years to better respond to the terrorism threat, the questions arise: is it worth it and is it enough? Then-National Security Council Advisor, Condoleezza Rice cited the new initiatives but conceded that more needed to be done. She recommended the creation of sister cities programs, student and professional exchanges, and language and area studies programs that focus on the Muslim world. U.S. public diplomacy has been viewed by some as overseas PR, but congressional testimony in 2004 by members of the 9/11 Commission suggest that it goes much deeper than that. Public diplomacy, they said, must now be viewed as a dialogue, not a monologue, to reach a deeper understanding between societies and build long-term relationships and trust between government officials and their societies. "If we don't have long-term relationships with Muslim populations, we cannot have trust. Without trust, public diplomacy is ineffective." The 9/11 Commission Report stated that the U.S. government must use all its tools to win the war on terrorism. Former Governor Thomas Kean testified before Congress in August 2004 that terrorism is our number one threat now and that public diplomacy is one tool among many that should be used to combat the ongoing war against terrorism. "If we favor any [tools] and neglect others, we leave ourselves vulnerable." Similarly, a former Under Secretary of State for Public Diplomacy, stated recently that "activities associated with public diplomacy need to be seriously prioritized on an equal level with an aircraft carrier. Both are equally important." Among the specific recommendations, the 9/11 Commission suggested giving the Broadcasting Board of Governors increased funding to do more broadcasting to Arab and Muslim populations. Enacted BBG total appropriations in recent years have ranged from $420 million in FY2000 to $599.6 million in FY2005. Post 9/11 emergency supplemental appropriations to date have totaled $143.7 million for BBG. The 9/11 Report recommended that, just as the United States did during the Cold War, this country should identify what it stands for and communicate that message clearly. In addition to more funding for international broadcasting, the Commission urged increased funding for more exchanges, scholarships, and libraries overseas and asserted that whenever assistance is provided, it should be clearly identified as coming from the citizens of the United States. Chairman Thomas Kean asserted in recent testimony that (excluding Iraq) Egypt is the second largest recipient of U.S. assistance, yet only 15% of Egyptians have a favorable view of Americans, according to polls. In addition to bilateral programs, the Commission recommended that the U.S. government join with other nations in generously supporting a new International Youth Opportunity Fund. The Report stated that education and literacy lead to economic opportunity and freedom; therefore, better textbooks that do not teach racism or hatred to Arab and Muslim children, and offering a choice of schools other than extremist madrassas are among the steps that may be key to eliminating Islamist terrorism. Another multilateral approach the Commission recommended is the establishment of a forum, perhaps modeled after the Organization for Security and Cooperation in Europe (OSCE), for engaging both Western and Arab and Muslim representatives to discuss each culture's needs and perspectives. An organization of this nature, said the Commission, would help create long-term relationships and understanding among all countries. Improved relationships would lead to cooperation and trust among Western and Muslim populations, which is critical for containing or eliminating global terrorism, the Report said. The Commission emphasized that the vast majority of Muslims worldwide are moderates who do not agree with violence. In contrast, the Commission stated that the Islamist terrorists hate America and all that it stands for, and violence and terror are their weapons against the United States. The Commission asserted that the United States, through public diplomacy, can find a way to drive a wedge between the two groups. We can gain the support of the moderate majority by exporting optimism and hope for a good future for their children through public diplomacy, the Commission reported. Prior to establishment of the 9/11 Commission, several organizations studied public diplomacy in order to improve international goodwill and America's image, as well as to combat terrorism. The Council on Foreign Relations, the Government Accountability Office (GAO), the Advisory Group on Public Diplomacy for the Arab and Muslim World, and the Broadcasting Board of Governors, in addition to some Members of Congress and congressional committees, offered suggestions intended to elevate public diplomacy and make it more effective. Some options follow: Create a Corporation for Public Diplomacy with tax-exempt status under Section 501(c)(3) of the U.S. tax code, that would receive private sector grants and coordinate private and public sector involvement in public diplomacy; Reconstitute USIA or some other entity that would have U.S. public diplomacy as its sole mission; Increase the emphasis on public diplomacy throughout all U.S. government agencies, with organizational changes in the White House, National Security Council, and the State Department; Require all foreign policy agencies to train key staff in public diplomacy and languages; and Measure the success of public diplomacy efforts by blending the best practices used in the public and private sectors, and improve public diplomacy program effectiveness with the knowledge attained. Public diplomacy is one of numerous tools that the United States has used since the early 20 th century to promote U.S. interests abroad. Over the decades since its formal authorization by the Smith-Mundt Act of 1948, views have fluctuated between vigorously supporting public diplomacy as a highly valuable foreign policy tool and disparaging it as a government program with no constituency and uncertain long-term benefits. After the end of the Cold War, many in Congress questioned the expense and abolished the USIA, moving public diplomacy into the Department of State where it could be more closely coordinated with other foreign policy tools. Since the terrorist attacks in 2001, many in Congress have advocated an increase in public diplomacy funding to "win the hearts and minds of Muslims" and, perhaps, help prevent future attacks. The 9/11 Commission Report agreed with significantly increasing the budget and status of public diplomacy as has been done with the military. Some foreign policy experts and Members of Congress have cautioned, however, that public diplomacy is only good if the message is credible. Recent worldwide polls show that the United States government continues to be viewed with skepticism by much of the world, not just among Arab and Muslim populations. When the message isn't consistent with what people see or experience independently, many assert, public diplomacy is not effective. Furthermore, they say, if U.S. foreign policy is the primary cause of negative foreign opinion, then public diplomacy may be less effective than lawmakers would like. America could benefit, however, if in this view, the government uses public diplomacy more proactively to clearly and truthfully explain U.S. foreign policy actions, rather than appearing indifferent to world opinion. According to the Advisory Group on Public Diplomacy for the Arab and Muslim World, "Spin and manipulative public relations and propaganda are not the answer. ...Sugar-coating and fast talking are not solutions, nor is absenting ourselves." And as Edward R. Murrow (USIA Director, 1961 - 1964) said in 1963 before a House Subcommittee regarding U.S. public diplomacy activities: American traditions and the American ethic require us to be truthful.... truth is the best propaganda and lies are the worst. To be persuasive we must be believable; to be believable we must be credible; to be credible we must be truthful. It is as simple as that. P.L. 108-458 ( S. 2845 ) Intelligence Reform and Terrorism Prevention Act of 2004. A bill to reform the intelligence community and the intelligence and intelligence-related activities of the United States Government, and for other purposes. Introduced September 23, 2004. S.Amdt. 3942 would increase in Muslim populations public diplomacy activities including through increased broadcasting, educational exchanges, and establishing the International Youth Opportunity Fund. The President signed it into law ( P.L. 108-458 ) on December 17, 2004. | While the 9/11 terrorist attacks rallied unprecedented support abroad for the United States initially, they also heightened the awareness among government officials and terrorism experts that a significant number of people, especially within Muslim populations, harbor enough hatred for America so as to become a pool for terrorists. Over time it became clear that for the global war on terrorism to succeed, sustained cooperation from around the world would be required. In the years prior to September 11th, both Congress and the various administrations downplayed the importance of funding public diplomacy activities, and in 1999 abolished the primary public diplomacy agency—the U.S. Information Agency (USIA). Public diplomacy often was viewed as less important than political and military functions and, therefore, was seen by some legislators as a pot of money that could be tapped for funding other government activities. Even prior to the 2001 attacks, a number of decisions by the Bush Administration, including refusing to sign onto the Kyoto Treaty, the International Criminal Court, the Chemical Weapons Ban, and the Anti-Ballistic Missile Treaty, damaged foreign opinion of the United States. After the decision to go to war with Iraq, foreign opinion of the United States fell sharply, not only in the Arab and Muslim world, but even among some of America's closest allies. Some foreign policy and public diplomacy experts believe that using public diplomacy to provide clear and honest explanations of why those decisions were made could have prevented some of the loss of support in the war on terrorism. Many U.S. policymakers now recognize the importance of how America and its policies are perceived abroad. A former Under Secretary of State for Public Diplomacy and both chairmen of the 9/11 Commission expressed the view that public diplomacy tools are at least as important in the war on terrorism as military tools and should be given equal status and increased funding. As a result of the 9/11 Commission recommendations, Congress passed the Intelligence Reform and Terrorism Prevention Act of 2004 (S. 2845, P.L. 108-458) which included provisions expanding public diplomacy activities in Muslim populations. At the same time, some believe that there are limits to what public diplomacy can do when the problem is not foreign misperception of America, but rather disagreements with specific U.S. foreign policies. A major expansion of U.S. public diplomacy activities and funding cannot change that, they say. This report presents the challenges that have focused renewed attention on public diplomacy, provides background on public diplomacy, actions the Administration and Congress have taken since 9/11 to make public diplomacy more effective, as well as recommendations offered by others, particularly the 9/11 Commission. It will be updated if events warrant. |
Starting in 2006, commercial migratory beekeepers along the East Coast of the United States began reporting sharp declines in their honey bee colonies. Because of the severity and unusual circumstances of these colony declines, scientists named this phenomenon colony collapse disorder (CCD). Current reports indicate that beekeepers in most states have been affected. Overall, the number of managed honey bee colonies dropped an estimated 35.8% and 31.8% in the winters of 2007/2008 and 2006/2007, respectively. Preliminary loss estimates for the 2008/2009 winter are reported at 28.6%. To date, the precise reasons for colony losses are not yet known. This report provides an overview of the importance of honey bee pollination to U.S. agricultural production, especially specialty crops. It describes the extent and symptoms of CCD and how it differs from previous honey bee colony losses, describing some of the reasons why scientists believe honey bee colonies are being affected by CCD. Finally, the report discusses policy options and actions that Congress has taken to address this issue. Honey bees ( Apis mellifera ) are the most economically valuable pollinators of agricultural crops worldwide and are the only bee species kept commercially in the United States. In the United States, bee pollination of agricultural crops is said to account for about one-third of the U.S. diet, and to contribute to the production of a wide range of high-value fruits, vegetables, tree nuts, forage crops, some field crops, and other specialty crops. The monetary value of honey bees as commercial pollinators in the United States is estimated at about $15 billion annually ( Table 1 ). Some studies report the estimated value of honey bee pollination at as much as $20 billion annually. This estimated value is measured according to the additional value of production attributable to honey bees, in terms of the value of the increased yield and quality achieved from honey bee pollination, including the indirect benefits of bee pollination required for seed production of some crops. About one-third of the estimated value of commercial honey bee pollination is in alfalfa production, mostly for alfalfa hay. Another nearly 10% of the value of honey bee pollination is for apples, followed by 6%-7% of the value each for almonds, citrus, cotton, and soybeans. Overall, pollinator-dependent crops are reported to make up an estimated 23% of total U.S. agricultural production in 2006, up from an estimated 14% in the 1960s. A number of agricultural crops are almost totally (90%-100%) dependent on honey bee pollination, including almonds, apples, avocados, blueberries, cranberries, cherries, kiwi fruit, macadamia nuts, asparagus, broccoli, carrots, cauliflower, celery, cucumbers, onions, legume seeds, pumpkins, squash, and sunflowers. Other specialty crops also rely on honey bee pollination, but to a lesser degree. These crops include apricot, citrus (oranges, lemons, limes, grapefruit, tangerines, etc.), peaches, pears, nectarines, plums, grapes, brambleberries, strawberries, olives, melon (cantaloupe, watermelon, and honeydew), peanuts, cotton, soybeans, and sugarbeets. In the United States, most pollination services are provided by commercial migratory beekeepers who travel from state to state and provide pollination services to crop producers. These operations are able to supply a large number of bee colonies during the critical phase of a crop's bloom cycle, when honey bees pollinate a crop as they fly from flower to flower collecting nectar and pollen, which they carry back to the nest. Data from the U.S. Department of Agriculture's (USDA) 2007 Census indicate that there were about 28,000 operations with 2.9 million bee colonies in the United States. The majority of these, more than 2 million bee colonies, are reported to belong to commercial migratory beekeepers. The Dakotas accounted for a combined 27% of all bee colonies. Another one-fifth of all colonies are in California (about 14%) and Florida (7%). Montana, Minnesota, Idaho, and Texas accounted for 4%-5% each of all colonies nationwide. Other states with a large number of bee colonies were Michigan, Oregon, Georgia, Nebraska, New York, Washington, Wisconsin, and Wyoming, with about 2% each. Although these operations also produce honey for commercial sale, it is their value as crop pollinators that provides the greatest economic impact in the production of food and feed crops. It is estimated that, each year, more than 2 million bee colonies are rented for U.S. crop pollination. Available limited information indicates that the greatest number of honey bee colony rentals are for apple and almond production, followed by clover seed, cherries, and pears. About one-half of the nation's honey bee colonies (an estimated 1.3 million colonies) are used to pollinate California's current 550,000 acres of almond trees, and this need is projected to grow to 1.5 million colonies by 2010. Both locally and globally, there are concerns that growth in the availability of honey bee stocks is not keeping pace with growing agricultural demands for pollination services. Rental fees collected by commercial beekeepers for pollination services may vary by crop type, and often tend to be lower for some seed crops and higher for berry and tree crops. In recent years, pollination fees paid by crop producers have increased. For example, fees paid by California's almond industry have risen from a reported $35 per colony in the late 1990s to about $75 per colony in 2005. More recent estimates of fees for pollinating almond trees are even higher, at $150 per colony or more. Among the reasons for higher pollination fees are expanding almond acreage and relatively high honey prices, but also fewer available honey bees for pollination due, in part, to colony declines and bee mortalities. Starting in the last three months of 2006, a seemingly new phenomenon began to occur based on reports of an "alarming" number of bee colony losses and die-off along the East Coast. By the end of 2006, beekeepers on the West Coast also began to report "unprecedented" losses. Available estimates indicate that beekeepers in 35 states have been affected ( Figure 1 ). Because of the severity and lack of precedent, scientists coined a new term, Colony Collapse Disorder (CCD), for this phenomenon. Much of the current research on CCD is being conducted by scientists at USDA's Agriculture Research Service (Beltsville bee laboratory), Pennsylvania State University, the University of Montana, and the Pennsylvania and Florida Departments of Agriculture, among others. Many of these researchers also participate in the CCD Working Group, which includes Bee Alert Inc., the Florida and Pennsylvania Departments of Agriculture, Pennsylvania State University, and USDA. Up-to-date information is regularly posted to the website of the Mid-Atlantic Apiculture Research and Extension Consortium (MAAREC), which represents beekeeping associations in New Jersey, Maryland, Delaware, Pennsylvania, and West Virginia. Honey bee colony losses are not uncommon. A recent report by the National Research Council (NRC) documents the extensive literature on honey bee population losses due to bee pests, parasites, pathogens, and disease. Most notable are declines due to two parasitic mites, the so-called vampire mite ( Varroa destructor ) and the tracheal mite ( Acarapis woodi ), and also colony declines due to the pathogen Paenibacillus larvae . Other reasons for bee colony declines reported by the NRC include interspecific competition between native and introduced bees, pathogen spillover effects, habitat loss, invasive plant species that reduce nectar- and pollen-producing vegetation, bee genetics, and pesticides, among other factors. Mite infestations are a relatively new occurrence. The 1980s saw two periods of large die-offs due to Varroa and tracheal mites: The first Varroa mite infestation was reported in 1987; tracheal mites were first detected in 1984. Varroa mites are also said to have eliminated most feral bee colonies in the mid-1990s. Varroa parasitism affects both worker bees and male larvae and can affect the ability of the queen to reproduce. It is associated with viral pathogens and if left untreated can cause colony mortalities usually within six months to two years after the initial infestation. Less is known about the effects of the tracheal mite. The pathogen Paenibacillus larvae is the most serious honey bee pathogen and causes American foulbrood (AFB), which is a disease of larval honey bees. AFB resulted in large colony losses in the 1940s, but its incidence has been reduced by the use of antibiotics and increased apiary inspection programs. Nevertheless, mite and pathogen infestations have likely raised beekeeper operating costs to pay for miticides and/or antibiotics, labor and expenses for treatment, improved management and inspection, and colony replacement of dead bees. Symptoms similar to those observed for CCD have been described in the past, and heavy losses have been documented. It is still not clear whether the current colony losses are being caused by the same factors or if new contributing factors are involved. MAAREC also reports that large beekeeper operations may have experienced higher than normal losses compared with the past few years, and heavy overwintering losses were reported in 2003-2004 for many northern beekeepers. Overall, USDA reports that bee colony losses have averaged 17%-20% per year since the 1990s, attributable to a variety of factors, such as mites, diseases, and management stress. By comparison, bee colony losses between the winters of 2006/2007 and 2007/2008 averaged more than 30% during the year. The first report of CCD was in mid-November 2006 by a Pennsylvania beekeeper overwintering in Florida. By February 2007, large commercial migratory beekeepers in several states had reported heavy losses associated with CCD. Their reports of losses varied widely, ranging from 30% to 90% of their bee colonies; in some cases beekeepers feared loss of nearly all of their colonies. Surviving colonies were reportedly weakened and might no longer be viable to pollinate or produce honey. Losses were reported in migratory operations wintering in California, Florida, Oklahoma and Texas. In late February, some larger non-migratory beekeepers in the mid-Atlantic and Pacific Northeast regions also reported significant losses of more than 50%. Bee colony losses also were reported in five Canadian provinces, several European countries, and countries in South and Central America and Asia. In March 2007, the Apiary Inspectors of America (AIA) conducted a survey of its members in 15 states. The survey tracked changes from September 2006 and March 2007. Overall, responding beekeepers suffered an average loss of 38% of their colonies during the winter of 2006-2007. If these losses are representative of the nation, between 651,000 and 875,000 of the nation's estimated 2.4 million colonies were lost over that winter. While a majority of losses were attributable to known causes, approximately 25% of beekeepers are believed to have suffered from CCD. The survey indicated that, among the beekeepers surveyed, more than 50% reported "abnormally heavy losses" with total colony losses of 55%. This compared to those reporting "normal losses" with total colony losses of 16%. Of the responding beekeepers, about one-fourth reported conditions associated with CCD. Beekeeping operations experiencing CCD-like conditions reported losses of 45% of their managed bee colonies. Among the leading causes reported by most affected commercial beekeeping operations were pest diseases. A 2007 survey conducted by Bee Alert Technology, Inc., showed that, among the beekeepers surveyed, more than 40% reported "severe losses," with losses of nearly 60% of their colonies. Another 48% reported average or lower losses. Smaller operations with less than 100 colonies are more likely to have suffered more severe losses than normal. Respondents were also asked to indicate whether the general cause for colony losses was due to overwinter losses, mites, pesticide exposure, or colony disappearance (or CCD). Among all respondents, colony losses due to disappearance (43%) and overwintering (37%) accounted for the greatest share of total losses, with mites and disease accounting for another 15%. Pesticides were indicated to account for a relatively small share (4%) of surveyed colony failures, regardless of operation size. This compares to other previous estimates of winter losses from various different surveys showing overall colony losses of about 30% during the period 2000-2006, mostly associated with losses due to Varroa mites. Survey information reported by USDA and AIA indicate that the number of managed honey bee colonies dropped an estimated 35.8% in the 2007/2008 winter and 31.8% in the 2006/2007 winter. Preliminary loss estimates for the 2008/2009 winter are reported at 28.6%. This survey data also indicates that 15% of all the colonies lost during the 2008/2009 winter died with symptoms of CCD, compared to a 60% colony loss with CCD-like symptoms in the winter of 2007/2008. Although more recent estimates reflect a possible decrease in the rate of managed colony losses, USDA asserts that this rate of loss remains unsustainable. Other information from USDA indicates that colony losses range widely depending on area, from 7% to 80% loss at some surveyed operations. Current bee colony losses seem to differ from past losses in that colony losses are occurring mostly because bees are failing to return to the hive (which is largely uncharacteristic of bee behavior); bee colony losses have been rapid; colony losses are occurring in large numbers; and the reason why these losses are occurring remains still largely unknown. The phenomenon was first called "Fall-Dwindle Disease," but was renamed because of the unusual characteristics of the colony declines. Moreover, the condition is not only seasonal but manifests itself throughout the year. The term "dwindle" implies a gradual loss, whereas CCD onset is sudden. Also, the term "disappearance" is used to describe other types of conditions, which differ from the symptoms currently being associated with CCD. Finally, the term "disease" is usually associated with a biological agent, but none has yet been identified. The symptoms of CCD, based on the available research, include the following: rapid loss of adult worker bees, few or no dead bees found in the hive, presence of immature bees (brood), small cluster of bees with live queen present, and pollen and honey stores in hive. Among the key symptoms of CCD in collapsed colonies is that the adult population is suddenly gone without any accumulation of dead bees. The bees are not returning to the hive but are leaving behind their brood (young bees), their queen, and maybe a small cluster of adults. What is uncharacteristic about this situation is that the honey bee is a very social insect and colony-oriented, with a complex and organized nesting colony. Failing to return to the hive is considered highly unusual. An absence of a large number of dead bees makes an analysis of the causes of CCD difficult. Also there is little evidence that the hive may have been attacked. In actively collapsing colonies, an insufficient number of adult bees remain to care for the brood. The remaining workforce seems to be made up of young adult bees. The queen is present, appears healthy and is usually still laying eggs, but the remaining cluster is reluctant to consume feed provided by the beekeeper, and foraging is greatly reduced. The initial scientific search of the possible factors involved in CCD focused on four areas: pathogens, parasites, environmental stresses, and bee management stresses such as poor nutrition. Early on, researchers had tentatively removed some practices and conditions from the list of possible causes of CCD. These included feeding practices, chemicals used by beekeepers (such as antibiotics and miticides), use of bees (primarily for honey production versus pollination), and queen source. However, the scientists researching this phenomenon note that these could contribute to the risk of bee colonies developing CCD. Some scientists also wonder whether a combination of the stressors, including mites, disease, and nutritional stress, are interacting to weaken bee colonies and are allowing stress-related pathogens, such as fungi, thus causing a final collapse. Others note the possible role of miticide resistance in bees. Others have speculated that because most of the reported colony losses are among large commercial migratory operations, which may move bees two to five times during a growing season, the current disorder may be the result of accumulated stress, and factors such as confinement and temperature fluctuations. These stresses may increase the colony's susceptibility to disease and may also increase its potential exposure to other diseases and parasites. A 10% die-off is not uncommon following transportation, with losses of 30% possible. As outlined in USDA's 2007-2008 progress report, the available research over the past few years on the numerous possible causes for CCD has led USDA and university researchers to conclude that "no single factor alone is responsible" for CCD. This has led researchers to further examine the hypothesis that CCD may be "a syndrome caused by many different factors, working in combination or synergistically," including "an interaction between pathogens and other stress factors." Currently, USDA states, researchers are focusing on three major possibilities: 1. pesticides that may be having unexpected negative effects on honey bees; 2. a new parasite or pathogen that may be attacking honey bees, such as the parasite Nosema ceranae or viruses; and 3. a combination of existing stresses that may compromise the immune system of bees and disrupt their social system, making colonies more susceptible to disease and collapse. Stresses could include high levels of infection by the V arroa mite; poor nutrition due to apiary overcrowding, pollination of crops with low nutritional value, or pollen or nectar scarcity; exposure to limited or contaminated water supplies; and migratory stress. Initially, the potential causes of CCD, as reported by the scientists researching this phenomenon, were thought to include but not be limited to parasites, mites, and disease loads in the bees and brood; emergence of new or newly more virulent pathogens, such as fungal diseases; poor nutrition among adult bees; lack of genetic diversity and lineage of bees; level of stress in adult bees, as indicated by stress-induced proteins (e.g., transportation and confinement of bees, overcrowding, or other environmental or biological stressors); chemical residue/contamination in the wax, food stores, and/or bees, including acute or cumulative exposure to new types of agricultural pesticides as well as exposure to chemicals that beekeepers use to control mites; and a combination of these and/or other factors. In July 2007, USDA reported that theories about the causes of CCD were focused on increased losses due to the Varroa mite; new or emerging diseases, especially mortality by a new species of a single-celled parasite Nosema ceranae ; pesticide exposure; and potential immune-suppressing stress on bees due to one or a combination of these factors. In September 2007, a research team that included USDA published the results of a genetic screening of CCD-affected honey bee colonies and non-CCD-affected hives. The only pathogen found in nearly all samples (96.1%) from CCD-affected colonies, but not in non-CCD colonies, was the Israeli acute paralysis virus (IAPV), a dicistrovirus that can be transmitted by the Varroa mite. USDA considers this research to have identified IAPV as a marker of CCD, since it is found in affected bees, but not to have identified IAPV as the cause of CCD; however, this research indicates there is a strong correlation of the appearance of IAPV and CCD together. High levels of bacteria, viruses, and fungi have been found in the guts of the recoverable dead bees. Early evidence does suggest the possible presence of a pathogen, given that some bee colonies have recovered once their bee boxes were irradiated. Researchers have found the fungus Nosema ceranae and other pathogens such as chalkbrood in some affected hives throughout the country. Some researchers have speculated that these high infection levels may be compromising the immune system of the honey bees, resulting in immune deficiencies in bees that may be among the possible causes for bee mortalities and disappearance. A 2009 study by researchers in Spain found further evidence that infection in bees by Nosema ceranae may be among the primary causes of CCD. Of the possible causes of CCD being examined, one that has become the subject of debate is whether certain chemicals or combinations of chemicals could be contributing to CCD, including some pesticides and possibly some fungicides. Scientists have long been concerned that pesticides may have sub-lethal effects on bees, not killing them outright but instead impairing their development and behavior. One class of insecticide being studied are neonicotinoids, which contain the active ingredient imidacloprid, and similar other chemicals, such as clothianidin and thiamethoxam. Honey bees are thought possibly to be affected by such chemicals, which are known to work their way through the plant up into the flowers and leave residues in the nectar and pollen (which is the food for young, developing bees). The scientists studying CCD have tested samples of pollen and have indicated findings of a broad range of substances, including insecticides, fungicides, and herbicides. These scientists note that the doses taken up by bees are not lethal, but they are concerned about possible chronic problems caused by long-term exposure. As noted by the NRC, some studies report sublethal effects of pesticides on bee foraging behavior that may impair the navigational and foraging abilities of honey bees. Concerns about imidacloprid, as reported by beekeeping associations in the United Kingdom and France and by some U.S. beekeepers, have focused on its potential to affect complex behaviors in insects, including flight, navigation, olfactory memory, recruitment, foraging, and coordination. However, the NRC and some scientists who study CCD note there is conflicting information about the effect of these pesticides on honey bees. Still, the U.S. Environmental Protection Agency has identified some of these chemicals as highly toxic to honey bees, and use of some of these pesticides has reportedly been discontinued in parts of Europe because of their potential effects on pollinators. However, bee colony losses are also occurring in Europe, where these chemicals are reportedly no longer used. In the United States, the Organic Consumers Association reports that bee colony losses are not occurring at organic beekeeping operations. Nevertheless, a number of environmental groups are taking legal action to highlight the possibility that pesticides and chemical loads may be contributing to colony declines. For example, in December 2009, a federal court in New York invalidated the U.S. Environmental Protection Agency's (EPA's) approval of the pesticide spirotetramat and ordered the agency to reevaluate the chemical, as a result of a suit filed by the Natural Resources Defense Council (NRDC) and the Xerces Society. The pesticide, manufactured by Bayer CropScience under the trade names Movento and Ultor, is thought to be potentially harmful to honey bees. NRDC also filed a lawsuit against the EPA in August 2008 to obtain information that they allege the U.S. government is withholding about the risks posed by pesticides to honey bees. NRDC claims that EPA has evidence of connections between pesticides and CCD. Also in August 2008, a German coalition group brought legal charges against Bayer AG, accusing them of "marketing dangerous pesticides" and contributing to bee colony declines. The coalition filed the charge in cooperation with German beekeepers who claim they lost hives because of the Bayer pesticide clothianidin dating back to May 2008. Some countries, including Germany, Italy and France, reportedly are either considering or have already instituted full or partial bans of neonicotinoid-based pesticides due to their potential impact on honey bee populations. Other reported theories include the effects of shifting spring blooms and earlier nectar flow associated with broader global climate and temperature changes, the effects of feed supplements that are produced from transgenic or genetically modified crops, such as high-fructose corn syrup, and also the effects of cell phone transmissions and radiation from power lines that may be interfering with a bee's navigational capabilities. The contributions of these possible factors have not been substantiated by evidence examined by the key researchers of this issue. In late 2008, beekeepers in some states began to raise concerns about live bee imports from Australia. Specifically, these concerns centered on reports that the Asian honey bee, Apis cerana , had been introduced to Australia. Asian honey bees, found in southeast Asia, are considered an invasive species of bees and are known to carry a mite ( tropilaelaps clarae ). Neither the Asian honey bee nor the mite are known to be present in the Western Hemisphere. However, U.S. beekeepers have expressed concerns that bee imports could result in the introduction of mites and other diseases and further contribute to stressors already facing domestic species. In November 2008, Australia notified APHIS of an incursion of Asian honey bees in the Cairns, Queensland, area of northeastern Australia, and Australia voluntarily stopped issuing export certificates to ship honey bees to the United States. In response, APHIS required that all honeybee exports be derived from colonies 100 miles away from any find of Asian honey bees known to have occurred in the last two years. As of late December, Australian shipments of honey bees to the United States have resumed. APHIS's decision to resume trade was based on data provided by Australia indicating that the areas outside the quarantine zone in Cairns are free the Asian honey bee and of the mites of concern. Live bees (only queens with attendants and package bees) are allowed for import into the United States from Canada, Australia, and New Zealand. Imports from other countries are restricted. Certain import requirements apply along with general restrictions regarding the transit of live honey bees, bee byproducts, and bee equipment. Items that are not allowed for transit include imports of whole colonies in hives, used beekeeping equipment, and pollen. Restrictions apply on beeswax for beekeeping and honey for bee feed, and require special treatment. During the 110 th Congress there were three House subcommittee hearings on honey bee colony declines and concerns about CCD. The House Subcommittee on Horticulture and Organic Agriculture held two hearings: one in March 2007 and a second in June 2008. The Subcommittee on Fisheries, Wildlife, and Oceans of the House Committee on Natural Resources held a hearing in June 2007 on the role of pollinators in ecosystem health, which also addressed concerns about bee colony declines. In the Senate, in April 2008, Chairwoman Barbara Boxer and other members of the Senate Environment and Public Works Committee hosted a briefing on pollinators and their role in agricultural security. Policy options discussed at these congressional hearings and briefings focused on the need for increased federal funding for multi-disciplinary research and monitoring to document changes in pollination reserves, as well as additional technical support and assistance for beekeepers. Additional research funding would help support USDA's research efforts and those at its laboratories located in Arizona, Louisiana, Maryland, Texas, and Utah. Other recommended options included expanding crop insurance to include beekeepers and honey producers; providing a one-time payment for incurred losses; improving existing USDA conservation programs to better prevent habitat loss and sustain wildlife populations; emphasizing the importance of pollinator diversity and sustaining wild and native pollinator species; developing or improving existing federal and state best management practices for beekeepers; improving regulatory enforcement to prevent misuse of agricultural chemicals; and continuing the current marketing loan program for honey. In May 2008, Congress enacted the 2008 farm bill ( P.L. 110-246 ), which, among other things, provided additional funding for research and conservation programs addressing honey bees and pollinators. The law reflects provisions that were included in both the House- and Senate-passed versions of the farm bill, which addressed honey bees and pollinators as part of their conservation, specialty crop, research, and miscellaneous title provisions. The conservation title of the 2008 farm bill included language that broadly encourages habitat development and protection among the administrative requirements for native and managed pollinators under USDA's conservation programs (Section 2708), and ensures that USDA's conservation technical assistance includes standards that account for native and managed pollinators (Section 2706). These provisions could broaden the focus of USDA's farm conservation programs to include pollinator habitats and habitat improvement among their goals, as well as require USDA to review its conservation practice standards with respect to managed and native pollinators. The research title of the 2008 farm bill identified pollinator protection among its so-called high-priority research and extension areas (Section 7204). It provided for research and extension grants (1) to survey and collect data on bee colony production and health; (2) to investigate pollinator biology, immunology, ecology, genomics, and bioinformatics; (3) to conduct research on various factors that may be contributing to or associated with colony collapse disorder and other serious threats to the health of honey bees and other pollinators, including parasites and pathogens of pollinators, and the sublethal effects of insecticides, herbicides, and fungicides on honey bees and native and managed pollinators; (4) to develop mitigative and preventative measures to improve native and managed pollinator health; and (5) to promote the health of honey bees and native pollinators through habitat conservation and best management practices. For this provision, the 2008 farm bill authorized appropriations for grants at $10 million annually for FY2008-FY2012. The research provisions also directed USDA to increase its capacity and infrastructure to address colony collapse disorder and other long-term threats to pollinator health (including hiring additional personnel) and to conduct research on colony collapse disorder and other pollinator issues at USDA's facilities. Annual appropriations were authorized at $7.25 million (FY2008-FY2012), with another $2.75 million annually (FY2008-FY2012) for honey bee pest and pathogen surveillance. The 2008 farm bill also directed USDA to submit an annual report to Congress on its response to CCD, indicating that the report should investigate the cause(s) of honey bee colony collapse and recommend appropriate strategies to reduce colony loss. Other provisions in the 2008 farm bill supported pollinators through the bill's crop insurance and other disaster assistance provisions. One such provision identifies honey farms as possible beneficiaries of the bill's supplemental agricultural disaster assistance (Section 12033); another provision provides contracts for additional policies and studies to carry out research and development regarding insurance policies that cover loss of bees (Section 12023). Since enactment of the farm bill, USDA has created the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP). This program, administered by USDA's Farm Service Agency (FSA), provides disaster assistance for honey bee producers. The ELAP provides emergency relief to producers of livestock, honey bees, and farm-raised fish to aid in the reduction of losses because of disease, adverse weather, or other conditions, such as blizzards and wildfires. Eligible honey bee producers—those who incur physical losses of honey bees and honey bee hives because of colony collapse disorder—must provide documentation, and/or a certification that the loss of honey bees was due to CCD, from one or more of the following: registered entomologist; cooperative extension specialist; and/or land grant university. Additional information on this program is available at USDA's website and at state county FSA offices. The 2008 farm bill also contained provisions that generally support honey production. These include, for example, provisions pertaining to the National Honey Board (Section 10401-10402); provisions covering rates for marketing assistance loans for certain commodities, including honey (Section 1202); and provisions covering certain nutrition title provisions (such as Section 4231). USDA released its initial action plan for addressing CCD in July 2007. USDA's action plan focuses on improving coordination and redirecting existing resources and research for mitigation and prevention, including education and outreach, as well as expanding research and diagnostic resources to prevent future losses, working with the land grant universities. It also coordinates activities across three USDA agencies: the Agricultural Research Service (ARS), the Animal and Plant Health Inspection Service (APHIS), and the National Institute of Food and Agriculture (NIFA). USDA's focus on expanded research is consistent with the approach taken in the most recently introduced congressional bills and with recommendations by the American Honey Producers Association and the American Beekeeping Federation. Under the plan, USDA would (1) conduct surveys and collect data on bee health; (2) analyze bee samples for pests, disease-causing pathogens, pesticide exposure, and other factors; (3) conduct controlled experiments to identify factors affecting bee health, including potential causes of colony collapses; and (4) develop best management practices and guidelines to improve general bee health and reduce susceptibility to colony collapses and other disorders among both honey bees and non- Apis bees. Aspects of USDA's action plan were presented at a hearing before the Subcommittee on Fisheries, Wildlife, and Oceans of the House Committee on Natural Resources in June 2007. In June 2009, USDA published its 2007-2008 progress report on ongoing and intended future research efforts related to honeybees and CCD, following on the action items in its action plan. As outlined in USDA's progress report, prior study of the numerous possible causes for CCD has led researchers to further examine the hypothesis that CCD may be "a syndrome caused by many different factors, working in combination or synergistically." Accordingly, future study will "focus increasingly on combinations and synergistic effects of factors in causing CCD." The progress report provides detailed information on the status of ongoing research under each of the four elements of USDA's action plan, including survey and (sample) data collection, analysis of existing samples, research to identify factors affecting honey bee health, and mitigative and preventive measures. The progress report is available at USDA's CCD website at http://www.ars.usda.gov/is/br/ccd/ccd_progressreport.pdf . Funding for honey bee and CCD research at USDA's ARS has increased, following enactment of the 2008 farm bill ( P.L. 110-246 ) and also FY2009 and FY2010 appropriations ( P.L. 111-8 and P.L. 111-80 , respectively), which, among other things, provide additional funding for research and conservation programs addressing honey bees and pollinators. Total ARS funding for honey bee and CCD research has been as follows: FY2007—$7,675,000 FY2008—$7,798,000 FY2009—$8,290,000 FY2010—$9,790,000 (includes $1.5 million increase for CCD research) ARS also has an "Area-wide Project on Bee Health," which consists of temporary funding of $670,000 in FY2008 and will continue for at least four additional years at approximately $1 million per year. Additional funding is available to USDA's NIFA, and includes combined research on honey bees, funding specific to CCD and bee health, and funding for various research labs and grants. Recently, emerging issues grants were awarded to Penn State University and the University of Georgia to study the effects of pesticides, pathogens, and miticides on pollinator populations. | Starting in late 2006, commercial migratory beekeepers along the East Coast of the United States began reporting sharp declines in their honey bee colonies. Because of the severity and unusual circumstances of these colony declines, scientists named this phenomenon colony collapse disorder (CCD). Reports indicate that beekeepers in most states have been affected. Overall, the number of managed honey bee colonies dropped an estimated 35.8% and 31.8% in the winters of 2007/2008 and 2006/2007, respectively. Preliminary loss estimates for the 2008/2009 winter are reported at 28.6%. To date, the precise reasons for colony losses are not yet known. Honey bees are the most economically valuable pollinators of agricultural crops worldwide. Scientists at universities and the U.S. Department of Agriculture (USDA) frequently assert that bee pollination is involved in about one-third of the U.S. diet, and contributes to the production of a wide range of fruits, vegetables, tree nuts, forage crops, some field crops, and other specialty crops. The monetary value of honey bees as commercial pollinators in the United States is estimated at about $15-$20 billion annually. Honey bee colony losses are not uncommon. However, losses in recent years differ from past situations in that colony losses are occurring mostly because bees are failing to return to the hive (which is largely uncharacteristic of bee behavior); bee colony losses have been rapid; colony losses are occurring in large numbers; and the reason(s) for these losses remains largely unknown. Based on the available research over the past few years on the numerous possible causes of CCD, USDA concluded in its 2007-2008 progress report (released in June 2009) that "it now seems clear that no single factor alone is responsible for the malady." This has led researchers to further examine the hypothesis that CCD may be "a syndrome caused by many different factors, working in combination or synergistically." Currently, USDA states, researchers are focusing on three major possibilities: pesticides that may be having unexpected negative effects on honey bees; a new parasite or pathogen that may be attacking honey bees, such as the parasite Nosema ceranae or viruses; and a combination of existing stresses that may compromise the immune system of bees and disrupt their social system, making colonies more susceptible to disease and collapse. Stresses could include high levels of infection by the Varroa mite; poor nutrition due to apiary overcrowding, pollination of crops with low nutritional value, or pollen or nectar scarcity; exposure to limited or contaminated water supplies; and migratory stress. Funding for honey bee and CCD research at USDA's Agricultural Research Service (ARS) has increased sharply, following both the enactment of the 2008 farm bill (P.L. 110-246) and the FY2009 and FY2010 appropriations process (P.L. 111-8 and P.L. 111-80, respectively). These legislative actions contained additional provisions that would, among other things, provide additional funding for research and conservation programs addressing honey bees and pollinators. Total ARS funding for honey bee and CCD research averaged more than $7.7 million each in FY2007 and FY2008, increasing to $8.3 million in FY2009 and $9.8 million for FY2010. |
Federal policymakers are debating a range of potential initiatives for reducing atmospheric carbon dioxide (CO 2 ) emissions from U.S. energy sources. Legislative proposals would seek to limit U.S. CO 2 emissions to specific (historical) levels through emissions caps, carbon taxes, or other regulatory mechanisms. Many of these proposals dictate or anticipate a declining long-term trajectory for annual U.S. carbon emissions. The Obama administration proposes cutting U.S. greenhouse gas emissions, including CO 2 emissions, 14% from 2005 levels by 2020. The American Clean Energy and Security Act of 2009 ( H.R. 2454 ), which is viewed as the most widely discussed such legislative proposal in Congress, would set a more aggressive goal of reducing U.S. greenhouse gas emissions 17% below 2005 levels by 2020. Other proposals to reduce U.S. carbon emissions to specific levels are found in the Cap and Dividend Act of 2009 ( H.R. 1862 ), the Clean Environment and Stable Energy Market Act of 2009 ( H.R. 1683 ), the America's Energy Security Trust Fund Act of 2009 ( H.R. 1337 ), and the Safe Markets Development Act of 2009 ( H.R. 1666 ). An overarching policy issue which arises from carbon control proposals is how the CO 2 reduction targets could be achieved. Numerous analysts have been examining this question and have identified specific measures to reach particular targets—especially in the electricity industry, which is responsible for nearly 40% of U.S. carbon emissions. In the electricity sector, these measures typically include some combination of energy efficiency, renewable energy, nuclear power, advanced fossil-fuel power generation, carbon capture and sequestration, plug-in hybrid electric vehicles, and distributed energy resources. Key among these is end-use energy efficiency, which is viewed by many as the measure with the greatest potential to reduce CO 2 emissions quickly and at relatively low cost. According to Secretary of Energy Steven Chu, "energy efficiency, energy conservation are where the greatest gains will be." Residential and commercial buildings, especially existing stock, are considered a particularly rich target for electricity efficiency improvements, as the two sectors combined account for 40% of primary energy consumption in the United States. H.R. 2454 contains key sections promoting electricity efficiency in buildings as a means of reaching the bill's carbon emissions targets. But increasing the efficiency of buildings is not a new priority in the United States. Indeed, Congress has recognized the benefits of electricity efficiency in buildings, and the challenges of capturing those benefits, since the Energy Policy and Conservation Act of 1975 ( P.L. 94-163 ). To date, federal initiatives in building energy efficiency have been somewhat effective, but not as much as they would need to be to achieve the steep CO 2 reductions anticipated under H.R. 2454 . It is widely believed that much greater electricity savings are available through additional building efficiency improvements. However, analysts have identified a number of critical socio-economic and policy barriers which have historically limited the impact of federal and state building efficiency programs. This report describes those barriers, the degree to which federal law has addressed them, and their implications for meeting future U.S. carbon reduction targets. Although this report focuses on electricity efficiency in buildings, there are other opportunities for energy efficiency related to buildings that may also offer significant opportunities for atmospheric CO 2 reductions. These include improved energy efficiency in transportation (to and from buildings), reducing direct use of fossil fuels in buildings, and reducing energy use or carbon emissions associated with building materials and construction (e.g., steel and concrete). Analysis of some of these options is provided in CRS Report R40147, Issues in Green Building and the Federal Response: An Introduction , by [author name scrubbed]. The term "energy efficiency" can mean different things in different contexts. For the purposes of this report, "energy efficiency" means that an energy conversion device, such as a household appliance or an elevator, uses less energy while providing the same level of service for a building (e.g., cooling, lighting, motor drive). Efficiency improves when the device undergoes a technical modification, or through the use of certain design changes such as better insulation, thermal windows, improved ventilation, and solar orientation. The energy-saving result of an efficiency increase is referred to as "energy conservation." Baseline improvements in energy efficiency occur over time as an economic response to changes in energy prices, the availability of new technology, turnover in end-use equipment, and other factors. Beyond these baseline improvements, conservation studies since the 1970s have identified substantial additional potential for energy efficiency. One analysis in 1976 stated, technical fixes in new buildings can save 50 percent or more in office buildings and 80 percent or more in some new houses.... [B]y 1990, improved design of new buildings and modification of old ones could save a third of our current total national energy use—and save money too. A 1981 study by the Solar Energy Research Institute likewise found that "through energy efficiency, the U.S. could achieve a full-employment economy and increase worker productivity, while reducing national energy consumption by nearly 25 percent." The study further concluded that "the consumption of electricity can be reduced to a point where, on a national basis, demands through the end of the [twentieth] century can be met with generating equipment now operating or in advanced stages of construction." More recent studies continue to identify significant untapped electricity conservation potential. The "Five Lab Study" in 1997 estimated a technical electricity savings potential of approximately 23%, and a maximum "achievable" potential of 15% among residential and commercial buildings, assuming aggressive policies promoting conservation and a carbon cost of $50/metric ton (1993 dollars). A 2004 meta-analysis by the American Council for an Energy-Efficient Economy of several regional studies reported a technical electricity conservation potential of 33%, and an achievable potential of 24% over a 5 to 15 year time horizon, depending upon the study. The U.S. Department of State's 2006 Climate Action Report concludes that "by using commercially available, energy-efficient products, technologies, and best practices, many commercial buildings and homes could save up to 30 percent on energy bills." Both federal and state agencies have implemented a multitude of initiatives over the last 40 years to capture energy efficiency potential in the electricity sector. These initiatives have included appliance, equipment, and building efficiency standards; electric utility-administered conservation incentives; consumer information campaigns; and other programs. Notwithstanding these efforts, the levels of incremental electricity conservation actually achieved since the 1970s have been more modest than the 25%-30% suggested in conservation potential studies. A 2004 analysis examining a comprehensive range of both federal and utility-sponsored conservation and energy efficiency programs (including federal efficiency standards) administered through 2000 concluded as follows: [P]rograms for which ex post quantitative estimates of energy savings exist are likely to have collectively saved up to 4.1 quads of electricity annually. These estimates typically reflect the cumulative effect of programs (e.g., all appliance efficiency standards, past and present) on annual energy consumption. This total energy savings represents about 6% of annual nontransportation energy consumption.... A study of California's 2001 energy demand reduction initiative (promoted heavily as an emergency measure to avoid blackouts during the state's electricity crisis) reported 6% reduced electricity usage compared to the prior year, although only a portion of this reduction was "attributable to savings from energy efficiency or onsite generation projects ... likely to persist for many years." Consistent with these studies, a 2008 analysis by EPRI projected a "realistic" U.S. end-use electricity savings potential of 7% beyond baseline levels which would occur without additional market intervention. A 2007 study by the McKinsey Global Institute found a savings potential from improved efficiency of well over 20% in the residential and commercial sectors, but projected that policies in place at the time would lead to an annual capture rate of under 0.5%. Taken together, the studies of technical conservation potential and actual conservation impacts suggest a perpetual opportunity for incremental electricity conservation on the order of 25%—more than four times the savings such programs have actually realized. Moving beyond the 5% to 7% electricity savings range, however, has been a persistent challenge to conservation proponents. Students of end-use markets have long been puzzled by the lack of adoption of ostensibly cost-effective energy efficiency technologies. A rich literature has developed around this question, and evidence for various barriers to adoption of efficiency technologies is widespread. Seeking the most current perspectives on these barriers, along with other constraints on CO 2 emissions reduction, Congress established an advisory committee under the Energy Policy Act of 2005 ( P.L. 109-58 ) to "develop recommendations that would provide for the removal of domestic barriers to the commercialization and deployment of greenhouse gas intensity reducing technologies and practices." The advisory committee released its report, Carbon Lock-In: Barriers To Deploying Climate Change Mitigation Technologies (hereinafter referred to as the Lock-in report) in November 2007. The report lists 10 categories of potential barriers inhibiting the deployment of a range of greenhouse gas reduction technologies, identifying those barriers considered "critical" or "important" for particular options. The report's findings related specifically to end-uses in buildings are summarized in Table 1 . While by no means an original list, Table 1 is unusual in segregating the barriers according to general importance. All 10 barriers to energy efficiency listed above likely warrant policy attention, but understanding and overcoming the six barriers considered critical may be a priority. This report adopts the critical barriers in Table 1 as an organizing structure because the Lock-in report which produced them was prepared specifically at the direction of Congress and because the barriers as a whole are consistent with those identified in prior analyses. As in all such lists of barriers, their separation into distinct categories may be somewhat artificial. In reality, there may be interactions among specific categories (e.g., incomplete information and lack of specialized knowledge) which defy clear separation. Nonetheless, for purposes of policy analysis, this list of barriers can serve as a useful basis for examining related federal statutes in an organized way. The critical barriers as characterized by the Lock-in report, as well as similar studies, are discussed in more detail below. The Lock-in report identifies industry structure as the "most important" of the critical barriers to building efficiency. Industry structure in this context refers to a complex and fragmented set of decision-making relationships involving numerous stakeholders (e.g., investors, owners, occupants, builders, architects, equipment manufacturers, lenders, code setters, and realtors) whose interests in efficiency may not align. A 1996 Lawrence Berkeley National Laboratory study likewise found that among "the most vexing issues for energy efficiency policies" is "the variety of institutions and firms that influence energy use." A 2007 international study by the World Business Council for Sustainable Development reached similar conclusions. The council's report graphically illustrates the complex nature of relationships among the various stakeholders affecting building efficiency decisions, as shown in Figure 1 . One important set of difficulties arising from the industry structure in Figure 1 are "principal-agent" problems associated with efficiency investments, wherein the parties responsible for choosing end-use equipment are not financially responsible for its energy costs. In the residential rental market, for example, landlords may choose not to install efficient appliances for their tenants—who must pay the bills to run them. Similarly home builders, in order to keep down construction costs, may choose not to use the most energy-efficient windows or insulation options—at the expense of the home's future buyer who will pay higher utility bills. These and other problems associated with industry complexity and fragmentation make increasing building efficiency a challenge because it can be difficult to act upon so many decision processes comprehensively, coherently, and effectively using targeted public policy instruments. The Lock-in report identifies incomplete and imperfect information about the cost-effectiveness and availability of efficient technologies as another critical barrier to improved building efficiency. As an earlier study stated, "Cost-effective energy efficiency measures are often not undertaken as a result of lack of information on the part of the consumer, a lack of confidence in the information, or high transaction costs for obtaining reliable information." In the residential sector, the Lock-in report cites the lack of end-use energy consumption information in typical utility bills as obscuring the cost-effectiveness of end-use efficiency improvements. In the non-residential sector, the complexity of buildings makes it hard to determine to what extent any particular building is energy efficient, and consequently, what measures have what potential to improve that building's efficiency. The Lock-in report finds that "consumers are often reluctant to pay more upfront to purchase products with lower life cycle costs, especially when lenders do not credit them for lower utility bills later." Consistent with this finding, a 2009 survey of commercial building professionals reported that 73% of respondents considered first cost the most significant barrier to the adoption of high-efficiency lighting systems. Changes in building design, technology selection, and building controls face similar obstacles when they involve higher initial costs, even if the changes are clearly cost-effective investments over time. Some consumers, such as low-income households and small businesses, have limited access to credit, face high financing costs, and often have difficulty calculating life cycle costs to evaluate efficiency investments. In a 2009 joint survey of facility managers by Johnson Controls and the International Facility Management Association, 63% of respondents cited either capital availability, payback period, or return on investment as the top barrier to achieving energy efficiency. To the extent that energy efficiency measures involve changes in building technologies, the Lock-in report finds that insufficient validation of their performance leads to a perception of technical risk. Moreover, the cost-effectiveness of advanced technologies, in particular, can be situation-specific and hard to predict. One example of the latter barrier is the adjustable speed motor drive (ASD), which has potential application in reducing energy use significantly in many motor-driven end uses, especially water pumping and building air handling systems. While ASDs have great efficiency potential, the cost to implement them may vary greatly in advanced applications. As one university extension program has concluded, the cost of a basic ASD installation may "easily" more than double when accounting for unique application requirements, special features, advanced controls, and other factors. A combination of technical riskiness and cost uncertainty deters many businesses from implementing new efficiency measures in place of "tried and true" technologies. The Lock-in report identifies market risks as uncertainties about the lifecycle costs of competing technologies, and uncertainties about the development and availability of new technology in the marketplace, among other considerations. In the case of building efficiency, acceptance of efficient technologies is also hindered specifically by energy price uncertainties and concerns related to irreversible investments. The former has been a particular challenge due to recent volatility in U.S. natural gas and coal prices, for example, which are principal fuels for electricity generation. Regarding irreversible investments, building owners may be reluctant to make long-term commitments to new technologies during a period of rapid technical change. This is analogous to waiting an extra two years to replace an office computer system with the expectation that microprocessor performance will greatly improve in the meantime. The fiscal impediments to energy efficiency identified by the Lock-in report primarily are rooted in the rate structures of electric utilities. The report cites the lack of cost-recovery mechanisms for utility efficiency investments, utility revenue erosion from efficiency improvements, and lack of de-coupling of utility profits from sales as "critical" disincentives to building efficiency. The rates an electric utility charges its electricity customers typically tie a utility's recovery of fixed costs to its sales of electricity. This system of price cap regulation discourages even the most economical [efficiency] investments if they are likely to reduce throughput. As sales go down, the utility's shareholders or customer-owners lose dollars with every unsold kilowatt-hour. To actively encourage or promote demand- or supply-side resources installed on the customer side of the meter ... would undermine the institution's financial health. Since electric utilities are thought to have great influence on the electricity use and the investment behavior of their customers, such financial disincentives for utilities are seen as broadly hampering, or at least not facilitating, activities to improve building end-use efficiency. Given the set of critical barriers identified in the Lock-in report—prepared at the behest of Congress—it seems logical to review federal building efficiency policies in the context of these barriers. In particular, a review of the Lock-in analysis invites the question: How have federal statutes on building efficiency addressed the critical barriers in the Lock-in report? To explore this question, CRS has categorized building efficiency provisions in key federal statutes according to the six critical barriers discussed above. In performing this analysis, we reviewed the original statutory language and, in some cases, associated committee reports to determine the legislative intent of statutory provisions that were relevant to energy efficiency in buildings. Based upon this review, we judged which provisions appeared to address at least some part of the critical Lock-in barriers as described in the report. Statutory provisions clearly addressing more than one barrier category were identified with the multiple barriers. Table 2 summarizes the exercise, identifying with an "X" in the appropriate columns, whether the key federal statutes contain provisions aligned with critical efficiency barriers. Note that such categorization can be subjective, and some provisions address more than one barrier, so the inclusion of certain provisions in one category versus another could be debated. Note also that provisions for largely unrestricted grants to state-run building efficiency programs could not be specifically categorized and, therefore, were excluded from the analysis. Despite these caveats, Table 2 offers a number of key insights about the trajectory of congressional policy promoting energy-efficient buildings over the last 35 years, as discussed below. A detailed version of this table, listing specific sections from each statute that are relevant to this analysis, is provided in the Appendix ( Table A-1 ). As Table 2 shows, Congress has a substantial and sustained history of policy intervention for three of the critical barriers in the Lock-in report. Beginning with the Energy Policy and Conservation Act of 1975 ( P.L. 94-163 ) Congress has enacted policies addressing efficiency barriers due to industry structure, imperfect information, and high first costs. In the case of industry structure, these initiatives have focused largely on promulgating ever-stricter equipment efficiency standards and building codes, promoting state efforts to improve building efficiency, and mandating efficient practices for federal buildings. In the case of imperfect information, federal initiatives have promoted studies of conservation potential in buildings, energy audits, public education, and labeling programs. In the third case, grants, tax credits, and loan programs have been offered to help offset first cost barriers for efficiency measures, especially in the low-income residential sector. Congress began addressing the technical risk barrier somewhat later than the first three barriers. Although some technology demonstration measures were enacted under the National Energy Conservation Policy Act of 1978 ( P.L. 95-619 ), Congress pursued technical risk policies more vigorously in the Energy Policy Act of 1992 ( P.L. 102-486 ) and subsequent statutes. For all of these critical barriers, one can debate the nature, breadth, and significance of the policy intervention—but it is clear that Congress has had ongoing concern about the issues and has periodically revisited them in response to changing building sector conditions. In contrast to the building efficiency barriers above, Congress does not have a history of sustained statutory initiatives addressing either unfavorable fiscal policies or market risk. The Energy Policy Act of 1992 included important provisions related to the role of electric utilities in promoting end-use efficiency, but the effects of those provisions were ultimately limited. Additional statutes related to fiscal policies are discussed later in the report. Congress appears to have taken little, if any, action to address market risks as defined in the Lock-in study. If one accepts that overcoming fiscal policies and market risk is critical to improving U.S. building efficiency, congressional treatment of these two barriers warrants further examination. As noted above, the Lock-in report identifies energy price uncertainties and concerns about irreversible investments as key barriers to building efficiency. Energy price uncertainty is probably the greater barrier, because it drives the cost-effectiveness of efficiency measures both from an individual end-user's perspective and from a broader social perspective. It stands to reason that uncertainty about the future price of energy would complicate decisions about building efficiency investments, and could deter conservative building owners from considering all but the most highly cost effective improvements. As it happens, recent U.S. energy price volatility is at historic highs. The price of natural gas illustrates this point. Natural gas is a key fuel for electric power generation, especially during peak hours, so natural gas price in some regions can be a significant determinant of electricity prices. As Figure 2 shows, natural gas price volatility this decade has been staggering. According to the Energy Information Administration, "[a]s a result of wide swings, the range in average monthly wellhead prices for [2008] was the widest in history." Coal prices have also become extremely volatile in most U.S. coal-producing regions, as shown in Figure 3 . Coal-fired generation accounts for approximately 50% of electricity produced in the United States, so coal prices are a key driver of U.S. electricity prices. Relatively limited volatility of energy prices through the late 1990s may partly explain the lack of congressional attention to this issue in its historical efficiency statutes—energy price uncertainty may have only emerged as a critical efficiency barrier this decade. In the current energy market, however, where prices for some energy commodities can change by a factor of two or three in a matter of months, consumers face difficulties evaluating the lifecycle costs and cost-effectiveness of energy efficiency investments. In the short run, retail electricity prices—which generally are regulated—may partly insulate end-users from volatility in wholesale prices for generation fuel. But over the long run, electricity rates must ultimately reconcile with generation fuel costs, so the trajectory of those future costs is still a key concern for efficiency measure cost-effectiveness, even at the end-use level. An increase in natural gas-fired generation in response to future carbon costs may make volatility in natural gas prices, specifically, an even greater influence on retail electricity costs. From a social perspective, other energy market factors may exacerbate energy price uncertainty and its implications for the cost-effectiveness of building efficiency. Slowing growth of electricity demand, such as during the current economic downturn, may lower electricity prices by changing the supply-demand balance, and may also change which generation units supply the marginal demand for power. Uncertain energy prices and electricity load growth, taken in combination, can have great implications for the cost effectiveness of building efficiency measures. An analysis by Exelon Corporation demonstrates the potential effect of these factors, estimating the utility's cost of avoided carbon emissions (an alternative measure of cost-effectiveness) by increasing end-use energy efficiency among its customers ( Figure 4 ). The "blocks" in the figure represent distinct categories of efficiency investment. As Figure 4 shows, whereas energy efficiency more than pays for itself under high natural gas prices as experienced in July 2008, most efficiency measures cost in excess of $25 per metric ton of avoided CO 2 under a scenario with low natural gas prices and low electric load growth. The costs of any future restrictions on atmospheric CO 2 emissions also exacerbate energy price uncertainty if those costs are not clearly established in advance. A carbon tax, or cap-and-trade allowance program, ultimately should encourage efficiency investments by raising their cost-effectiveness relative to energy supply options that continue emitting CO 2 . Uncertainty about the carbon costs, however, simply adds another degree of variability to future energy prices, and, in this respect, may make it harder for building owners to make efficiency commitments. Carbon policies complicate efficiency investment calculations and may encourage delay in implementing cost-effective efficiency measures to see how energy prices will trend when carbon costs and market responses are factored in. As one Johnson Controls executive reportedly has stated, following the company's joint survey with the International Facility Management Association, We see a wide distribution of views about what will happen to energy prices—ranging from a 100 percent increase to a 60 percent decrease.... This uncertainty appears to be another reason business leaders are holding back on [energy efficiency] investments. Market evidence, therefore, suggests that energy price uncertainties may be having a greater negative impact on the nature and timing of building efficiency investments in the private sector than is commonly understood. Energy price uncertainty presents a challenge to government policymakers because it is usually driven by global, competitive market forces beyond the reach of policy instruments available to any single national authority. As unanticipated volatility in U.S. gasoline prices demonstrated last year, Congress may have few options to moderate energy commodity price swings driven by global supply and demand—even when there may be a compelling national interest to do so. Notwithstanding the competitive drivers of energy commodity prices, Congress has, in some cases, considered or enacted policies to shield energy producers or consumers from energy price swings to ensure the economic viability of their investments. For example, in the 110 th Congress, provisions in the proposed Coal Liquid Fuel Act would have provided federal price guarantees for coal liquefaction projects "resolving uncertainties in the long-term outlook for oil prices that ... inhibited the flow of private capital into coal-to-liquids facilities." The Alaska Natural Gas Pipeline Act of 2004 provides an $18 billion loan guarantee for the pipeline developers, offsetting the risk of a potential drop in delivered natural gas prices and an associated loss of natural gas revenues. The Energy Security Act of 1980 offered federal loan guarantees and price guarantees to encourage investment in synthetic fuels and biomass energy infrastructure (which may not have been economical based solely on the market price of produced energy). Although such price risk policies are intended to promote increased investment in specific categories of energy supply, similar price risk justifications could apply equally to end-use efficiency investments. One particular complication of energy price uncertainty for energy efficiency initiatives is its implications for the level of government incentives offered to encourage building efficiency investments. Be they tax breaks, cash rebates, low interest loans, or other financial mechanisms, government incentives for building energy efficiency measures must be established based upon assumptions about financial performance. If cost-effectiveness estimates are highly variable due to energy price volatility, financial incentive programs may end up paying more than they need to, or may not pay enough, to achieve a given energy savings outcome. Facing rapidly changing energy prices, administrative delays or statutory time lags in establishing (or revising) the levels of efficiency incentives may result in additional economic inefficiency. Although global energy markets are not subject to direct control by U.S. agencies, some drivers of electricity prices, specifically, may be more in Congress's sphere of influence. For example, the costs imposed by carbon control, corporate taxes, and other federal requirements are largely established by Congress. In these cases, even where markets may also play a role (e.g., sulfur dioxide allowance trading), Congress may establish rules and limits to provide greater cost certainty and, in this way, reduce the investment risk premium associated with cost uncertainty. In the context of building energy efficiency, there may be many policy options available to reduce electricity price uncertainty, but there has been relatively little identification or consideration of them in the policy community. Neither the American Clean Energy and Security Act of 2009 ( H.R. 2454 ), now under consideration, nor any other current legislative proposals contain these kinds of provisions. Accordingly, Congress may ultimately move to develop additional information and perspective on the role of market risks on building efficiency investment and their implications for achieving national building efficiency goals. The Lock-in report identifies utility cost-recovery, revenue erosion, and the coupling of utility profits to sales as key fiscal policy disincentives to building efficiency. Some stakeholders maintain that, until utility profits are decoupled from the amount of electricity they sell (through alternative rate structures), utilities will be, at best, only reluctant partners in government efforts to reduce building electricity consumption. Addressing utility rate issues has been a challenge for the federal government as retail rate design for electric utilities historically has been under exclusive state or local authority. Nonetheless, as Table 2 shows, starting with the Energy Policy Act of 1992 ( P.L. 102-486 ), Congress has enacted rate-related provisions intended to alleviate utility rate policy challenges. Among other provisions, P.L. 102-486 required that state utility regulators consider setting the rates for electric utilities so that outlays for energy conservation and energy efficiency resources, accounting for lost revenues, would be at least as profitable as those for new energy supply infrastructure (§111(a)(8)). These "revenue neutral" rate provisions targeted fiscal policy barriers to utility-run efficiency programs like those cited in the Lock-in analysis. The Energy Policy Act of 2005 ( P.L. 109-58 ) mandated a study of state policies promoting utility energy efficiency programs, taking into consideration rate issues and other fiscal disincentives (§139). The resulting report, released by the Department of Energy in March 2007, recommended that state regulators consider a range of policies to remove rate disincentives to utility-run end-use efficiency programs. The Energy Independence and Security Act of 2007 ( P.L. 110-140 ) expanded the provisions in P.L. 102-486 by mandating that state utility regulators consider "rate design modifications to promote energy efficiency investments" (§532(a)). Although Congress first enacted rate barrier provisions in P.L. 102-486 , these and subsequent statutes have had only a limited impact on current utility rate structures. Adoption of revenue neutral rates and other rate policies under P.L. 102-486 and P.L. 110-140 has been voluntary—and most state utility commissions have not embraced them. Some states that initially adopted these policies in the 1990s have subsequently moved away from them due to perceived incompatibility with utility deregulation (concurrently promoted by Congress) and rapidly evolving energy markets. Opponents of new rate structures, in particular, have argued that they depart too much from traditional regulation, they shift sales risks from utilities to customers, they are complicated by other regulatory initiatives to promote end-use efficiency, or that they change rate designs for all customers for the benefit of a few, among other reasons. It is beyond the scope of this report to examine the merits of these arguments individually. Building efficiency advocates and federal policymakers have offered a number of counterarguments. The key point is that state and local regulators have limited the implementation of rate policy measures in P.L. 102-486 and other, similar, rate initiatives. As of March 2009, for example, only 13 states had approved, or planned to approve, either fully decoupled rates or decoupled rate pilots. The American Recovery and Reinvestment Act ( P.L. 111-5 ) signed by President Obama on February 17, 2009, includes new provisions to address utility rate policy issues. The act authorizes additional state energy program grants only to states whose governors seek to implement ... a general policy that ensures that utility financial incentives are aligned with helping their customers use energy more efficiently and that provide timely cost recovery and a timely earnings opportunity for utilities associated with cost-effective measurable and verifiable efficiency savings, in a way that sustains or enhances utility customers' incentives to use energy more efficiently. (Div. A, Title III, § 410(a)(1)) While its language is broad, the potential impact of this provision is debatable, in part because it appears to stop short of being mandatory. Furthermore, because state utility commissions are largely independent of governor's offices, they may not be legally bound to adopt a governor's regulatory policy. According to the accompanying House committee report, therefore, this provision is designed only to "nudge" states "toward adopting policies that would remove disincentives that utilities have to invest in energy efficiency." However, the language seems to suggest that a state utility commission will have to, at least, consider changes in its ratemaking practices to align utility incentives with end-use energy efficiency. Moreover, many stakeholders interpret the provision as encompassing utility rate decoupling, among other rate options, which may lead more states to consider (or reconsider) decoupling policies, specifically, in the interest of securing federal stimulus funds. It remains to be seen to what extent P.L. 111-5 will ultimately result in more efficiency-oriented rate structures among U.S. utilities, and, consequently, more efficient buildings among their customers. Establishing new utility rates is typically a multi-year regulatory process, especially if those rates involve a significant departure from traditional practice. Moreover, because decoupling is controversial, some governors may choose to forgo federal energy grant funds and not abide by the act's utility rate measures. Legal challenges by opponents of alternatives rates, especially decoupled rates, may also ensue. Even in states where decoupled rates are ultimately adopted, their effects on building efficiency may vary. The National Association of Regulatory Utility Commissioners (NARUC), which opposes federal decoupling policies, has stated, "[w]hether decoupling will in itself result in increased efficiency is still the subject of debate." Given the recent passage of the utility rates provisions in P.L. 111-5 , and reviewing the history of the earlier efficiency-oriented rate provisions in prior statutes, Congress may choose to see how effective its latest policies turn out to be before considering additional actions on utility rates. H.R. 2454 contains no utility rate decoupling provisions. Nonetheless, according to press reports, some stakeholders are proposing mandatory rate decoupling statutes in the current session of Congress, potentially tied to a new federal cap and trade program for CO 2 emissions. Whether such a policy would ultimately achieve greater building efficiency than that in P.L. 111-5 is unclear, although a proposal of this type would suggest that at least some analysts believe Congress's most recent utility rate policy may not go far enough in reducing utility rate barriers. In any case, because of the time required to consider, enact, and implement new utility rate policies among the states, and the time required for utilities to implement additional efficiency activities under those rates, utility rate policies will likely remain a significant obstacle to building efficiency programs well into the next decade. To date, the impact of federal efficiency initiatives in terms of energy savings has been well below its technical potential—but not for lack of attention from legislators. Congress has had an interest in improving the energy efficiency of buildings in the United States for over three decades. Recent concerns about the contribution of power plant fuel combustion to atmospheric CO 2 , and therefore to global warming, have lent a new urgency to building efficiency considerations. Looking back on federal efficiency statutes in the context of the Lock-in report, it appears that congressional policies since 1975 have been focused persistently on the critical barriers of industry structure, imperfect information, and high first costs. Congress has a history of addressing technical risk, too, by encouraging technology demonstration, although this issue appears to have been a lower priority over the last few years—perhaps due to the imperative of accelerating the implementation of well-demonstrated efficiency measures. In successive statutes, Congress has attempted to "push the envelope" in these areas through ever tighter efficiency standards, new financial incentives, and other measures. For these barriers, policy debates revolve more around the aggressiveness of federal actions and the details of programs rather than whether Congress should intervene. Congress also has a history of addressing unfavorable fiscal policies among utilities. Until 2009, this history could be characterized as a single significant, but largely ineffective, attempt to advance efficiency-oriented utility rates under P.L. 102-486 . Rate provisions in P.L. 111-5 , however, are another significant attempt to lower rate barriers, although it will be at least a few years before Congress will be able to gauge whether this statute will be more successful than the one passed in 1992. So, in this case as well, Congress has long recognized the significance of the rate barrier to building efficiency. It seems simply to have been harder to develop and enact consensus policies to address it. That utility rate reform has been complicated should come as no surprise due to the regulatory primacy of the states on utility retail rate matters and the often controversial economic implications of decoupled rates. Congressional treatment of market risks seems to differ from its treatment of the other critical barriers. Market risks, especially energy price risks, seem to have received relatively little policy attention from Congress to date. One might argue that first cost incentives, like efficient equipment rebates, implicitly address energy price volatility by making up for the risk premium that volatility imposes on the financing of efficiency investments. But Congress does not appear to have incorporated this perspective in its statutory provisions, so even though market risks and incentive levels could be linked in this way, important questions remain about the nature of this linkage and its importance in end-user investment decisions. Given the importance commercial building owners and operators seem to place on this issue, Congress may consider a more direct examination of market risk issues in the context of building efficiency investment and the policy options available in response. What these policy options may be is an open question, as few analysts have devoted significant attention to the issue. Statutes promoting an Alaska natural gas pipeline or synthetic fuel plants offer possible examples of energy market risk mitigation policies, but there may be other, potentially more appropriate ones. Some analysts suggest that policies establishing federal energy efficiency resource standards, which would require utilities to achieve specified levels of energy efficiency in their service territories, could be an effective means of promoting efficiency investments in the face of the barriers discussed in this report. The Save American Energy Act ( H.R. 889 ) and the American Clean Energy and Security Act of 2009 ( H.R. 2454 § 101) are prominent examples of such legislation currently under debate. In setting efficiency performance targets for utilities, however, such policies may not necessarily target specific efficiency barriers as identified in the Lock-in report. Utilities bearing more responsibility for efficiency improvements among their customers might, therefore, face the same barriers that the federal government does now, with no new mechanisms to overcome them. The utilities could choose to seek new rate structures to promote efficiency, but such actions would require the consent of state regulators, already required to consider such rates as a condition of receiving federal energy grants under P.L. 111-5 . So it is unclear if, and how, federal energy efficiency resource standards would do more to overcome the Lock-in barriers than existing congressional initiatives. The discussion above offers some perspective, albeit only qualitative, on the implications of congressional building efficiency policies for meeting U.S. carbon reduction targets. Carbon control studies that project electricity efficiency savings on the order of 5% to 10% over a 20-year time frame appear consistent with U.S. conservation program experience, and may be aided by any future costs of CO 2 emissions if they are reflected in electricity prices. Achieving efficiency improvements substantially above these levels, however, will likely require aggressive and effective policies to overcome all critical barriers to investment in building efficiency. Using the "critical" barriers from the congressionally mandated Lock-in report as a guide, it appears that significant policy gaps remain with respect to utility fiscal policies and market risks. To the extent that these barriers continue to impede private investment in building efficiency measures, they may reduce the likelihood of achieving federal targets for carbon control associated with efficiency. Therefore, policymakers may benefit from a complete and integrated understanding of the full set of barriers to building efficiency and the range of carbon outcomes they imply. See Table A-1 on the following page. | Federal policymakers are debating a range of potential initiatives to limit U.S. emissions of carbon dioxide (CO2). The American Clean Energy and Security Act of 2009 (H.R. 2454), for example, would set a target of reducing U.S. greenhouse gas emissions, including CO2 emissions, 17% below 2005 levels by 2020. In the electricity industry, increasing the energy efficiency of buildings is viewed by many as the measure with the greatest potential to reduce CO2 emissions quickly and at relatively low cost. In light of the efficiency initiatives the federal government has taken since the 1970s, questions arise as to what additional policies might be considered to achieve more ambitious efficiency goals under a national policy of carbon control. In November 2007, a congressionally-mandated advisory committee released a report examining barriers to the deployment of greenhouse gas reducing technologies and practices, including energy efficiency. The report, Carbon Lock-In: Barriers To Deploying Climate Change Mitigation Technologies, identified the following six "critical" barriers to end-use efficiency in buildings: industry structure, incomplete/imperfect information, high (first) costs, technical risks, market risks, and unfavorable utility fiscal policies. Looking back on key federal efficiency statutes in the context of the Carbon Lock-in report, it seems that congressional policies since 1975 have been focused persistently on the critical barriers of industry structure, imperfect information, and high first costs. Congress has a history of addressing technical risk, too, by encouraging technology demonstration, although this issue appears to have been a lower priority over the last few years. In successive statutes, Congress has attempted to "push the envelope" in these four areas through ever tighter efficiency standards, new financial incentives, and other measures. Congress has a more limited history of addressing unfavorable rate policies among utilities. Until 2009, this history could be characterized as a single significant, but largely ineffective, attempt to advance efficiency-oriented utility rates under the Energy Policy Act of 1992 (P.L. 102-486). However, new rate provisions in the American Recovery and Reinvestment Act (P.L. 111-5) are another significant attempt to lower utility rate policy barriers, although it will be years before Congress can gauge their effects. Market risks, especially energy price risks, seem to have received relatively little policy attention from Congress to date. It stands to reason that uncertainty about the future price of energy would complicate decisions about building efficiency investments, and could deter conservative building owners from considering all but the most highly cost effective improvements. As it happens, recent U.S. energy price volatility is at historic highs. Market evidence suggests that energy price uncertainties may be having a greater negative impact on the nature and timing of building efficiency investments in the private sector than is commonly understood. In the context of building energy efficiency, there may be many policy options available to reduce energy price uncertainty, but there has been relatively little identification or consideration of them in the policy community. Neither the American Clean Energy and Security Act of 2009 (H.R. 2454), now under consideration, nor any other current legislative proposals contain these kinds of provisions. Using the "critical" barriers from the congressionally mandated Lock-in report as a guide, it appears that significant policy gaps remain with respect to utility rate policies and market risks. To the extent that these barriers continue to impede private investment in building efficiency, they may reduce the likelihood of achieving federal targets for carbon control associated with efficiency. Therefore, policymakers may benefit from a complete and integrated understanding of the full set of barriers to building efficiency and the range of carbon outcomes they imply. |
RS21342 -- Immigration: Diversity Visa Lottery Updated April 26, 2004 The purpose of the diversity visa lottery is, as the name suggests, to encourage legal immigration from countries other than the majorsending countries of current immigration to the United States. The law weighs allocation of immigrant visas heavilytowards alienswith close family in the United States and, to a lesser extent, aliens who meet particular employment needs. Thediversity immigrantcategory was added to the Immigration and Nationality Act (INA) by the Immigration Act of 1990 ( P.L. 101-649 )to stimulate "newseed" immigration (i.e., to foster new, more varied, migration from other parts of the world). (1) The current diversity lottery began inFY1995 following three transitional years with temporary lotteries. (2) The diversity lottery makes 55,000 visas available annually to natives of countries from which immigrantadmissions were lower thana total of 50,000 over the preceding five years. The United States Citizenship and Immigration Services Bureau(USCIS) generatesthe formula for allocating visas according to the statutory specifications: visas are divided among six geographicregions according tothe relative populations of the regions, with their allocation weighted in favor of countries in regions that wereunder-representedamong immigrant admissions to the United States. The Act limits each country to 7%, or 3,850, of the visa limit,and provides thatNorthern Ireland be treated as a separate foreign state. Recipients of the visas become legal permanent residents(LPRs) of the UnitedStates. While the diversity lottery has not been directly amended since its enactment in 1990, the Nicaraguan Adjustment and CentralAmerican Relief Act of 1997 (NACARA) temporarily reduces the 55,000 annual ceiling by up to 5,000 visasannually. Beginning inFY1999, the diversity ceiling became 50,000 to offset immigrant visa numbers made available to certainunsuccessful asylum seekersfrom El Salvador, Guatemala, and formerly communist countries in Europe who are being granted LPR status underspecial rulesestablished by NACARA. While the offset is temporary, it is not clear how many years it will be in effect to handlethese adjustmentsof status. In FY2002, there were 42,829 persons actually admitted or adjusted as LPRs with diversity visas, according to the FY2002 USCISadmissions data. This number represents 4% of all LPRs in FY2002 and is comparable to FY2001, when 42,105diversity immigrantscomprised 3.9% of all LPRs. The top five countries in FY2002 (the latest year for which detailed data are available)were Albania,Ethiopia, Nigeria, Poland, and the Ukraine. As Table 1 details, these five countries have consistently ranked among the top diversity visa sending countries, along withBangladesh, Bulgaria, Morocco, Romania, and Russia. Citizens of Ireland, Poland, and the former Soviet Unionwon the most visasin the mid-1990s, but their participation in the lottery has fallen in recent years. Albania ranks as the top sendingcountry for thisentire period, followed by Nigeria. The numbers for Russia and Ukraine may be understated because nationals whoqualified fromsome of the post-Soviet nations reported that they were born in the Soviet Union. Table 1. Top Diversity Visa Sending Countries, FY1997-FY2002 Source: CRS analysis of USCIS admissions data, reported by DHS Office of Immigration Statistics. PDF version The sending world regions for diversity visas, as intended, differ substantially from the sending regions for family-based andemployment-based immigration. As Figure 1 illustrates, European immigrants comprised 39.4%of the diversity visa recipients incontrast to 10.4% of the family-based and employment-based immigrants in FY2002. African immigrants received38.1% of thediversity visas in contrast to 3.6% of the family-based and employment-based visas. Caribbean, Latin American,and Asianimmigrants dominated family-based and employment-based immigration, and as a result, made up much smallerpercentages of thediversity visa immigrants. (3) To be eligible for a diversity visa, the INA requires that an alien must have a high school education or the equivalent, or two yearsexperience in an occupation which requires at least two years of training or experience. (4) The alien or the alien's spouse must be anative of one of the countries listed as a foreign state qualified for the diversity visa lottery. Diversity lottery winners, like all other aliens wishing to come to the United States, must undergo reviews performed by Departmentof State consular officers abroad and DHS inspectors upon entry to the U.S. (5) These reviews are intended to ensure that they are notineligible for visas or admission under the grounds for inadmissibility spelled out in the INA. (6) These criteria for exclusion aregrouped into the following categories: 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. The State Department announced the FY2005 lottery on August 19, 2003. The 60-day application period began on November 1, 2003and ended on December 30, 2003. (7) For the first time,applications for the diversity lottery must have been submitted electronically. Entrants received an electronic confirmation notice upon receipt of a completed entry form. Paper forms were notaccepted. Sincethe objective of the diversity lottery is to encourage immigration from regions with lower immigration rates, nativesof countries withhigh admissions are usually ineligible. For FY2005, the ineligible countries were: Canada, China (mainland born),Columbia,Dominican Republic, El Salvador, Haiti, India, Jamaica, Mexico, Pakistan, the Philippines, Russia, South Korea,the United Kingdomand dependent territories, and Vietnam. (8) When applying for a diversity visa, petitioners had to follow the instructions issued by the State Department precisely. If there wereany mistakes or inconsistencies with the petition, it may have been disqualified by the State Department. In theFY2003 lottery, over2 million of the 8.7 million applications were disqualified for failure to comply with the instructions. (9) Aliens who submit more thanone application are supposed to be disqualified, but husbands and wives may submit separate entries even thoughspouses andunmarried children under the age of 21 qualify as derivative beneficiaries of successful applicants. Any derivativebeneficiary must belisted on the petition when it is initially filed, and the derivative beneficiary visas are counted against the 50,000visa cap. If adiversity lottery winner dies before obtaining LPR status, the visa is automatically revoked and derivativebeneficiaries are no longerentitled to diversity visa classification. (10) Once all acceptable applications were received by the visa center, the winners were selected randomly by computer. Petitioners whowere not selected were not notified by the State Department. The State Department is expected to notify the winnersof the FY2005diversity lottery by mail between May and July 2004, and their visas will be issued between October 1, 2004 andSeptember 30, 2005. Winning the first round of the FY2005 lottery does not guarantee a visa, because the State Department draws moreapplications thanthe number of visas available. Therefore, winners must be prepared to act quickly to file the necessarydocumentation demonstratingto the State Department that they are admissible as LPRs. The applications are processed on a first-come,first-served basis. Aliensmust complete this process before September 30, 2005 to receive visas. (11) In person interviews are expected to begin in October2004. Some question the continuation of the diversity visa lottery, given that family members often wait years for a visa to immigrate to theUnited States. They state a preference that the 55,000 visas be used for backlog reduction of the other visacategories. Supporters ofthe diversity visa, however, point to the immigration dominance of nationals from a handful of countries and arguethat the diversityvisa provides "new seed" immigrants for an immigration system weighted disproportionately to family-basedimmigrants. Some are arguing that the INA should be amended to prevent nationals from countries that the United States identifies as sponsors ofterrorism from participating in the diversity visa lottery. These critics maintain that the difficulties of performingbackground checksin these countries as well as broader concerns about terrorism should prompt this change. Supporters of current lawobserve thatLPRs coming to the United States in other visa categories are not restricted if they come from nations that sponsorterrorism andargue that the policy should be uniformly applied. Who should bear the costs of operating the lottery has also arisen as a issue. Those aliens who win the lottery pay a fee with their visaapplication, but some argue that a fee should be charged to enter the lottery as well. The diversity visa has beencriticized asvulnerable to fraud and misuse, but the State Department maintains that they are addressing these concerns. | The diversity visa lottery offers an opportunity for immigration to nationals of countriesthat do not have high levels of immigration. Aliens from eligible countries had until noon on December 30, 2003to submit theirapplications for the FY2005 diversity visa lottery. Aliens who are selected through the lottery, if they are otherwiseadmissible underthe Immigration and Nationality Act (INA), may become legal permanent residents of the United States. Participation in the diversityvisa lottery is limited annually to 55,000 aliens from countries that are under-represented among recent immigrantadmissions to theUnited States. In FY2001, over 8 million aliens from around the world sent in applications for the FY2003 lottery. Of the diversityvisas awarded in FY2002, European immigrants comprised 39.4% of the diversity visa recipients and Africanimmigrants received38.1%. This report does not track legislation and will not be regularly updated. |
The United States has long sought, via its domestic laws as well as foreign policies, to ensure that ostensibly peaceful nuclear commerce does not aid nuclear weapons programs. Mechanisms and instruments such as the nuclear Nonproliferation Treaty (NPT), International Atomic Energy Agency (IAEA) safeguards, the Nuclear Suppliers Group (NSG), and economic sanctions all continue to play a role in stemming nuclear weapons proliferation. The restrictions contained in U.S. law governing nuclear cooperation with other countries comprise another tool for preventing proliferation. However, Congress has become increasingly concerned that, with the growing international interest in nuclear power, U.S. laws and policies may need to be changed in order to prevent further nuclear proliferation. This report begins with a brief overview of the global nuclear power industry, including the possessors of enrichment and reprocessing technology. It then describes the state of the U.S. nuclear industry, particularly its dependence on both international trade and foreign suppliers. The report then reviews the multilateral nuclear nonproliferation mechanisms. It concludes with a detailed summary of U.S. nuclear cooperation agreements, the primary mechanism by which the United States both promotes U.S. nuclear commerce and ensures that such commerce does not contribute to clandestine nuclear weapons programs. The report also includes appendices that provide additional details. The United States has long engaged in civil nuclear commerce with other countries, buying and selling nuclear fuel, reactors, and related components. Perhaps the most significant congressional action to regulate such commerce was the Nuclear Nonproliferation Act of 1978 ( P.L. 95-242 ), which amended the Atomic Energy Act of 1954 (AEA) and imposed additional restrictions on U.S. nuclear commerce designed to ensure that transfers of nuclear energy technology would not contribute to the proliferation of nuclear weapons. In the 113 th Congress, Members have introduced several bills that would add to the nonproliferation criteria and strengthen congressional oversight of bilateral nuclear cooperation under Section 123 of the AEA, as amended ( P.L. 95-242 ; 42 U.S.C. §2153 et seq.) (hereinafter "123 agreements"). During the past decade, Members of Congress have become increasingly concerned that, with an increased global interest in nuclear power, additional countries may obtain domestic enrichment or reprocessing technology, the most sensitive components of the nuclear fuel cycle. Uranium enrichment can produce low-enriched uranium for use as fuel in nuclear reactors, but can also produce highly enriched uranium, which can be used as both reactor fuel and as fissile material in nuclear weapons. By reprocessing spent nuclear reactor fuel, a state can produce plutonium, which it might use as fuel in certain types of nuclear reactors and also as fissile material in nuclear weapons. Obtaining fissile material is widely regarded as the most difficult task in building nuclear weapons. (For an illustration of the nuclear fuel cycle, see Appendix A .) These proliferation concerns have generated increased congressional interest in laws governing bilateral nuclear cooperation agreements. Recent congressional debates over 123 agreements with India, Russia, the United Arab Emirates (UAE), South Korea, and Vietnam highlighted concerns about the need to balance nonproliferation, commercial, and strategic goals. Additional agreements are expected to come before Congress for consideration in the next few years. Sixteen countries are planning to build their first nuclear power plants by 2030, according to the World Nuclear Association. IAEA estimates that world nuclear power generation by 2030 will grow 46%-142% from 2012, led by the Far East and Eastern Europe (along with possible reductions in Western Europe). Concerns about the safety of nuclear power and its economic competitiveness are the major near-term inhibitors of nuclear growth, according to IAEA. But the agency predicted, "In the longer run, the underlying fundamentals of population growth and demand for electricity in the developing world, as well as climate change concerns, security of energy supply and price volatility for other fuels, continue to point to nuclear generating capacity playing an important role in the energy mix." World nuclear power generation has dropped since 2006, particularly after Japan's reactors shut down following the 2011 Fukushima disaster. Nuclear power critics contend that construction delays, cost overruns, and competition from renewable energy will strongly inhibit the future of nuclear power. They point out that three countries—China, India, and Russia—account for two-thirds of the reactors currently under construction worldwide. In the countries considering their first nuclear reactors, such projects are at various stages of planning (see Appendix B ). Ten countries that are currently building or formally planning reactor projects—Bangladesh, Belarus, Egypt, Indonesia, Jordan, Kazakhstan, Poland, Turkey, the UAE, and Vietnam—have never operated nuclear power plants. According to the Organization for Economic Cooperation and Development (OECD), 36 countries that have never had nuclear power are "actively preparing" or have "expressed interest in starting a nuclear power programme." OECD categorizes the potential nuclear newcomer countries by the size of their economies and their electrical grid capacity, because those factors "may provide a rough indication of which countries may be the strongest candidates to proceed with nuclear development" (see Table 1 ). Only Canada, China, France, Japan, Russia, South Korea, and the United States export nuclear reactors. India is reportedly attempting to join this group. Some emerging nuclear power states have concluded agreements with non-U.S. reactor suppliers. For example, Vietnam has such contracts with Russia and Japan, Turkey has an agreement with Russia, and the UAE has signed a reactor contract with South Korea. The United States has nuclear cooperation agreements with 25 countries, the IAEA, and Euratom (see Appendix C ). State Department officials have said that approximately 17 nuclear cooperation agreements will be negotiated, renegotiated, or extended in the next three years. Currently, the United States is negotiating a 123 agreement with Jordan, although those negotiations have been suspended. The most recent 123 agreement—with Vietnam—entered into force on October 3, 2014. The preamble of the agreement includes a political commitment that says Vietnam intends to rely on international markets for its nuclear fuel supply, rather than acquiring sensitive nuclear technologies. At the same time, the United States pledges to support international markets to ensure a reliable nuclear fuel supply for Vietnam. Article 6 of the agreement specifically prohibits Vietnam from enriching or reprocessing U.S.-obligated nuclear materials—for instance, materials that are transferred from the United States—without specific future U.S. consent. The United States has concluded Memoranda of Understanding (MoU) regarding potential nuclear cooperation with Bahrain, Jordan, Mongolia, and Saudi Arabia. However, a state's conclusion of such an MoU is neither necessary nor sufficient for a country to conclude a 123 agreement. Only a limited number of countries conduct commercial enrichment and reprocessing of fissile materials and can supply this technology. At the present time, supplier states are not planning any transfers of enrichment or reprocessing technology. As is discussed below, the Nuclear Suppliers Group recently added criteria to its guidelines for the supply of fuel cycle technologies. Commercial reprocessing is now being done in France, the United Kingdom, Russia, Japan, and India. China has a pilot reprocessing plant and plans to open a larger facility around 2017, possibly followed by a full-scale commercial plant to be built by the French firm Areva by 2025. South Korea is pursuing a research and development program on pyroprocessing. Some countries with few natural energy resources, such as Japan, argue that they want to reprocess their spent fuel to reduce dependence on foreign energy sources. Reprocessing proponents in those countries prefer a closed fuel cycle, in which spent nuclear fuel from reactors is used to make fuel for other reactors; opponents raise questions about weapons proliferation risks and high economic costs. Commercial enrichment is currently being done in the United States, Russia, France, Japan, China, and countries in the Urenco consortium (the United Kingdom, Netherlands, Germany). The Eurodif consortium's enrichment plant is on French soil, and France does not share the enrichment technology with co-owners Belgium, Italy, Spain, and Iran. Argentina is in the process of re-commissioning its gaseous diffusion enrichment plant at Pilcanyeu to provide fuel for one of its nuclear power reactors. Brazil has been gradually expanding a small enrichment facility for its nuclear power reactors. Only Russia and the United States, as well as the European multinational consortia Urenco and Eurodif, supply enriched uranium for commercial purposes to other countries. The only currently operating U.S. enrichment plant, which started up in 2010, is the Urenco USA facility in New Mexico. Some reports argue that, for the foreseeable future, current commercial enrichment capacity will be able to provide for global nuclear fuel needs and, therefore, building new enrichment plants on purely commercial grounds may not be justified. According to the World Nuclear Association, world enrichment capacity is likely to continue substantially exceeding world nuclear fuel requirements at least through 2020. Most states depend on foreign enrichment services for their nuclear fuel, and current enrichment providers have been expanding their capacity in anticipation of an expanded market in the future. In addition, Russian and U.S. stockpiles of high-enriched uranium (HEU) from dismantled nuclear weapons are being down-blended for use as low-enriched uranium (LEU) fuel, further adding to market supply. However, an increase in nuclear power plants in countries without enrichment capabilities may increase interest in domestic enrichment in new states. There has been a renewed interest in multinational fuel cycle services as a way to provide fuel supply assurances. Urenco and Eurodif have provided commercial enrichment services for over three decades. The International Uranium Enrichment Centre in Angarsk, Russia, began operations in 2007. It is a commercial uranium enrichment consortium that does not share sensitive enrichment technology, but does share profits. Participants include Russia, Kazakhstan, Ukraine, and Armenia. Non-Russian members pledge to refrain from developing uranium enrichment on their own soil. U.S. exports of nuclear plant components, equipment, fuel, and technology—which require nuclear cooperation agreements—have held steady at modest levels since the mid-1990s, according to an analysis by the Government Accountability Office (GAO). However, the analysis found that, because worldwide nuclear-related exports rose significantly during that period, the U.S. share of the market dropped sharply. The declining U.S. share of the world nuclear market is a dramatic reversal from earlier decades, when the United States was the dominant supplier of nuclear technology and fuel for the non-communist world. The U.S. Atomic Energy Commission (AEC) and its successor agencies were the sole free-world suppliers of enriched uranium until European commercial enrichment plants began operating in the late 1970s. Since then, the U.S. share of world enrichment capacity has fallen to 7%, as all the three former AEC plants were retired, leaving only the Urenco USA plant, and foreign capacity expanded. In the equipment supply sector, General Electric (GE) and Westinghouse directly supplied about three dozen reactors to foreign utilities during the 1960s, 1970s, and 1980s, but only about 10 during the past two decades. U.S. reactor technology has typically been transferred to foreign industrial firms under licenses that allowed them to gradually take over most or all aspects of subsequent reactor projects, diminishing U.S. involvement. That pattern has continued with China, which is currently building four Westinghouse AP1000 reactors under a technology transfer agreement and now is developing its own designs based on Westinghouse technology. GAO's analysis found that U.S. exports of enriched uranium and other nuclear materials totaled $20.7 billion from 1994 through 2008 (in 2010 dollars), averaging about $1.4 billion per year. Japan accounted for 63% of those exports, far more than any other country, much of that apparently from uranium enrichment purchases. Sales of reactor components and equipment, according to GAO, totaled $4.4 billion during 1994-2008, averaging about $300 million per year. Japan, South Korea, Mexico, Spain, and the Czech Republic accounted for 70% of the reactor component exports. Exports to South Korea largely resulted from a technology transfer agreement with U.S. supplier Combustion Engineering, now part of Westinghouse. Under the agreement, Combustion Engineering built four reactors in South Korea during the 1990s with Korean industrial firms, which then took the lead on subsequent projects. GAO could not find statistics for U.S. exports of nuclear services, which were described by Commerce Department officials as "an increasingly important and growing market segment for the U.S. nuclear industry." According to the United Nations Commodity Trade Statistics Database (Comtrade), U.S. exports of enriched uranium and related nuclear material totaled $955 million in 2013. Exports of nuclear reactors, fuel elements, and components in 2013 totaled $471 million. Bilateral nuclear cooperation agreements may increasingly become a necessity for U.S. domestic nuclear energy production. The 100 nuclear power reactors currently operating in the United States were designed and built by U.S. companies using predominantly U.S.-manufactured components. Construction of those plants began in the 1960s and 1970s, when U.S. nuclear power technology was dominant throughout the non-communist world. U.S. companies, especially Westinghouse and GE, built nuclear reactors around the world and established licensing agreements and partnerships with foreign companies to further develop their technology for international use. However, U.S. nuclear power development stagnated after the 1970s—with no domestic orders after 1973 that were not subsequently canceled—while foreign projects continued at a steady but reduced pace. Westinghouse's nuclear power business was bought by a British firm in 1999 and subsequently by the Japanese firm Toshiba in 2006. GE has partnered with the Japanese firm Hitachi to market and construct new nuclear power plants. Several of GE and Westinghouse's former foreign partners, such as the French firm Areva and the Japanese firm Mitsubishi Heavy Industries, have become fully independent in nuclear power plant design and construction. South Korea and China could follow that path in the future. The significant number of foreign suppliers for current U.S. reactor projects provides a good indication of the changes in the world nuclear industry that have taken place since the first round of U.S. nuclear projects several decades ago. Construction officially got underway in 2012 on the first new U.S. nuclear power plants since completion of the latest U.S. reactor in 1996 (on which construction had begun in the early 1970s). The new nuclear construction was marked by the pouring of concrete foundations for four new units in South Carolina and Georgia, as well as the resumption of construction at a long-suspended reactor in Tennessee. License applications for 12 more new reactors are currently under consideration by the Nuclear Regulatory Commission (NRC)—in addition to about a dozen others that have been withdrawn or suspended since the current wave of applications began in late 2007. Six of the reactors currently listed on NRC's docket are designed by Westinghouse (plus the four new reactors already under construction in Georgia and South Carolina), two are from Areva, and four are from GE-Hitachi. Because of the lengthy gap in U.S. nuclear plant construction, many key reactor components, such as large pressure vessel forgings, can no longer be made in the United States. At least in the near term, "having sufficient major equipment for new U.S. nuclear units will depend on non-U.S. manufacturers," the Department of Energy concluded in 2005. Therefore, the current round of planned U.S. nuclear plants is expected to rely much more on a worldwide supply chain than was the case for today's operating plants, all of which began construction before 1979. Many large forgings for the new U.S. reactors that are now under construction or in the planning stage have already been ordered from or produced by Japan Steel Works. Fabrication of the large forgings into finished reactor components has been performed by the South Korean firm Doosan. Also, steel plates for the 200-foot-high containment structure that surrounds the major reactor components in Westinghouse's AP1000 reactor design are being produced by IHI Corporation in Japan for two planned new reactors at Southern Company's Vogtle site in Georgia. The plates are being welded together by Chicago Bridge and Iron Company. Core make-up tanks and pressurizers for the two new reactors at the South Carolina Electric & Gas V.C. Summer plant were built at Mangiarotti Nuclear, S.p.A., facilities in Italy. The United States imported $334.6 million worth of nuclear reactor components from 2006 through 2013, according to the U.N. Comtrade database. Another measurable indicator of the increasing globalization of the nuclear power plant supply chain is the worldwide distribution of "N-stamp" certifications by the American Society of Mechanical Engineers (ASME). The N-stamp and related ASME nuclear stamps are recognized by NRC as evidence that suppliers meet quality control standards for producing nuclear plant components. The number of U.S. manufacturing facilities with N-stamp certification fell by half from the mid-1980s to early 2000s before rising slightly with the wave of U.S. reactor license applications after 2007. Even after that rise, fewer than half of N-stamp holders (45%) were located in the United States in 2010, while 38% were in Asia and the remainder were elsewhere in the world. According to the World Nuclear Association, "China had six ASME N-stamp accredited manufacturers at the end of 2009, by October 2011 it had 26." Both of the major U.S.-based reactor suppliers, GE-Hitachi and Westinghouse, have indicated that they will generally rely on a global supply chain for new nuclear projects but would use local suppliers to the extent justified by the size of the host nation's nuclear construction program. A 2009 British report noted that "the full 'localization' approach cannot be justified for a single reactor build and significant investment will only be worthwhile for situations where multiple reactors are likely to be built within the same country or region, and there is benefit in economy of scale." Under that reasoning, the domestic content of U.S. reactors could rise from currently anticipated levels if a significant amount of new U.S. nuclear construction materializes. Anticipation of U.S. nuclear orders has already spurred an increase in U.S. supply capacity, including the restoration of an N-stamp by Babcock & Wilcox at its Mount Vernon, IN, plant, and the opening of a nuclear plant module fabrication facility by the Shaw Group (now owned by Chicago Bridge and Iron) in Lake Charles, LA. A similar facility planned by Areva in Newport News, VA, has been indefinitely delayed. New and proposed U.S. uranium enrichment plants also have significant foreign involvement. The European consortium URENCO began production in June 2010 at a new enrichment plant in New Mexico that uses European gas centrifuge technology. Areva plans to use the same technology at a planned Idaho plant that received an NRC license in 2011 but was indefinitely delayed in 2013. If built, that plant would add to Areva's extensive fuel cycle operations in the United States. The U.S. firm Centrus Energy (formerly USEC) plans to build an enrichment plant in Ohio using U.S.-developed gas centrifuge technology, a project that received past support from Toshiba. However, further financing for the facility has been uncertain since USEC's bankruptcy in March 2014 and re-emergence as Centrus. In another enrichment project with foreign participation, GE-Hitachi is considering construction of an enrichment plant using Australian laser technology in North Carolina or Kentucky. The international community has adopted a variety of means to address the potential for ostensibly peaceful enrichment and reprocessing facilities to enable nuclear weapons programs. These measures are designed to impede or slow the proliferation of nuclear weapons. The nuclear Nonproliferation Treaty (NPT), which entered into force in 1970, prohibits non-nuclear-weapon states-parties from producing or acquiring nuclear weapons. It also specifies that nuclear-weapon states-parties should not "assist, encourage, or induce" any non-nuclear-weapon state to acquire nuclear weapons. (See Appendix D .) All U.N. member-states except for India, Israel, and Pakistan are parties to the NPT. An NPT state-party is obligated to conclude a safeguards agreement with the International Atomic Energy Agency (IAEA). In the case of non-nuclear-weapon states-parties to the treaty, such agreements, known as comprehensive safeguards agreements, allow the agency to monitor nuclear facilities and materials to ensure that they are not diverted to military purposes. According to the IAEA, safeguards pursuant to such agreements are applied 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 agency inspections and monitoring of declared nuclear facilities. The IAEA's monitoring and inspection authority in a particular country is limited to facilities that have been declared by the government. Additional Protocols to IAEA comprehensive safeguards agreements further augment the agency's ability to investigate clandestine nuclear facilities and activities. Additional Protocols give IAEA inspectors expanded physical access to nuclear-related sites in the member state. They also allow for surprise inspections and environmental monitoring. An increasing number of countries, particularly those with significant nuclear activities, have been signing Additional Protocols and bringing them into force. Of the 190 NPT states-parties, 144 have signed Additional Protocols; of those, 124 are in force. (See Appendix E .) Over 80% of the 72 countries with "safeguards-significant nuclear activities" have signed Additional Protocols. Most of the states-parties that have not signed Additional Protocols do not have significant nuclear programs or plans, but six non-signatories (Algeria, Argentina, Brazil, Egypt, Syria, and Venezuela) have nuclear reactors under safeguards. (See Appendix F .) Although many analysts and observers have expressed concerns about the possibility that a country seeking nuclear weapons might use dual-use technology supplied to a peaceful nuclear energy program in a covert weapons program, all legitimate transfers of nuclear technology to NPT non-nuclear-weapon states are under IAEA safeguards and no country with comprehensive safeguards in place, and a record in good standing with the IAEA, has used declared nuclear facilities to produce fissile material for weapons. As a result, a nuclear weapons program would likely need to include some covert facilities. Specifically, the nuclear programs of greatest concern today, such as those of India, Iran, North Korea, and Pakistan, have utilized combinations of indigenous know-how and overt or covert foreign assistance. The United States has worked to standardize nuclear suppliers' nonproliferation criteria, primarily through the Nuclear Suppliers Group (NSG). However, the United States has struggled in recent years to gain agreement among suppliers to strengthen nonproliferation conditions of supply. Members of the NSG, a voluntary group of countries which coordinates nuclear exports and has developed guidelines for such exports, have since the 1970s adhered to an informal restriction on transferring enrichment, reprocessing, and heavy water technology to states outside the NSG, which currently has 48 members (see Appendix G ). Until recently, NSG Guidelines said that supplier countries should "exercise restraint" in transferring any enrichment or reprocessing technologies. These policies were voluntary, but resulted in no contractual transfers of enrichment or reprocessing technology to additional states. Following revelations about a covert procurement network for nuclear technology run by former Pakistani nuclear official Abdul Qadeer Khan, some NSG countries sought to tighten these restrictions. NSG member states began in 2004 to negotiate a list of criteria that recipient states would need to meet before they could receive enrichment or reprocessing technology. The NSG announced following its June 23-24, 2011, plenary meeting that the group had reached agreement on such criteria. These criteria require a potential recipient to be an NPT state-party in good standing; to have a comprehensive safeguards agreement in force; to have no current breaches of safeguards obligations; to have a bilateral agreement with the supplier that contains nonproliferation assurances; to commit to international standards of physical protection and safety; and to implement effective export controls and adhere to the NSG guidelines. In addition, the amended guidelines require a recipient state to have brought into force an Additional Protocol to its IAEA safeguards agreement or, "pending this," to implement "appropriate safeguards agreements in cooperation with the IAEA, including a regional accounting and control arrangement for nuclear materials, as approved by the IAEA Board of Governors." The NSG also agreed to require that enrichment plants be exported only if they are "black boxed"—that is, built to prevent the recipient state from replicating the technology transferred. The final guidelines differ in some respects from a November 2008 draft that contained more subjective criteria, such as general conditions of stability and security; potential negative impact of fuel cycle technology transfers on the stability and security of the recipient state and the region; and whether there is a credible and coherent rationale for pursuing enrichment and reprocessing capability for civil nuclear power purposes. These criteria are not included in the revised guidelines, although the guidelines do state that suppliers should take into account "any relevant factors as may be applicable." Negotiations over the guidelines had been contentious. Little public information is available about NSG discussions, but press reports said that Turkey raised objections during the 2010 NSG plenary meeting to several criteria, including the "black box" requirement and subjective criteria concerning regional stability. In the past, Argentina, Brazil, and South Africa had raised objections to the Additional Protocol as a condition of supply; the provision allowing a "regional accounting and control arrangement" to substitute for an Additional Protocol appears, in effect, to exempt Argentina and Brazil from the Additional Protocol requirement. In general, developing countries are wary of what they characterize as additional obstacles to their ability to access nuclear technology for peaceful purposes. With a lack of NSG consensus, the Group of Eight (G-8) nations had in recent years issued joint policy statements regarding enrichment and reprocessing supply. From 2004 to 2007, the G-8 announced a year-long suspension of any such transfers at their annual summit meetings. The 2008 Summit declaration first stated that the supplier states would only transfer enrichment or reprocessing equipment or facilities on the basis of the NSG draft criteria: We agree that transfers of enrichment equipment, facilities and technology to any additional state in the next year will be subject to conditions that, at a minimum, do not permit or enable replication of the facilities; and where technically feasible reprocessing transfers to any additional state will be subject to those same conditions. The G-8 countries have since issued endorsements of the policies outlined in the November 2011 updated NSG guidelines. In 2004, the United States proposed that the international community adopt a ban on all future transfers of enrichment and reprocessing technology. Developing countries strongly resisted this proposal, even though only some of them had concrete plans to acquire these technologies. Responding to these concerns, the United States and others began discussions at the IAEA on multilateral nuclear fuel assurances that would provide states with an incentive to refrain from acquiring their own fuel cycle capabilities and instead obtain nuclear fuel by using existing suppliers, joining international consortia, or using an IAEA-run fuel bank if commercial arrangements failed. The IAEA Board of Governors approved a Russian-operated fuel reserve in 2009 and an IAEA-administered fuel bank in 2010. The IAEA Fuel Bank is located in Kazakhstan, and final arrangements are being negotiated with the IAEA. In addition, the United States has established its own fuel reserve, the American Assured Fuel Supply program. Fuel banks do not replace commercial supply, but are hoped to provide another reassurance that fuel supply will not be cut off for political reasons. It is worth noting that arguably both Urenco and Eurodif have operated multilateral commercial models for uranium enrichment since the 1970s. Some countries are concerned that supporting multilateral fuel arrangements would undermine their right to access nuclear technology for peaceful purposes under the NPT, and argue that only an independent national fuel cycle can provide a country with energy security. Other countries oppose the fuel bank on principle, characterizing it as an effort to create a division between countries that have these technologies and those that do not. However, because domestic nuclear fuel programs may not be economically viable for most countries, multilateral solutions continue to be attractive. Many states with nuclear power depend on the foreign supply of LEU fuel for their reactors. Proposals for multilateral arrangements to manage spent nuclear reactor fuel and thereby prevent the further spread of reprocessing technology are less developed at this stage. On-site storage of spent fuel is most common, and some countries reprocess their spent fuel rods into mixed-oxide fuel. Multilateral solutions, however, might prevent the further spread of reprocessing technology. Some non-governmental analysts have proposed that a pyro-processing program in South Korea be developed under multilateral auspices. Another proposal has been the establishment of an international spent fuel repository. States also participate in joint research ventures on advanced and fast reactors such as the Generation IV International Forum or IAEA's International Project on Innovative Nuclear Reactors and Fuel Cycles. A major U.S.-led initiative, the International Framework for Nuclear Energy Cooperation (formerly the Global Nuclear Energy Partnership), was meant to stimulate international collaboration on developing proliferation-resistance in the fuel cycle. The United States and the international community have developed other mechanisms to control the spread of enrichment and reprocessing. For example, the U.N. Security Council has adopted resolutions prohibiting the transfer of such technologies to Iran and North Korea. Furthermore, the United States has in the past placed bilateral pressure on suppliers to refrain from providing sensitive fuel cycle technologies to such countries as Pakistan and Iran. Moreover, individual states can refrain from transferring enrichment and reprocessing technologies; as noted, no such transfers are planned. Under existing law (Atomic Energy Act [AEA] of 1954, as amended; P.L. 95-242 ; 42 U.S.C. §2153 et seq.) all significant U.S. nuclear cooperation with other countries requires a peaceful nuclear cooperation agreement. Significant nuclear cooperation includes the transfer of U.S.-origin special nuclear material subject to licensing for commercial, medical, and industrial purposes. Such agreements, which are "congressional-executive agreements" requiring congressional approval, do not guarantee that cooperation will take place or that nuclear material or technology will be transferred, but rather authorize and set the terms of reference for nuclear cooperation. The AEA includes requirements for an agreement's content, conditions for the President to exempt an agreement from those requirements, requirements for presidential determinations and other supporting information to be submitted to Congress, conditions affecting the implementation of an agreement once it takes effect, and procedures for Congress to consider and approve the agreement. Section 123 of the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria and that the President submit any such agreement to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. The Department of State is required to provide the President an unclassified Nuclear Proliferation Assessment Statement (NPAS), which the President is to submit, along with the agreement, to those two committees. The State Department is also required to provide a classified annex to the NPAS, prepared in consultation with the Director of National Intelligence. The NPAS is meant to explain how the agreement meets the AEA nonproliferation requirements. The President must also make a written determination "that the performance of the proposed agreement will promote and will not constitute an unreasonable risk to, the common defense and security." The President may exempt an agreement for cooperation from any of the requirements in Section 123a if he determines that the requirement would be "seriously prejudicial to the achievement of U.S. non-proliferation objectives or otherwise jeopardize the common defense and security." The AEA provides different requirements, conditions, and procedures for exempt and non-exempt agreements. Under the AEA, Congress has the opportunity to review a 123 agreement for two time periods totaling 90 days of continuous session. The President must submit the text of the proposed nuclear cooperation agreement, along with required supporting documents (including the unclassified NPAS) to the House Foreign Affairs Committee and the Senate Foreign Relations Committee. The President is to consult with the committees "for a period of not less than 30 days of continuous session." After this period of consultation, the President is to submit the agreement to Congress, along with the classified annex to the NPAS and a statement of his approval of the agreement as well as a determination that it will not damage the national security interests of the United States. This action begins the second period, which lasts for 60 days of continuous session. In practice, the President has submitted the agreement to Congress, along with the unclassified NPAS, its classified annex, and his approval and determination, at the beginning of the full 90-day period. The 60-day period has been considered as following immediately upon the expiration of the 30-day period. If the President has not exempted the agreement from any requirements of Section 123a, it becomes effective at the end of the 60-day period unless, during that time, Congress adopts a joint resolution disapproving the agreement and the resolution becomes law. If the agreement is an exempted agreement, Congress must adopt a joint resolution of approval and it must become law by the end of the 60-day period or the agreement may not enter into force. At the beginning of this 60-day period, joint resolutions of approval or disapproval, as appropriate, are to be automatically introduced in each house. During this period, the committees are to hold hearings on the proposed agreement and "submit a report to their respective bodies recommending whether it should be approved or disapproved." If either committee has not reported the requisite joint resolution of approval or disapproval by the end of 45 days, it is automatically discharged from further consideration of the measure. After the joint resolution is reported or discharged, Congress is to consider it under expedited procedures, as established by Section 130i of the AEA. Section 123 of the AEA requires the President to keep the Senate Foreign Relations Committee and the House Foreign Affairs Committee "fully and currently informed of any initiative or negotiations relating to a new or amended agreement for peaceful nuclear cooperation." The United States often has diverse policy goals when deciding to conclude a nuclear cooperation agreement with another country, including promoting nonproliferation, supporting the U.S. nuclear industry, satisfying the needs of the U.S. domestic nuclear energy program, and improving or sustaining overall bilateral and strategic relations. A major U.S. goal of concluding nuclear cooperation agreements has been to ensure the peaceful use of any transferred nuclear technology. The Nuclear Nonproliferation Act of 1978, which amended Section 123 of the Atomic Energy Act of 1954, added new requirements for nuclear cooperation with the United States. The House report on this legislation explained the new requirements: "The approach to the legislation is to provide both incentives for foreign nations to conform to comprehensive anti-proliferation safeguards, and deterrents to attainment of technologies and materials which would enable other nations to produce nuclear explosives in a short time." The United States and other countries have become increasingly concerned that with the spread of nuclear energy facilities, additional countries may obtain enrichment and reprocessing technology, the most sensitive components of the nuclear fuel cycle. Consequently, the United States and other governments have pursued policies both to persuade countries to refrain from enrichment and reprocessing and to conclude Additional Protocols to their IAEA safeguards agreements. Former State Department official Fred McGoldrick has argued that 123 agreements also "provide a framework for establishing invaluable person-to-person and institution-to-institution contacts and collaboration that can help advance our nonproliferation objectives." These agreements facilitate cooperation between business contacts and laboratories, as well as the Department of Energy and its counterparts, McGoldrick said, adding that such "intangible" cooperation enables the United States to establish relationships with foreign nuclear energy establishments that might otherwise be dominated by non-U.S. nuclear suppliers. As discussed, the AEA requires that any agreement for nuclear cooperation meet nine nonproliferation criteria, but these do not include requirements that countries conclude Additional Protocols or forgo enrichment or reprocessing. The AEA mandates that U.S. nuclear cooperation agreements require U.S. consent for any "alteration in form or content" (to include enrichment or reprocessing) of U.S.-origin material or any material that was processed in a plant containing transferred U.S. nuclear technology. They also require U.S. consent for any re-transfer of material or technology. Additional options are available under U.S. law to sanction a country for transfer or receipt of enrichment or reprocessing technology under the Arms Export Control Act, as amended. These provisions are similar to those contained in the Foreign Assistance Act of 1961. Section 101 (Nuclear Enrichment Transfers; 22 U.S.C. 2799aa, known as the Symington Amendment), prohibits foreign economic or military assistance to a country if the President determines that it has delivered or received "nuclear enrichment equipment, materials, or technology," unless it is placed under "multilateral auspices and management" when available and is under IAEA safeguards. The President can invoke similar penalties after making a determination regarding transfer or receipt of reprocessing equipment, materials, or technology under Section 102 (known as the Glenn Amendment). With reprocessing transfers, there is no exception made if the reprocessing technology is under safeguards. There is an exception for the transfer of reprocessing technology as part of an international program, in which the United States participates, for evaluation of technologies which are "alternatives to pure plutonium reprocessing." During the past several years, the United States has attempted to persuade certain countries with which it is negotiating nuclear cooperation agreements to forgo enrichment and reprocessing and conclude additional protocols. Washington has argued that its December 2009 nuclear cooperation agreement with the United Arab Emirates (UAE) could set a useful precedent for mitigating the dangers of nuclear proliferation. For example, President Obama argued in May 2009 that the agreement "has the potential to serve as a model for other countries in the region that wish to pursue responsible nuclear energy development." Similarly, then-State Department spokesperson P.J. Crowley described the agreement as "the gold standard" during an August 5, 2010, press briefing. The agreement's status as a potential model is grounded in two nonproliferation provisions not found in any other U.S. nuclear cooperation agreement. First, the agreement requires that the UAE bring into force its Additional Protocol to its IAEA safeguards agreement before the United States licenses "exports of nuclear material, equipment, components, or technology" pursuant to the agreement. Second, the agreement states that the UAE: shall not possess sensitive nuclear facilities within its territory or otherwise engage in activities within its territory for, or relating to, the enrichment or reprocessing of material, or for the alteration in form or content (except by irradiation or further irradiation or, if agreed by the Parties, post-irradiation examination) of plutonium, uranium 233, high enriched uranium, or irradiated source or special fissionable material. Furthermore, the U.S.-UAE agreement also provides the United States with the right to terminate nuclear cooperation and to require the return of any nuclear "material, equipment or components ... and any special fissionable material produced through their use" if, after the agreement's entry into force, the UAE "possesses sensitive nuclear facilities within its territory or otherwise engages in activities within its territory relating to enrichment of uranium or reprocessing of nuclear fuel." The U.S.-UAE agreement also includes a provision that apparently intends to establish the agreement's conditions as a minimum standard for future such agreements in the Middle East. An Agreed Minute to the nuclear cooperation agreement states that "the fields of cooperation, terms and conditions" accorded by the U.S.-UAE agreement "shall be no less favorable in scope and effect than those which may be accorded, from time to time, to any other nonnuclear-weapon State in the Middle East in a peaceful nuclear cooperation agreement." The Minute explains that, in the event that a future U.S. nuclear cooperation agreement with another regional government contains less-stringent requirements, the United States will, at the UAE's request, consult with the UAE "regarding the possibility of amending" the U.S.-UAE agreement in order to make its terms equally favorable to the new agreement. A similar provision in the 1981 U.S.-Egypt agreement made it necessary for the United States to ensure that the agreement with the UAE would be at least as stringent. Since the latter agreement is more stringent than the Egypt agreement, it has established a higher standard for future U.S. nuclear cooperation agreements in the region. The United States has made efforts to elicit from other regional governments nonproliferation commitments similar to those described in the U.S.-UAE agreement. Washington has signed Memoranda of Understanding with Bahrain, Jordan, Mongolia, and Saudi Arabia that express those countries' intention to refrain from pursuing enrichment or reprocessing technologies. The United States signed a similar memorandum with the UAE in 2008. These memoranda are statements of intent regarding future cooperation, but are not legally binding and are neither prerequisites for nor guarantees of concluding future nuclear cooperation agreements. However, the Department of State has argued that the memoranda are useful tools for cooperating with countries interested in the responsible use of nuclear energy, because they create opportunities to solicit specific commitments with regard to nuclear technology and safeguards choices. Nevertheless, U.S. efforts to establish the UAE agreement as a model for future such agreements in the Middle East may be faltering. Jordan, the next regional government most likely to conclude a nuclear cooperation agreement with the United States, reportedly may no longer be willing to include in the agreement the fuel-cycle commitments described in its Memorandum of Understanding. However, Ambassador Richard Stratford stated on March 29, 2011, that the two sides had been "very, very close" to an agreement containing similar commitments. As noted, the negotiations have been suspended. The Obama Administration does not envision that the U.S.-UAE agreement will necessarily be a model for nuclear cooperation agreements with countries outside the Middle East. Crowley stated during the August 2010 briefing that the United States "would encourage countries to make the same decision that the UAE has made." However, he acknowledged that "not every country is going to make that decision," adding that "a particular approach is going to be different ... country by country or region by region." The Administration has not yet decided whether to solicit from other countries commitments similar to those contained in the U.S.-UAE agreement. U.S. nuclear cooperation agreements with foreign countries are also designed to help promote growth in the U.S. nuclear industry by facilitating U.S. nuclear exports. As noted, U.S. exports of nuclear plant components, equipment, fuel, and technology—which require nuclear cooperation agreements—have held steady at modest levels since the mid-1990s and comprise a decreasing share of the global market. That downward trend could be altered by new, higher-efficiency uranium enrichment plants currently planned in the United States and by new U.S. contracts to supply reactor technology and components in China and elsewhere. Recent plans for nuclear power expansion around the world, particularly in China and India, could lead to future growth in U.S. nuclear reactor exports. A consortium led by Westinghouse signed a contract with Chinese nuclear firms on July 24, 2007, to supply four AP1000 reactors—Westinghouse's newest design—at a cost estimated at $8 billion. The four reactors are currently under construction at two sites. According to the World Nuclear Association, 14 additional AP1000 reactors at seven sites are currently planned, 20 others are planned but deferred, and as many as 80 more AP1000 units have been proposed. Much like earlier U.S. agreements with South Korea and other countries, the Westinghouse-China deal includes the transfer of the AP1000 technology to Chinese firms, who are expected eventually to be able to build the reactors on their own. Westinghouse is also working with another Chinese consortium to develop larger versions of the AP1000. India has announced plans for up to 12 U.S. nuclear reactors at two sites, although the projects have been held up by liability issues. U.S. uranium enrichment exports could see future growth resulting from planned new enrichment plants, despite the scheduled decommissioning of the main previously operating U.S. plant. The first new commercial enrichment plant in the United States since the 1950s began commercial production in June 2010 in Lea County, NM. Built by a U.S. subsidiary of the European enrichment firm Urenco, the Lea County plant reached full initially licensed capacity in April 2014, with expansion of up to 50% planned by 2017. Two other new enrichment plants of similar capacity are planned by the French firm Areva in Idaho and by Centrus in Ohio to replace a closed plant in Kentucky, although neither has a firm schedule. The Urenco, Areva, and Centrus plants use advanced gas centrifuge technology, which is far less energy-intensive than the gaseous diffusion technology used by previous U.S. plants. GE-Hitachi is considering building an enrichment plant using laser enrichment technology that it is developing. If all the planned and proposed U.S. enrichment capacity were to come online, total U.S. enrichment capacity would reach more than six times its current level. 123 agreements are required for the construction of enrichment facilities by foreign firms and for the export of enriched uranium. 123 agreements benefit the U.S. nuclear energy program in other ways. For example, licenses under the U.S.-Australia agreement have been primarily for the import of uranium to the United States from Australia. More recently, as noted, foreign firms have been involved in sustaining the U.S. nuclear energy program by, for example, participating in nuclear reactor projects in the United States (see discussion above " Increasing Importance of Foreign Suppliers to U.S. Nuclear Power Projects "). Lastly, but in some cases most importantly, nuclear energy cooperation agreements are very often a part of an overall diplomatic strategy to improve U.S. bilateral relations with a country. For some policy makers, this was a key motivation for nuclear cooperation agreements that the United States concluded with both India and Russia. This report has focused on nonproliferation and bilateral nuclear cooperation agreements. Additional factors may strongly influence the outcome of U.S. attempts to influence other countries' nuclear policies. Many foreign governments provide liability insurance for their nuclear industry, or cap liability exposure. Other companies, such as Rosatom in Russia and Areva in France, are granted sovereign immunity protections since they are at least partially state-owned. Some argue that the U.S. nuclear industry is at a disadvantage when competing for foreign contracts because the U.S. government does not provide similar liability protections. The United States has ratified the Convention on Supplementary Compensation for Nuclear Damage (CSC), which would cover U.S. nuclear equipment suppliers conducting foreign business, but the convention has not yet entered into force. For many U.S. companies, ratification of the CSC by the importing state is a requirement for them to do business there, although U.S. firms have built reactors in countries that are not CSC signatories. Each party to the CSC would be required to establish a nuclear damage compensation system within its borders. For any damages not covered by those national compensation systems, the convention would establish a supplemental tier of damage compensation to be paid by all parties. Whether French and Russian nuclear companies are actually shielded from nuclear liability claims is unclear. French companies have recently stressed that the CSC, which requires additional compensation limits apart from liability, is a prerequisite for them to do business in a country. Moreover, France and Russia are discussing with India means of resolving their concerns about that country's liability law, which was adopted in August 2010 and, according to many observers, is inconsistent with the CSC. However, according to a Nuclear Energy Agency analysis, Russian and French companies could, in the event of a nuclear accident, still be less exposed to lawsuits than U.S. companies because Moscow and Paris would be in a "more powerful position to negotiate a settlement with the Indian government than a private supplier may be." Additionally, suppliers are more likely to be subject to class action lawsuits in the United States than would suppliers in Russia or France. The ability of the United States to influence regulations for international nuclear commerce has arguably diminished. As discussed above, the U.S. nuclear industry's market power has declined and foreign competitors have been concluding nuclear supply agreements with other countries. Moreover, some influential governments have demonstrated limited enthusiasm for such regulations. For example, as noted, some members of the NSG displayed resistance to proposals that would restrict the transfer of enrichment and reprocessing technology. Furthermore, the NSG decided in 2008 to exempt India from some of its export guidelines—a step which many observers argued would assist New Delhi's nuclear weapons program. Some suppliers may use the 2008 decision to justify supplying other states that do not meet NSG guidelines; indeed, China has agreed to supply Pakistan with two additional nuclear reactors. It is also possible that Israel and Pakistan, which, like India, do not have full-scope safeguards and have not signed the NPT, may continue to ask for exemptions from NSG guidelines. For its part, Israel proposed export criteria in 2007 that would have had the effect of exempting Israel from the current NSG guidelines and is widely believed to have sought a nuclear cooperation agreement with the United States. Recent proposals have called for restricting foreign nuclear firms' activities in the United States if they provide nuclear power plants to countries that have not agreed to forswear enrichment and reprocessing. Such restrictions would be intended to encourage other nuclear supplier countries to adopt export standards similar to those in the U.S.-UAE 123 agreement. For example, in a November 2010 letter to President Obama, 16 nuclear energy policy experts specifically targeted France, urging that federal loan guarantees for proposed French nuclear projects in Maryland and Idaho be conditioned on France's adoption of the U.S.-UAE framework. In addition to loan guarantees, the letter recommended that licenses from the Nuclear Regulatory Commission, as well as federal contracts, be denied to foreign firms "unless they are willing to support the very toughest nuclear nonproliferation standards our own government has developed in the U.S.-UAE deal." Many foreign firms operating in the United States or participating in U.S. nuclear projects could potentially be subject to such sanctions. The French firm Areva, which plans to build a reactor in Maryland and a uranium enrichment plant in Idaho, and also hopes to sell reactors in the Middle East, says it has nearly 5,000 employees in the United States and Canada. Many foreign companies that are likely to be involved in the worldwide supply chain for U.S. nuclear projects may also be involved in nuclear projects that do not include agreements by the recipients to forswear enrichment and reprocessing. It would appear, therefore, that U.S. denial of loan guarantees, licenses, and contracts could be painful for the targeted companies, possibly putting pressure on their home governments. However, such sanctions could also impede or halt planned U.S. nuclear projects, harm the U.S. operations of foreign companies, and disrupt federal nuclear activities. As noted, Congress has become increasingly concerned that U.S. laws and policies may need to be changed in order to prevent further nuclear proliferation. In the future, Congress may choose to consider such factors as the 2011 Nuclear Suppliers Group's (NSG) decision on the supply of enrichment and reprocessing technology; the extent to which the U.S. nuclear industry is dependent on foreign suppliers; the magnitude of the proliferation threat from nuclear power programs; the efficacy of current nonproliferation mechanisms, including IAEA safeguards; and whether and to what extent the United States can influence other governments' nuclear supply policies. Appendix A. The Conceptual Nuclear Fuel Cycle For a detailed discussion, see CRS Report RL34234, Managing the Nuclear Fuel Cycle: Policy Implications of Expanding Global Access to Nuclear Power , coordinated by [author name scrubbed]. Appendix B. Status of World Wide Nuclear Power Plants Appendix C. U.S. Nuclear Cooperation Agreements The following states and other entities had civilian nuclear cooperation (Section 123) agreements with the United States in force as of November 1, 2014: Appendix D. Articles I, II, and IV of the Nuclear Nonproliferation Treaty 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 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. Appendix E. Additional Protocol Trends Appendix F. Reactors, Additional Protocols, 123 Agreements Appendix G. Nuclear Suppliers Group Members The following 48 countries are members of the Nuclear Suppliers Group as of November 1, 2014. The European Commission participates as an observer. | U.S. civil nuclear cooperation agreements ("123" agreements), which are bilateral agreements with other governments or multilateral organizations, have several important goals, including promoting the U.S. nuclear industry, which is increasingly dependent on foreign customers and suppliers, and preventing nuclear proliferation. Increased international interest in nuclear power has generated concern that additional countries may obtain fuel-making technology that could also be used to produce fissile material for nuclear weapons. Ensuring the peaceful use of transferred nuclear technology has long been a major U.S. objective, and Congress has played a key role. For example, the Nuclear Nonproliferation Act of 1978, which amended the Atomic Energy Act (AEA) of 1954, added new requirements for nuclear cooperation with the United States. Moreover, the United States has been a longtime proponent of restrictive international nuclear export policies. In recent years, some observers and Members of Congress have advocated that the United States adopt new conditions for civil nuclear cooperation. These would include requiring potential recipients of U.S. civil nuclear technology to forgo fuel-making enrichment and reprocessing technologies and to bring into force an Additional Protocol to their International Atomic Energy Agency (IAEA) safeguards agreements. Such protocols augment the IAEA's legal authority to inspect nuclear facilities. The near-term proliferation threat posed by civil nuclear commerce, particularly reactor transfers, is far from clear: All but three states (India, Israel, and Pakistan, all of which have nuclear weapons) are parties to the nuclear Nonproliferation Treaty (NPT); all legitimate transfers of nuclear technology to NPT non-nuclear-weapon states are subject to IAEA safeguards; and no country with comprehensive safeguards in place and a record in good standing with the IAEA has used declared nuclear facilities to produce fissile material for weapons. Further, the international community has multiple mechanisms to dissuade countries from developing domestic enrichment or reprocessing facilities. States such as India, Iran, Israel, North Korea, and Pakistan did acquire enrichment or reprocessing technology, but did so either clandestinely or prior to the establishment of the Nuclear Suppliers Group (NSG) in the mid-1970s. Key factors and issues for Congress: The United States concludes nuclear cooperation agreements for a variety of reasons, including promoting nonproliferation, supporting the U.S. nuclear industry, and improving or sustaining overall bilateral and strategic relations. (See "Policy Goals of U.S. Nuclear Cooperation Agreements.") The U.S. nuclear industry's market share has declined in recent years; foreign customers and suppliers are important to the industry's viability. Some argue that the absence of U.S. government liability protections for U.S. reactor exports puts that industry at a disadvantage relative to foreign competitors who enjoy such protections. (See "U.S. Nuclear Industry" and "Liability.") Fears of additional states obtaining enrichment or reprocessing technologies may not materialize. Neither the United States nor any other states possessing enrichment or reprocessing technology have plans to transfer any such technologies (although the United States is currently conducting joint reprocessing research with South Korea). Moreover, the market for nuclear fuel currently functions well and the international community has begun to implement mechanisms to support the market. Although countries have the right under the NPT to develop their own nuclear fuel production capabilities, a functioning nuclear fuel market should reduce the need for them to do so. Nevertheless, as noted, states have previously managed to acquire these technologies. (See "Enrichment and Reprocessing Worldwide.") The number of NPT states-parties that have signed Additional Protocols has been steadily increasing; most states with significant nuclear activities have signed such protocols, giving the IAEA greater inspection authority over civil nuclear programs. (See "The NPT and IAEA Safeguards.") Some argue that the United States should use its influence to persuade other countries to adopt additional constraints on nuclear transfers. However, the relative decline of the U.S. nuclear industry, as well as some key states' demonstrated lack of willingness to accept such constraints, suggests that U.S. influence in this area is limited. (See "Additional Issues for Consideration.") This report discusses broad themes related to U.S. nuclear cooperation with other countries. More details of specific legislative proposals from the 113th Congress are found in CRS Report RS22937, Nuclear Cooperation with Other Countries: A Primer, by [author name scrubbed] and [author name scrubbed]. |
In troduction This report explains the process for filling positions to which the President makes appointments with the advice and consent of the Senate (PAS positions). It also identifies, for the 111 th Congress, all nominations to executive-level full-time positions in the 15 executive departments. It excludes appointments to regulatory boards and commissions and independent and other agencies, which are covered in other CRS reports. A profile of each agency tracks the appointments to positions within the agency, providing information on Senate activity (confirmations, rejections, returns to the President, and elapsed time between nominations and confirmation) as well as further related presidential activity (including withdrawals and recess appointments). The profiles also identify, for each agency, the executive-level positions in the agency requiring Senate confirmation, the incumbents in those positions as of the end of the 111 th Congress, and the pay levels of those officials. The Constitution (Article II, Section 2) empowers the President to nominate and, by and with the advice and consent of the Senate, to appoint the principal officers of the United States, as well as some subordinate officers. Officers of the United States are those individuals serving in high-ranking positions that have been established by Congress and "exercising significant authority pursuant to the laws of the United States" (emphasis added). Three distinct stages mark the appointment process: selection, clearance, and nomination by the President; consideration by the Senate; and appointment by the President. In the first stage, the White House selects and clears a prospective appointee before sending a formal nomination to the Senate. There are a number of steps in this stage of the process for most Senate-confirmed positions. First, with the assistance of, and preliminary vetting by, the White House Office of Presidential Personnel, the President selects a candidate for the position. Members of Congress and interest groups sometimes recommend candidates for specific PAS positions. They may offer their suggestions by letter, for example, or by contact with a White House liaison. In general, the White House is under no obligation to follow such recommendations. In the case of the Senate, however, it has been argued that Senators are constitutionally entitled, by virtue of the advice and consent clause noted above, to provide advice to the President regarding his selection; the extent of this entitlement is a matter of some debate. As a practical matter, in instances where Senators perceive insufficient pre-nomination consultation has occurred, they have sometimes exercised their procedural prerogatives to delay or even effectively block consideration of a nomination. During the clearance process, the candidate prepares and submits several forms, including the "Public Financial Disclosure Report" (Office of Government Ethics (OGE) 278), the "Questionnaire for National Security Positions" (Standard Form (SF) 86), a supplement to SF 86 ("86 Supplement"), and sometimes a White House Personal Data Statement. The vetting process often includes a background investigation conducted by the Federal Bureau of Investigation (FBI), which prepares a report that is delivered to the White House. It also includes a review of financial disclosure materials by OGE and an ethics official for the agency to which the candidate is to be nominated. If conflicts of interest are found during the background investigation, OGE and the agency ethics officer may work with the candidate to mitigate the conflicts. At the completion of the vetting process, the nomination is ready to be submitted to the Senate. The selection and clearance stage has often been the longest part of the appointment process. There have been, at times, lengthy delays, particularly when many candidates have been processed simultaneously, such as at the beginning of an Administration, or where conflicts needed to be resolved. Candidates for higher-level positions have often been accorded priority in this process. At the end of 2004, in an effort to reduce the elapsed time between a new President's inauguration and the appointment of his or her national security team, Congress enacted amendments to the Presidential Transition Act of 1963. These amendments encourage a President-elect to submit, for security clearance, potential nominees to high-level national security positions as soon as possible after the election. A separate provision of law, enacted as part of the Federal Vacancies Reform Act of 1998, lengthens, during presidential transitions, the potential duration of a temporary appointment by 90 days. For a position located within a state (e.g., U.S. attorney, U.S. marshal, and U.S. district judge), the President, by custom, frequently has nominated an individual recommended by one or both Senators from that state (if they are from the same party as the President). In instances where neither Senator is from the President's party, he usually has deferred to the recommendations of party leaders from the state. Occasionally, the President has solicited recommendations from Senators of the opposition party because of their positions in the Senate. If circumstances permit and conditions are met, the President could give the nominee a recess appointment to the position (see section entitled " Recess Appointments " below). Recess appointments have sometimes had political consequences, however, particularly where Senators perceived that such an appointment was an effort to circumvent their constitutional role. Some Senate-confirmed positions, including many of those in the executive departments, may also be temporarily filled under the Vacancies Act. A nominee has no legal authority to assume the duties and responsibilities of the position; a nominee who is hired by the agency as a consultant while awaiting confirmation may serve only in an advisory capacity. Authority to act comes once there is Senate confirmation and presidential appointment, or if another method of appointment, such as a recess appointment or a temporary appointment, is utilized. In the second stage, the Senate alone determines whether or not to confirm a nomination. The way the Senate has acted on a nomination has depended largely on the importance of the position involved, existing political circumstances, and policy implications. Generally, the Senate has shown particular interest in the nominee's views and how they are likely to affect public policy. Two other factors have sometimes affected the examination of a nominee's personal and professional qualities: whether the President's party controlled the Senate, and the degree to which the President became involved in supporting the nomination. Much of the Senate confirmation process occurs at the committee level. Administratively, nominations are received by the Senate executive clerk, who arranges for the referral of the nominations to committee, according to the Senate rules and precedents. Committee nomination activity has generally included investigation, hearing, and reporting stages. As part of investigatory work, committees have drawn on information provided by the White House, as well as information they themselves have collected. Some committees have held hearings on nearly all nominations; others have held hearings for only some. Hearings provide a public forum to discuss a nomination and any issues related to the program or agency for which the nominee would be responsible. Even where confirmation has been thought to be a virtual certainty, hearings have provided Senators and the nominee with opportunities to go on the record with particular views or commitments. Senators have used hearings to explore nominees' qualifications, articulate policy perspectives, or raise related oversight issues. A committee may decline to act on a nomination at any point—upon referral, after investigation, or after a hearing. If the committee votes to report a nomination to the full Senate, it has three options: it may report the nomination favorably, unfavorably, or without recommendation. A failure to obtain a majority on the motion to report means the nomination will not be reported to the Senate. If the committee declines to report a nomination, the Senate may, under certain circumstances, discharge the committee from further consideration of the nomination in order to bring it to the floor. The Senate historically has confirmed most, but not all, executive nominations. Rarely, however, has a vote to confirm a nomination failed on the Senate floor. Unsuccessful nominations usually do not make it past the committee stage. Failure of a nomination to make it out of committee has occurred for a variety of reasons, including opposition to the nomination, inadequate amount of time for consideration of the nomination, or factors that may not be directly related to the merits of the nomination. Senate rules provide that "nominations neither confirmed nor rejected during the session at which they are made shall not be acted upon at any succeeding session without being again made to the Senate by the President…" In practice, such pending nominations have been returned to the President at the end of the session or Congress. Pending nominations also may be returned automatically to the President at the beginning of a recess of more than 30 days, but the Senate rule providing for this return is often waived. In the final stage, the confirmed nominee is given a commission bearing the Great Seal of the United States and signed by the President and is sworn into office. The President may sign the commission at any time after confirmation, at which point the appointment becomes official. Once the appointee is given the commission and sworn in, he or she has full authority to carry out the responsibilities of the office. The Constitution also empowers the President to make limited-term appointments without Senate confirmation when the Senate is in recess, either during a session (intrasession recess appointment) or between sessions (intersession recess appointment). Such recess appointments expire at the end of the next session of the Senate. Presidents have occasionally used the recess appointment power to circumvent the confirmation process. In response, Congress has enacted provisions that restrict the pay of recess appointees under certain circumstances. Because most potential appointees to full-time positions cannot serve without a salary, the President has an incentive to use his recess appointment authority in ways that allow them to be paid. Under the provisions, if the position falls vacant while the Senate is in session and the President fills it by recess appointment, the appointee may not be paid from the Treasury until he or she is confirmed by the Senate. However, the salary prohibition does not apply (1) if the vacancy arose within 30 days before the end of the session of the Senate; (2) if, at the end of the session, a nomination for the office, other than the nomination of an individual appointed during the preceding recess of the Senate, was pending before the Senate for its advice and consent; or (3) if a nomination for the office was rejected by the Senate within 30 days before the end of the session and an individual other than the one whose nomination was rejected thereafter receives a recess appointment. A recess appointment falling under any one of these three exceptions must be followed by a nomination to the position not later than 40 days after the beginning of the next session of the Senate. For this reason, when a recess appointment is made, the President generally submits a new nomination for the nominee even when an earlier nomination is pending. Although a recess appointee whose nominations to a full term is subsequently rejected by the Senate may continue to serve until the end of his or her recess appointment, a provision of the FY2008 Financial Services and General Government Appropriations Act may prevent him or her from being paid after the rejection. From the 110 th Congress on, Congress has periodically used specific scheduling practices in an attempt to prevent the President from making recess appointments. The evolution of these practices, the President's response to them, and associated controversies are beyond the scope of this report. Detailed information may be found in other CRS reports. Notably, these practices were used only once during the 111 th Congress. Congress has provided limited statutory authority for the temporary filling of vacant positions requiring Senate confirmation. It is expected that, in general, officials holding PAS positions who have been designated as "acting" are holding their offices under this authority or other statutory authority specific to their agencies. Under the Federal Vacancies Reform Act of 1998 (FVRA), when an executive agency position requiring confirmation becomes vacant, it may be filled temporarily in one of three ways: (1) the first assistant to such a position may automatically assume the functions and duties of the office; (2) the President may direct an officer in any agency who is occupying a position requiring Senate confirmation to perform those tasks; or (3) the President may select any officer or employee of the subject agency who is occupying a position for which the rate of pay is equal to or greater than the minimum rate of pay at the GS-15 level, and who has been with the agency for at least 90 of the preceding 365 days. A temporary appointment made under the FVRA is limited to 210 days from the date of the vacancy, but the time restriction is suspended if a first or second nomination for the position is pending. In addition, during a presidential transition, the 210-day restriction period does not begin to run until either 90 days after the President assumes office, or 90 days after the vacancy occurs, if the vacancy occurs during the 90-day inauguration period. The act does not apply to positions on multi-headed regulatory boards and commissions and to certain other specific positions that may be filled temporarily under other statutory provisions. Table 1 summarizes appointment activity, during the 111 th Congress, related to full-time executive-level positions in the 15 departments. President Barack H. Obama submitted to the Senate 347 nominations to executive department full-time positions. Of these 347 nominations, 293 were confirmed; 16 were withdrawn; and 38 were returned to the President under the provisions of Senate rules. The length of time a given nomination may be pending in the Senate can vary widely. Some nominations are confirmed within a few days, others are confirmed within several months, and some are never confirmed. This report provides, for each executive department nomination that was confirmed in the 111 th Congress, the number of days between nomination and confirmation ("days to confirm"). For confirmed nominations, an average (mean) of 73.2 days elapsed between nomination and confirmation. The median number of days elapsed was 52.0. Each of the 15 executive department profiles provided in this report is organized into two parts: a table providing information, as of the end of the 111 th Congress, regarding the organization's full-time PAS positions, and a table of appointment action with regard to these positions during the 111 th Congress. Data for these tables were collected from several authoritative sources. The first of these two tables identifies, as of the end of the 111 th Congress, each full-time PAS position in the department, its incumbent, and its pay level. For most presidentially appointed positions requiring Senate confirmation, the pay levels fall under the Executive Schedule, which, as of the end of the 111 th Congress, ranged from level I ($199,700) for cabinet-level offices to level V ($145,700) for the lowest-ranked positions. An incumbent's name followed by "(A)" indicates an official who was, at that time, serving in an acting capacity. Vacancies are also noted. The appointment action table provides, in chronological order, information concerning each nomination or recess appointment. It shows the name of the nominee or recess appointee, position involved, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation. Actions other than confirmation (i.e., nominations returned to or withdrawn by the President) are also noted. Some individuals were nominated more than once for the same position, usually because the first nomination was returned to the President. The appointment action tables that list more than one nomination also give 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. Both are presented because although the mean is a more familiar measure, it can be influenced by extreme values ("outliers") in the data, while the median 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. Presenting both numbers provides a more accurate portrayal of the central tendency of the data. For a small number of positions in this report, the two tables may give slightly different titles to the same position. This is a result of the fact that the titles used in the nomination the White House submits to the Senate, the title of each position as established by statute, and the title of the position used by the department itself are not always identical. The first table in each department profile, the table listing the incumbents at the end of the 111 th Congress, relies upon data provided by the department itself in listing the positions. The second table presented, the list of Appointment Action within each department, relies primarily upon the Senate nominations database of the Legislative Information System (LIS). This information is based upon the nomination sent to the Senate by the White House, which is not always identical to the exact title of the position used by the department. However, the inconsistency only appears in a small minority of the positions listed in this report. Inconsistencies are noted in the footnotes following each appointment table. Appendix A presents a table of all nominations and recess appointments to positions in executive departments, alphabetically organized by last name, and follows a similar format to that of the department appointment action tables. It identifies the agency involved and the dates of nomination and confirmation. The table also indicates if a nomination was confirmed, withdrawn, or returned. The mean and median numbers of days taken to confirm a nomination are also provided. Appendix B provides a table with summary information on appointments and nominations, by department. For each of the 15 executive departments discussed in this report, the table provides the number of positions, nominations, individual nominees, confirmations, nominations returned, nominations withdrawn, and recess appointments. The table also provides the mean and median numbers of days to confirm a nomination. A list of department abbreviations can be found in Appendix C . Appendix A. Presidential Nominations, 111 th Congress Appendix B. Appointment Action, 111 th Congress Appendix C. Abbreviations of Departments | This report explains the process for filling positions to which the President makes appointments with the advice and consent of the Senate (also referred to as PAS positions). It also identifies, for the 111th Congress, all nominations to full-time positions requiring Senate confirmation in the 15 executive departments. It excludes appointments to regulatory boards and commissions and independent and other agencies, which are covered in other CRS reports. The appointment process for advice and consent positions consists of three main stages. The first stage is selection, clearance, and nomination by the President. This step includes preliminary vetting, background checks, and ethics checks of potential nominees. At this stage, if the position is located within a state, the President may also consult with Senators who are from his party. The second stage of the process is consideration of the nomination in the Senate, most of which takes place in committee. Finally, if a nomination is approved by the Senate, the President may then present the nominee with a signed commission, making the appointment official. During the 111th Congress, the President submitted to the Senate 347 nominations to executive department full-time positions. Of these 347 nominations, 293 were confirmed; 16 were withdrawn; and 38 were returned to him in accordance with Senate rules. For those nominations that were confirmed, an average of 73.2 days elapsed between nomination and confirmation. The median number of days elapsed was 52.0. The President made 10 recess appointments to full-time positions in executive departments during the 111th Congress. Information for this report was compiled from data from the Senate nominations database of the Legislative Information System (LIS) http://www.congress.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 2008 "Plum Book" (United States Government Policy and Supporting Positions). This report will not be updated. |
During 2005 and 2006, the 109 th Congress made a number of changes to federal child welfare policy, which have recently been implemented or are set to be implemented in the near future. Most of these changes were made to the child welfare programs authorized under Title IV-E and Title IV-B of the Social Security Act. These programs primarily provide funding to state child welfare agencies to support services to families and children in their own homes (e.g. to provide services intended to keep children safely living with their parents), to provide foster care for eligible children who can no longer safely remain in their homes, and to provide adoption assistance for eligible children who are adopted out of foster care. These programs are administered by the Children's Bureau, within the Administration for Children and Families (ACF) at the U.S. Department of Health and Human Services (HHS), and the legislation amending them was primarily reported by the House Ways and Means Committee and the Senate Finance Committee. Amendments to the Court Appointed Special Advocates (CASA) program, which is authorized under Subtitle B of the Victims of Child Abuse Act, are also discussed. This program supports provision of advocates for abused or neglected children who are the subject of court proceedings. It is administered within the Office of Justice Programs (OJP) at the Department of Justice (DOJ), and legislation amending it was reported by the House and Senate Judiciary Committees. The changes enacted affect a broad spectrum of child welfare policies, which range from who is an eligible child and what are eligible costs for which states may claim reimbursement under the Title IV-E Foster Care and Adoption Assistance program to the provision of new support for services to children affected by a parent/caretaker's abuse of methamphetamine or other substances and to required collaboration between welfare agencies and courts. The recently enacted laws also added a number of specific new requirements for state child welfare agencies. With regard to children in foster care, each state must have in place new or revised policies or procedures related to (1) the quality and quantity of caseworker visits; (2) consultation with medical professionals on health treatment; (3) placement of children across state lines; (4) verification of citizenship or immigration status; and (5) background checks of prospective foster and adoptive parents. Further, states are required to have in place policies or procedures enabling them to continue providing necessary child welfare services during a disaster. These changes were enacted in seven bills, each of which is briefly discussed below in order of their enactment. The Fair Access to Foster Care Act of 2005 ( P.L. 109-113 ) permits states to claim reimbursement under Title IV-E of the Social Security Act on behalf of otherwise eligible foster children whose maintenance payments are provided to foster parents or institutional foster care providers via a for-profit foster care placement agency. Prior law stipulated that if a state sought to claim federal Title IV-E support on behalf of an otherwise eligible foster child, the child's maintenance payments could only be made by a public or non-profit agency. Noting that the use of for-profit foster care placement agencies is limited, the Congressional Budget Office (CBO) estimated this change would have an "insignificant" effect on federal foster care spending. The change was effective with the date of the law's enactment (November 22, 2005). The Violence Against Women and Department of Justice Reauthorization Act ( P.L. 109-162 ) reauthorized funding for the Court Appointed Special Advocates (CASA) program, permitted additional funding for training and technical assistance related to improving the criminal prosecution of child abuse, and authorized a new competitive grant program intended to improve services to children and youth exposed to violence. Section 112 of P.L. 109-162 amended Subtitle B of the Victims of Child Abuse Act and reauthorized funding for the Court Appointed Special Advocates (CASA) program for each of FY2007-FY2011 at the prior law annual level of $12 million. In FY2007, CASA, which is administered within the Department of Justice, received $12 million in funding ( P.L. 110-5 ). In addition to extending the program's funding authority, P.L. 109-162 clarified that CASA funding may be used to "initiate, sustain, and expand" CASA programs. (Prior law generally limited the purpose of these funds to initiating or expanding programs.) It further authorizes state and local CASA programs to request criminal background checks for prospective volunteers from the Federal Bureau of Investigation (FBI) and stipulates that any CASA program that makes such a request is required to pay the "reasonable costs" associated with the check. Finally, with regard to CASA, P.L. 109-162 prohibits use of federal funds provided under the CASA program for lobbying and requires the Inspector General of the Department of Justice to prepare a report that looks at the types of activities funded by the National CASA Association since 1993 and compares outcomes in cases where a CASA volunteer is appointed to assist a child to those where no CASA volunteer is appointed. Section 1193 of P.L. 109-162 added a new authorization of $7.5 million for each of FY2007-FY2011 for grants to the American Prosecutors Research Institute (APRI) to improve prosecution of child abuse cases. More specifically, APRI is expected to use these funds to provide technical assistance and training to attorneys and other individuals who prosecute child abuse cases in state or federal courts. Although P.L. 109-162 references program authority previously provided in statute for this kind of training and technical assistance (Section 214A of the Victims of Child Abuse Act), it did not amend that prior law, which expired with FY2005 (and had authorized annual funding of $5 million with no mention of APRI) . However, Congress has continued to provide funding for this purpose under that expired funding authority, and these funds are administered by the Department of Justice. In FY2007, just over $2 million was appropriated. Section 303 of P.L. 109-162 amended the Violence Against Women Act to add authority for four competitive grant programs related broadly to services, education, protection, and justice for young victims of violence. Just one of these grant programs is discussed in this report because it specifically requires child welfare agency involvement in administering any grant funding. Under this grant program, the Department of Health and Human Services (HHS, specifically the Family and Youth Services Bureau, FYSB) is authorized to make competitive grants to eligible entities for training and other activities intended to improve the collaborative community response to families in which both child maltreatment and domestic violence are present. To be eligible to receive this grant, an entity must be a collaborative partnership that includes a child welfare agency, an agency serving victims of domestic violence (or dating violence), and a law enforcement agency (it may also include courts and other relevant social service providers). Funding for this single grant program was authorized at $5 million for each of FY2007-FY2011. However, no specific funding was provided for this grant program in FY2007. An omnibus budget reconciliation measure, the Deficit Reduction Act (DRA, P.L. 109-171 , Title VII, Subtitle D) made legislative changes intended to clarify which children are eligible for federal foster care and adoption assistance support (under Title IV-E of the Social Security Act). It also placed certain limitations on the ability of states to make claims for federal reimbursement of the costs of administering their Title IV-E foster care programs, including limits on the length of time a child may be considered a "candidate" for foster care and new rules or restrictions on administrative claims related to foster children placed in unlicensed relative homes or other settings that are "ineligible" under the federal foster care program. Separately, the legislation raised the mandatory funding authorization for the Promoting Safe and Stable Families program (Title IV-B, Subpart 2 of the Social Security Act). It further amended both the Child Welfare Services (Title IV-B, Subpart 1) and the Court Improvement (Section 438 of the Social Security Act) programs to require both "ongoing" and "meaningful" collaboration between courts and child welfare agencies. Further, it amended the Court Improvement Program to authorize two new grants (related to data collection and training), which are intended to improve court handling of child welfare proceedings. The law appropriated $100 million ($20 million in each of FY2006-FY2010) for those grants. Finally, the DRA amended the Foster Care and Adoption Assistance plan requirements (under Title IV-E, of the Social Security Act) to assert that the program's confidentiality provisions are not intended to limit a state's flexibility in determining public access to child abuse and neglect proceedings, provided that, at a minimum, a state's policy on this issue ensured the safety and well-being of the child, parents, and family. For more detailed information on the child welfare provisions of the Deficit Reduction Act (which are included in Title VII, Subtitle D of that act), see CRS Report RL33155, Child Welfare: Foster Care and Adoption Assistance Provisions in Budget Reconciliation and CRS Report RL33350, Child Welfare: The Court Improvement Program , both by [author name scrubbed]. P.L. 109-239 amended Title IV-B and Title IV-E of the Social Security Act to encourage the expedited placement of foster children into safe and permanent homes across state lines and made several additional changes to child welfare policy under those parts of the law. The law establishes a federal 60-day deadline for completing an interstate home study (necessary to determine the suitability and safety of the home) and a 14-day deadline for a state that requests this interstate home study to act on the information in the study. (For any home study begun before October 1, 2008, states may have up to 75 days to complete the study if they can document certain circumstances beyond their control that prevented its completion within 60 days.) The new law also authorizes $10 million in each of FY2007-FY2010, for incentive payments (valued at $1,500 each) to states for every interstate home study that is completed in 30 days. No funds were appropriated for these payments in FY2007. P.L. 109-239 also prohibits states from restricting the ability of a state agency to contract with a private agency to conduct interstate home studies. Further, for children who will not be reunited with their parents, P.L. 109-239 encourages (or in some cases requires) identification and consideration of both in-state and out-of-state placement options—as part of currently required case review and planning activities for children in foster care. Separately, the bill requires courts (as a condition of receiving certain funding intended to improve their handling of child welfare proceedings) to notify any foster parent, pre-adoptive parent, or relative caregiver of a foster child of any proceedings to be held regarding the child, and emphasizes the right of these individuals to be heard at permanency planning proceedings. Finally, the law strengthens language requiring the child welfare agency to maintain and update a complete health and education record for each child in foster care and requires that youth leaving foster care custody because they have reached the age of majority (typically at 18 years of age) must be given a free copy of their health and education record. An omnibus measure, the Adam Walsh Child Protection and Safety Act of 2006 ( P.L. 109-248 ) includes additional federal requirements related to criminal background checks of prospective foster and adoptive parents and newly requires states to check child abuse and neglect registries for information about prospective foster or adoptive parents (Section 152). The law also requires the establishment of a national registry of substantiated cases of child abuse and neglect (Section 633). State procedures for criminal records checks of prospective foster and adoptive parents must now include a check of national crime databases (i.e., an FBI check), and must be done before the placement of any foster child can be finally approved with prospective foster or adoptive parents. Under prior law, the kind of criminal record check (for example, state vs. FBI vs. local) was not specified, and the federal requirement for these checks extended only to children for whom a state intended to make federal foster care or adoption assistance claims (under Title IV-E of the Social Security Act). As under prior law, (except in those states opting out of the requirements; see discussion below), if a criminal record check reveals certain felony convictions of a prospective foster or adoptive parent, a state may not claim Title IV-E foster care or adoption assistance for a child placed in his or her home. However, this does not absolutely prohibit the state child welfare agency from placing a foster child in the home of such a prospective foster or adoptive parent, if the agency nonetheless determines that the home is safe for the child. At the same time, use of this placement by the agency disqualifies the child for Title IV-E and the agency may not then seek federal reimbursement of the otherwise eligible costs it incurs on the foster or adoptive child's behalf. For most states, these criminal record check requirements became effective with the first day of FY2007. However, prior law allowed states to "opt out" of the federal criminal records check procedures, and P.L. 109-248 permits those "opt out states" to have until the first day of FY2009 to come into compliance with the prior law as well as the new requirements. These states are: Idaho, Oklahoma, Oregon, California, New York, Massachusetts, Ohio, and Arizona. (Further, any state may be granted limited additional time to meet the new requirements if HHS determines that state legislation is needed to permit the state to comply with the new federal rules.) Many child abuse and neglect cases are not the subject of criminal court proceedings, and information on the perpetrators is therefore unlikely to appear in a criminal records check. However, this data may be included in a state child abuse and neglect registry. As of the first day of FY2007, P.L. 109-248 requires all states to check any child abuse and neglect registry they maintain for information about a prospective foster or adoptive parent (and any adult living in their household). The check must be made before approving placement of a foster child in the home (and without regard to whether the state plans to claim Title IV-E support for the child). States must also request (and all states must comply with such requests) information from any other state's child abuse and neglect registry where the prospective foster or adoptive parent, or other adult, has lived in the past five years. There are no federal stipulations about how states must use the information from these registries. Finally, P.L. 109-248 requires HHS, in consultation with the Justice Department, to create a national registry of substantiated cases of child abuse or neglect. Information in this national registry is to be accessible only to a federal, state, tribal, or local government entity (or an agent of such a public entity) that needs the information "to carry out its responsibilities under law to protect children from child abuse and neglect." Separately, the law requires HHS to "conduct a study on the feasibility of establishing data collection standards for a national child abuse and neglect registry" and to make recommendations and findings on (1) the costs and benefits of such data collection standards; (2) data collection standards currently employed by states, tribes, or other political subdivisions; and (3) data collection standards that should be considered to establish a model of promising practices. The law authorized total funding of $500,000 (for FY2006 and FY2007) to carry out the study and required that a report of this study be submitted to Congress by the end of July 2007. However, no funds were appropriated under this authority. The acting head of the HHS, Administration for Children and Families (ACF), stated in a July 27, 2007, letter that "Completion of the feasibility study, and careful consideration of its conclusions, should be undertaken before establishing the National Registry." He further noted that in responding to "constituent inquiries" concerning the registry, HHS "acknowledges that work on the National Registry cannot begin because funds are not available for the feasibility study." The Child and Family Services Improvement Act of 2006 ( P.L. 109-288 ) amended and/or reauthorized the Child Welfare Services, Promoting Safe and Stable Families, Court Improvement, and Mentoring Children of Prisoners programs (all authorized under Title IV-B of the Social Security Act) and made one amendment to the section of Title IV-E of the Social Security Act that defines the case review procedures required for each child in foster care. The Promoting Safe and Stable Families program (PSSF, Title IV-B, Subpart 2 of the Social Security Act) primarily authorizes formula grants to all states for provision of family support, family preservation, time-limited reunification and adoption promotion and support services. P.L. 109-288 extended, through FY2011, the program's annual funding authorization of $545 million(Title IV-B, Subpart 2). Program funding, however, has never reached the full authorization. In FY2007, the PSSF program received $434 million. For each of FY2006-FY2011, P.L. 109-288 targets no less than $40 million of this PSSF funding for two specific purposes: to support monthly caseworker visits to children in foster care and to improve outcomes for children affected by methamphetamine or other substance abuse. From this six-year funding set-aside of $240 million, the law stipulates that a total of $95 million is to be distributed to all states, by formula, to support monthly caseworker visits with children in foster care and $145 million is to be made available as competitive grants to regional partnerships (which must in nearly all cases include a public child welfare agency) that provide services and activities to improve the outcomes of children affected by parents/caretakers' abuse of methamphetamine or other substances. In late September 2007, HHS announced 53 grantees (in 28 states) who are each expected to receive total funding under this grant program of between $1.5 million and $3.7 million (across grant periods ranging from three to five years). In addition, the law increased the funding set-aside from the PSSF program for tribal child and family services—tribal funding under this program grew from roughly $5 million in FY2006 to about $12 million in FY2007. Further, in FY2006, roughly 80 tribes had access to the PSSF funds for child and family services as compared to more than 130 tribes in FY2007. P.L. 109-288 also amended the PSSF program to require states to report on their actual use of funds under Title IV-B of the Social Security Act, and it requires HHS to annually submit a report to Congress on these state expenditures. (Under prior law, states reported planned expenditures only, and these data have not been readily available to Congress.) Finally, the law limits administrative spending under the PSSF program (both federal and state/local dollars) to no more than 10% of funds spent by the state. P.L. 109-288 made amendments to the Child Welfare Services program (CWS, Title IV-B, Subpart 1 of the Social Security Act), which authorizes formula grants to states to develop a broad range of child welfare services and activities. The CWS program was first authorized in 1935. Significant amendments had not been made to it in more than a decade. Under prior law, the CWS program had a permanent funding authorization—meaning it never needed funding reauthorization. The 2006 amendments reorganized certain provisions in the program and limited funding authority for the program to FY2007-FY2011. (This places the program on the same reauthorization cycle as the PSSF program.) P.L. 109-288 did not change the funding authority for this program, which was set at $325 million beginning with FY1990. However, funding for this program has never reached this full authorization level. In FY2007, the program received $287 million. P.L. 109-288 emphasized that CWS funds are provided to assist states in developing and expanding child and family services that use "community-based" agencies. A new "Purposes" section further adds that these services should protect and promote the welfare of all children, prevent neglect, abuse, or exploitation of children, support at-risk families (to allow children to remain safely in their own homes or to return home in a timely manner); to promote the safety, permanence, and well-being of children in foster care and adoptive families; and to provide training, professional development, and support to ensure a well-qualified child welfare workforce. With the exception of the attention to community-based agencies and the mention of staff training support, these purposes are largely in keeping with the prior law definition of "child welfare services" that previously defined how states could use funds provided under this program. P.L. 109-288 also included several new state plan requirements. States (as of September 28, 2007) are required to have procedures to respond to and maintain child welfare services in the wake of a disaster and must also describe in their state plan how they consult with medical professionals to assess the health of and provide medical treatment to children in foster care. Further, states were required to establish (as of October 1, 2007) standards for the content and frequency of caseworker visits of children in foster care. Those standards must "at a minimum, ensure that the children are visited on a monthly basis and that the caseworker visits are well-planned and focused on issues pertinent to case planning and service delivery." For any state to receive funding under the CWS program in FY2008, P.L. 109-288 specifies that it must provide data to HHS showing the percentage of children in foster care that were visited on a monthly basis (by the caseworker handling the child's placement) and the percentage of those visits that occurred where the child lived. Further, on the basis of this data, HHS and each state must develop a plan to ensure that no later than October 1, 2011, at least 90% of children in the state's foster care caseload are visited monthly and that the majority of the visits occur where the child lives. States failing to make the planned progress toward this goal will be required to spend more of their own (i.e. state or local or both) funds in order to receive their full allotment of CWS funding. P.L. 109-288 made a number of additional changes related to the use of CWS funds. Beginning with FY2008, the law limits the use of program funds (both federal and state/local) for administrative purposes to no more than 10%. Also beginning with FY2008, the law prohibits any use of federal CWS funds for adoption assistance payments or child care above the amount of federal CWS funds spent for those purposes in FY2005, and it prohibits the use of both federal and state/local CWS funds for foster care maintenance payments above the amount of those funds spent for foster care maintenance payments in FY2005. P.L. 109-288 extended for five years (FY2007-FY2011) grants to eligible state highest courts to assess and improve their handling of child welfare proceedings (under the Court Improvement Program). It reauthorized the Mentoring Children of Prisoners program for those same five years—authorizing funding of "such sums as may be necessary"—and provided new authority for HHS to support a demonstration of the effectiveness of vouchers as a way to improve the delivery of (and access to) mentoring services for children of prisoners. Finally, P.L. 109-288 amended the case review procedures included in Title IV-E of the Social Security Act to require that the court (or court-approved administrative body) conducting a required permanency hearing for a child in foster care to consult with the child in an "age-appropriate manner" regarding the proposed plan to find a permanent home for the child or to help the child transition to independent living. For more information about the changes made by P.L. 109-288 to Promoting Safe and Stable Families, Child Welfare Services, and other programs, see CRS Report RL33354, The Promoting Safe and Stable Families Program: Reauthorization in the 109 th Congress , by [author name scrubbed]. An omnibus measure, the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ), made several changes to provisions that were enacted in the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) that affect children in foster care. Specifically, Section 6036 of the DRA requires most individuals to submit certain forms of citizenship or nationality documentation in order to be eligible for Medicaid. P.L. 109-432 (Section 405(c)), however, exempts all foster children (without regard to Title IV-E eligibility) from this requirement . The change was made effective as if it was included in the DRA. Separately, P.L. 109-432 amended Title IV-E of the Social Security Act to require states to have in effect procedures for verifying the citizenship or immigration status of each child in foster care (whether or not the state claims Title IV-E support for the child). Finally, this law amended Section 1123A of the Social Security Act to specifically require that state compliance with this new federal requirement be checked as part of periodic conformity reviews (e.g. the Child and Family Services Review). These changes were effective as of June 20, 2007 (six months after the enactment of P.L. 109-432 ). | This report summarizes changes enacted in federal child welfare policy during the 109th Congress. Most federal child welfare programs are authorized in Title IV-B and Title IV-E of the Social Security Act, and the bulk of the changes enacted amended programs in those parts of the law. These programs include Child Welfare Services, Promoting Safe and Stable Families, Court Improvement, and Foster Care and Adoption Assistance. Legislation amending these programs is typically reported by the House Ways and Means and Senate Finance Committees, and the programs are administered within the U.S. Department of Health and Human Services (HHS). Changes made to the Court-Appointed Special Advocates (CASA) program (Subtitle B of the Victims of Child Abuse Act), which were included in legislation reported by the House and Senate Judiciary committees, are also discussed. That program is administered within the Department of Justice (DOJ). The changes enacted affect a broad spectrum of child welfare policies, ranging from who are eligible children and what are eligible costs for which states may claim reimbursement under the Title IV-E Foster Care and Adoption Assistance program to the provision of new support for services to children affected by a parent or caretaker's abuse of methamphetamine or other substances and to required collaboration between child welfare agencies and courts. The recently enacted laws also added a number of specific new requirements for state child welfare agencies. With regard to children in foster care, each state must have in place new or revised policies or procedures related to (1) the quality and quantity of caseworker visits; (2) consultation with medical professionals on health treatment; (3) placement of children across state lines; (4) verification of citizenship or immigration status; and (5) background checks of prospective foster and adoptive parents. Further, states are required to have in place policies or procedures enabling the agency to continue providing necessary services during a disaster. The child welfare provisions of the seven laws providing for these changes are discussed in this report in order of their enactment. These laws are the Fair Access to Foster Care Act of 2005 (P.L. 109-113), the Violence Against Women and Department of Justice Reauthorization Act of 2005 (P.L. 109-162), the Deficit Reduction Act of 2005 (P.L. 109-171), the Safe and Timely Interstate Placement Act of 2006 (P.L. 109-239), the Adam Walsh Child Protection and Safety Act of 2006 (P.L. 109-248), the Child and Family Services Improvement Act of 2006 (P.L. 109-288), and the Tax Relief and Health Care Act of 2006 (P.L. 109-432). This report will not be updated. |
In recent years, some states and localities have considered, and in a few cases enacted, measures intended to deter the presence of aliens who entered and/or remain in the United States without legal authorization. Typically, these measures have sought to (1) limit the hiring and employment of unauthorized aliens, including through the denial of permits to persons that employ unauthorized aliens and the regulation of day labor centers; (2) restrict the ability of unlawfully present aliens to rent or occupy dwellings within a state or locality's jurisdiction; and/or (3) deny unlawfully present aliens access to state or local services or benefits. More recently, some states have arguably gone further by imposing criminal or civil penalties upon activities that may facilitate unauthorized immigration. Several such measures have been challenged in court, including on federal preemption and Fourteenth Amendment grounds. Legal challenges brought in federal court concerning restrictions on employment, in particular, have led to conflicting court rulings. In some cases, the relevant state or local measure has been upheld as constitutionally and legally valid. In other cases, the measure has been struck down. In still other instances, the parties have reached a settlement agreement that precludes enforcement of the contested law; the government has repealed the challenged provision; or the presiding court has enjoined the enforcement of the challenged provisions pending trial. These cases illustrate the difficulties that states and localities face in attempting to regulate the presence and rights of aliens within their jurisdictions in a manner consistent with federal law. Over time, the courts have narrowed the legal bases upon which states and localities may enact legislation affecting aliens. State and local authority to regulate aliens has also been limited, directly or impliedly, by the growing scope of federal immigration law. With the enactment of federal employer sanctions, welfare reform, and other recent immigration laws, Congress has left increasingly few opportunities for states and localities to legislate. Significantly, these laws have not only broadened the substantive regulation of aliens (e.g., employment eligibility), but also established discrete procedures for determining alien eligibility for employment and certain benefits. Perhaps ironically then, even as new state and local measures to deter illegal immigration are motivated in part by a perceived lack of federal enforcement of immigration law, the degree to which states and localities may regulate immigration-related matters has arguably been curbed by the growing breadth of federal immigration law. Conflicting court rulings regarding the permissibility of state and local measures targeting unlawfully present aliens have further contributed to this legal ambiguity. In particular, the U.S. Courts of Appeals for the Third, Ninth, and Tenth Circuits have reached differing conclusions as to whether federal law preempts state or local measures that would require employers within their jurisdiction to use E-Verify, the online federal employment eligibility verification system, to check the work authorization of employees. This term, the Supreme Court is considering the case of Chamber of Commerce v. Whiting , which involves arguments as to whether federal law preempts an Arizona statute that requires employers to use the federal government's E-Verify system to determine the work eligibility of employees and suspends or revokes the business licenses of entities found to have hired unauthorized aliens. This report discusses the constitutional issues raised by state and local laws intended to deter the presence of unauthorized aliens by limiting their access to housing, employment, and public benefits, as well as the implications that federal civil rights statutes might have for the implementation and enforcement of these laws. It also discusses recent federal court cases addressing the constitutionality of such measures. A separate report, CRS Report R41221, State Efforts to Deter Unauthorized Aliens: Legal Analysis of Arizona's S.B. 1070 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed], discusses state laws that require state and local police to enforce federal immigration law or criminalize conduct that may facilitate unauthorized immigration. An estimated 37 million foreign-born persons currently reside in the United States, almost a third of whom may be present without authorization. Over the past two decades, the number of aliens who unlawfully reside in the United States has grown significantly, from an estimated 3.2 million in 1986 to a high of more than 11 million in 2008. While this number dropped to 10.8 million in 2009 and the level of unauthorized migration into the United States has declined in recent years, some states and localities, concerned about the perceived negative effects of illegal immigration, have enacted measures intended to deter the presence of unauthorized aliens within their jurisdiction. Since early 2006, some states and localities have considered legislation that would (1) limit the hiring and employment of unauthorized aliens, including through the denial of permits to persons that employ unauthorized aliens and the regulation of day labor centers; (2) restrict the ability of unlawfully present aliens to rent or occupy dwellings within a state or locality's jurisdiction; and/or (3) deny unlawfully present aliens access to state or local services or benefits. Although local measures to restrict unlawfully present aliens' access to employment or housing have received considerable attention, relatively few of the measures reportedly introduced appear to have been enacted. State action on these matters has arguably been more significant, with several states adopting measures that restrict employers from hiring or employing unauthorized aliens or aliens' eligibility for public benefits. No state appears to have enacted legislation specifically barring unlawfully present aliens from renting private dwellings, although such measures have been enacted by some localities. State or local restrictions upon unlawfully present aliens' access to employment or housing and eligibility for public benefits have been challenged upon various grounds. Among other things, plaintiffs challenging such restrictions have alleged that they: (1) are preempted by federal immigration law and thus unenforceable by federal or state courts; (2) deprive persons of equal protection of the law in violation of the Fourteenth Amendment to the U.S. Constitution; and/or (3) deprive persons of property or liberty interests without providing them due process of law in violation of the Fourteenth Amendment. The following sections describe the legal concepts of preemption, equal protection, and procedural due process in more detail, particularly as they may apply to state and local regulation of unlawfully present aliens within their jurisdiction. The doctrine of preemption derives from the Supremacy Clause of the Constitution, which establishes that federal law, treaties, and the Constitution itself are "the supreme Law of the Land." Thus, one essential aspect of the federal structure of government is that states can be precluded from taking actions that are otherwise within their authority if federal law is thereby thwarted. "States cannot, inconsistently with the purpose of Congress, conflict or interfere with, curtail or complement, the federal law, or enforce additional or auxiliary regulations." An act of Congress may preempt state or local action in a given area in any one of three ways: (1) the statute expressly states preemptive intent (express preemption); (2) a court concludes that Congress intended to occupy the regulatory field, thereby implicitly precluding state or local action in that area (field preemption); or (3) state or local action directly conflicts with or otherwise frustrates the purpose of the federal scheme (conflict preemption). The delineation between these categories, particularly between field and conflict preemption, is not rigid. The power to set rules for which aliens may enter and remain in the United States is undoubtedly federal, and the breadth and detail of regulation Congress has established in the Immigration and Nationality Act (INA) of 1952, as amended, precludes substantive state regulation concerning which noncitizens may enter or remain. With the INA, Congress established a comprehensive framework to regulate the admission and removal of aliens, as well as the conditions of aliens' continued presence in the United States. Later, Congress enacted the Immigration Reform and Control Act (IRCA) of 1986, which amended the INA to establish a system to combat the employment of unauthorized aliens. The Supreme Court has characterized this system as "central to the policy of immigration law." On the one hand, the INA sets forth various categories of legal aliens and grants certain rights to aliens falling within those categories. On the other hand, the INA establishes an enforcement regime to deter the unlawful presence of aliens, including through the use of employer sanctions, criminal and/or civil penalties, and deportation. Nevertheless, the Supreme Court has never held that "every state enactment which in any way deals with aliens is a regulation of immigration and thus, per se , pre-empted by this constitutional power, whether latent or exercised." In the 1976 case of De Canas v. Bica , the Court held that state regulation of matters within their jurisdiction that were only tangentially related to immigration would, "absent congressional action[,] ... not be an invalid state incursion on federal power." The Court further indicated that field preemption claims against state action that did not conflict with federal law could only be justified when the "complete ouster of state power ... was the clear and manifest purpose of Congress." Still, the De Canas Court recognized that, even in situations where federal immigration law "contemplates some room for state legislation," a state measure might nonetheless be unenforceable on conflict preemption grounds if it "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting the INA." The Equal Protection Clause of the Fourteenth Amendment provides that no state shall "deny to any person within its jurisdiction the equal protection of the laws." However, being entitled to "equal protection" does not mean that persons are entitled to "equal treatment," and not all classifications distinguishing between persons are invalid under the Equal Protection Clause. Generally, the standard of judicial review applied to state and local laws that treat different categories of persons differently—the "rational basis" test—is highly deferential to the government. Under this test, persons challenging the constitutionality of a law must show that it is not rationally related to a legitimate government interest. In contrast, if a distinction disadvantages a "suspect class" or relates to a "fundamental right," a reviewing court will apply "strict scrutiny." Under strict scrutiny, the state or locality must demonstrate that the distinction is justified by a compelling government interest. Other tests falling between rational basis review and strict scrutiny have also been applied on occasion, depending upon the nature of the classifications involved. All persons in the United States are entitled to equal protection under the Fourteenth Amendment, and states are limited in the degree to which they may restrict persons' rights and privileges because they are unauthorized aliens. In the 1982 case of Plyler v. Doe , the Supreme Court held that a Texas statute that would have prohibited students who were unauthorized aliens from receiving free public elementary and secondary education violated the Constitution. The Court first determined that the Equal Protection Clause of the Fourteenth Amendment protects unlawfully present aliens. Then, finding that unauthorized immigrants are not a "suspect class" and education is not a "fundamental right," but also sensitive to the hardship that could result to a discrete class of children who were not accountable for their being present in the United States without authorization, the Court evaluated the Texas statute under an "intermediate" standard of review, requiring that the statute further a "substantial state interest." Ultimately, it found that none of the interests alleged by the state as justifications for the statute—which included conserving the state's educational resources, preventing an influx of illegal immigrants, and maintaining high-quality public education—constituted such an interest. As a result, the Court struck down the Texas statute. The Fourteenth Amendment provides that no state may "deprive any person of life, liberty, or property, without due process of law." The Supreme Court has long recognized that the Due Process Clause contained in the Fifth and Fourteenth Amendments "applies to all 'persons' within the United States, including aliens, whether their presence here is lawful, unlawful, temporary, or permanent." Procedural due process operates to ensure that states and localities do not arbitrarily interfere with certain key interests (i.e., life, liberty, and property). However, procedural due process rules are not meant to protect persons from the deprivation of these interests, per se . Rather, they are intended to prevent the " mistaken or unjustified deprivation of life, liberty, or property" by ensuring that states and localities use fair and just procedures when taking away such interests. The type of procedures necessary to satisfy due process can vary depending upon the circumstances and interests involved. In Mat hews v. Eldridge , the Supreme Court announced the prevailing standard for assessing the requirements of due process, finding that: Identification of the specific dictates of due process generally requires consideration of three distinct factors: first , the private interest that will be affected by the official action; second , the risk of erroneous deprivation of such interest through the procedures used, and probable value, if any, of additional or substitute procedural safeguards; and finally , the Government's interest, including the function involved and the administrative and fiscal burdens that the additional or substitute procedural requirements would entail. Although the requirements of due process may vary depending on the particular context, states and localities must provide persons with the ability to contest the basis upon which they are to be deprived of a protected interest. This generally entails notice of the proposed deprivation and a hearing before an impartial tribunal. Additional procedural protections, such as discovery of evidence or an opportunity to confront adverse witnesses, may also be required in certain circumstances to minimize the occurrence of unfair or mistaken deprivations of protected interests. The procedural protections of the Due Process Clause apply only to direct government action that deprives a person of a protected interest. They "do[] not apply to the indirect adverse effects of governmental action." While persons who are indirectly affected by government action may, in some cases, possess a legal cause of action against the government or another party, this cause of action generally would not be based upon a procedural due process claim. The ability of states and localities to restrict the hiring or employment of unauthorized aliens may depend upon the form that those restrictions take, although any such restrictions could potentially be subject to preemption and procedural due process challenges. With IRCA, Congress amended the INA to establish a comprehensive federal scheme regulating the employment of unauthorized aliens. Section 274A of the INA generally prohibits the hiring, referring, recruiting for a fee, or continued employment of aliens who lack legal authorization to work in the United States. Violators may be subject to cease and desist orders, civil monetary penalties or, in the case of serial offenders, criminal fines and/or imprisonment for up to six months. Subsection (h)(2) of INA § 274A, in particular, expressly preempts … any State or local law imposing civil or criminal sanctions (other than through licensing and similar laws) upon those who employ, or recruit or refer for a fee for employment, unauthorized aliens. This provision means that states and localities cannot constitutionally enact measures that would impose "civil or criminal sanctions"—other than through "licensing and similar laws"—upon employers of unauthorized aliens. Neither "civil or criminal sanctions" nor "licensing and similar laws" is defined by IRCA. However, courts have found that state and local measures creating a private right of action against employers who discharge authorized workers while retaining unauthorized workers impose civil sanctions and are expressly preempted. They have also found that "licensing and similar laws" include laws pertaining to the issuance of business licenses, not just those pertaining to the issuance of professional licenses. Such laws have, thus, been found not to be expressly preempted, although they could potentially be impliedly preempted, as discussed below. The "inclusion of an express pre-emption clause does not bar the ordinary working of [implied] pre-emption principles," and measures that fall within the savings clause of an express preemption provision could still potentially be found unconstitutional either because Congress has evidenced an intent to occupy the field or because the state or local enactment conflicts with or otherwise frustrates the purpose of federal law. It is also possible that state and local measures could be found to be expressly preempted if they would sanction employers who purportedly employ unauthorized aliens, but have not been found by federal authorities to have violated the INA. However, most courts to date appear to have addressed this as conflict preemption, rather than express preemption. In determining whether state and local measures targeting employers of unauthorized aliens through "licensing and similar laws" are constitutional, courts generally apply a presumption against preemption because the regulation of employment has traditionally been within states' police powers. This presumption appears to apply even though federal regulation of the employment of unauthorized aliens expanded significantly with the enactment of IRCA. As the Third Circuit recently noted: We are aware, of course, that the landscape of federal immigration law has changed dramatically since the Court decided De Canas . In enacting IRCA, Congress clearly made the regulation of the employment of unauthorized aliens a central concern of federal immigration policy. However, while this sea change in the federal regulatory scheme is incredibly important for purposes of our substantive analysis, it does not negate the operation of the presumption against pre-emption. The applicability of the presumption turns on a state's historic police powers. By definition, that means that the presumption depends on the past balance of state and federal regulation, not the present. Notwithstanding this presumption, depending upon their terms and the jurisdiction of any reviewing courts, state or local measures could still potentially be found to be impliedly preempted. The "pervasiveness" of the INA's provisions regarding employment of unauthorized aliens could potentially lead a court to find that Congress has preempted the field. However, the exclusion of "licensing and similar laws" from the express preemption of INA § 274A(h)(2) could perhaps be said to indicate that Congress has not evidenced an intent to wholly occupy the regulatory field with respect to alien employment, and, thus far, few courts have found that state or local restrictions on the employment of unauthorized aliens are precluded on field preemption grounds. Conflict preemption, in contrast, has been the primary focus of parties' arguments and judicial analysis to date. State and local measures could potentially be found to be unconstitutional on conflict preemption grounds if their requirements can be characterized as inconsistent or incompatible with federal law. Preemption challenges might, thus, be raised against state or local measures that (1) establish standards independent from those contained in the INA for determining whether a person has employed an unauthorized alien, and impose sanctions upon persons who violate these standards; (2) rely on state or local determinations that employers have violated the INA requirements concerning work eligibility, instead of relying upon federal determinations; (3) establish state and local procedures for verification of employees' work eligibility that differ from federal procedures (e.g., giving employers less time to resolve the status of an employee whose eligibility has been questioned than is provided for in federal law); (4) sanctioning persons for employing unauthorized aliens using a lower scienter (i.e., degree of awareness) threshold than provided for in federal law; or (5) imposing verification requirements upon persons who would not qualify as "employers" under federal law. However, it should be noted that not all differences between state and local measures and federal law would necessarily constitute grounds for finding conflict preemption, and reviewing courts could potentially interpret the relevant provisions of federal law differently in determining whether state and local measures are preempted on conflict grounds. Courts have, for example, reached differing conclusions as to the constitutionality of state and local measures requiring employers to use E-Verify, the online federal employment eligibility verification system, to check the work authorization of employees, because of their differing interpretations of federal law. The U.S. Court of Appeals for the Third Circuit has held that such measures are preempted on conflict grounds because, when Congress enacted the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 and established the pilot program that developed into E-Verify, it expressly prohibited the Secretary of Homeland Security from "requir[ing] any person or other entity to participate" in the program. Because of this prohibition, the Third Circuit found that state and local measures requiring the use of E-Verify conflict with federal law and frustrate congressional intent regarding the use of E-Verify. In contrast, the U.S. Courts of Appeals for the Ninth and Tenth Circuits have found that state and local measures requiring use of E-Verify are not conflict preempted because Congress intended for E-Verify to be used widely and/or did not prohibit states and localities from requiring the use of E-Verify. The Supreme Court heard oral arguments on this issue, as well as whether measures that would suspend or revoke the licenses of businesses that hire unauthorized aliens are preempted, this term. Additionally, even when state or local measures requiring employers to verify the work authorization of employees mirror the specific provisions of federal law, there is also the possibility that these measures could nonetheless be found to be preempted on conflict grounds if the broader policies they would promote are inconsistent with federal policies, or if the proliferation of similar local measures would have effects that are inconsistent with federal policies. The Third Circuit, in particular, recently found that the federal verification requirements established in IRCA reflect a deliberate balancing by Congress of policies relating to (1) deterring undocumented immigration (through the imposition of sanctions upon employers who hire unauthorized aliens); (2) minimizing the burdens imposed upon employers by the employment verification process; and (3) protecting aliens who are authorized to work and others who might be perceived as "foreign" from discrimination. It thus found that a local verification requirement, which it viewed as imposing additional burdens upon employers and which failed to provide its own protections against discrimination, was conflict preempted because it promoted deterrence over minimizing the burdens on employers and preventing discrimination. While the ordinance in question also diverged from federal law in its requirements, the Third Circuit's view that Congress intended all three policies to be promoted equally when it enacted IRCA could, if widely adopted, potentially lead courts to strike down state and local verification requirements that do not conflict with federal law in their provisions regarding deterrence, but that do not include protections against discrimination. Similarly, state or local measures could also be found to be conflict preempted if a court determines that the enactment of similar measures by other jurisdictions would have effects that are inconsistent with federal policy. It is also possible that a statute which is not unconstitutional on its face could be found to be unconstitutional as applied. Moreover, there is the possibility that, because of its terms, a state or local measure could be found to constitute a "regulation of immigration," rather than a regulation affecting aliens. In De Canas , the Supreme Court noted that while the latter may be permissible, the former is always preempted because the power to regulate immigration is exclusively federal. Some plaintiffs and commentators have asserted that state and local licensing and/or verification requirements constitute impermissible regulations of immigration because they would deter the employment of aliens, and persons generally cannot enter or remain in the United States without the ability to earn a livelihood. Courts have, thus far, declined to adopt this reasoning, and may be unlikely to do so given the precedent of De Canas . The De Canas Court rejected arguments that a California statute restricting the employment of unlawfully present aliens was per se preempted as a regulation of immigration, and instead suggested that states and localities could have legitimate interests in restricting employment of unauthorized aliens within their jurisdiction. However, the INA's regulation of the employment of aliens has expanded since De Canas was decided, and arguments that licensing and/or verification provisions constitute impermissible regulations of immigration could perhaps be made with more success in future litigation, especially in situations where the state or local measure is not narrowly tailored and/or based on legitimate purposes. In contrast, state or local regulations prohibiting or establishing day labor centers would, on their face, appear to raise fewer preemption issues. Nothing in federal law addresses day labor centers, much less expressly preempts state or local measures concerning them, and both zoning and employment matters are within states' historical police powers. Moreover, certain restrictions upon the operation of day labor centers, in particular, could plausibly be characterized as targeting "essentially local problems" and tailored to "combat effectively the perceived evils," as would appear to be permitted under De Canas . Depending upon their implementation, however, particular state or local measures could potentially be subject to preemption challenges on an as-applied basis. Restrictions upon day labor centers or solicitations of or by day laborers could also raise other constitutional issues that are outside the scope of this report, such as infringement of the rights to freedom of speech and association provided for in the First Amendment. State and local restrictions on the hiring and employment of unauthorized aliens could also be challenged on procedural due process grounds, depending upon the form such restrictions take. If, for example, a state or locality revoked the business permit of an entity that employed or hired unauthorized aliens, the employer's interests under the Due Process Clause would be implicated. The granting of a business license can accord the licensee a property interest that may not be revoked unless certain procedural due process requirements are met, although no such property interest exists which guarantees the issuance of a license. Additionally, the liberty interest protected by the Due Process Clause extends to the "right of the individual to contract, to engage in any of the common occupations of life," and this interest would appear to be abridged by state and local measures penalizing employers on account of the employment contracts they enter. State and local measures could be found unconstitutional if they fail to provide employers with the ability to contest the basis upon which they are to be deprived of protected property or liberty interests. This would generally entail notice of the proposed deprivation and a hearing before an impartial tribunal, during which they could challenge state or local findings regarding their employment practices. Additional procedural protections could potentially also be required. However, based upon the case law to date, employers would not necessarily be found to have been denied procedural due process if the state or local measure does not (1) provide employers with guidance on how to determine employees' work eligibility; (2) give employers the opportunity to review the contents of any third-party complaints against them which trigger state or local investigations; or (3) afford the employer a chance to contest, before state or local officials, any federal determinations that an employee is not authorized to work. State and local measures that provide employers with procedural protections similar to those accorded to businesses by the federal government under INA § 274A may be more likely to withstand a procedural due process challenge than those measures that do not. State and local measures barring unlawfully present aliens from renting or occupying private dwellings raise issues under both the preemption doctrine and the Fourteenth Amendment. These issues are, however, potentially more significant than those raised by state or local restrictions on employment because denial of housing can be seen as a regulation of immigration. State or local measures barring unlawfully present aliens from renting or occupying private dwellings within the jurisdiction could be susceptible to preemption challenges. Some have argued that such measures constitute impermissible "regulation of immigration" and are thus, per se , preempted. The De Canas Court described a "regulation of immigration" as one that attempts to determine "who should and should not be admitted into the country, and the conditions under which a legal entrant may remain," and at least one court has noted that it is "difficult to conceive of a more effective method of ensuring that persons do not enter or remain in a locality than by precluding their ability to live in it." Some courts have found that state or local measures constitute impermissible regulations of immigration because they classify persons using their own categories, instead of those used in the INA, when determining which aliens may rent housing, and/or they rely upon state or local personnel to determine individuals' immigration status. Other courts have found that such measures are impermissible regulations of immigration because denying persons an abode is tantamount to denying them permission to remain in the country. This argument might have less force in situations where the state or local measure relies on federal classifications and authorities in determining eligibility. However, the potential effects of similar restrictions in other areas could raise additional concerns. Even if state or local measures barring unlawfully present aliens from renting or occupying private dwellings do not constitute regulations of immigration that are, per se , preempted, they could still be found to be unconstitutional because of field or conflict preemption. The INA, particularly its provisions regarding harboring, could potentially be seen as preempting the field. Section 274 of the INA criminalizes various activities relating to the bringing in and harboring of aliens who are not authorized to enter or remain in the United States, as well as certain other activities related to the transportation of unlawfully present aliens or the encouragement or inducement of unlawfully present aliens to reside in the United States. Courts have generally interpreted this provision broadly, and it could be construed to cover renting property to an illegal alien or otherwise permitting him to dwell in a residence, at least when it is done in knowing or reckless disregard of the alien's illegal status. There is also the possibility of conflict preemption because of the broad discretion that the federal government has regarding which aliens to remove and/or the burden that state or local verification requirements would place on the federal government. Imposing burdens on aliens whose unauthorized presence the federal government has declined to sanction could be said to frustrate the federal scheme, as could "requiring" the federal government to devote resources to activities based upon state or local—as opposed to federal—priorities. State or local measures could also potentially be challenged on the grounds that they deprive prospective tenants, in particular, of equal protection in violation of the Fourteenth Amendment, although the outcome of such challenges remains somewhat uncertain, at least where no U.S.-born children of unlawfully present aliens are involved. The degree to which states and localities may restrict persons' ability to obtain private housing on account of alienage remains unsettled. As early as 1886, the Supreme Court recognized that the Equal Protection Clause applied to state classifications based on alienage. Nevertheless, during the early part of the twentieth century, the Supreme Court upheld a number of state laws denying rights and privileges to persons on account of their alienage (regardless of whether such aliens were lawfully present in the United States), in part because states were able to demonstrate a "special public interest" that was advanced through such measures. However, these decisions came at an earlier period of Fourteenth Amendment jurisprudence, and over time "the [Supreme] Court's decisions gradually have restricted the activities from which States are free to exclude aliens." Although none of the Court's earlier decisions has been expressly overruled, in at least some cases their precedential value has been questioned. Nevertheless, it appears well established, even following the Court's decision in Plyler , that states may impose greater restrictions upon the rights of unauthorized aliens than may be imposed upon citizens or legal immigrants, at least where the direct subjects of regulation are not children. At least one federal district court has found that an ordinance regulating the leasing of housing to unauthorized aliens did not violate the Equal Protection clause because it did not facially discriminate against a suspect class because of race, ethnicity, or national origin, and it was otherwise rationally related to a legitimate government interest in reducing crime by unauthorized immigrants and safeguarding community resources. This decision was not appealed. In contrast, alienage-based restrictions that directly or indirectly affect the legal rights of those children or spouses of unlawfully present aliens who lawfully reside in the United States might face more significant legal challenges. In the 1948 case of Oyama v. California , the Supreme Court found that a California statute banning alien landholding impermissibly discriminated against the citizen child of an alien, because it required the child to prove that his alien parent did not purchase property in the child's name to circumvent alien ownership restrictions—a burden not imposed upon the children of U.S. citizens. Depending on the manner and scope of a state or local housing restriction on unlawfully present aliens, the measure could trigger an Oyama -like challenge by a U.S. citizen directly or indirectly affected by the rule, such as a citizen child or spouse of an illegal immigrant whose property rights are impaired on account of family membership. Additionally, state or local measures that would bar unlawfully present aliens from renting or occupying private dwellings could implicate property interests of landlords and/or tenants that are affected by the Due Process Clause. The right to "maintain control over ... [one's] home, and to be free from governmental interference, is a private interest of historic and continuing importance." A government measure requiring the termination of a lease between a property owner and lessee deprives one or both of the parties of several property-related interests, including "the right of sale, the right of occupancy, the right to unrestricted use and enjoyment, and the right to receive rents." In addition, some measures barring persons from leasing real property to unlawfully present aliens are enforced through the imposition of monetary penalties upon offenders. Those who are compelled to pay such fines are deprived of an additional property interest. Ordinances that subject violators to incarceration would also deprive offenders of a liberty interest. State or local measures prohibiting the rental of housing to unlawfully present aliens therefore appear likely to deprive property owners and/or tenants of an interest protected by the Fourteenth Amendment's Due Process Clause. Accordingly, states and localities enacting such measures must provide procedural protections to minimize the occurrence of unfair or mistaken deprivations of protected interests, such as providing landlords with notice and an opportunity for a hearing before suspending their licenses and providing tenants with the opportunity to challenge their designation as unlawfully present. Some localities have attempted to deter the presence of illegal aliens within their borders via the denial of services and/or benefits. Such denials may be less prone to legal challenges than measures pertaining to employment and housing, partly because such measures appear less likely to raise preemption and equal protection challenges and partly because federal law expressly requires or authorizes states and localities to deny certain benefits to unlawfully present aliens. The outcome of any such challenge thus seems likely to hinge upon the scope of the benefits being denied, as well as whether the state or local measure in question would involve state or local personnel making independent assessments of persons' immigration status when determining whether to deny benefits. The degree to which states and localities may deny services or benefits based on unlawful presence in the United States remains unclear. During the 1970s and early 1980s, the U.S. Supreme Court decided a series of cases on governmental authority to discriminate against aliens in providing government benefits. Collectively, these cases set forth the following basic constitutional principles: state governments generally cannot discriminate between aliens who are authorized to live here indefinitely and U.S. citizens when setting eligibility requirements for state benefits; states have broader, but still limited, authority to discriminate against aliens who are here without authorization; and the federal government, by contrast, has wide discretion to discriminate both between citizens and legal aliens, as well as between classes of legal aliens. After these cases were decided, Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), which both established a general rule as to which benefits must be denied to aliens unlawfully residing in the United States and delineated which local public benefits must be provided regardless of immigration status. PRWORA prohibits many classes of noncitizens, legal and illegal alike, from receiving assistance. Generally, unlawfully present aliens are denied federal benefits and may qualify for state benefits only under laws passed by the states after the PRWORA's enactment. The class of benefits denied is broad and includes: (1) grants, contracts, loans, and licenses, and (2) retirement, welfare, health, disability, housing, food, unemployment, postsecondary education, and similar benefits. There are, however, exceptions to the aforementioned bars, including exceptions for: treatment under Medicaid for emergency medical conditions (other than those related to an organ transplant); short-term, in-kind, emergency disaster relief; immunizations against immunizable diseases and testing for and treatment of symptoms of communicable diseases; and services or assistance (such as soup kitchens, crisis counseling and intervention, and short-term shelters) designated by the Attorney General as: (i) delivering in-kind services at the community level, (ii) providing assistance without individual determinations of each recipient's needs, and (iii) being necessary for the protection of life and safety. The PRWORA also expressly bars unlawfully present aliens from most state and locally funded benefits. The restrictions on these benefits parallel the restrictions on federal benefits. As such, unauthorized aliens are generally barred from state and local government contracts, licenses, grants, loans, and assistance. However, states and localities are prohibited from denying benefits and/or services for emergency medical care, disaster relief, and immunizations. Although federal law has established a general framework as to what services may or may not be denied to unlawfully present aliens, courts have generally yet to weigh in on the issue of when localities may make lawful presence a requirement for services to be made available. Some of the services states and localities may attempt to deny to unlawfully present aliens could include bus tours for senior citizens, leadership training programs for adults, rental and mortgage assistance, drug treatment, health care for the uninsured, access to libraries and parks, and use of day labor centers. Courts will have to interpret how broadly the term "local public benefit" should be interpreted and whether denial of particular benefits is consistent with congressional purpose. This interpretation may depend on which services can be construed as encouraging illegal immigration. While services such as health care for the uninsured or rental assistance arguably fall within the purview of "local public benefit," others such as access to parks or libraries are less clear cut. Implementation of the denial of services to unlawfully present aliens could also raise issues, particularly if state or local personnel would determine alien eligibility for benefits by means other than that provided for in federal law. Some state and local measures restricting the hiring or housing of unauthorized aliens could also potentially conflict with existing federal anti-discrimination laws. Under Title VII of the Civil Rights Act, employers are prohibited from discriminating on the basis of race, color, religion, sex, or national origin. The Supreme Court has ruled that, with respect to Title VII, "the term 'national origin' does not embrace a requirement of United States citizenship." In reaching this result, the Court reasoned that national origin refers to the country in which someone is born or from which his or her ancestors came. Because individuals who share the same national origin do not necessarily share the same citizenship status, the Court determined that Title VII's prohibition on national origin discrimination does not necessarily make it illegal for employers to discriminate on the basis of citizenship status or alienage. Any state or local measure restricting the hiring or employment of unauthorized aliens must comply with Title VII requirements. Thus, for example, a local ordinance that authorized the enforcement of an employment complaint that alleged violations solely on the basis of an employee's race or national origin would not be legally enforceable. However, it is possible that an ordinance restricting the employment of unauthorized aliens could, when implemented, encourage violations of Title VII in situations where discrimination on the basis of citizenship would have the purpose or effect of discriminating on the basis of national origin. For example, employers who are concerned about inadvertently hiring unlawful workers may become reluctant to hire individuals from certain ethnic backgrounds, and such reluctance could have the unlawful effect of discriminating on the basis of national origin. In other cases, an employer might use a citizenship test as a pretext to disguise what is in fact national origin discrimination. As the Court has noted, "Title VII prohibits discrimination on the basis of citizenship whenever it has the purpose or effect of discriminating on the basis of national origin." In an effort to comply with such ordinances, therefore, some employers may engage in practices that could give rise to legal challenges under Title VII. Like Title VII, the Fair Housing Act (FHA) prohibits discrimination in the sale or rental of housing on a number of grounds, including national origin. In the housing context, as in the employment context, courts have found that citizenship discrimination does not automatically constitute national origin discrimination under the FHA, although they have held that the FHA would prohibit citizenship discrimination if such discrimination had the purpose or effect of discriminating on the basis of national origin. As a result, any state or local measure that authorizes the enforcement of housing complaints based solely on the national origin of a dwelling's inhabitants would be impermissible. Further, if landlords who are attempting to comply with an ordinance barring the tenancy of unlawfully present aliens engage in national origin discrimination, then such actions may give rise to legal challenges under the FHA. Thus far, only one federal court appears to have directly addressed whether a local ordinance intended to deter the housing of unlawfully present aliens constitutes a violation of the FHA. In Lozano v. City of Hazleton , the district court dismissed the plaintiffs' facial challenge, concluding that the plaintiffs had failed to show that there was no set of circumstances under which the ordinance would be valid. The court did, however, leave the door open to a possible "as applied" challenge to the local ordinances in question, noting, "Because the statutes have not yet gone into effect, we cannot know whether they would have the discriminatory effect that plaintiffs claim." The plaintiffs did not appeal. It is also possible that an employment or housing ordinance aimed at unauthorized aliens could give rise to violations of 42 U.S.C. § 1981. This provision, which was originally enacted as part of the Civil Rights Act of 1870, states that: All persons within the jurisdiction of the United States shall have the same right in every State and Territory to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. Although the Supreme Court has held that an alien is a "person" for purposes of § 1981, the Court has not addressed whether unauthorized aliens are encompassed within the statute's definition of "person." The Court, however, has held that unauthorized aliens are "persons" in the context of the Fourteenth Amendment, and, therefore, might be inclined to make a similar finding with respect to the definition of "person" under § 1981. If unauthorized aliens are protected from discrimination by governmental actors under the statute, then states or localities that pass employment or housing ordinances aimed at unauthorized aliens may be liable for violations of § 1981. Indeed, a federal district court held in the Lozano case that a local ordinance intended to deter the employment and housing of unauthorized aliens was a violation of § 1981. The Third Circuit did not address this issue on appeal. In addition, although the Supreme Court has held that § 1981 prohibits alienage discrimination by governmental actors, the Court has never addressed the question of whether § 1981 bars alienage discrimination by private actors. Until 1991, when Congress amended § 1981, the federal courts of appeals that had considered the issue were split with regard to this question. Since the amendments to § 1981, some courts have confirmed that the statute applies to private discrimination against aliens. As a result, it is possible, but not certain, that a court might find that an employer or landlord who, in complying with a state or local measure, refused to employ or rent to an unauthorized alien was in violation of § 1981. The State of Arizona has enacted several measures that place it in the vanguard of recent attempts to test the legal limits of state and local measures intended to deter unauthorized immigration. The Legal Arizona Workers Act of 2007 would, among other things, require employers to use E-Verify to check the work authorization of employees and suspend or revoke the licenses of employers found to have hired unauthorized aliens. It has been challenged by several parties on various grounds, including that it is preempted by federal law and deprives employers of due process. Its E-Verify and licensing provisions, in particular, have been upheld by the district court and the U.S. Court of Appeals for the Ninth Circuit. The plaintiffs appealed to the Supreme Court, which granted certiorari. Oral arguments in the case were heard on December 8, 2010, on the issue of whether these provisions are expressly or impliedly preempted. More recently, Arizona has arguably gone further in seeking to deter the presence of unauthorized aliens by enacting a measure in April 2010 that is commonly referred to as S.B. 1070. In addition to requiring state and local police to facilitate the detection of unauthorized aliens in their daily enforcement activities, S.B. 1070 would also criminalize certain conduct that may help bring about the presence of unlawfully present aliens within the state, including: willful failure to complete or carry an alien registration document; certain activities relating to the transport or harboring of unlawfully present aliens; and the application for, solicitation of, or performance of work within the state by unauthorized aliens. A federal district court has enjoined enforcement of many provisions of S.B. 1070—including those requiring state and local law enforcement to attempt to ascertain the immigration status of certain persons within their custody reasonably suspected to be unlawfully present—in response to the federal government's suit alleging that these provisions are preempted. A decision on the merits in this suit is still pending, as is the State of Arizona's appeal to the Ninth Circuit of the district court's grant of a preliminary injunction barring enforcement of many provisions of S.B. 1070. Private parties have also filed suit challenging S.B. 1070, including on the grounds that it would "cause widespread racial profiling." For more on S.B. 1070 see CRS Report R41221, State Efforts to Deter Unauthorized Aliens: Legal Analysis of Arizona's S.B. 1070 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. | An estimated 37 million foreign-born persons currently reside in the United States, almost a third of whom may be present without legal authorization. The reaction of state and local jurisdictions to unauthorized immigration has varied. In some cases, states and localities have adopted measures intended to deter unlawfully present aliens from arriving and settling within their jurisdictions, including by restricting such aliens' access to work, housing, and benefits. Typically, such measures have sought to (1) limit the hiring and employment of unauthorized aliens, including through the denial of permits to persons that employ unauthorized aliens and the regulation of day labor centers; (2) restrict the ability of unlawfully present aliens to rent or occupy dwellings within the state or locality; and/or (3) deny unlawfully present aliens access to state or local services or benefits. State or local restrictions upon unlawfully present aliens' access to employment or housing and eligibility for public benefits have been challenged on various grounds, including on the grounds that they (1) are preempted by federal law, including the Immigration and Nationality Act (INA), and thus unenforceable by federal or state courts; (2) deprive persons of equal protection of the law in violation of the Fourteenth Amendment to the U.S. Constitution; (3) deprive persons of property or liberty interests without providing them due process in violation of the Fourteenth Amendment; and (4) run afoul of federal civil rights statutes, including the Fair Housing Act, Title VII of the Civil Rights Act, and 42 U.S.C. § 1981. The outcomes of such challenges have varied, depending upon the specific restrictions at issue and the jurisdiction of the courts reviewing the restrictions. However, based upon the cases decided to date, these challenges appear to be more significant with regard to state and local restrictions on employing or renting property to unlawfully present aliens than they are with regard to state and local restrictions on unlawfully present aliens' access to public services and benefits. This term, the Supreme Court is considering the case of Chamber of Commerce v. Whiting, which involves arguments as to whether federal law preempts a 2007 Arizona statute that requires employers to use the federal government's E-Verify system to determine the work eligibility of employees and suspends or revokes the business licenses of entities found to have hired unauthorized aliens. This report discusses the constitutional issues raised by state and local laws intended to deter the presence of unauthorized aliens by limiting their access to housing, employment, and public benefits, as well as the implications that federal civil rights statutes might have for the implementation and enforcement of these laws. It also discusses recent federal court cases addressing the constitutionality of such measures. The report does not discuss recent state laws that seek to deter the presence of unauthorized aliens by requiring state law enforcement to enforce federal immigration law, or that criminalize conduct that may facilitate the presence of unauthorized aliens within the state. Such laws are discussed in a separate report, CRS Report R41221, State Efforts to Deter Unauthorized Aliens: Legal Analysis of Arizona's S.B. 1070, by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. |
RS21288 -- Smallpox: Technical Background on the Disease and Its Potential Role in Terrorism Updated January 10, 2003 Viruses are essentially small pieces of genetic material in a protein coat. They cannot reproduce by themselves. To multiply, a virus must hijack the replicationmachinery in living cells by infecting another organism. Smallpox is caused by the Variola virus, which undernormal circumstances only infects human cells. There are two types of Variola viruses. Variola minor causes a relatively mild disease that has less thana 1% fatality rate. Variola major causes what isgenerally thought of as smallpox, a very severe illness with a fatality rate of approximately 30%. (1) These viruses are part of the Orthopox genus whichalsocontains the viruses responsible for vaccinia, monkeypox, cowpox, camelpox and mousepox. (2) Before the last reported case of smallpox (a result of a laboratory accident in England in 1978), smallpox was considered to be one of the worst scourges inhuman history. Smallpox is estimated to have killed between 300 and 500 million people in the twentieth centuryalone. Once infected, the victim incubates the virus for seven to seventeen days during which the victim feels and appears normal. This stage is followed by one tofour days of high fever, malaise, headache, and muscle ache, often accompanied with nausea and vomiting. Duringthis time the person looks and feels very ill,but is not yet contagious. After this stage, the characteristic sores develop; first in the mouth then over the rest ofthe body. If the victim survives, the soresscab over and turn to scars in three to four weeks. About 30% of unvaccinated victims die (some sources suggestup to 50%). Up to 80% of the survivors aredisfigured by pockmarks or limb deformities. Smallpox is contagious, but the Centers for Disease Control and Prevention (CDC) (3) considers it to spread less widely and less rapidly than chickenpox,measles, whooping cough, or influenza. The victim is most likely to infect other people when the sores in the mouthare most active. This is in the first weekof the rash when virus comes out of the sores and into the saliva where they are easily aerosolized by coughing orsneezing. Although smallpox is usuallytransmitted by face to face contact, it can also be transmitted through the air over dozens of feet and by contaminatedclothing or bedding. The vaccine works by infecting a person with vaccinia virus which is closely related to smallpox virus. (4) The vaccine triggers immunity against all closelyrelated viruses, including smallpox. This immunity decreases over time; however, people who contract smallpoxeven thirty years after vaccination are muchless likely to die than unvaccinated people. (5) Interestingly, the vaccine also helps reduce the severity of the disease if given to victims within a few days aftersmallpox exposure. This is the only known treatment for smallpox, although several antiviral drugs have shownpromise in preliminary laboratory studies. Although the vaccinia vaccine is very effective at preventing smallpox, it is not without risks. Its complication rate is higher than that associated with anyroutinely used vaccine. Based on historical experience, experts estimate that most vaccinees will experience onlymild side effects such as low-grade fever, but1 in 797 people will experience serious side effects. Table 1 describes the historical complicationrates. Table 1. Historical smallpox vaccine complication rates (cases/million vaccinations) Source: CDC, Morbidity and Mortality Weekly Report, June 22, 2001, Vol. 50, No. RR-10, p.8. Inadvertent inoculation is the spread of the usually localized vaccinia infection to other parts of the body, causing sores and scarring most commonly on theface, genitals, and rectum. Generalized vaccinia causes vaccinia sores over the entire body. Eczema vaccinatumis a sometime fatal skin infection in peoplewho have a skin disorder such as eczema or atopic dermatitis. Encephalitis is a very serious and sometimes fatalinflammation of the brain. Progressivevaccinia is an inexorable rotting away of the flesh around the vaccine site that can sometimes also be fatal. As aresult of these complications, experts project1-2 deaths per million vaccinations. Complications are not limited to people who get vaccinated. People who come into contact with those who have been vaccinated within two weeks may also beexposed to the live vaccinia virus and develop complications. Some experts estimate that up to 20% of thecomplications will occur in the unvaccinatedcontacts. Historically, for every million people vaccinated, about 65 people who were not vaccinated becameinfected and developed a serious complicationsimply by coming into contact with a vaccinee. (6) Because of the high rate of vaccine complications, in 1971, U.S. public health authorities rescinded therecommendation for universal domestic smallpox vaccination. It is likely that the numbers in Table 1 underestimate the current and future problem with the vaccine. Since these numbers were last compiled in 1968, thenumber of people predisposed to problems with the vaccine has increased. Some experts estimate that up to 25%of the population now have conditions thatwould make vaccination contraindicated. These conditions include a history of eczema or other exfoliative skindisorder, pregnancy, or any immunodeficiencywhich could be caused by AIDS, chemotherapy or anti-rejection drugs following organ transplant. Because of theserious risk of transferring the virus to ahousehold member, it is recommended that people who live with someone with one of the above conditions notreceive the vaccine. Excluding these people iscomplicated by the large number of people who are unaware that they have a disease that will produce a serious sideeffect. For example, a vaccinee could livewith one of the estimated 300,000 people in the United States that do not know they are HIV positive. The only product proven to counter some of the vaccine complications is vaccinia immunoglobulin (VIG). This is extracted from the blood of peoplevaccinated with the smallpox vaccine. It is only effective for treatment of eczema vaccinatum and certain cases ofprogressive vaccinia. Significantly, VIGprovides no benefit in the treatment of postvaccinial encephalitis. Current civilian supplies of VIG are controlledby the CDC and are estimated to be enough todeal with the complications from about 27 million vaccinations. The CDC is in the process of procuring more VIG. Because the antiviral drug cidofovir hasshown some anti-vaccinia activity in lab animals, it is available for use as an Investigational New Drug when VIGtreatment fails. Although smallpox was officially declared to have been eliminated from the wild in 1980, many countries maintained laboratory stocks of the virus obtainedduring outbreaks. By 1985, these stocks were supposed to have been destroyed or transferred to one of the officialrepositories; one in the Soviet Union and theother in the United States. Russia inherited the smallpox stewardship following the break up of the Soviet Union. Although only the United States and Russia have declared stocks ofsmallpox, some experts have stated that although very unlikely, it is possible that some other countries haveundeclared stocks. Countries that may havedeliberately or inadvertently retained smallpox virus from naturally occurring outbreaks before eradication include:China, Cuba, India, Iran, Iraq, Israel, NorthKorea, Pakistan, and Yugoslavia. (7) A November2002 CIA intelligence review added France to this list and reportedly states a "high, but not very high [levelof] confidence" that Iraq and France have live smallpox samples and a "medium" level of confidence that NorthKorea does. (8) The highest barrier to a non-state sponsored terrorist using smallpox is likely to be the difficulty in obtaining the virus in the first place. Because all countrieshave stopped smallpox vaccination programs, citizens of all countries are equally vulnerable to a spreadingepidemic. Therefore, it is in the best interest of acountry with even an undeclared smallpox stock to keep it very secure. Despite this, some fear that the Russianstocks may not be sufficiently secure due to theeconomic collapse that accompanied the break up of the Soviet Union. Other than from a government controlled stockpile, some have suggested that it may be possible to acquire the virus from the bodies of smallpox victims buriedin the Siberian permafrost in the 1800s. However, this is probably unlikely since Russian experts have been unableto acquire viable virus this way despitemultiple attempts. (9) In 2002, American scientistssuccessfully constructed infectious polio virus from mail-ordered pieces of DNA. (10) However, most expertsclaim that it would be very difficult to construct Variola virus in this manner. For more information on this topic,see CRS Report RS21369(pdf) SyntheticPoliovirus: Bioterrorism and Science Policy Implications . If a terrorist organization were able to obtain a sample of virus, it would also need the advanced technical knowledge, skill and facilities to maintain the viruswithout infecting themselves until the planned dissemination. It is considered to be quite difficult to "weaponize"smallpox. (11) However, in general,weaponization refers to developing advanced delivery systems such as missiles, artillery, or bombs to cause masscasualties. This technological barrier wouldbe much lower for a terrorist. A terrorist, who was not concerned with his own survival could potentially use hisown body as the delivery system, infectingdozens of people before succumbing to the disease. In addition to the threat posed by terrorist groups, it is possible that another nation may choose to use smallpox against the United States. Some experts suggestthat of the countries that might have undeclared stocks of smallpox virus, Iraq may pose the most danger to theUnited States. Some experts believe that it isvery unlikely that Iraq has smallpox since they did not use it during the Gulf War. However, those who feel thatIraq has the smallpox virus counter that itwould not have been used because it is not well suited for battlefield deployment since it is contagious and likelyto infect troops on both sides. Some expertsalso believe that Iraq was dissuaded from using chemical or biological weapons by what could have been interpretedas a thinly veiled threat of nuclearretaliation. (12) In the current situation of risingtensions, some experts have stated that if Iraq has the capability, Saddam Hussein may unleash smallpox as aweapon of last resort, particularly if he can deploy it covertly on United States soil. (13) In December 2002, the Administration reserved the right to use nuclearweapons to respond to the use of weapons of mass destruction against the United States or its allies. (14) Nonetheless, most experts feel that the barriers posed by acquisition and successful deployment of smallpox virus are high enough to make such an attack veryunlikely. Furthermore because of these hurdles, most experts feel that a terrorist organization would require a statesponsor in order to successfully obtain anddeploy smallpox. Although most experts deem the risk of a smallpox attack to be very low, the high consequences of a release have led the President to order the vaccination ofapproximately 500,000 people in the armed forces and to initiate a voluntary program to encourage as many as 10million medical workers and first respondersto be vaccinated. By the middle of 2003, the vaccine will be available on demand to any American adult who is notin a high-risk group for complications. However, the Administration will not recommend vaccination for members of the general public because of the highcomplication rate. (15) Scientific research may be able to further limit the threat posed by smallpox. If a safer smallpox vaccine could be produced, for instance, public health officialswould be less reluctant to recommend mass vaccination. The development of such a vaccine is stymied by severalfactors. One is that it is difficult to predictbefore making a large investment whether a new vaccine will be safer and still effective against smallpox. (16) Another factor is the uncertain market of atherapeutic agent that is designed to protect against what most experts agree is a very unlikely event. Without aguaranteed market, the commercial sector maybe reluctant to make such investments. Some experts suggest that, in general, it may be better to develop treatments rather than relying on prophylactic measures for the many potential biologicalagents that could be used to attack the United States. They suggest that the financial and societal costs of multiplemass vaccination programs may make avaccines-only approach impractical. Some scientists are working on producing antiviral drugs as a cure forsmallpox and several have shown promise inpreliminary studies. (17) However, more work needsto be done to improve animal models of smallpox so that the efficacy of new therapeutics can be tested. (18) Another potential advantage of this approach is that these drugs may be effective against other viruses and thereforemight be marketable as treatments forinfluenza or AIDS. The United States might be better equipped to defend against a smallpox attack if the status of any undeclared smallpox stocks could be determined with greatercertainty. For example, if it could be determined that Iraq does not have any smallpox then focus could be shiftedto preventing terrorist access to other sources. Unfortunately, it is possible that Iraq could successfully hide a smallpox program from any inspection regime. The United States is helping to increase the security of the former Soviet Union's biological weapon stockpiles. By focusing on the physical security of theagents and the economic security of the scientists, these programs simultaneously reduce the threat posed by all ofthe agents in the former Soviet Union'sarsenal. For a comprehensive discussion of these programs, see CRS Report RL31368(pdf) PreventingProliferation of Biological Weapons: U.S. Assistance to theFormer Soviet States . | Smallpox, which kills approximately 30% of its victims, is estimated to have killedbetween 300 and 500 millionpeople in the twentieth century before the World Health Organization's successful eradication program. Thesmallpox vaccine is effective at preventingsmallpox but has a higher complication rate than any other currently used vaccine. The terrorist attacks of 2001have increased fears that smallpox might beused as a weapon of terror. Smallpox has several properties that might make it desirable by terrorists, such ascontagiousness and high lethality. These factorsand its limited availability also make it difficult for a terrorist to use. Most experts agree that it is very unlikely thatsmallpox will be used as a weapon, but thehigh consequences of a successful attack have prompted exploration of methods to counter this threat. Also seeCRS Report RL31694 Smallpox VaccineStockpile and Vaccination Policy and CRS Report RL31368(pdf), Preventing Proliferation of BiologicalWeapons: U.S. Assistance to the Former Soviet States. This report will updated as warranted. |
Veterans may participate in the general employment and training programs open to everyone seeking jobs, or in certain programs targeted specifically to veterans. In addition, the federal government has a policy of assisting veterans in employment through the use of preferences in federal employment, and requirements for affirmative action in the hiring of veterans by federal contractors. This report will provide an overview of these federal employment and training programs targeted to veterans, and federal policies to assist veterans in obtaining federal employment. Part of the Servicemen's Readjustment Act of 1944 (The GI Bill, P.L. 78-346) provided a cash allowance for returning unemployed veterans. This was provided because, at the time, veterans were not eligible for unemployment compensation. However, because of a combination of factors, including the strong economic growth shortly after World War II and the GI Bill's education and training benefits, few veterans took advantage of the cash assistance program. There is currently no system to provide a cash allowance to veterans seeking civilian employment although veterans are eligible for unemployment compensation, which provides partial replacement of lost cash wages. The federal government operates programs to assist veterans seeking civilian employment and provides preferences in federal employment for veterans. Outlined below are the major federal programs and policies to assist veterans seeking civilian jobs. The Department of Labor (DOL), in cooperation with the Department of Defense (DOD) and the Department of Veterans Affairs (VA), operates the Transition Assistance Program (TAP) and Disabled Transition Assistance Program (DTAP). Both programs are designed to provide information on employment and training for servicemembers within 180 days of separation from military service, or retirement. TAP is a three-day workshop conducted at military installations that includes sessions on how to look for jobs, current market conditions (both labor market and occupation-specific information is provided), preparation of job search materials (including resumes), and interview techniques. DTAP adds additional hours to the three-day program focused on the special needs of disabled servicemembers. In addition to the employment assistance sessions, information is provided on veterans benefits administered by the VA. P.L. 112-56 makes the following changes to TAP: mandatory participation in TAP by all members of the Armed Forces eligible for the program with the following two exceptions: (1) those that the Secretaries of Defense and Homeland Security, in consultation with the VA Secretary and the DOL Secretary, determine are unlikely to face major readjustment, health care, employment, or other transition challenges; and (2) those with specialized skills needed for an imminent deployment. the DOL Secretary, in consultation with the VA and the DOD Secretaries, is to enter into a contract for a study to identify equivalences between military training, military occupational specialties (MOS), military experience, and civilian private employment. The study is to be transmitted to Congress and made publicly available on the Internet. the DOD Secretary is to ensure that each servicemember participating in TAP receives an individualized assessment of civilian private sector employment positions for which the servicemember may be qualified based on the servicemember's military skills, training, MOS, and the results of the contracted study. the VA Secretary is required to enter, before November 21, 2013, into a contract to provide, at each TAP location, the following services to participants: counseling, identifying and applying for employment and training opportunities, assessment of academic preparation for enrollment in education and training programs, and other related or appropriate services (as identified by the VA Secretary). the VA, DOD, DOL, and Homeland Security Secretaries may enter into contracts with private entities that have experience in assisting members of the Armed Forces to provide TAP instruction on private sector culture (including resume writing, networking, and job search training), academic readiness, and other relevant topics. the DOD Secretary and the Secretary of Homeland Security may permit a member of the Armed Forces eligible for the TAP program to participate in an apprenticeship program. Before November 21, 2013, the comptroller general shall conduct a review of the TAP and report to Congress on the results of the review and any recommendations to improve TAP. The DOL Veterans' Employment and Training Service (VETS) offers assistance to veterans seeking jobs through the Jobs for Veterans State Grants (JVSG) Program. Under the program, grants are used to fund Disabled Veterans' Outreach Program (DVOP) specialists and Local Veterans' Employment Representatives (LVER). These are state positions, funded by the federal government, that provide outreach and assistance to veterans seeking employment. DVOP staff in a state are involved in outreach efforts to disabled veterans with greater barriers to employment, who therefore need more intensive services for employment or training. LVER staff help veterans find employment and are involved in outreach to the business community to encourage the hiring of veterans (including disabled veterans). P.L. 112-56 provides that the DOL Secretary shall award grants, to no more than three organizations, and for no more than two years, to provide training and mentoring for veterans seeking employment. The grant recipients must collaborate with disabled veterans' outreach specialists and local veterans' employment representatives. The DOL Secretary must report to Congress within six months on the process for awarding grants and within 18 months on an assessment of the grant results. The grant program is authorized for $4.5 million for the FY2012-FY2013 period. The VETS office also operates the Veterans' Workforce Investment Program (VWIP), a grant program authorized under the Workforce Investment Act (WIA, P.L. 105-220 ). Grants may be made to fund programs operated by eligible state and local workforce investment boards, state or local agencies, or private non-profit organizations. The grants are intended to help reintegrate veterans into the civilian labor force; develop service delivery systems that address the needs of veterans entering the civilian workforce; enhance workforce investment activities related to veterans; and perform outreach or public information activities to promote employment of veterans. In addition to the JVSG Program and the VWIP program, the VETS office in DOL also provides grants under the Homeless Veterans Reintegration Program, and information to veterans and employers on re-employment rights under the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA, P.L. 103-353 ). All VETS activities are required partners in the One-Stop Career Center system established by WIA. Any workforce development, job training, or placement program funded in part by DOL must provide a priority in services for veterans and eligible spouses. In general, persons covered under the priority of service (veterans and spouses) receive access to services and resources before non-covered persons. The federal government has four policies that provide a preference to veterans: (1) a system of point preference for hiring; (2) special appointment (hiring) authority; (3) affirmative action requirements for federal agencies; and (4) affirmative action requirements for contractors and subcontractors. Veterans are given a federal preference in hiring to prevent an individual from being penalized for having spent time in military federal service. A five-point preference is given to veterans with an honorable or general discharge who served on active duty (not active duty for training): during any war; during the period April 28, 1952, through July 1, 1955; for more than 180 consecutive days, any part of which occurred after January 31, 1955, and before October 15, 1976; during the Gulf War period beginning August 2, 1990, and ending January 2, 1992; for more than 180 consecutive days, any part of which occurred during the period beginning September 11, 2001, and ending on the date prescribed by presidential proclamation or by law as the last day of Operation Iraqi Freedom; or in a campaign or expedition for which a campaign medal has been authorized, such as El Salvador, Lebanon, Grenada, Panama, Southwest Asia, Somalia, and Haiti. To qualify for a five-point preference, medal holders and Gulf War veterans who originally enlisted after September 7, 1980, or entered on active duty on or after October 14, 1982, without having previously completed 24 months of continuous active duty, must have served continuously for 24 months or the full period called or ordered to active duty. As of October 1, 1980, military retirees at or above the rank of major or equivalent are not entitled to preference unless they qualify as disabled veterans. A 10-point preference is given to honorably separated veterans who qualify as disabled veterans because they have served on active duty in the Armed Forces at any time and have a present service-connected disability or are receiving compensation, disability retirement benefits, or pension from the military or the Department of Veterans Affairs; honorably separated veterans who are Purple Heart recipients; the spouse of a veteran unable to work because of a service-connected disability; the unmarried widow of certain deceased veterans; and certain mothers of veterans who died in service or who are permanently and totally disabled. P.L. 112-56 provides that a servicemember may be certified as a preference eligible for federal employment if he or she is within 120 days of separation from military service. There are three special appointment authorities available to federal government agencies related to veterans: (1) Veterans Recruitment Appointment (VRA); (2) Veterans Employment Opportunity Acts (VEOA); and (3) 30% or More Disabled Veteran (30%). The use of a VRA allows agencies to appoint an eligible veteran without competition. The VRA is an excepted appointment to a position that is otherwise in the competitive service. After two years of satisfactory service, the veteran may be converted to a career-conditional appointment in the competitive service. Once in federal employment, VRAs are treated like any other competitive service employee and may be promoted, reassigned, or transferred. VRA appointees with less than 15 years of education must complete a training program established by the agency. Veterans eligible for a VRA appointment are disabled veterans; veterans who served on active duty in the Armed Forces during a war, or in a campaign or expedition for which a campaign badge has been authorized; veterans who, while serving on active duty in the Armed Forces, participated in a U.S. military operation for which an Armed Forces service medal was awarded; or recently separated veterans. In addition to meeting the criteria above, veterans must have been separated under honorable conditions (i.e., the individual must have received either an honorable or general discharge). Federal agencies can recruit outside their own workforce, to all competitive service employees, in filling permanent competitive service openings. Veterans are eligible to apply for this type of open position even if not a current competitive service employee if the veteran is a preference eligible or has completed three or more years of active service. The federal government agency can then appoint the veteran using the VEOA appointment authority. The 30% or more disabled veteran authority allows a federal government agency to non-competitively appoint any veteran with a 30% or more service-connected disability to a permanent, temporary (one year or less), or term (one to four years) position in the competitive service. For permanent appointments, the veteran is placed in a time limited (60 days maximum) appointment and then converted to permanent at management's discretion. Federal agencies must have a separate affirmative action program for disabled veterans as part of agency efforts to hire, place, and advance persons with disabilities under the Rehabilitation Act of 1973 ( P.L. 93-112 ). Agencies are required to provide placement consideration under special noncompetitive hiring authorities for VRAs and veterans with a disability rating of 30% or more; ensure that all veterans are considered for employment and advancement under merit system rules; and establish an affirmative action plan for the hiring, placement, and advancement of disabled veterans. Contractors and subcontractors with federal contracts in excess of $100,000 must report to the DOL on efforts to hire veterans in specific categories: disabled veterans, other protected veterans, Armed Forces service medal veterans, and recently separated veterans. Contractors and subcontractors are required to post job openings through state job services or one stop offices, and may post job openings on the federal online service (USAJOBS). On November 9, 2009, President Obama issued Executive Order 13518, which established a Veterans Hiring Initiative and established a Council on Veterans Employment co-chaired by the Secretaries of DOL and VA. As part of the initiative, the Office of Personnel Management (OPM) established a new website— http://www.fedshirevets.gov —to provide information for veterans on federal government employment. One of the features of the website is an agency directory providing for each agency, the name, email address, and telephone number of the individual within each agency responsible for promoting veterans' employment within the agency. P.L. 112-56 provides that the OPM Director shall designate federal executive agencies that will be required to establish a program (coordinated with TAP) to provide employment assistance to separating servicemembers, including employment with the agency, and to promote the recruiting, hiring, training, development, and retention of servicemembers and veterans by the agency. The Department of Defense Appropriations Act, 2003 ( P.L. 107-248 ) authorized the DOD to transfer funds to the Center for Military Recruitment, Assessment, and Veterans Employment. The center is a 501(c)(6) organization supported by construction employers and building and trade organizations within the AFL-CIO to help veterans find employment in the construction industry, through operation of the "Helmets to Hardhats" program. The transfer of funds has been done each year since FY2003. The FY2010 transfer was $3.0 million as provided by the Department of Defense Appropriations Act ( P.L. 111-118 ). The Department of Education transfers funds to the DOD to provide funding for participants in the "Troops 2 Teachers" Program. The program can provide a stipend of up to $5,000 for eligible military personnel to obtain certification as an elementary, secondary, or vocational/technical teacher. Instead of the stipend for certification, the program may pay a bonus of up to $10,000 to participants who teach in a high-poverty school. For FY2010, the funding for the program was $14 million. | There are federal employment and training programs and policies specifically targeted to help veterans seeking employment in the civilian economy. Transition assistance programs are operated by the Department of Defense (DOD), the Department of Veterans Affairs (VA), and the Department of Labor (DOL) to assist servicemembers as they prepare to leave the military. DOL operates grant programs to states to provide outreach and assistance to veterans in finding civilian employment. In addition, the federal government has policies (including veterans preference) that assist veterans in obtaining jobs with the federal government and federal contractors. P.L. 112-56 makes several changes to the Transition Assistance Program (TAP) for separating servicemembers and permits a servicemember who is within 120 days of separation from military service to be certified as a preference eligible for federal employment. This report provides a brief overview of these federal programs and policies. This report will be updated as needed. |
V ocational Rehabilitation and Employment for veterans (VR&E) is an entitlement program that provides job training and related services "to enable veterans with service-connected disabilities to achieve maximum independence in daily living and, to the maximum extent feasible, to become employable and to obtain and maintain suitable employment." The program is administered by the Department of Veterans Affairs (VA). The VR&E program provides comprehensive services to enable veterans with service-connected disabilities and employment handicaps to become employable and maintain suitable employment. For severely disabled veterans for whom employment is not possible, the program strives to help them achieve the highest quality of independent living possible with a future chance of employment, given medical and technological advances. This report provides an overview of the VR&E program. After a brief background section, it describes how the program establishes individual veterans' entitlements and the scope of benefits and services available to qualified veterans. The final section provides participation and outcome data. In 1918, Congress enacted P.L. 65-178, the Vocational Rehabilitation Act, to provide for the retraining of disabled persons who served in the U.S. military and naval forces. The rehabilitation program was administered by the Federal Board for Vocational Education. In 1921, control of veterans' rehabilitation was transferred to the newly created Veterans' Bureau. In 1930, Congress created the Veterans Administration by combining three bureaus: the Veterans' Bureau, the Bureau of Pensions, and the National Homes for Disabled Volunteer Veterans. In 1943, Congress enacted P.L. 78-16, which broadened eligibility and provided that any eligible veteran may receive up to four years of training specifically directed to restoring employability. In subsequent years, the scope of the veterans' rehabilitation program has been modified and expanded to better fulfill its mission. The program has undergone several name changes and has usually been housed with the education services in the Department of Veterans Affairs (VA). In 1999, the VR&E program acquired its current name with the intention of emphasizing employment services and job placement. In 2004, the Secretary of Veterans Affairs responded to continuing criticisms of VR&E's operations from congressional committees, the Government Accountability Office, and others by forming a task force to evaluate the program. The task force report found little evidence that the program's efforts to obtain jobs for rehabilitated veterans had been effective. Among its 110 recommendations, the task force emphasized that VR&E should focus on employment and place more emphasis on its clients' skills rather than their disabilities. In response to these recommendations, VR&E developed the five-track employment process discussed later in this report. The VR&E program is authorized by Chapter 31 of Title 38 of the U.S. Code. Veterans' benefits are often referred to by their authorizing chapter of Title 38. As such, VR&E benefits are often described as "Chapter 31" benefits. The VR&E program is administered by the Veterans Benefits Administration (VBA) within the VA. VR&E costs are divided between mandatory and discretionary spending. VR&E funds are appropriated with other VA-administered readjustment benefits in the Military Construction-Veterans Affairs appropriations bill. VR&E benefits and the subsistence allowances for VR&E beneficiaries are mandatory spending. Costs for these activities in FY2016 were $1.315 billion. This total consists of $741 million for VR&E benefits in the form of tuition, books, and other direct assistance as well as $573 million in subsistence allowances for individuals who were enrolled in an eligible training program. Table 1 presents benefit costs from FY2012 through FY2016. The VR&E program's discretionary costs, which cover VR&E staff, counseling from such staff, and other expenses, were $218 million for FY2016. In FY2016, the VR&E program reported that it employed 1,538 full-time equivalents. There are two determinations between a veteran's application for VR&E and his or her receipt of services: eligibility and entitlement . A veteran must apply to the VA to establish eligibility. To be eligible for VR&E services, a veteran must have served on or after September 16, 1940; have received, or will receive, a discharge under conditions other than dishonorable; and have a service-connected disability rating of 10% or more. Active duty servicemembers are eligible for VR&E services if their service-connected disabilities are reasonably expected to be rated at a minimum of at least 20% following their discharge. Veterans are eligible for VR&E services for 12 years after separation from active military duty. In cases where a veteran was notified of a service-connected disability rating after separation, eligibility extends 12 years from the date of notification. The period of eligibility may be extended if the VA determines that the veteran has a serious employment handicap, has not yet been rehabilitated to the point of employability, has been rehabilitated but still cannot perform the duties required, or needs more services because the occupational requirements have changed. An objective evaluation is required for these circumstances to be determined. For independent living services, if the medical condition is so severe that achievement of the vocational goal is not feasible and that goal is necessary to ensure that the veteran will achieve maximum independence, the period of eligibility may be extended. Once eligibility is established, an applicant completes a comprehensive evaluation with a Vocational Rehabilitation Counselor (VRC). The evaluation includes an assessment of the veteran's interests, aptitudes, and abilities; an assessment of whether service-connected disabilities impair the veteran's ability to secure and maintain suitable employment; and identification of services necessary to maintain a career or achieve maximum independence. An applicant is entitled to VR&E services if the evaluation finds that he or she has a service-connected disability rated at 20% or more and an employment handicap; or a service-connected disability rated at 10% and a serious employment handicap. An employment handicap is an impairment of a veteran's ability to prepare for, obtain, or retain employment consistent with his or her abilities, aptitudes, and interests. A serious employment handicap is a significant impairment of a veteran's ability to prepare for, obtain, or retain employment consistent with his or her abilities, aptitudes, and interests. To be entitled to VR&E services, the veteran's service-connected disability must contribute to the employment handicap and VR&E must be able to identify, observe, and measure it. A veteran who applies for VR&E services but is not found to be entitled to services is to be informed about appeal rights and the appeals process. The VA will also use the information gathered in the application process to recommend other services. After a veteran is found to be entitled to VR&E services, a case manager is assigned to work with the veteran. The case manager works in conjunction with a VRC and the veteran to determine an employment goal and assess obstacles to employment. A written rehabilitation plan is then developed, describing the goal of the VR&E program and the services required to achieve the goal. The required services may be provided by the VRC or the case manager may provide referrals for other services. The plan is reviewed with the participation of the client at least once a year. The most common services provided by VR&E agencies are funding for higher education, career counseling, and short-term employment services like job search assistance. The full range of services that VR&E agencies are required to make available to entitled clients, however, is much broader and includes a variety of specialized services for workers with disabilities. Each VR&E beneficiary is assigned to a service delivery track based on the veteran's objective and services needed. If necessary, a veteran may change tracks while enrolled in the VR&E program. The Reemployment Track is for veterans who wish to return to work with their previous employers. In addition to the case management and counseling that all VR&E beneficiaries receive, veterans on the reemployment track may receive assistance from the VA to make their workplace more accessible. They may also receive counseling on workplace rights for veterans. A veteran on this track is considered rehabilitated when he or she has completed the employment program and maintained suitable employment for 60 days. The Rapid Access to Employment Track emphasizes the goal of immediate employment and is available to separating veterans who already have the skills necessary to compete in the job market in suitable occupations. On this track, VR&E services may include job readiness preparation, resume development, or job search assistance. The VRC may also counsel veterans on this track in disability rights and assist an employer in providing accommodations to a disability. A veteran on this track is considered rehabilitated when he or she has completed the employment program and maintained suitable employment for 60 days. This track is for veterans who have limited access to traditional employment and need flexible work schedules and a more accommodating work environment because of their disabling conditions or other special circumstances. Veterans may be provided with assistance in the development of a business plan, training in the operation of small businesses, financial assistance, and guidance on obtaining adequate resources to implement the business plan. A veteran on this track is considered rehabilitated when he or she has completed the self-employment program and maintained a viable business for one year. This track targets veterans who need long-term employment training to prepare them for suitable employment. Formal classroom courses are the most common long-term service, though training may also include on-the-job training, apprenticeships, internships, or other workplace preparation programs. While counselors have the authority to approve a wide variety of programs, statute specifies that "to the maximum extent practicable," courses under the VR&E program should be courses that are approved for the GI Bill. Services last as long as is necessary for the beneficiary to attain the objectives set out in his or her employment plan, but may not exceed 48 months (or the equivalent when pursued on a part-time basis). In limited circumstances (such as a veteran's disability worsening during the rehabilitation process and the original employment objective becoming unviable), a rehabilitation program can be extended beyond 48 months. Extensions must be approved by a counseling psychologist and a VR&E officer. A veteran on the employment through long-term services track is considered rehabilitated when he or she has completed a training program and maintained employment for 60 days. The Independent Living (IL) Services Track is for veterans who may not be able to work immediately and need additional rehabilitation to enable them to live more independently. The short-term focus of the program is on allowing veterans to participate in family and community life, but it also aims to increase their ability to possibly return to work in the longer term. Veterans on this VR&E track may be provided with assistive technology, independent living skills training, and connections to community-based support services. Unlike the other VR&E tracks, the IL track is limited in the number of veterans it can serve. Currently, 2,700 veterans are permitted to begin an IL program each year. This limit is waived for veterans who have been adversely affected by a natural or other disaster, as determined by the VA. IL programs for veterans are typically limited to 24 months. This limit can be extended if the VA determines that an extension would substantially increase a veteran's level of independence in daily living. The limit may also be extended for veterans who served after September 11, 2011, and have a severe disability. In addition to training benefits and other employment services, veterans who are entitled to VR&E services are also eligible for certain financial benefits. Many veterans who are receiving benefits under the VR&E program are also eligible for a monthly subsistence allowance. Veterans who are only receiving (1) initial evaluation, (2) placement or postplacement services, and (3) counseling from the VR&E program are not eligible for a subsistence allowance, nor are veterans who are enrolled in a training program less than half-time. The VR&E subsistence allowance varies by the type of program the veteran is enrolled in and whether or not the veteran has dependents. As of October 1, 2017, the monthly allowance for a veteran enrolled full-time at an institute of higher learning with two dependents is $902. The subsistence allowance is increased each year proportionate to the rate of inflation. The subsistence allowance continues as long as the veteran is enrolled in an eligible program and continues for two months after the program of training has been completed. In cases where a veteran is displaced as the result of a natural or other disaster while receiving a subsistence allowance, the subsistence allowance is extended for an additional two months. Typically, veterans are not permitted to participate in both the VR&E program and another VA educational program (such as a G.I. Bill program). However, veterans who are eligible for both VR&E services and the Post-9/11 GI Bill (also known as Chapter 33 benefits) may collect the housing allowance offered under Chapter 33 while receiving training and other benefits under VR&E. This policy was instituted to eliminate the incentive for disabled veterans to choose the Post-9/11 G.I. Bill (which typically offers a higher cash allowance but fewer services) over the VR&E program (which offers a lower cash allowance but more supportive services). Unlike the VR&E subsistence allowances, which are the same for veterans nationwide, Chapter 33 housing allowances are determined by a veteran's geographic location. In many cases, Chapter 33 housing allowances are greater than VR&E subsistence allowances: as of October 1, 2017, the Chapter 33 housing allowance ranges from about $825 per month in lower-cost locations to more than $3,000 per month in some higher-cost locations. In FY2016, the VA reported that VR&E subsistence allowance benefits totaled $573 million. This estimate includes VR&E beneficiaries who collected the traditional subsistence allowance as well as VR&E beneficiaries who collected the Chapter 33 housing allowances in place of the VR&E subsistence allowance. Veterans who are entitled to VR&E benefits may also be eligible for interest-free loans. These loans are only available to veterans who have a plan of service with VR&E and "would otherwise be unable to begin, continue or reenter his or her rehabilitation program." The maximum loan amount is equal to twice the weekly subsistence allowance for a veteran with no dependents ($1,214 in FY2016). Repayment of the loan is made in monthly installments from future wages, pensions, subsistence allowances, educational assistance allowance, or retirement pay. The VA reported that 2,402 loans totaling approximately $2.4 million were made in FY2016 and that the default rate was "close to zero percent." The VR&E loan program cost $464,000 in FY2016, of which $367,000 was for administrative expenses. Table 2 shows participation data from FY2011 through FY2016. The categories for "applicants," "eligible," "completed evaluation," "entitled to services," and "new plans of service" trace the number of individuals who continued through each stage of the application process, and in many cases, a single veteran may be counted in multiple categories. The "rehabilitated" category includes veterans who secured and maintained suitable employment or completed an independent living program. "Participants" include veterans in any stage of the VR&E process after the applicant and evaluation phases have been completed. It includes veterans who began a VR&E plan in a prior year as well as those in interrupted rehabilitation plan status. Due to the multiyear nature of many rehabilitations and the complex and diverse nature of the VR&E population, the data in Table 2 cannot be used to calculate the share of program participants who have been rehabilitated. Historically, the most precise indicator of efficacy may have been the VR&E rehabilitation rate, which was based on the share of veterans exiting the program who were rehabilitated. The VA is in the process of replacing the rehabilitation rate with a more comprehensive "positive outcomes performance standard." Data using this new standard are not currently available. Table 3 shows the types of programs that beneficiaries participated in during FY2016. The table only includes individuals who were concurrently receiving a subsistence allowance while they completed an educational program. It does not include individuals who were receiving training without an accompanying subsistence allowance nor does it include individuals who received nonmonetary benefits from VR&E such as counseling or job search assistance. Table 4 presents more detail on VR&E participants who completed the rehabilitation process in FY2016. About 85% of veterans who were rehabilitated achieved an employment outcome. Among rehabilitated veterans who achieved an employment outcome, the average annual wage after rehabilitation was $46,208. | Vocational Rehabilitation and Employment for veterans (VR&E) is an entitlement program that provides job training and other employment-related services to veterans with service-connected disabilities. In cases where a disabled veteran is not able to work, the VR&E program provides independent living (IL) services to help the veteran achieve the highest possible quality of life. The VR&E program is administered by the Veterans Benefits Administration (VBA), part of the Department of Veterans Affairs (VA). To be entitled to VR&E services, a veteran must have been discharged under conditions other than dishonorable and be found to have either (1) a service-connected disability rated at 20% or more and an employment handicap, or (2) a service-connected disability rated at 10% and a serious employment handicap. After a veteran is found to be entitled to VR&E, a vocational rehabilitation counselor helps the veteran identify a suitable employment goal and determine what services will be necessary to achieve that goal. The veteran is then assigned to one of five reemployment tracks: Reemployment for veterans who wish to return to work they held prior to their military service; Rapid Access to Employment for veterans who already have the skills necessary to compete in the job market and only need short-term services such as job search assistance; Employment through Long-Term Services for veterans who require postsecondary or vocational training to reach their employment goals; Self-employment for veterans who have the skills to start businesses; or Independent Living for veterans for whom employment is not a viable goal. Veterans may change tracks if a disability worsens or if their employment objective changes. Services may be provided by the VA, though they are more frequently purchased from an outside provider. VR&E benefits are typically limited to 48 months, though the benefit period can be extended under certain circumstances. In most cases, veterans are entitled to a subsistence allowance while they are enrolled in an education or training program. In FY2016, approximately 29,340 veterans developed a new plan of service with VR&E and 11,531 veterans completed rehabilitation. In FY2016, costs for mandatory VR&E benefits were approximately $1.3 billion. Discretionary support services and other administrative costs were approximately $218 million. |
The EPA has identified and promulgated National Ambient Air Quality Standards (NAAQS) under the Clean Air Act (CAA) for six principal pollutants classified by the agency as "criteria pollutants": particulate matter (PM), ozone (O 3 , a key measure of smog), nitrogen dioxide (NO 2 , or, inclusively, nitrogen oxides, NOx), sulfur oxides (SOx, or, specifically, SO 2 ), carbon monoxide (CO), and lead (Pb). On October 17, 2006, the EPA published its revisions to the NAAQS for particulates to provide protection against potential health effects associated with short- and long-term exposure to particulate matter (including chronic respiratory disease and premature mortality). The EPA's newly promulgated particulates NAAQS modify the standards established in 1987 that focused on particles smaller than 10 microns (PM 10 , or coarse particles) and standards for "fine" particles smaller than 2.5 microns (PM 2.5 ) introduced for the first time with the promulgation of the 1997 PM 2.5 NAAQS. The 2006 revisions to the particulates NAAQS are the culmination of the EPA's most recent statutorily required periodic review, based on its evaluation and analysis of more than 2,000 scientific studies available between 1997 and 2002, and on determinations made by the Administrator. Prior to this, the most recent changes to any NAAQS, a strengthening of the particulate matter and ozone standards, were promulgated jointly in 1997. The EPA's most recently completed review of the particulates NAAQS and of the scientific criteria for setting the standards was initiated not long after the 1997 promulgation. The 2006 particulates NAAQS are expected to continue to generate national interest and debate, and possibly oversight in Congress, as did the previous changes to the particulates standards promulgated in 1997. While the new 2006 particulates NAAQS generally tightened the air quality standards for particulate matter, the action has caused considerable controversy, including concerns that the standards are outside the range recommended by both EPA staff and by the scientific advisory panel (Clean Air Scientific Advisory Committee, or CASAC ) established by the Clean Air Act (CAA). Conversely, some continue to contend that available data do not support the need for stricter standards or, in some cases, the standards as promulgated in 1997. In December 2006, 13 states and the District of Columbia petitioned the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit to review the new 2006 particulates NAAQS. In addition, several groups representing various industry and agriculture interests (including coal, iron, steel, and corn refiners, oilseed processors, farmers, and cattle and pork producers), as well as environmental and public health organizations, also filed petitions to the D.C. Circuit challenging the new 2006 NAAQS. Briefs from petitioners, EPA, and supporters were filed with the court by March 7, 2008, but the date for oral argument had not yet been scheduled as of the updating of this report. EPA anticipates a decision in late 2008. The completion of the 2006 PM NAAQS review was followed by an EPA announcement, on December 7, 2006, that it would modify the process for setting and reviewing NAAQS. Among other changes, the CASAC would no longer have a role in approving the policy staff paper with its recommendations to the Administrator. CASAC would be relegated to commenting on the policy paper after it appears in the Federal Register, during a public comment period. The Senate Environment and Public Works Committee included the EPA's changes to the NAAQS review process among the topics it considered February 6, 2007, in a hearing on "Oversight of Recent EPA Decisions." Seven Democratic members of the committee wrote EPA Administrator Johnson on December 21, 2006, to express their strong opposition to the changes and to ask him to "abandon" them. In order to better understand EPA's actions, this report provides an analysis of the agency's final 2006 revisions to the particulates NAAQS, and the estimated costs and benefits of the new standards and of more stringent alternatives analyzed. The report concludes by highlighting concerns and issues raised regarding the revisions to the particulates standards, including those of the science advisory committee (CASAC), and actions in Congress. Establishing NAAQS does not directly limit emissions; rather, it represents the EPA Administrator's formal judgment regarding the level of ambient pollution that will protect public health with an adequate margin of safety . Under Sections 108-109 of the CAA, Congress mandated that the EPA set national ambient (outdoor) air quality standards for pollutants whose emissions "may reasonably be anticipated to endanger public health (primary standards) or welfare (secondary)" and "the presence of which in the ambient air results from numerous or diverse mobile or stationary sources." The statute further requires that every five years EPA review the latest scientific studies and either reaffirm or modify previously established NAAQS. The CAA is quite specific about certain steps for establishing and reviewing NAAQS, particularly with regard to the preparation of a "criteria document" that summarizes the scientific information and resulting criteria that the EPA Administrator will use to determine the final standard and the procedural process for promulgating the standard. The act also established the Clean Air Scientific Advisory Committee to review criteria and standards, and to advise the Administrator. The CASAC augments its own resources by creating a review panel of scientists with expertise specific to the pollutant in question. The PM review panel consisted of 22 national experts, primarily academics and independent researchers. In addition to the CAA requirements, the EPA has chosen to add the preparation of a "staff paper" that summarizes the criteria document and lays out policy options. Traditionally, the CASAC has also formally reviewed the EPA staff paper. The EPA's most recent review found that the scientific evidence since 1997 reinforced the associations between exposure to particulates and numerous cardiovascular and respiratory health problems, including aggravated asthma, chronic bronchitis, reduced lung function, irregular heartbeat, nonfatal heart attacks, and premature death. The CASAC found that the numerous epidemiological studies EPA reviewed "have shown statistically significant associations between the concentrations of ambient air PM 2.5 and PM 10 (including levels that are lower than the 1997 particulates NAAQS) and excess mortality and morbidity." Further, the EPA concluded, and most of the CASAC panel concurred, that the scientific evidence supported modifying the particulates standards. The primary NAAQS for both PM 2.5 and PM 10 include an annual and a daily (24-hour) limit. To attain the annual standard, the three-year average of the weighted annual arithmetic mean PM concentration at each monitor within an area must not exceed the maximum limit set by the agency. The 24-hour standards are a concentration-based percentile form, indicating the percentage of the time that a monitoring station can exceed the standard. For example, a 98 th percentile 24-hour standard indicates that a monitoring station can exceed the standard 2% of the days during the year. As modified and published in the October 17, 2006, Federal Register Notice, the primary PM 2.5 and PM 10 standards are as follows: PM 2.5 : strengthens the daily (24-hour) standard, which currently allows no more than 65 micrograms per cubic meter (µg/m 3 ), by setting a new limit of 35 µg/m 3 , based on the three-year average of the 98 th percentile of 24-hour PM 2.5 concentrations; retains the annual standard at 15 µg/m 3 . PM 10 : retains the daily (24-hour) standard at 150 µg/m 3 but changes from the 99 th percentile to no more than one exceedance per year on average over three years; eliminates the annual maximum concentration (50 µg/m 3 ) standard for PM 10 . For PM 2.5 and PM 10 , the secondary (welfare) NAAQS are the same as the primary standards. Table 1 below provides a comparison of the newly revised primary NAAQS with those previously promulgated for both PM 2.5 and PM 10 . EPA's final revisions to the standards for fine particulates (PM 2.5 ) are the same as the agency had proposed in January 2006. However, the final 2006 EPA revisions to the PM 2.5 NAAQS, while tightening the standards, are not as stringent as those recommended by the CASAC and by the EPA staff. With regard to coarse particulates, the EPA had proposed replacing the current particle size indicator of PM 10 with a range of 10 to 2.5 micrometers (PM 10-2.5 ), referred to as inhalable (or thoracic) coarse particles, and setting a PM 10-2.5 daily standard of 70 µg/m 3 rather than the current PM 10 daily standard of 150 µg/m 3 . The proposal also included narrowing the focus of the PM 10-2.5 standard to "urban and industrial" sources and excluding particles typical to rural areas, including "windblown dust and soils and particulates generated by agricultural and mining sources." The range of alternative standards considered and proposed and issues associated with the EPA's final decisions are discussed later in this report. Promulgation of NAAQS sets in motion a process under which the states and the EPA first identify geographic nonattainment areas, those areas failing to comply with the NAAQS based on monitoring and analysis of relevant air quality data. The 2006 tightening of the PM 2.5 standards is expected to increase the number of areas (typically defined by counties or portions of counties) in nonattainment. EPA expects to finalize the nonattainment designations (based on 2005-2007 monitoring data) for the new 2006 PM NAAQs by the end of 2008 with an effective date of April 2009. Following formal designation, the states have three years (until April 2012) to submit State Implementation Plans (SIPs), which identify specific regulations and emission control requirements that will bring an area into compliance. The EPA is not requiring new nonattainment designations for PM 10 and it does not anticipate any significant incremental cost impacts of this action. A discussion of the potential benefits and cost impacts associated with implementation of the new particulates NAAQS follows. As discussed above, in setting and revising the NAAQS, the CAA directs the EPA Administrator to protect public health with an adequate margin of safety . This language has been interpreted, both by the agency and by the courts, as requiring standards based on a review of the health impacts, without consideration of the costs, technological feasibility, or other non-health criteria. This being the case, costs and benefits were not to play a central role in setting the particulates NAAQS. Costs and feasibility are generally taken into account in NAAQS implementation (a process that is primarily a state responsibility). Nevertheless, the EPA released a regulatory impact analysis (RIA) on October 6, 2006, to meet its obligations under Executive Order 12866 and in compliance with guidance from the White House Office of Management and Budget. The RIA only analyzed the benefits and costs of implementing the PM 2.5 NAAQS. Citing time, data, and modeling limitations, the EPA did not analyze the benefits and costs of retaining the PM 10 standard. The EPA emphasized that the October 2006 RIA differs from typical RIAs in that it does not analyze the regulatory impact of an action and that it is primarily for illustrative purposes. The basis for the benefits calculations are reductions in ambient concentrations of PM 2.5 resulting from a reasonable, but speculative, array of cost-effective state implementation strategies selected by the EPA for purposes of analysis. The analysis does not model the specific actions that each state will undertake in implementing the new PM 2.5 NAAQS. The EPA includes a detailed discussion of the limitations and uncertainties associated with the analyses. The EPA estimated incremental costs of attaining the new PM 2.5 standard based on a set of assumptions and extrapolations regarding currently designated nonattainment areas, likely control strategies and technologies and their associated engineering costs, emissions inventories and sources, and regional variability. The EPA emphasizes that the technologies and control strategies selected for analysis only illustrate one way for nonattainment areas to reach attainment, and that states will compile and evaluate a variety of programs and adopt those attainment strategies best suited for their specific local conditions. For purposes of comparing costs with monetized benefits, the EPA estimated that the total annual mean social cost of attainment of the new PM 2.5 NAAQS incremental to attainment of the 1997 standards would be $5.4 billion in 2020. EPA's estimates of the monetized benefits of complying with the new PM 2.5 standard reflect the valuation associated with predicted reductions in the incidence of certain health and social welfare effects. In the RIA, the EPA presents a variety of benefits estimates based on several published epidemiological studies, including an American Cancer Society (ACS) Study used in previous RIAs, and the Harvard Six Cities Study, as well as an expert elicitation study conducted by the EPA in 2006. The EPA estimated the total annual monetized benefits of attaining the new PM 2.5 NAAQS would range from $15 billion to $17 billion based on the mortality function from the ACS study and morbidity function from the published studies. Using the mortality function developed using the expert elicitation in conjunction with the morbidity function from the published studies, the EPA's total annual benefits are estimated to range from $8 billion to $76 billion in 2020. The EPA's estimated monetized benefits for 2020, like the cost estimates, are based on the EPA's projected compliance schedule and are incremental to compliance with the 1997 PM 2.5 NAAQS by 2015. According to the October 6, 2006, RIA, the estimated total annual health and welfare net benefits (subtracting social costs from the monetized benefits) in 2020 of attaining the new PM 2.5 NAAQS range from $9 billion to $12 billion, based on modeling of morbidity and mortality using published epidemiology studies, and from $2.4 billion to $70 billion, based on derivation from expert elicitation. The EPA's benefits and cost estimates are in terms of 1999 dollars and are incremental to the agency's modeled attainment strategy for the 1997 PM 2.5 NAAQS by 2015. The baseline case incorporates expected impacts associated with implementation of recent national regulations addressing emissions from the power generation sector (e.g., the Clean Air Interstate Rule [CAIR] ), as well as various mobile sources, that contribute to lowering PM 2.5 concentrations in future years. below presents a range of the EPA's cost and monetized benefits estimates. In addition to the monetized health benefits estimates, the EPA estimated the monetary benefits associated with improvements in visibility in selected Class I national parks and wilderness areas. The EPA primarily used a stated preference approach which estimates values based on sampling surveys asking people what amount of compensation would be equivalent to a defined improvement in environmental quality. Extrapolating the results of a study based on a 1988 survey on recreational visibility value, the EPA estimated visibility "willingness to pay" benefits to be $530 million in 2020 with attainment of the new PM2.5 NAAQS. EPA estimated the cost and benefits of a more stringent alternative PM2.5 for purposes of comparative analysis. The comparative results are discussed in the "Potential Concerns and Issues" section of this report. According to the January 2008 EPA report entitled, Latest Findings on National Air Quality Status and Trends Through 2006 , nationally, annual PM2.5 concentrations declined by 14% between 2000 and 2006. Between 1990 and 2006, nationally, PM10 concentrations declined by 30%. For PM2.5 the areas that showed the greatest improvement were the ones that had the highest concentrations in the earlier years. Decreasing concentrations in southern California were largely the result of decreasing levels of nitrate particles; organic carbon levels remained relatively unchanged and have been the largest component of PM2.5 in southern California. The Southeast had little change in PM2.5. The industrial Midwest and the Northeast showed decreasing concentrations, mostly due to reductions in nitrates and sulfates. Despite this progress, in 2006 nearly 67 million people lived in counties with measured concentrations exceeding the annual PM2.5 national air quality standard (based on one-year metric, not the three-year average). A report released by the American Lung Association (ALA) in April 2007 indicated higher average concentration levels of year-round PM2.5 in densely populated areas of the eastern United States during 2003-2005, compared with 2002-2004. The report noted that outside of the eastern United States, particle levels continued to drop during the same time period, even in areas that the ALA has historically ranked as high in particle pollution. For purposes of illustration, Table 3 summarizes the EPA's predicted reductions in the incidence of a range of adverse health effects annually in 2020 for the new PM2.5 NAAQS (15/35 µg/m3), as reported in its RIA. The range of the estimated mean number of reductions in premature deaths is based on the EPA's derivations using the ACS and the Harvard Six-City studies. EPA's mean estimates for the remaining adverse health effects are based on various epidemiology studies. The EPA health effects estimates were a primary component of its derivations of the monetized benefits discussed above. In addition to the expected improved health benefits based on the epidemiology studies, the EPA estimated reductions in premature mortality based on the expert elicitation approach discussed above. The estimates were variable from expert to expert, ranging from a mean of 1,200 to 13,000 avoided premature deaths annually in 2020 resulting from attainment of the new standards (15/35 μg/m 3 ) incremental to the EPA's baseline strategy for the 1997 PM 2.5 NAAQS (15/65 μg/m 3 ). When promulgating the 1997 PM 2.5 NAAQS, the EPA estimated that compliance would result in the annual prevention of 15,000 premature deaths, 75,000 cases of chronic bronchitis, and 10,000 hospital admissions for respiratory and cardiovascular disease, as well as other benefits. These estimates have been the subject of significant debate and re-analysis. Since 1998, with dedicated funding from Congress, the EPA accelerated its research and re-analysis on PM 2.5 to better understand the potential associated health effects and to develop ways to reduce risks. The funding supported EPA intramural and extramural PM research projects and the establishment of five university-based PM research centers around the country. The EPA's most recent review has increased its confidence in earlier findings associating exposure to PM 2.5 with increases in respiratory health problems, hospitalizations for heart and lung disease, and premature death, particularly for children, the elderly, and those with preexisting heart and lung disease. As described earlier, the Clean Air Act has been interpreted to exclude consideration of the costs, technological feasibility, and other non-health criteria when setting and revising the NAAQS. Nevertheless, costs and feasibility associated with the NAAQS implementation (primarily a state responsibility) are key elements of the debate regarding the new 2006 particulates NAAQS. The proposed tightening of the PM 2.5 standards is expected to increase the number of areas (typically defined by counties or portions of counties) in nonattainment, and subsequently result in increased costs to achieve compliance. The current PM 10 daily (24-hour) standard has been retained at the 1987 level and the annual standard revoked. The EPA is not requiring new nonattainment designations for PM 10 , and it does not anticipate any significant incremental cost impacts of this action. The Agency has designated 87 areas as nonattainment with the PM 10 NAAQS since 1990. As of March 2008, 40 of the original 87 PM 10 areas have been redesignated to attainment. Of the remaining 47 nonattainment areas (46 counties with a population of 28.5 million), 18 areas are currently not meeting the 1987 standard based on 2004-2006 data. The remaining counties have submitted the required SIPs for PM 10 but have not yet been formally redesignated to attainment. Figure 1 , below, shows the status of nonattainment of the 1987 PM 10 NAAQS. Designation of geographical areas and the associated impacts on specific areas would be speculative at best, because implementation of the 2006 revised PM NAAQS is several years off. The tightening of the PM 2.5 standards is expected to increase the number of areas (typically defined by counties or portions of counties) in nonattainment. States provided recommendations to EPA in December 2007 for nonattainment boundaries for the 2006 PM 2.5 standards based on 2004-2006 monitoring data. EPA expects to finalize these nonattainment designations (based on 2005-2007 monitoring data) by the end of 2008 with an effective date of April 2009, and state implementation plans (SIPs) would be due three years later in April of 2012. SIPs identify specific regulations and emission control requirements that will bring an area into compliance. If new or revised SIPs for attainment establish or revise a transportation-related emissions allowance ("budget"), or add or delete transportation control measures (TCMs), they will trigger "conformity" determinations. Transportation conformity is required by the CAA, Section 176(c), to prohibit federal funding and approval for highway and transit projects unless they are consistent with ("conform to") the air quality goals established by a SIP, and will not cause new air quality violations, worsen existing violations, or delay timely attainment of the national ambient air quality standards. Under the Clean Air Act, states are required to meet the new 2006 PM 2.5 standard "as expeditiously as practicable," but no later than five years from the date of designation—April 2014. An extension of one to five years may be obtained if a state demonstrates severe air quality conditions prevent achieving attainment within the five years after designation. With regard to the 1997 PM 2.5 NAAQS, States are required to submit their SIPs for how the designated nonattainment areas will meet the 1997 PM 2.5 NAAQS by April 2008. EPA expects that about half of the 58 SIPs (there are 39 areas but some have multiple states submitting individual SIPs) to be submitted before July 2008, and the remainder to be submitted in the following months. States with nonattainment areas must be in compliance with the 1997 PM 2.5 NAAQS by April 5, 2010, unless they are granted a five-year extension. The EPA published its final "PM 2.5 implementation" rule on April 25, 2007, which describes the requirements that states and tribes must meet in their implementation plans to achieve and maintain attainment of the 1997 PM 2.5 NAAQS. The rule also provides guidance and procedures for establishing controls to achieve and maintain attainment. Six petitions for review of EPA's implementation rule have been filed with the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit, and two petitions for reconsideration have been filed with EPA. Implementation of the 1997 PM 2.5 NAAQS—delayed several years by litigation, the lack of monitoring capability, and other factors—is ongoing. The EPA's final designation of 39 geographical areas, composed of 208 counties in 20 states and the District of Columbia, in nonattainment with the 1997 PM 2.5 NAAQS (those areas with or contributing to air quality levels exceeding the annual and 24-hour standards) became effective on April 5, 2005. A direct national comparison of nonattainment areas for the 1997 PM 2.5 NAAQS and the 2006 revised PM 2.5 NAAQS is not currently available. However, using 2003-2005 monitoring data, the EPA identified 143 of those counties with monitors that exceed the new PM 2.5 NAAQS. Although the actual nonattainment designations would be based on monitoring data from later years (EPA expects to use 2005-2007 monitoring data, comparatively the counties identified reflect an increase from 73 counties with monitors within the total 208 counties that were designated by EPA as in nonattainment (exceeding) the 1997 PM 2.5 NAAQS. presents the geographic distribution of counties with monitors exceeding new 2006 PM 2.5 NAAQS identified by EPA, and those exceeding the 1997 PM 2.5 NAAQS. Observed on the map in Figure 2 below, the identified areas can seem small compared with the approximately 3,000 counties in the United States. However, taking into account those areas without monitors but contributing to air quality levels exceeding the new 2006 PM2.5 and other factors considered by the agency when determining the designations, the total number of counties in nonattainment, and the potential impacts with the new PM2.5 NAAQS, is likely to be even larger. The number of counties where emissions will need to be controlled may be two or three times the number of those exceeding the standard, because "nonattainment areas" include both counties where pollutant concentrations exceed the standard and those that contribute to exceedance of the standard in adjoining counties. Entire metropolitan areas tend to be designated nonattainment, even if only one county in the area has readings worse than the standard. In addition, the nonattainment counties tend to have larger populations than those in attainment: nearly 90 million people (about 30% of the U.S. population) live in the 208 counties designated nonattainment for the current standard. The new standard may affect an even larger percentage of the population. Congress and a wide variety of stakeholders have closely followed the development of the new 2006 particulates NAAQS since EPA's review began nearly 10 years ago. During the 109 th Congress the Senate Committee on Environment and Public Works and the committee's Subcommittee on Clean Air, Climate Change, and Nuclear Safety held hearings regarding implementation and review of the particulates NAAQS. Well before the EPA formally proposed revising the particulates NAAQS, stakeholders were providing evidence and arguments at public hearings and other forums for their preferred recommendations. In general, business and industry oppose more stringent standards, and public health and environmental interest groups advocate tighter standards. The EPA received thousands of comments during various stages of development of the particulates criteria document and in response to drafts of the EPA particulates staff paper. The agency reported receiving more than 120,000 comments in response to the January 2006 particulates NAAQS proposal. The Administrator's proposed and final decisions represent the first time in CASAC's nearly 30-year history that the promulgated standards fall outside of the range of the scientific panel's recommendations. In letters dated March 21, 2006, and September 29, 2006, the CASAC raised its concerns and objections regarding both PM 10 and PM 2.5 proposed standards. The Administrator is not required by statute to follow CASAC's recommendations; the act (in Section 307(d)(3)) requires only that the Administrator set forth any pertinent findings, recommendations, and comments by CASAC and the National Academy of Sciences, and, if his proposal differs in an important respect from any of their recommendations, provide an explanation of the reasons for such differences. Courts, in reviewing EPA regulations, also generally defer to the Administrator's judgment on scientific matters, focusing more on issues of procedure, jurisdiction, and standing. Nevertheless, CASAC's detailed objections to the Administrator's decisions and its description of the process as having failed to meet statutory and procedural requirements could play a role litigation challenging the standards. At the time of its January 2006 proposal, the agency solicited comment regarding its supporting analysis and a variety of alternative particulates NAAQS. In addition to soliciting written comments, the EPA held public hearings in early March 2006 in Philadelphia, Chicago, and San Francisco. As presented in its rationale for the final standards throughout the preamble of the final rule, in some cases the EPA has revised elements of its proposal based on certain comments; in other cases the EPA lays out its reasoning for disagreeing. EPA's final modifications to the existing particulates NAAQS have sparked interest and conflicting concerns among a diverse array of stakeholders and in Congress. The following sections highlight several areas of interest. The final 2006 revised PM 2.5 NAAQS, which are the same as proposed, are not as stringent as the levels recommended by the independent CASAC and those recommended by EPA professional staff, as noted above. EPA staff and CASAC recommendations for PM 2.5 included a range of levels more stringent than those proposed in January and finalized September of 2006. In particular, the majority of the CASAC panel " did not endorse the option of keeping the annual standard at its present value ." According to the CASAC: Of the options presented by EPA staff for lowering the level of the PM standard, based on the above considerations and the predicted reductions in health impacts derived from the risk analyses, most Panel members favored the option of setting a 24-hour PM 2.5 NAAQS at concentrations in the range of 35 to 30 μg/m 3 with the 98 th percentile form, in concert with an annual NAAQS in the range of 14 to 13 μg/m 3 . Table 5 below compares the CASAC and EPA staff recommendations for PM 2.5 primary standards, the 1997 standards, and 2006 standards as proposed and promulgated. In response to the discrepancies between the proposal and the CASAC recommendations, EPA Administrator Stephen Johnson indicated that his decision required consideration of a number of factors and "judgment based upon an interpretation of the evidence." The Administrator relied on the evidence of long-term exposure studies as the principal basis for retaining the annual PM2.5 standard. CASAC strongly disagreed with the Administrator's decision regarding the PM 2.5 annual standard and took the unprecedented step of urging reconsideration of the proposal. Many public comments received on the EPA's proposed revisions to the PM 2.5 standards, most frequently from environmental and public health organizations, medical doctors and researchers, and the association representing state air quality regulators, argue for standards as stringent or more stringent than those recommended by CASAC. In contrast, another group of commenters, generally representing industry associations and businesses, opposed revising the 1997 PM 2.5 standards, in some cases highlighting different aspects of the same research cited by the CASAC and others supporting tighter standards. Some who opposed more stringent particulates NAAQS called attention to more recent studies of health effects attributable to particulates that demonstrate risk estimates are lower and less statistically significant than they were in 1997, when the last standard was set. In Section II of the preamble of the final October 2006 revisions, "Rationale for Final Decisions on Primary PM 2.5 Standards," the EPA discusses its final decision with respect to the CASAC recommendations regarding the PM 2.5 annual standard. The Administrator differs with the CASAC with regard to the level of uncertainty associated with the agency's quantitative risk assessment and whether the results appropriately serve as a primary basis for a decision on the level of the annual PM 2.5 standard. The Administrator further stressed the emphasis placed on the long-term means of the levels associated with mortality effects in the two key long-term studies in determining the level of the annual standard. CASAC considered the evidence from specific short-term exposure studies as part of the basis for its recommendation for a lower annual standard level. As noted above, the CASAC expressed its objections to the EPA's final 2006 particulates NAAQS in its September 29, 2006, letter to Administrator Johnson. With regard to PM 2.5 , the letter stated: "CASAC is concerned that the EPA did not accept our finding that the annual PM 2.5 standard was not protective of human health and did not follow our recommendation for a change in that standard." The letter noted that " there is clear and convincing scientific evidence that significant adverse human-health effects occur in response to short-term and chronic particulate matter exposures at and below 15 µg/m 3 , " and noted that 20 of the 22 Particulate Matter Review Panel members, including all seven members of the statutory committee were in "complete agreement" regarding the recommended reduction. " It is the CASAC ' s consensus scientific opinion that the decision to retain without change the annual PM 2.5 standard does not provid e an adequate margin of safety … requisite to protect the public health ' (as required by the Clean Air Act) ... . " In its RIA, the EPA estimated the nationwide monetized human health and welfare benefits of attaining two suites of PM 2.5 NAAQS: (1) the newly revised PM 2.5 NAAQS, which include the new 35 µg/m 3 daily (24-hour) standard and the unchanged 15 µg/m 3 annual standard, and (2) an alternative standard similar to the least stringent of the CASAC recommendations that includes a tighter annual standard of 14 µg/m 3 and the same 35 µg/m 3 daily (24-hour) standard. As discussed previously, the EPA presented a variety of benefits estimates based on several epidemiological studies, the American Cancer Society (ACS) Study used in previous RIAs, the Harvard Six-Cities Study, and expert elicitation study conducted by the EPA in 2006. The EPA estimated that attainment of the more stringent alternative PM 2.5 NAAQS would result in $26 billion to $30 billion of total annual benefits in 2020, based on the ACS mortality function. This compares to a range of $15 billion to $17 billion estimated for compliance with the newly promulgated PM 2.5 NAAQS (see Table 2 and discussion earlier in this report). EPA's estimate of annual benefits derived using the expert elicitation ranged from $15 billion to $140 billion for the more stringent alternative, compared to the agency's estimates of $8 billion to $76 billion for compliance with the new standard. EPA also estimated the monetary benefits ("willingness to pay") associated with improvements in visibility in selected Class I national parks and wilderness areas would be $1.2 billion in 2020 with attainment of the more stringent alternative PM 2.5 standard analyzed, compared to $530 million with attainment of the newly revised PM 2.5 NAAQS. EPA estimated the total annual cost associated with attainment of the alternative PM 2.5 NAAQS analyzed would be $7.9 billion in 2020, compared to $5.4 billion. As discussed previously, a key component of the EPA's monetized benefits estimates are the agency's predicted reductions in the incidence of premature deaths and a range of adverse health effects annually in 2020 associated with compliance of the new 2006 PM 2.5 NAAQS. For example, for the more stringent attainment strategy analyzed (14/35 µg/m 3 ), the EPA estimated 2,200 to 24,000 fewer premature deaths based on the expert elicitation. For purposes of illustration, Table 5 provides a comparison of EPA's predicted reductions annually for the new PM 2.5 NAAQS (15/35 µg/m 3 ) with a more stringent alternative analyzed (14/35 µg/m 3 ), based on data from the ACS and Harvard Six-City studies, and various epidemiology studies. The EPA and most of the CASAC panel members concluded that there was a lack of evidence (often a lack of studies) on long-term adverse health effects of specific PM 10 measurements to support the annual standard, and that there was a specific need to address particles ranging in size from 2.5 to 10 microns. EPA's January 17, 2006, proposal would have replaced the existing particle size indicator of 10 micrometers (PM 10 ) with an indicator range of 10 to 2.5 micrometers (PM 10-2.5 ), referred to as inhalable (or thoracic) coarse particles, and setting a PM 10-2.5 daily standard of 70 µg/m 3 rather than the current PM 10 daily standard of 150 µg/m 3 . At the time of its proposal, the EPA concluded that the scientific evidence supported the standard based on short-term exposure to certain coarse particles, particularly in urban and industrial areas. In the final 2006 particulates NAAQS, the EPA decided to maintain the PM 10 , citing the limited body of evidence on health effects associated with thoracic coarse particles from studies that use PM 10-2.5 measurements. The agency also determined that the only studies of clear quantitative relevance to health effects most likely associated with thoracic coarse particles used PM 10 . The new 2006 particulates NAAQS retain the PM 10 indicator and the daily (24-hour) standard of 150 µg/m 3 . In its September 29, 2006, letter, the CASAC said it was "completely surprised" at the decision to revert to the use of PM 10 as the indicator for coarse particles, noting that the option of retaining the existing daily PM 10 standard was not discussed during the advisory process and that CASAC views this decision as "highly-problematic since PM 10 includes both fine and coarse particulate matter." The CASAC did agree that having a standard for PM 10 was better than no standard. The EPA indicated that it is promulgating a new federal reference method (FRM) for measurement of mass concentrations of PM 10-2.5 in the atmosphere as the standard of reference for measurements of PM 10-2.5 concentrations in ambient air. The EPA anticipates that the new FRM should provide a basis for gathering scientific data to support future reviews of the particulates NAAQS. According to the EPA, these monitors will employ the latest in speciation technology to advance the science, enabling future regulation to provide more targeted protection. The EPA's January 17, 2006, proposal to change the indicator of the standard for coarse particles was in response to a 1999 U.S. Court of Appeals for the DC Circuit decision directing the EPA to ensure that the standard did not duplicate the regulation of fine particles. The EPA's standard for PM 10 , as modified by the 1997 changes to the particulates NAAQS, was challenged shortly after promulgation. Concluding that PM 10 was a "poorly matched indicator" for thoracic coarse particles because it included the smaller PM 2.5 category as well as the larger particles, the D.C. Circuit remanded the standard to the EPA. The agency contends that it has addressed the concerns raised by the court regarding PM 10 as an indicator for inhalable coarse particulate matter in its rationale in the final 2006 particulates NAAQS, announced September 21, 2006. This is an issue that could potentially be challenged in further litigation. In addition to the changes to the coarse particulates indicator, the EPA had proposed narrowing the focus of the PM 10-2.5 standard on "urban and industrial" sources—particles typical to rural areas including " windblown dust and soils and PM generated by agricultural and mining sources " would not be subject to this standard. Additionally, the EPA proposed revoking the current 24-hour PM 10 standards, except in areas that have 1) violating monitors, and 2) a population of 100,000 or more. The emphasis on urban and industrial areas in the January 2006 proposal was based on the findings reported in the Criteria Document, the PM staff paper, and the CASAC conclusion that "the evidence for the toxicity of PM 10-2.5 comes from studies conducted primarily in urban areas and is related, in large part, to the re-entrainment of urban and suburban road dusts, as well as primary combustion products." The EPA's proposal to exclude any ambient mix of PM 10-2.5 that is dominated by rural windblown dust and soils and particulates generated by agricultural and mining sources, and how the EPA would distinguish the sources during its implementation, raised a number of questions and resulted in numerous comments. In response to the proposal, in its March 21, 2006, letter to the EPA Administrator, the CASAC stated that while it had recognized the scarcity of information on the toxicity of rural dust, it "neither foresaw nor endorsed a standard that specifically exempts all agricultural and mining sources, and offers no protection against episodes of urban-industrial PM 10-2.5 in areas of populations less than 100,000." The committee strongly recommended "expansion of our knowledge of the toxicity of PM 10-2.5 dusts rather than exempting specific industries (e.g., mining, agriculture)." Several Members of the House Committee on Agriculture submitted a letter to EPA Administrator Stephen Johnson in July 2006 conveying support for the agency to maintain its provision to exclude agriculture and mining dust and similar sources of coarse particulates in the particulates NAAQS, as had been proposed. The EPA indicated that with the exception of representatives of those sources that would have been excluded under the proposal (e.g., agriculture and mining), most commenters opposed the exclusion. Those opposed included environmental and public health groups, state and local agencies, and industries not excluded from the proposed indicator (e.g., transportation and construction). The EPA did not exclude any areas or the types of particle in the final 2006 particulates NAAQS revisions, based on further consideration of the data and in response to comments. In its rationale for the final PM 10 standard, the EPA continued to acknowledge that there is far more evidence concerning health effects associated with thoracic coarse particles in urban areas than in non-urban areas. However, the EPA also stated that "the existing evidence is inconclusive with regard to whether or not community-level exposures to thoracic coarse particles are associated with adverse health effects in non-urban areas." The EPA indicated that it is expanding its research and monitoring programs to collect additional evidence on the differences between coarse particles typically found in urban areas and those typically found in rural areas. The EPA announced the release of a final rule amending its national air quality monitoring requirements on September 27, 2006. In contrast to objections regarding other aspects of EPA's final 2006 particulates NAAQS revisions, the CASAC agreed with the EPA decision against including exemptions in its September 29, 2006, letter to the EPA Administrator. However, a number of those representing agriculture interests, including some Members of Congress, remain concerned that EPA's decision not to include the exclusions in the final 2006 particulates NAAQS will result in unnecessary burdens on the agricultural community. During the 109 th Congress, some Members of the House Committee on Agriculture expressed their concerns with the EPA's final actions with regard to the exemptions at a September 28, 2006, hearing regarding the EPA's pesticide programs. The EPA proposal, and the final 2006 particulates NAAQS, set the secondary standard for PM 10 and for PM 2.5 at the same level as their primary standard. The PM staff paper and the CASAC both recommended secondary standards at levels different from the primary in order to be more protective of visibility, and the CASAC reiterated the recommendations in its March 21, 2006, and September 29, 2006, letters to the EPA Administrator. For PM 2.5 , the EPA PM staff paper and most of CASAC panel recommended consideration of a sub-daily standard with a level in the range of 20 to 30 μg/m 3 for a four- to eight-hour midday time period, with a 92 nd to 98 th percentile form, as opposed to the primary daily standard at 35 µg/m 3 , based on the current three-year average of the 98 th percentile of 24-hour PM 2.5 concentrations. Although the CASAC agreed with setting a secondary standard at the same level as the primary standard based on the coarse particulates indicator PM 10-2.5 , the committee recommended that the standard not be limited to urban areas, as the EPA had proposed. A number of stakeholders commented that EPA should have considered certain studies that were published too recently to have been included in the 2004 criteria document that, they argued, increased the uncertainty about possible health risks associated with exposure to particulates. Others contend that there are new studies (some of them the same) in support of their arguments for a lower (more stringent) level to protect health. Some commenting on the January 17, 2006, proposal who opposed more stringent standards, argued that the agency should have delayed its decision regarding the PM NAAQS to take into consideration several of these studies. At the time of the proposal the EPA declared its intention to review and evaluate significant new studies developed since 2002, and those published since the close of the criteria document, during the comment period. With the release of its final 2006 particulates NAAQS, the EPA acknowledged that these studies provided expansion of the science and some insights regarding particulates exposure and related health effects, but determined that the new data "do not materially change any of the broad scientific conclusions regarding the health effects of PM exposure made in the 2004 PM Air Quality Criteria Document." Based on the EPA's references to the comments in the preamble to the final 2006 particulates NAAQS revisions published October 17, 2006; a review of several comments in the Federal Docket for the January 17, 2006, proposal; and several media articles and available press releases, views of proponents and critics of stricter standards are summarized below. Proponents of more stringent particulates standards generally assert that the standards should be at least as stringent as the more stringent combined daily and annual levels recommended in the EPA PM staff paper and those recommended by the CASAC, based on its review of the criteria and the EPA staff analysis; scientific evidence of adverse health effects is more compelling than when the standards were revised in 1997; exclusion of rural sources from the coarse particle (PM 10 ) standard would not be sufficiently protective of human health and would be difficult to distinguish and implement; more stringent standards ensure continued progress toward protection of public health with an adequate margin of safety as required by the CAA, in addition to avoidance of other adverse health effects; and welfare effects, such as visibility, crop yield, and forest health, will be enhanced. Critics of more stringent particulates standards contend that more stringent standards (and in some cases even the 1997 standards) are not justified by the scientific evidence; the proposal did not take into account hundreds of studies completed since the 2002 cut-off; requiring the same level of stringency for all fine particles without distinguishing sources is unfounded; costs and adverse impacts on regions and sectors of the economy are excessive; some commenters identified as "urban" sources contend exemption of rural particles may result in a disproportional compliance burden; those identified as "rural" sources contend exemption of rural particles is warranted by the lack of evidence regarding adverse effects associated with emission sources in these areas, and that not excluding these areas and sources creates an unnecessary burden; revising the standards could impede implementation of the existing particulates NAAQS and the process of bringing areas into compliance, given the current status of this process; revisions could also impede efforts to meet air quality regulations promulgated in 2004 and 2005, such as the Clean Air Interstate Rule (CAIR) and Clean Air Nonroad Diesel Rule; and the benefits (and costs) associated with implementation of the 1997 PM 2.5 NAAQS, as well as compliance with recent EPA air quality regulations, have not yet been realized. In late December 2006, thirteen states (New York, California, Connecticut, Delaware, Illinois, Maine, New Hampshire, New Jersey, New Mexico, Oregon, Pennsylvania, Rhode Island, Vermont), the District of Columbia, and the South Coast Air Quality Management District petitioned the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit to review the new 2006 particulates NAAQS. In addition, several groups representing various industry and agriculture interests (including coal, iron, steel, and corn refiners; oilseed processors; farmers; and cattle and pork producers), as well as environmental and public health organizations also filed petitions to the D.C. Circuit challenging the new 2006 NAAQS. The court consolidated the cases and ordered submission of briefs from petitioners, EPA, and supporters for October 2007 through February 2008, with final briefs due by March 2008. Briefs from petitioners, EPA, and supporters were filed with the court by March 7, 2008, but the date for oral argument had not yet been scheduled at the time this report was updated. Parties are to be notified of the schedule for oral arguments by a separate order. EPA anticipates a decision in late 2008. The EPA's October 17, 2006, promulgation of the final modifications to the existing particulates NAAQS following completion of its statutorily required review has sparked interest and conflicting concerns among a diverse array of stakeholders, and in Congress. Tightening the particulates NAAQS will result in more areas classified as nonattainment and needing to implement new controls on particulate matter. States and local governments will be required to develop and implement new plans for addressing emissions in those areas that do not meet the new standards. A stricter standard means increased costs for the transportation and industrial sectors most likely to be affected by particulate matter controls, including utilities, refineries, and the trucking industry. In terms of public health, a stricter standard is estimated to result in fewer adverse health effects for the general population and particularly sensitive populations, such as children, asthmatics, and the elderly. Because of health and cost implications, NAAQS decisions have been the source of significant concern to some in Congress for quite some time. The evolution and development of the particulates NAAQS, in particular, have been the subject of extensive oversight. When the 1997 particulates NAAQS were promulgated, Congress held 28 days of hearings on the EPA rule. Congress enacted legislation specifying deadlines for implementation of the 1997 PM 2.5 NAAQS, funding for monitoring and research of potential health effects, and the coordination of the particulates (and ozone) standard with other air quality regulations. In December 2006, several states and industry, agriculture, business, environmental, and public health groups petitioned the Court of Appeals for the D.C. Circuit to review the new 2006 particulates NAAQS. The EPA's previous review and establishment of particulates NAAQS were the subject of litigation and challenges, including a Supreme Court decision in 2001. The EPA's 1997 promulgation of standards for both coarse and fine particulate matter prompted critics to charge the EPA with overregulation and spurred environmental groups to claim that the EPA had not gone far enough. More than 100 plaintiffs petitioned the court to overturn the standard. Several elements of the EPA's most recent action, including the level of stringency of the new 2006 particulates NAAQS, the objections of the CASAC, the agency's decision not to modify the particle size indicator for coarse particulates, and not excluding rural sources from the coarse standard as proposed have already generated debate and controversy. Thus, the final form of the current efforts to revise PM NAAQS may not be known for some time. | On October 17, 2006, the EPA published its final revisions to the National Ambient Air Quality Standards (NAAQS) for particulate matter (particulates, or PM). The EPA reviewed more than 2,000 scientific studies and found that the evidence continued to support associations between exposure to particulates in ambient air and numerous significant health problems, including aggravated asthma, chronic bronchitis, reduced lung function, heart attacks, and premature death in people with heart or lung disease. Based on several analytical approaches, the EPA estimated that compliance with the new NAAQS will prevent 1,200 to 13,000 premature deaths annually, as well as substantial numbers of hospital admissions and missed work or school days due to illness. Although a tightening of the standards, the new 2006 particulates NAAQS are not as stringent as recommended by EPA staff or the independent scientific advisory committee (Clean Air Scientific Advisory Committee, or CASAC) mandated under the Clean Air Act. The new 2006 particulates NAAQS strengthen the pre-existing (1997) standard for "fine" particulate matter 2.5 micrometers or less in diameter (PM2.5) by lowering the allowable daily concentration of PM2.5 in the air. The new daily standard averaged over 24-hour periods is reduced from 65 micrograms per cubic meter (µg/m3) to 35 µg/m3. However, the annual PM2.5 standard, which is set in addition to the daily standard to address human health effects from chronic exposures to the pollutants, is unchanged from the 1997 standard of 15 µg/m3, although the CASAC had recommended a tighter annual standard in the range of 13 to 14 µg/m3. Nearly 90 million people live in the 208 counties designated as "nonattainment" areas for the 1997 PM2.5 NAAQS. The 2006 particulates NAAQS also retain the 24-hour standard and revoke the annual standard for slightly larger, but still inhalable, particles less than or equal to 10 micrometers (PM10). The EPA abandoned its proposal to replace the particle size indicator of PM10 with a range of 10 to 2.5 micrometers (PM10-2.5), and did not follow through on its proposal to exclude any mix of particles "dominated by rural windblown dust and soils and PM generated by agricultural and mining sources." The divergence from the CASAC's recommendation has proved controversial, as have several other elements of the 2006 particulates NAAQS, including the decision not to exclude rural sources from the coarse particle standard. Some have also questioned the EPA's strengthening of the standard for all fine particles, without distinguishing their source or chemical composition. In December 2006, several states and industry, agriculture, business, and public advocacy groups petitioned the U.S. Court of Appeals for the District of Columbia (D.C.) Circuit to review the new 2006 particulates NAAQS. All briefs from petitioners, EPA, and supporters were filed with the court by March 7, 2008, but the date for oral argument has not yet been scheduled. EPA anticipates a decision in late 2008. Congress may conduct oversight of the new 2006 particulates NAAQS, given the potential public health and economic impacts, and concerns regarding the role of CASAC in NAAQS reviews. |
The Bush Administration notified Congress on February 12, 2004, that it intends to begin free trade agreement (FTA) negotiations with Thailand. This notification, which follows an October 19, 2003 announcement by President Bush and former Thai Prime Minister Thaskin of their agreement to launch negotiations, allows for talks to begin within 90 days or by mid-May 2004, after required consultations with Congress. Two negotiating sessions took place in 2004, and a third was held April 4-8, 2005, in Thailand. The fourth and fifth sessions were held July 15, 2005, in Montana, and September 26-30, 2005, in Hawaii. The sixth was held in Thailand from January 10-13, 2006. But Thailand suspended negotiations on February 24, 2006, when it was decided that a new election would be held in April. Since the April election, no decision has been made yet to resume the negotiations due to ongoing political turmoil (the April election was invalidated by the constitutional court and a new general election is to take place this fall). In the notification letter sent to the Speaker of the House and the Senate Majority Leader, then-U.S. Trade Representative Robert Zoellick put forth an array of potential commercial and foreign policy gains that could be derived from the agreement. At the same time, Mr. Zoellick alluded to sensitive issues that require attention: trade in automobiles, protection of intellectual property rights, and labor and environmental standards. Zoellick's letter states that an FTA would be particularly beneficial to U.S. agricultural producers who have urged the administration to move forward, as well as to U.S. companies exporting industrial goods and services. For agricultural producers, by eliminating or reducing Thailand's high tariffs and other barriers, the FTA offers the opportunity to significantly increase export sales to Thailand. In 2005, Thailand was the 16 th largest market for U.S. farm exports. The administration also argued that an FTA would help boost U.S. exports of goods and services in sectors such as information technology, telecommunications, financial services, audiovisual, automotive, and medical equipment. In 2005, U.S. companies exported to Thailand $7.4 billion in goods and over $1 billion in services. Maintaining preferential access for U.S. investors in Thailand is also a top priority for U.S. business. Given that Thailand is a relatively small economy compared to the United States (1/100 th "the size"), the agreement by itself will have limited effects on the overall U.S. economy. From the standpoint of U.S. foreign policy interests, the Administration views the proposed FTA as strengthening cooperation with Thailand in bilateral, regional, and multilateral fora. Bilaterally, the FTA is seen as strengthening Thailand's position as a key military ally, particularly in the war on terrorism. Regionally, the FTA is viewed as advancing President Bush's Enterprise for ASEAN Initiative (EAI). The goal of the EAI is to negotiate a network of bilateral trade agreements with the 10 members of ASEAN. Multilaterally, Thailand plays a key leadership role in the World Trade Organization (WTO). An FTA could encourage Thailand to actively cooperate with the United States in supporting multilateral trade negotiations under the aegis of the Doha Development Agenda, particularly in the area of agricultural liberalization. As for Thailand, similar broad economic and political calculations explain its interest in an FTA. In economic terms, Thailand is very concerned that its exports to the United States have been losing market share in recent years to countries such as Mexico and China. By eliminating U.S. tariff and non-tariff barriers to Thai exports, an FTA could help increase the competitiveness and market share of Thai products in the U.S. market. Thailand also does not want to be excluded from FTA benefits the U.S. has negotiated with other countries, particularly the potential of an FTA to increase U.S. investment in Thailand. Modernization of the services economy and diffusion of higher levels of technology, know-how, and labor management skills are essential for the Thai economy to advance beyond the competition from lower-wage emerging market economies such as China, Vietnam, and Laos. In addition, a closer political and economic relationship with the United States could provide Thailand with more leverage to play a larger role in Southeast Asia. General opposition to the FTA in both countries is expected from workers and companies in import-competing industries that bear the brunt of the adjustment costs of a trade agreement. Despite the welfare gains to society as a whole (e.g. more efficient resource allocation, lower priced imports, and greater selection of goods), those industries subject to increased competition face additional pressure to cut costs, wages, and prices. Some companies may not be able to withstand these pressure and may be forced out of business, accompanied by a loss of jobs. Under these circumstances, certain stakeholders, as a matter of self-interest, may oppose trade agreements that accelerate competition and structural changes in an economy. Specific opposition in Thailand has arisen from stakeholders in the agricultural and services sectors. Given that close to 50 percent of the Thai labor force is employed in agriculture, liberalization of this sector has been contentious. Similarly, in a number of services sectors, Thai companies feel they are at a competitive disadvantage in opening up to U.S. competitors. Thailand's banking and financial services industry, in particular, is wary of further liberalization after the financial crisis of 1997. Thai stakeholders are also particularly wary, given the high incidence of AIDS infections, in U.S. efforts to secure data exclusivity for patented pharmaceuticals. In addition, a number of Thai business interests reportedly are concerned over potential U.S. investment in newly privatized companies such as the Electricity Generating Authority of Thailand and the Mass Rapid Transit Authority. Opposition in the United States may arise from groups concerned about the impact of the trade agreement on labor and environmental standards. Often joined by anti-globalization activists, these interest groups question whether trade agreements enhance the social welfare of participating countries. Other issues such as transparency in government decision-making, human rights, and freedom of the press could also be raised. Increased market access for Thai agricultural products such as rice and sugar, as well as a reduction of the 25% U.S. tariff on lightweight pick-up trucks, is already controversial. In addition, Thailand is a persistent opponent and critic of U.S. trade remedy laws, which many U.S. interests groups don't want to see weakened. In short, competing viewpoints have surfaced regarding the desirability of an FTA. As in most FTAs that the United States has negotiated, the distribution of gains and losses would depend on the details of the provisions. As background for congressional oversight, this report examines Thailand's economy and trade orientation, the scope and significance of the U.S.-Thai commercial relationship, and the likely top issues in the negotiations. The report concludes with a short summary of the Congressional role and interest in the FTA. Thailand was severely affected by the Asian Financial Crisis, which hit the Thai economy in July 1997 and subsequently affected several other East Asian economies. The economic crisis in Thailand was characterized by a significant depreciation of its currency (the baht), depletion of nearly all of Thailand's foreign exchange reserves, a decline in the stock market, bankruptcies among a number of major Thai banks and corporations, and a sharp deterioration of property prices. The combination of these shocks led to a sharp economic downturn. Ten years prior to the 1997 crisis, Thailand had been one of the world's fastest growing economies. Between 1990 and 1996, gross domestic product (GDP) averaged 8.6%, fueled in large part by rapid export growth. However, in 1998, GDP fell by 10.5% while, exports and imports dropped by 6.7% and 33.0%, respectively, over 1997 levels (see Table 1 ). In addition, the unemployment rate rose from 3.2% in 1997 to 7.3% in 1998, and living standards (measured according to per capita GDP measured on a purchasing power parity basis), plummeted by 11%. Thailand's economy was stabilized by a $17.2 billion loan from the International Monetary Fund. Real GDP grew by 4.4% in 1999 and by 4.8% in 2000, but slowed to 2.2% in 2001. Public dissatisfaction in Thailand with the way the government was handling economic restructuring brought about the election of a new coalition government in 2001 (headed by the Thai Rak Thai Party) with Thaksin Shinawatra as prime minister. He launched a series of economic initiatives designed to stabilize the economy, boost domestic demand, encourage the growth of small and medium-sized businesses, and improve rural incomes. Thailand's economy experienced relatively strong growth from 2002-2004; real GDP growth averaged 6.2%. Real GDP growth was more modest in 2005 at 4.5%, due to a number of factors, including the December 2004 tsunami, higher energy prices, rising inflation, concerns over the avian influenza (bird flu), and domestic insurgencies. Global Insight, an international economic forecasting firm, estimates Thailand's real GDP will rise by 4.6% in 2006 and 5.2% in 2007. Major economic challenges include reducing the high level of corporate debt and the amount of non-performing loans held by the banking sector. Thailand's economy is heavily dependent on international trade and foreign investment. In 2005, the value of Thailand's merchandise exports was equal to 63% of its GDP. Foreign direct investment (FDI) is an important source of exports, employment, and access to new technologies and processes. Thailand's top five trading partners in 2005 were ASEAN, Japan, the European Union, the United States, and China (see Table 2 ). The United States was Thailand's second largest export market and its fifth largest supplier of imports. Thailand's major exports (2004 data) included machinery and mechanical appliances (mainly computers and computer parts), electrical apparatus for electrical circuits, and electrical appliances. Major imports included mineral and metal products, electronic parts, and crude oil. Annual FDI flows to Thailand have been relatively flat over the past few years, averaging about $1.5 billion annually from 2002 to 2005. Some analysts contend that China may be drawing FDI away from Thailand and other East Asian countries. The United States and Thailand maintain extensive commercial ties. Thailand affords the United States preferential treatment vis-a-vis other countries for certain types of investment under the U.S.-Thai Treaty of Amity and Economic Relations of 1966. The American Chamber of Commerce in Thailand estimates that the United States is the second largest foreign investor in Thailand (after Japan), with cumulative investment at over $21 billion through 2004. U.S.-invested firms in Thailand employ over 200,000 Thai nationals. Major sectors for U.S. FDI in Thailand include petroleum, banking, electronics, and automotive. In recent years, U.S. auto companies have invested heavily in Thailand. In 2005, Thailand was the 23 rd largest U.S. export market ($7.4 billion) and its 16 th largest source of imports ($20.0 billion) (see Table 3 ). U.S. exports to, and imports from, Thailand expanded by 15.6% and 14.0%, respectively over the previous period in 2004. Major U.S. exports to Thailand include semiconductors and other electronic components; computer equipment; basic chemicals, navigational, measuring, electromedical, and control instruments; miscellaneous manufactured products ; and basic chemicals. Major U.S. imports from Thailand include computer equipment, semiconductors and other electronic components, communications equipment, apparel, and miscellaneous manufactured products (mainly jewelry). Thai-U.S. economic relations continue to deepen, as Thailand continues to reform its economy and lower its trade barriers. Still, a number of contentious issues persist. Thai officials have criticized U.S. agricultural subsidy programs, contending that they give U.S. farmers an unfair competitive advantage. In addition, Thailand has participated in two WTO dispute resolution cases against the United States: U.S. anti-dumping subsidy offsets (the "Byrd Amendment"), and U.S. restrictions on shrimp imports. While the United States has not filed any cases against Thailand in the WTO, it has pressed Thailand to liberalize its trade and investment regimes and to improve protection of U.S. intellectual property rights (IPR). Countries that form FTAs agree at a minimum to phase out tariff and non-tariff barriers (NTBs) on mutual trade in goods in order to enhance market access between trading partners. Most U.S. FTAs, including NAFTA and agreements with Chile and Singapore, are more comprehensive. Because the U.S.- Thailand FTA is being modeled on the Singapore FTA, no sector, product, or functional issue can expect to be excluded from the liberalization process. This approach is favored by many Members of Congress. As a result, the negotiation is covering trade in goods and services, agriculture, investment, and intellectual property rights, as well as other issues such as government procurement, competition policy, and customs procedures. Tariffs are the major barrier to liberalized trade in goods. Thailand's reliance on import licensing, opaque customs procedures, and excise taxes are also issues the U.S. is addressing. Thailand's simple average applied tariff rate of about 13% for non-agricultural imports provides a relatively high level of protection. Many Thai tariff rates are much higher than the average and tend to be applied to imports competing with locally produced products. These include tariffs on autos and auto parts, alcoholic beverages, fabrics, footwear and headgear, and some electrical appliances. For example, the tariff on passenger cars and sport utility vehicles is 80%, the tariff on motorcycles 60%, and the tariff on completely knocked down (CKD) auto kits 33%. Tariffs on fabrics range from 25%-40%. Beyond cuts in tariffs, market access for U.S. goods could be improved by reducing excessive paperwork and undue processing delays in Thai customs procedures. In addition, import licensing requirements on various items remains opaque and can sometimes serve as a quantitative restriction. U.S. tariffs imposed on Thai non-agricultural exports are relatively low, averaging around 2-3%, but U.S. tariffs on some items such as textiles and apparel and light trucks are much higher. Thai concerns may also focus on U.S. trade remedy measures, such as use of antidumping and countervailing duty procedures to protect U.S. industry. The United States and Thailand are important trading partners in agricultural products, but the U.S. market is more important for Thailand than the Thai market is for U.S. exporters. The United States is the second largest market for Thai agricultural exports and Thailand is the fourth largest supplier of U.S. agricultural imports. At the same time, even though the United States has been the largest supplier of Thailand's agricultural imports, Thailand ranks only as the 16 th largest market for U.S. agricultural exports. The total value of bilateral farm trade was about $1.2 billion in 2002 with the U.S. running a $377 million deficit. The major Thai exports to the United States are processed seafood, frozen shrimp, rubber, rice, tapioca, sugar, and fruits and vegetables. Major Thai imports from the U.S. are oil seeds, cotton, cereals (especially wheat), soybean oil and cake. Thai-U.S. agricultural trade is more restricted than trade in manufactured goods. Both countries impose higher tariffs on agricultural products than on manufactured goods. The Thai average MFN applied tariff on agricultural products is about 24 percent compared to about 7% for the United States. More than 43% of the Thai tariff lines for agricultural products have applied rates exceeding 20%, compared to only 1.3% of the U.S. tariff lines. Consumer-ready products, meats, fresh fruits and vegetables face tariffs ranging from 40-60%. Excise taxes and surcharges, licensing fees, and labeling and certification standards can further boost the tax burden considerably. U.S. fruit growers estimate lost sales of up to $25 million annually from the combined effect of Thailand's high tariffs and surcharge. Other U.S. exports that could benefit from liberalization include meat and dairy products, sugar, alcoholic beverages, and tobacco. U.S. tariff rates that Thailand may want to see reduced include vegetables and fruits with tariff rates exceeding 10%, pineapples with a tariff rate of 29%, and fish and fish products with a tariff rate of 26%. Thailand, which is the world's third largest producer of sugar, will also seek substantial liberalization of the U.S. sugar quotas. Since agricultural barriers are higher than non-agricultural barriers, liberalization could boost trade more in agricultural products than in manufactured goods. U.S. farm groups estimate that potential U.S. agricultural exports to Thailand could increase by around $300 million annually if Thailand's tariffs and other trade-distorting measures were substantially reduced. Similar large increases in Thai agricultural exports to the United States can be expected if substantial liberalization occurs. Deficiencies in Thai protection of U.S. IPR, such as patents, copyrights, and trademarks, have been a longstanding U.S. concern. The USTR's 2005 "Special 301" report acknowledged that Thailand had taken a number of measures in 2004 to improve IPR protection, such as conducting raids on illegal production facilities, but expressed concern over transshipments of illegal IPR products through Thailand and the continued high piracy rates of copyrighted materials (such as optical disks, software, and books). The International Intellectual Property Rights Alliance (IIPA) estimates that IPR piracy in Thailand cost U.S. firms $175 million in 2004. U.S. IPR stakeholders lobbied hard to see Thailand make more progress on IPR enforcement before the FTA negotiations were formally announced. In a March 2004 press release, IIPA president Eric Smith stated: "The Thai Government harbors dozens of CD plants capable of producing over 400 million discs per year—more than seven times any justifiable legitimate domestic demand. It is clear Thailand has become a major exporter of pirate discs." In deference to these concerns, then-U.S. Trade Representative Zoellick, in announcing the intention to begin negotiations, recognized their "... concerns about the deficiencies in Thailand's protection of intellectual property and in its customs regime. Addressing these issues, as well as other areas such as strengthening measures against the production of illegal optical discs, will be essential for the successful conclusion of these negotiations." In August 2005, the Thai government reportedly implemented new regulations that would enforce stringent restrictions on the sale and transfer of CD production equipment in order to combat piracy. All CDs will be required to display a "mark certifying manufacture" issued by the government. Services such as commerce (wholesale and retail trade), transportation, telecommunications, and finance account for a growing share of economic activity in Thailand. In 2002, services accounted for about 55% of GDP and about 40% of employment. A large share of foreign investment goes into services, especially in finance and retail trade. U.S. negotiating objectives are likely to include improvements in access for U.S. providers of financial, telecommunications, and professional services, and other sectors. Liberalization of these sectors is likely to be accompanied by improvements in Thailand's regulatory environment, as well as capacity to oversee and insure effective competition. In pursuing these objectives, U.S. negotiators are insisting on according greater market access across each other's entire services sector, subject to a few exceptions that must be in writing. This so-called negative list approach was used in the Singapore FTA and is supported by many Members of Congress. Exceptions in the Singapore agreement deal with sectors that usually require government certification or licenses (lawyers, accountants) involve government institutions (airports, provision of social security, public hospitals, government corporations), or involve national policy (atomic energy). Major financial institutions in Thailand include the central bank, commercial banks, finance companies, securities companies, and insurance companies. Following the 1997 Asian financial crisis, Thailand increasingly deregulated and liberalized access of foreign firms to its financial sector. For example, foreign equity limits were relaxed for ten years to allow foreign ownership of up to 100% (previously 25%) in commercial banks and finance companies. However, new capital invested in these companies after the ten-year period must be provided by domestic investors until foreign-held equity share falls to 49%. Other restrictions concerning the number branches foreign banks may operate, as well as limits on the number of expatriate professionals that can be employed, could also be raised in the negotiations. Similarly, in the area of brokerage services, foreign firms are allowed to own shares greater than 49% of Thai securities firms only on a case-by-case basis. Thailand's communications market is characterized by limited competition and relatively high prices. While Thailand has committed to open up telecommunications services to direct foreign competition by early 2006, the reform process has lagged. Although the Thai Government has allowed foreign participation in the telecommunications sector since 1989, the market is still dominated by two state-owned companies: the Communications Authority of Thailand, which controls international services, and the TOT Corporation and Public Company Limited, which controls domestic services. A few private sector companies have been awarded concessions by the Thai government to provide wireless and fixed-line services. Pending establishment of a National Telecommunications Commission to serve as an independent regulator, deregulation and full liberalization of the telecommunications market is likely to be difficult. Liberalization of other services such as legal, construction, architecture, engineering, and accounting are also U.S. negotiating objectives. Various Thai laws currently make it very difficult for foreign-owned companies and nationals to operate in these industries. The United States has an investment agreement with Thailand under the 1966 Treaty of Amity and Economic Relations (AER). The treaty accords the same rights to U.S. and Thai citizens and companies to own and operate in each other's territory with the exception of professional services and several sectors such as communications, transportation, and depository banking. Initially, the AER provided few benefits to U.S. investors because Thailand at the time had few laws and regulations restricting foreign investment. Over time, however, Thailand instituted new laws and regulations that limited foreign nationals' operations in Thailand. As a result, the legal treatment accorded by the 1966 treaty became preferences extended only to U.S. investors. Consequently, the AER came to violate Thailand's WTO obligations to accord equal treatment to all member states. Thailand received an exemption from the WTO for ten years, but the exemption expired in January 2005. The FTA negotiations may consider ways to construct a bilateral investment agreement that is WTO-consistent but still retains current privileges for U.S. companies and nationals. With over 1200 U.S. companies currently taking advantage of the rights protected by the AER, the issue is a top priority for the U.S. business community. U.S. negotiators may also make establishment of a special investor-state dispute mechanism a priority objective. Such a mechanism could ensure neutral and binding third-party resolution of disputes involving foreign investors and the host country. Thailand's plans for reforming and privatizing a number of state-owned companies continues to be a matter of great interest to foreign investors. The Thai government's plan to overhaul state-owned telecommunications, energy, and transport companies has encountered widespread opposition from labor unions, causing indefinite delays in planned share offerings of the Electricity Generating Authority of Thailand, Thailand's largest state-owned company. The two sides completed their sixth round of FTA negotiations in Chiang Mai, Thailand on January 10-13, 2006. While U.S. negotiators stated that some progress was made, they expressed disappointment over the lack of progress in the talks. Major stumbling blocks reportedly include U.S. proposals on IPR, and liberalization of the services sector, including distribution, financial services (such as banking, insurance, and securities brokerage), and telecommunications. Thai officials have sought to reduce high U.S. tariffs on light trucks (25%) and restrictions on sugar imports. In addition, the January 2006 FTA talks were reportedly temporarily disrupted by an estimated 10,000 Thai protesters. On January 19, 2006, Thailand's lead negotiator in the U.S.-Thailand FTA talks, Nitya Pibulsonggram resigned. Press reports stated that the resignation was induced in part by political opposition to the FTA by various groups. In March 2006 Thailand suspended the negotiations pending the outcome of the snap April general election (which was subsequently invalidated by a constitutional court). With a new general election scheduled for this fall, the FTA negotiations remain suspended. Thus, it appears that even if they were to restart unexpectedly before the election, it is unlikely an agreement could be completed in time to be considered under the current Trade Promotion Authority statute, which expires on July 1, 2007. The U.S.-Thailand FTA negotiations are of interest to Congress because (1) an agreement would require passage of implementing legislation to become operational; (2) an agreement could increase U.S. exports of goods, services, and investment; (3) an agreement could increase competition for U.S. import-competing industries such as textiles and apparel and pick-up trucks; and (4) if an agreement is implemented, Thailand would become the second Asian FTA partner (the first was Singapore) for the United States. Many Members of Congress support an aggressive FTA strategy because of the potential to open foreign markets further to U.S. exports and investment. While the Administration's policy of negotiating multiple FTAs has not been very controversial, some Members have expressed concerns that the Administration's criteria for deciding on FTA partners has relied too heavily on foreign policy considerations. In the case of Thailand, however, the same Members welcomed the announcement of the Thailand FTA because Thailand represents a relatively large market that offers significant commercial gains, particularly to U.S. agricultural producers. At the same time, some congressional concern has surfaced in regard to automotive trade, centered on the impact that a reduction of the current 25% U.S. tariff on pick-up trucks could have on imports and U.S. jobs. Auto companies based in Thailand produce more than 500,000 pick-ups a year, making the country the world's second largest producer. None of these vehicles, however, are exported to the United States, but the United Auto Workers argue that if the 25% tariff were removed, some 80,000 auto jobs would be jeopardized. (More than a million pick-ups are currently produced in the United States.) Senators George Voinovich (R-OH) and Carl Levin (D-MI), co-chairs of the Senate Auto Caucus, in a November 12, 2003 letter, urged the Bush Administration to retain the 25% tariff out of concern that its elimination would open the door for Japan to export trucks from Thailand to the United States. A similar letter was signed by the chairs of the House Auto Caucus, Representatives Dale Kildee (D-MI) and Fred Upton (R-MI). On the Senate side, a group of 40 Senators (36 Democrats and 4 Republicans) sent a similar letter to U.S. trade officials on March 18, 2005. A different approach to this concern is embodied in S.Con.Res. 90 introduced by Senators Levin and Voinovich on February 23, 2004, and H.Con.Res. 366 , introduced February 24, 2004, by Representatives Kildee, Quinn, and Levin. Because Japan and other countries could benefit from bilateral concessions agreed to between the United States and Thailand, the resolutions maintain that negotiations affecting access to the U.S. automotive market should only take place if all major automobile producing countries participate. One House Ways and Means Committee member Phil English announced on June 8, 2006 that he would not support the FTA if it were brought to Congress. English said that "Thailand continues to demonstrate that it does not share common views with the United States with respect to the World Trade Organization and a country's right to police its markets effectively from predatory or illegally traded imports." Other members of Congress may wish to consider how a U.S.-Thai FTA could affect U.S. commercial relations in Asia in general, particularly in light of the trend among Asian countries for bilateral trade agreements. China's growing economic role in Asia and its quest for new markets, materials, and trade deals is pushing almost every other major Asian country, including Japan and South Korea, to consider FTAs with each other. Given the increased competition, the U.S.-ASEAN Business Council has called for a vigorous timetable for the completion of the U.S.-Thai FTA talks and designation of the next ASEAN country with which the United States will seek an FTA. Accordingly, U.S. trade strategy toward the ten-nation ASEAN grouping, which is the third largest market for U.S. exports, could be an important congressional consideration. | President Bush and former Thai Prime Minister Thaskin on October 19, 2003, agreed to negotiate a bilateral free trade agreement (FTA). Six negotiating rounds took place, the most recent January 10-13, 2006 in Thailand. U.S. trade officials had hoped to conclude the negotiations by early 2006, but the negotiations were suspended by Thailand in February 2006 due to Bangkok's political crisis. After 18 months of negotiations the two sides were wide apart on a number of issues, such as financial services liberalization and a number of other sensitive issues. Combined with considerable public opposition to the FTA in Thailand, the Bush Administration may be hard pressed to complete the negotiation before trade promotion authority expires in mid-2007. While the Thai government appointed by the military after Thailand's September 2006 coup remains committed to concluding an FTA with the United States, it also plans to submit any agreement to the 242 National Legislative Assembly (NLA) for approval—a step that deposed Prime Minister Thaskin maintained was not required. At this date, however, there are no plans (date or venue) to resume the negotiations. In the notification letter sent to the congressional leadership, then-U.S. Trade Representative Robert Zoellick put forth an array of commercial and foreign policy gains that could be derived from the agreement. The letter stated that an FTA would be particularly beneficial to U.S. agricultural producers, as well as to U.S. companies exporting goods and services to Thailand and investing there. Mr. Zoellick also alluded to sensitive issues that would need to be addressed: trade in automobiles, protection of intellectual property rights, and labor and environmental standards. Thailand has been viewed as a strong candidate for an FTA with the United States. Its economy has shown relatively healthy growth in recent years, rising by 6.2% in 2004 and 4.5% in 2005. Yet, Thailand maintains relatively high tariff and non-tariff barriers on a number of products and services. Secondly, an FTA with Thailand would allow U.S. exporters to gain access to Thai markets similar to that obtained by other countries through bilateral and plurilateral agreements with Thailand. Third, a U.S.-Thailand FTA would likely induce other countries to seek a trade liberalization agreement with the United States. Countries that form FTAs agree at a minimum to phase out or reduce tariff and non-tariff barriers (NTBs) on mutual trade in order to enhance market access between the trading partners. The U.S.-Thailand FTA is expected to be comprehensive, seeking to liberalize trade in goods, agriculture, services, and investment, as well as intellectual property rights. Other issues such as government procurement, competition policy, environment and labor standards, and customs procedures are also on the negotiating table. The U.S.-Thailand FTA negotiations are of interest to Congress because (1) an agreement would require passage of implementing legislation to go into effect; (2) an agreement could increase U.S. exports of goods, services, and investment, with particular benefits for agricultural exports; and (3) an agreement could increase competition for U.S. import-competing industries such as textiles and apparel and light trucks, thereby raising the issue of job losses. This report will be updated if negotiations are resumed. |
Internet gambling is gambling on, or by means of, the Internet. It encompasses placing a bet online with a bookie, betting shop, or other gambling enterprise. It also includes wagering on a game played online. A few states ban Internet gambling per se. Most states, however, rely upon their generally applicable gambling laws. Gambling that is unlawful when conducted in person is ordinarily unlawful when conducted online. There are many federal gambling laws, most enacted to prevent unwelcome intrusions of interstate or international gambling into states where the activity in question has been outlawed. In very general terms, it is a federal crime to use wire communications to place or receive bets on, or to transmit gambling information relating to, sporting contests or events; to conduct a large-scale gambling business in violation of state law; to travel interstate or overseas, or to use any other facility of interstate or foreign commerce, to facilitate the operation of an illegal gambling business; to conduct a gambling business and accept payment for illegal Internet gambling participation; to systematically commit these crimes in order to acquire or operate a commercial enterprise; to launder the proceeds of an illegal gambling business or to plow them back into the business; to spend or deposit more than $10,000 of the proceeds of illegal gambling in any manner; or to conspire with others, or to aid and abet them, in their violation of any of these federal laws. Commentators most often mention the Wire Act when discussing federal criminal laws that outlaw Internet gambling in one form or another. Early federal prosecutions of Internet gambling generally charged violations of the Wire Act. In fact, Cohen , perhaps the most widely known of federal Internet gambling prosecutions, involved the Wire Act conviction, upheld on appeal, of the operator of an offshore, online sports book. In general terms, the Wire Act outlaws the use of interstate telephone facilities by those in the gambling business to transmit bets or gambling-related information. Offenders are subject to imprisonment for not more than two years and/or a fine of the greater of not more than twice the gain or loss associated with the offense or $250,000 (not more than $500,000 for organizations). They may have their telephone service canceled at law enforcement request, and conduct that violates the Wire Act may provide the basis for a prosecution under the money laundering statutes, the Travel Act, the Illegal Gambling Business Act, RICO, or the Unlawful Internet Gambling Enforcement Act. Wire Act prohibitions apply to anyone who I. being engaged in the business of betting or wagering II. knowingly III. uses a wire communication facility IV. A. for the transmission in interstate or foreign commerce 1. of bets or wagers or 2. information assisting in the placing of bets or wagers on any sporting event or contest, or B. for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or C. for information assisting in the placing of bets or wagers.... 18 U.S.C. 1084(a). As a general matter, the Wire Act has been more sparingly used than some of the other federal gambling statutes, and as a consequence it lacks some of interpretative benefits which a more extensive case law might bring. The act is addressed to those "engaged in the business of betting or wagering" and therefore apparently cannot be used to prosecute simple bettors. The government must prove that the defendant was aware of the fact he was using a wire facility to transmit a bet or gambling-related information; it need not prove that he knew that such use was unlawful. The courts have also rejected the contention that the prohibition applies only to those who transmit, concluding that "use for transmission" embraces both those who send and those who receive the transmission. Grammatically, interstate transmission appears as a feature of only half of the elements (compare, "for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest," (IV.A.1 & 2. above), with, "for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers," (4.B. & C. above). Nevertheless, virtually every court to consider the question has concluded that a knowing, interstate or foreign transmission is an indispensable element of any Wire Act prosecution. As a practical matter, the Justice Department appears to have resolved the question of whether the section applies only to cases involving gambling on sporting events (compare IV.A.1 & 2. with IV.B. & C. again). The vast majority of prosecutions involve sports gambling, but cases involving other forms of gambling under the Wire Act are not unknown. One federal appellate panel concluded that the Wire Act applies only to sports gambling; while a subsequent district court concluded that it applies to non-sports gambling as well. The Justice Department's Office of Legal Counsel, however, ultimately opined that "interstate transmissions of wire communications that do not relate to a 'sporting event or contest,' 18 U.S.C. §1084(a), fall outside the reach of the Wire Act." Construction of the Wire Act is complicated by the defense available under subsection 1084(b) for the transmission of gambling information. Read casually it might suggest a general defense, but the district court in the Internet gambling case in the Southern District of New York has highlighted its more restrictive scope, "the §1084(b) exemption by its terms applies only to the transmission of information assisting in the placing of bets, not to the other acts prohibited in §1084(a), i.e. , transmission of (1) bets or wages or (2) wire communications entitling the recipient to money or credit as a result of bets or wagers. With regard to transmissions of information assisting in the placing of bets, the exemption is further narrowed by its requirement that the betting at issue be legal in both jurisdictions in which the transmission occurs. No exemption applies to the other wire communications proscribed in §1084(a) even if the betting at issue is legal in both jurisdictions. See United States v. McDonough , 835 F.2d 1103, 1105 (5 th Cir. 1988)." The Second Circuit panel in Cohen , endorsed the court's construction. An accomplice who aids and abets another in the commission of a federal crime may be treated as if he had committed the crime himself. The classic definition from Nye & Nissen explains that liability for aiding and abetting attaches when one "in some sort associates himself with the venture, participates in it as in something that he wishes to bring about, [and] seeks by his action to make it succeed." The Department of Justice advised the National Association of Broadcasters that its members risked prosecution for aiding and abetting when they provided advertising for the online gambling operations. In addition to such accomplice liability, a conspirator who contrives with another for the commission of a federal crime is liable for conspiracy, any completed underlying crime, and for any additional, foreseeable offense committed by a confederate in furtherance of the common scheme. There is some dispute over the application of the Wire Act to certain horse racing activities. Some contend that the Wire Act was amended sub silentio by an appropriations rider rewording a provision in the civil Interstate Horseracing Act. The Justice Department does not share this view. The Interstate Horseracing Act is the product of the emergence of state licensed off-track betting parlors. The parlors accepted wagers on races conducted both within the state and without. Race tracks and those dependent upon their success objected that the tracks were losing customers who lived proximate to both an in state track and an off-track betting parlor in a neighboring state. The Horseracing Act provides for compensation agreements. More precisely, it prohibits acceptance of interstate off-track wagers except as it provides, but permits such acceptance with the consent of various horse racing associations, state horse racing commissions, state off-track racing commissions, and horse racing track operators. It affords aggrieved states, horse racing associations and horsemen's groups a cause of action against violators of its provisions. It neither provides criminal penalties nor explicitly addresses its relationship to other federal and state gambling laws. Although the act calls for the consent of the operators of any track located within 60 miles of an off-track betting office, it does not give track operators a cause of action for failure to comply with this or any of its other requirements. One track operator attempted unsuccessfully to invoke the Wire Act and federal racketeer influenced and corrupt organization (RICO) provisions to overcome this limitation. Suffolk claimed that the defendant, who operated an off-track betting site within 60 miles of Suffolk , accepted wagers on interstate races without its consent and that these activities involved the patterned interstate transmission of gambling-assisting information (race results) from the track to the off-track betting parlor in violation of the Wire Act and consequently constituted a RICO violation, id. at 1272. The First Circuit affirmed the lower court's rejection of the claim on the basis of the Wire Act exception found in 18 U.S.C. 1084(b) that exempts the interstate transmission of sports gambling-assisting information to and from jurisdictions where gambling on such sporting events or contests is legal. Summarizing in general terms, the court declared: To recapitulate, we think it clear that Congress, in adopting section 1084, did not intend to criminalize acts that neither the affected states nor Congress itself deemed criminal in nature. [The defendant's] acts fall into this chiaroscuro category—perhaps not right, but certainly not felonious. It follows that these acts, not indictable under section 1084, cannot constitute a pattern of racketeering activity within RICO's definitional parameters. Id. at 1273. The operator of an off-shore Internet gambling site subsequently seized upon this "Congress-did-not-intend-to-criminalize" language when challenging his conviction under the Wire Act. The Second Circuit in Cohen rejected the challenge with the observation that unlike Suffolk where the transmission of gambling-related information came within the safe harbor of section 1084(b), Cohen's case involved the online (i.e., wire) transmission of wagers themselves, a transmission that falls outside the safe harbor provision of the section 1084(b). The facts that gave rise to Suffolk and Cohen , however, occurred prior to the 2000 amendments to the Interstate Horseracing Act. P.L. 106-553 , which made appropriations for the District of Columbia as well as for the Departments of Commerce, Justice and State, and which amended the definition of "interstate off-track wager" in the Interstate Horseracing Act to read: "interstate off-track wager" means a legal wager placed or accepted in one State with respect to the outcome of a horserace taking place in another State and includes pari-mutuel wagers, where lawful in each State involved, placed or transmitted by an individual in one State via telephone or other electronic media and accepted by an off-track betting system in the same or another State, as well as the combination of any pari-mutuel wagering pools . 15 U.S.C. 3002(3); sec. 629, P.L. 106-533 , 114 Stat. 2762-108 (2000) (language of the amendment in italics). The language in italics was added for the first time in conference with the simple accompanying explanation which in its entirety declares, "the conference agreement includes a new section 629, to clarify the Interstate Horseracing Act regarding certain pari-mutuel wagers." A critic objected to the amendment during floor debate. Otherwise the only reference was "inserted or appended, rather than spoken, by a Member of the House on the floor." Proponents claim the amendment permits tracks to accept online, out-of-state bets from states where pari-mutuel betting is legal (although not necessarily where either off-track or online betting is legal); the Justice Department disagrees. Uncertainty over the issue apparently led an Appellate Body of the World Trade Organization (WTO) to conclude that the United States may permit domestic entities to offer Internet gambling on horse racing, but denies offshore entities such an opportunity. During hearings on the Unlawful Internet Gambling Enforcement Act, the Justice Department indicated that to confirm its understanding of the law it was conducting "a civil investigation relating to a potential violation of law regarding this activity." Section 1955, which outlaws conducting an illegal gambling business, appears on its face to reach any illegal gambling business conducted using the Internet. Commentators seem to concur. However, early prosecutions under the Wire Act were more prevalent. Violations are punishable by imprisonment for not more than five years and/or fines of the greater of not more than twice the gain or loss associated with the offense or $250,000 ($500,000 for an organization). Moreover, the federal government may confiscate any money or other property used in violation of the section. The offense may also provide the foundation for a prosecution under the Travel Act, the money laundering statutes, and RICO. The sanctions of the Illegal Gambling Business Act apply to anyone who I. A. conducts, B. finances, C. manages, D. supervises, E. directs, or F. owns II. all or part of an illegal gambling business that III. A. is a violation of the law of a State or political subdivision in which it is conducted; B. involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and C. has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day. "[N]umerous cases have recognized that 18 U.S.C. 1955 proscribes any degree of participation in an illegal gambling business except participation as a mere bettor." Or as more recently described, "'[c]onductors' extends to those on lower echelons, but with a function at their level necessary to the illegal gambling operation." The section bars only those activities that involve illegal gambling under applicable state law and that meet the statutory definition of such a business. Illegal gambling is at the threshold of any prosecution under the section, and cannot to be pursued if the underlying state law is unenforceable under either the United States Constitution, or the operative state constitution. The business element can be satisfied (for any endeavor involving five or more participants) either by continuity ("has been or remains in substantially continuous operation for period in excess of thirty days") or by volume ("has a gross revenue of $2,000 in any single day"). The volume prong is fairly self-explanatory and the courts have been fairly generous in their assessment of continuity. They are divided, however, on the question of whether the jurisdictional five and continuity/volume features must coincide. There is no such diversity of opinion on the question of whether section 1955 lies within the scope of Congress's legislative authority under the Commerce Clause. The Supreme Court's decision in United States v. Lopez , finding the Gun Free School Zone Act (18 U.S.C. 922(q)) beyond the bounds of Congress's Commerce Clause power, stimulated a host of appellate decisions here and elsewhere. In the case of section 1955, Lopez challenges have been rejected with the observation that, unlike the statute in Lopez , section 1955 (a) involves the regulation of a commercial activity (a gambling business), (b) comes with jurisdictional elements selected to reserve prosecution to those endeavors likely to substantially affect interstate commerce (five participants in a substantial gambling undertaking), and (c) was preceded by Congressional findings evidencing the impact of substantial gambling operations upon interstate commerce. The accomplice and conspiratorial provisions attend violations of section 1955 as they do violations of the Wire Act. Although frequently difficult to distinguish in a given case, the difference is essentially a matter of depth of involvement. "[T]o be guilty of aiding and abetting a section 1955 illegal gambling business ... the defendant must have knowledge of the general scope and nature of the illegal gambling business and awareness of the general facts concerning the venture ... [and he] must take action which materially assists in 'conducting, financing, managing, supervising, directing or owning' the business for the purpose of making the business succeed." Unlike conspiracy, one may only be prosecuted for aiding and abetting the commission of a completed crime; "before a defendant can be found guilty of aiding and abetting a violation of section 1955 a violation of section 1955 must exist ... [and] aiders and abettors cannot be counted as one of the statutorily required five persons." As a general rule, a federal conspiracy exists when two or more individuals agree to commit a federal crime and one of them commits some overt act in furtherance of their common scheme. "A conspiracy may exist even if a conspirator does not agree to commit or facilitate each and every part of the substantive offense. The partners in the criminal plan must agree to pursue the same criminal objective and may divide up the work, yet each is responsible for acts of each other. If the conspirators have a plan which calls for some conspirators to perpetrate the crime and others to provide support, the supporters are as guilty as the perpetrators." Conspiracy is a separate crime and thus conspirators may be convicted of both substantive violations of section 1955 and conspiracy to commit those violations. In fact, under the Pinkerton doctrine, co-conspirators are liable for conspiracy, the crime which is the object of the conspiracy (when it is committed), and any other reasonably foreseeable crimes of their confederates committed in furtherance of the conspiracy. The application of the Illegal Gambling Business Act to offshore gambling operations that take wagers from bettors in the United States involves two questions. First, does state law proscribing the gambling in question apply when some of the elements of the offense are committed outside its jurisdiction? Second, did Congress intend the section to apply beyond the confines of the United States? Section 1955 can only apply overseas when based on an allegation that the gambling in question is illegal under a state law whose reach straddles jurisdictional lines. For example, a statute that prohibits recording bets (bookmaking) in Texas cannot be used against a gambling business which records bets only in Jamaica or Dominican Republic, even if the bets are called in from Texas. On the other hand, an overseas gambling business may find itself in violation of section 1955 if it accepts wagers from bettors in New York, because New York law considers the gambling to have occurred where the bets are made, inter alia. Whether a federal criminal statute applies overseas is a matter of Congressional intent. The intent is most obvious where Congress has expressly stated that a provision shall have extraterritorial application. Section 1955 has no such expression of intended overseas application. In the absence of an explicit statement, the courts use various interpretive aids to divine Congressional intent. Unless some clearer indication appears, Congress is presumed to have intended its laws to apply only within the United States. The courts have recognized contrary indications under several circumstances. Congress will be thought to have intended a criminal proscription to apply outside the United States where one of the elements of the offense, like the commission of an overt act in furtherance of a conspiracy, occurs in the United States. Similarly, Congress will be thought to have intended to outlaw overseas crimes calculated to have an impact in the United States, for example, false statements made abroad in order to gain entry into the United States. Finally, Congress will be thought to have intended extraterritorial application for a criminal statute where its purpose in enacting the statute would otherwise be frustrated, for instance, the theft of United States property overseas. There is a countervailing presumption interwoven among these interpretive devices. Congress is presumed not to have intended any extraterritorial application that would be contrary to international law. International law in the area is a matter of reasonableness, of minimal contacts, traditionally described as permitting geographical application of a nation's laws under five principles: a country's laws may be applied within its own territory (territorial principle); a country's laws may be applied against its own nationals wherever they are located (nationality principle); a country's laws may be applied to protect it from threats to its national security (protective principle); a country's laws may be applied to protect its citizens overseas (passive personality principle); and a country's laws may be applied against crimes repugnant to the law of nations such as piracy (universal principle). Section 1955 does not say whether it applies overseas. Yet an offshore illegal gambling business whose customers where located in the United States seems within the section's domain because of the effect of the misconduct within the United States. The operation of an illegal gambling business using the Internet may easily involve violations of the Travel Act, as several writers have noted. Like the Illegal Gambling Business Act, Travel Act convictions result in imprisonment for not more than five years and/or fines of the greater of not more than twice the gain or loss associated with the offense or $250,000 ($500,000 for an organization). The act may serve as the foundation for a prosecution under the money laundering statutes and RICO. It has neither the service termination features of the Wire Act nor the forfeiture features of the Illegal Gambling Business Act. The Travel Act's elements cover anyone who I.A. travels in interstate or foreign commerce, or B. uses any facility in interstate or foreign commerce, or C. uses the mail II. with intent A. to distribute the proceeds of i. any business enterprise involving unlawful activities (including gambling) in violation of the laws in which it is conducted or of the laws of the United States; or ii. any act which is indictable as money laundering; or B. to otherwise i. promote, ii. manage, iii. establish, iv. carry on, or v. facilitate the promotion, management, establishment, or carrying on, of any business enterprise involving unlawful activities (including gambling) in violation of the laws in which it is conducted or of the laws of the United States, or any act which is indictable as money laundering; and III. thereafter so A. distributes the proceeds from any business enterprise involving gambling or from any act indictable as money laundering, or B. promotes, manages, establishes, carries on, or facilitates the promotion, management, establishment, or carrying on of any business enterprise involving unlawful activities (including unlawful gambling) or any act indictable as money laundering. The courts often abbreviate their statement of the elements: "The government must prove (1) interstate travel or use of an interstate facility; (2) with the intent to ... promote ... an unlawful activity and (3) followed by performance or attempted performance of acts in furtherance of the unlawful activity." The Supreme Court determined some time ago that the Travel Act does not apply to the simple customers of an illegal gambling business, although interstate solicitation of those customers may certainly be covered. When the act's jurisdictional element involves mail or facilities in interstate or foreign commerce, rather than interstate travel, evidence that a telephone was used, or an ATM, or the facilities of an interstate banking chain will suffice. The government is not required to show that the defendant used the facilities himself or that the use was critical to the success of the criminal venture. It is enough that he caused them to be used and that their employment was useful for his purposes. Moreover, intrastate telephone communications constitute the use of "facilities in interstate or foreign commerce." Thus in the case of Internet gambling, the jurisdictional element of the Travel Act might be established at a minimum either by reference to the telecommunications component of the Internet, to shipments in interstate or foreign commerce (in or from the United States) associated with establishing operations on the Internet, to any interstate or foreign nexus to the payment of the debts resulting from the gambling, or to any interstate or foreign distribution of the proceeds of such gambling. A criminal business enterprise, as understood in the Travel Act, "contemplates a continuous course of business—one that already exists at the time of the overt act or is intended thereafter. Evidence of an isolated criminal act, or even sporadic acts, will not suffice," and it must be shown to be involved in an unlawful activity outlawed by a specifically identified state or federal statute. Finally, the government must establish some overt act in furtherance of the illicit business committed after the interstate travel or the use of the interstate facility. Accomplice and co-conspirator liability, discussed earlier, apply with equal force to the Travel Act. The act would only apply to "business enterprises" involved in illegal gaming, so that e-mail gambling between individuals would likely not be covered. And Rewis , supra, seems to bar prosecution of an Internet gambling enterprise's customers as long as they remain mere customers. But an Internet gambling venture that constitutes an illegal gambling business for purposes of section 1955, supra , and is engaged in some form of interstate or foreign commercial activity in furtherance of the business will almost inevitably have included a Travel Act violation. The Wire Act, the Illegal Gambling Business Act, and the Travel Act implicitly outlaw Internet gambling and related activity. The Unlawful Internet Gambling Enforcement Act (UIGEA) does so explicitly. More exactly, it prohibits those who engage in a gambling business from accepting payments related to unlawful Internet gambling. Violations are punishable by imprisonment for not more than five years and/or a fine of not more than $250,000 (not more than $500,000 for organizations). Offenders may be subject to civil and regulatory enforcement actions as well. The Unlawful Internet Gambling Enforcement Act declares that I. No person II. engaged in the business of betting or wagering III. may knowingly accept IV. in connection with participation of another person V. in unlawful Internet gambling VI. a. credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card; or b. an electronic fund transfer, or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of such other person; or c. any check, draft, or similar instrument which is drawn by or on behalf of such other person and is drawn on or payable at or through any financial institution; or d. the proceeds of any other form of financial transaction, as the Secretary and the Board of Governors of the Federal Reserve System may jointly prescribe by regulation, which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of such other person. UIGEA's proscription draws meaning from a host of definitions, exceptions, and exclusions—some stated, others implied. It does not define "person." Nevertheless, as elsewhere in the United States Code , "persons" for purposes of UIGEA means individuals as well as "corporations, companies, associations, firms, partnerships, societies, and joint stock companies." It does not define the "business of betting or wagering," although it defines what it is not and defines the terms that provide the grist for such a business: bets or wagers. The business of betting or wagering does not encompass the normal business activities of financial or communications service providers, unless they are participants in an unlawful Internet gambling enterprise. On the other hand, Congress chose the term "business of betting or wagering" rather than the term "illegal gambling business," found in the Illegal Gambling Business Act. This implies that UIGEA covers businesses regardless of whether they met the threshold requirements of Illegal Gambling Business Act, that is (1) five participants and (2) continuous operations for at least thirty days or gross revenues in excess of $2,000 a day. To come within the statute's reach, a business must involve "bets or wagers" and must accept payment relating "unlawful Internet gambling." To bet or wager is to stake something on the outcome of a game or event. More exactly, "[t]he term 'bet or wager'—(A) means the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome." Earlier in UIGEA's legislative history, the definition of "bet or wager" used the phrase "a game predominantly subject to chance" rather than simply "a game subject to chance." The Justice Department questioned whether the original phrase was "sufficient to cover card games, such as poker." The change in language appears to accommodate that concern by extending coverage to games that have an element of chance, even if not necessarily a predominant element. The definition also explicitly covers lotteries and information relating to the financial aspects of gambling. The list of other common activities exempted from the definition includes securities and commodities exchange activities, insurance, Internet games and promotions that do not involve betting, and certain fantasy sporting activities. "Unlawful Internet gambling" refers to an Internet bet or wager that is illegal in the place where it is placed, received, or transmitted. The term does not encompass various forms of Internet use by the horse racing industry, regardless of their legal status over other provisions of law. If certain conditions are met, the definition also exempts from UIGEA's prohibitions certain intrastate and intratribal forms of gambling, like state lotteries and Indian casinos that operate under state regulations or compacts. To qualify for the intrastate exception, a bet must: (1) be made and received in the same state; (2) comply with applicable state law that authorizes the gambling and the method of transmission including any age and location verification and security requirements; and (3) be in accord with various federal gambling laws. The intratribal exception is comparable, but a little different. Compliance with the various federal gambling laws remains a condition. And there are comparable security as well as age and location verification demands. The intratribal gambling, however, may involve transmissions between the lands of two or more tribes and need not be within the same state. Definitions aside, UIGEA's prohibitions can only be breached by one who acts "knowingly." As a general rule, "the word 'knowingly' means that the defendant realized what she was doing and was aware of the nature of her conduct and did not act through ignorance, mistake or accident." However, "the term 'knowingly' does not necessarily have any reference to a culpable state of mind or to knowledge of the law." There is nothing to shield UIGEA defendants from the same general accomplice and conspirator liability provisions that apply in the case of any other federal felony. Those who aid or abet a violation, that is, those who knowingly embrace the criminal activity and assist in its commission with an eye to its success, are liable to the same extent as those who commit the offense directly. Conspirators are liable for conspiracy, for any completed crime that is the object of the plot, and for any additional, foreseeable offense committed by a confederate in furtherance of the common scheme. Section 5362(2) excludes the activities of financial institutions, as well as communications and Internet service providers, from the definition of "business of betting or wagering." Section 5367 declares that such entities may nonetheless incur liability under the act if they are directly engaged in the operation of an Internet gambling site. Neither section precludes their incurring liability as accomplices or co-conspirators. As noted earlier, whether a federal law applies to conduct committed entirely outside the United States is ordinarily a matter of congressional intent. The most obvious indicia of congressional intent is a statement within a particular statute that its provisions are to have extraterritorial application. UIGEA contains no such statement. Its legislative history of the act, however, leaves little doubt that Congress was at least as concerned with offshore illegal Internet gambling businesses as with those operated entirely within the United States. Offenders may also suffer civil constraints. UIGEA creates a limited federal civil cause of action to prevent and restrain violations of the act. It authorizes federal and state attorneys general to sue in federal court for injunctive relief to prevent and restrain violations of the act. It does not foreclose other causes of action on other provisions of state or federal law, but it does preclude suits in state court to enforce the act. It does not expressly authorize a private cause of action. It does not expressly offer attorneys general or anyone else any prospect of relief other than the federal court orders necessary to prevent and restrain. Moreover, it expressly limits the instances when the attorneys general may institute proceedings against Internet service providers and financial institutions. They may only proceed civilly against financial institutions to block transactions involving unlawful Internet gambling unless the institution is directly involved in an unlawful Internet gambling business. Barring application of the same direct involvement exception, the attorneys general may sue Internet service providers under the act only to block access to unlawful Internet gambling sites or to hyperlinks to such sites under limited circumstances. Subject to an exception that mirrors the direct involvement exception, the act also removes providers from the coverage of the Wire Act provision under which law enforcement officials may insist that communications providers block the wire communications of Wire Act violators. Neither of the provisions restricting the civil liability of financial institutions and of Internet service providers explicitly immunizes them from criminal prosecution for aiding or abetting or for conspiracy. Although UIGEA restricts the civil liability of financial institutions, it binds them under a regulatory enforcement scheme outlined in the act. The act calls upon the Secretary of the Treasury and the Governors of the Federal Reserve Board in conjunction with the Attorney General to create a regulatory mechanism that identifies and blocks financial transactions prohibited in the act. Among its other features, the mechanism must admit to practical exemptions and ensure that lawful Internet gambling transactions are not blocked. Good faith compliance insulates regulated entities from both regulatory and civil liability. Regulatory enforcement falls to the Federal Trade Commission and to the "federal functional regulators" within their areas of jurisdiction, that is, the Governors of the Federal Reserve, the Comptroller of the Currency, the Federal Deposit Insurance Commission, the Office of Thrift Supervision, the National Credit Union Administration, the Securities and Exchange Commission and the Commodities Exchange Commission. The Third Circuit has concluded that UIGEA is neither unconstitutionally vague nor unconstitutionally intrusive on any recognized right to privacy. Illegal gambling may trigger the application of federal racketeering (RICO) provisions. Violations of the Wire Act, the Illegal Gambling Business Act, and the Travel Act, as well as any state gambling felony, are all RICO predicate offenses. RICO violations are punishable by imprisonment for not more than twenty years and/or a fine of greater of not more than $250,000 (not more than $500,000 for an organization) or twice the gain or loss associated with the offense. An offender's crime-tainted property may be confiscated, and he may be liable to his victims for triple damages and subject to other sanctions upon the petition of the government. RICO makes it a federal crime for any person to I. conduct or participate, directly or indirectly, in the conduct of II. the affairs of an enterprise III. engaged in or the activities of which affect, interstate or foreign commerce IV. A. through the collection of an unlawful debt, or B. through a pattern of racketeering activity, defined to include: 1. any act of gambling which is chargeable under State law and punishable by imprisonment or more than 1 year; 2. any act which is indictable under 18 U.S.C. 1084 (Wire Act); 3. any act which is indictable under 18 U.S.C. 1952 (Travel Act); 4. any act which is indictable under 18 U.S.C. 1955 (relating to conducting an illegal gambling business, 18 U.S.C. 1962(c). "To establish the elements of a substantive RICO offense, the government must prove (1) that an enterprise existed; (2) that the enterprise affected interstate or foreign commerce; (3) that the defendant associated with the enterprise; (4) that the defendant participated, directly or indirectly, in the conduct of the affairs of the enterprise; and (5) that the defendant participated in the enterprise through a pattern of racketeering activity by committing at least two racketeering (predicate) acts [ e.g ., 18 U.S.C. 1084 (Wire Act), 18 U.S.C. 1952 (Travel Act), 18 U.S.C. 1955 (illegal gambling business)]. To establish the charge of conspiracy to violate the RICO statute, the government must prove, in addition to elements one, two and three described immediately above, that the defendant objectively manifested an agreement to participate ... in the affairs of the enterprise." The "person" who commits a RICO offense need not be a human being, but may be "any individual or entity capable of holding a legal or beneficial interest in property," The "enterprise" element is defined with comparable breath, embracing "any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity." In spite of their sweeping scope, the elements are distinct and a single defendant may not be simultaneously charged as both the "person" and the "enterprise" under 18 U.S.C. 1962(c). Subject to this limitation, however, a RICO enterprise may be formal or informal, legal or illegal. In order for a group associated in fact to constitute a RICO enterprise, it "must have at least three structural features: a purpose, relationships among those associated with the enterprise, and longevity sufficient to permit these associates to pursue the enterprise's purpose." On the other hand, it "need not have a hierarchical structure or a 'chain of command'; decisions may be made on an ad hoc basis and by any number methods.... Members of the group need not have fixed roles." And, "nothing in RICO exempts an enterprise whose associates engage in spurts of activity punctuated by periods of quiescence." The interstate commerce element of the RICO offense may be established either by evidence that the enterprise has conducted its affairs in interstate commerce or foreign commerce or has engaged in activities that affect interstate commerce or foreign commerce. The "pattern of racketeering activity" element demands the commission of at least two predicate offenses, which must be of sufficient relationship and continuity to be described as a "pattern." Related crimes, for pattern purposes, are marked by "the same or similar purposes, results, participants, victims, or methods of commission, or otherwise are interrelated by distinguishing characteristics and are not isolated events." The "continuity" of predicate offenses may be shown in two ways, either by prove of the regular occurrences of related misconduct over a period of time in the past (closed ended) or by evidence of circumstances suggesting that if not stopped by authorities they would have continued in the future (open ended). The courts have been reluctant to find the continuity required for a RICO pattern for closed ended enterprises (those with no threat of future predicate offenses) unless the enterprise's activities spanned a fairly long period of time. Open-ended continuity (found where there is a threat of future predicate offenses) is nowhere near as time sensitive and is often found where the predicates consist of murder, drug dealing or other serious crimes or are part of the enterprise's regular way of doing business. The RICO conspiracy and accomplice branches of the law are notable for at least two reasons. RICO conspiracies are outlawed in a subsection of section 1962 that imposes no overt act requirement. The crime is complete upon the agreement to commit a RICO offense. Second, at least in some circuits, RICO accomplices are not subject to RICO tort liability. The criminal proscriptions of the UIGEA do not appear to qualify as a RICO predicate offense. Certainly, P.L. 109-437 which created it did not explicitly amend RICO to include UIGEA among the RICO predicates. UIGEA outlaws certain Internet gambling related transactions, not Internet gambling itself. Nevertheless, those engaged in the business receipt of revenue from unlawful Internet gambling may also be guilty of any of the state or federal gambling felonies that are RICO predicate offenses. Congress has enacted several statutes to deal with money laundering. It would be difficult for an illegal Internet gambling business to avoid either of two of the more prominent, 18 U.S.C. 1956 and 1957, both of which involve financial disposition of the proceeds of various state and federal crimes, including violation of 18 U.S.C. 1084 (Wire Act), 18 U.S.C. 1955 (illegal gambling business), 18 U.S.C. 1952 (Travel Act), or any state gambling law (if punishable by imprisonment for more than one year). In fact, Santos , one of the landmark cases in the development of federal money laundering law, is a gambling case. In other instances, the lower federal courts have frequently upheld money laundering convictions predicated upon various gambling offenses. The crimes under section 1956 are punishable by imprisonment for not more than twenty years or a fine of the greater of not more than twice the value of the property involved in the transaction or not more than $500,000; those under section 1957 carry a prison term of not more than ten years or a fine of the greater of twice the amount involved in the offense or not more than $250,000 (not more than $500,000 for an organization). Any property involved in a violation of either section is subject to the civil and criminal forfeiture provisions of 18 U.S.C. 981, 982. Section 1956 creates several distinct crimes: (1) laundering with intent to promote an illicit activity such as an unlawful gambling business; (2) laundering to evade taxes; (3) laundering to conceal or disguise; (4) structuring financial transactions (smurfing) to avoid reporting requirements; (5) international laundering; and (6) "laundering" conduct by those caught in a law enforcement sting. In its most basic form the promotion offense essentially involves plowing the proceeds of crime back into an illegal enterprise. Section 1956 has two promotional offenses: those involving financial transactions and those involving international monetary transfers. The elements of the two are roughly comparable. The transaction offense applies to whoever I. knowing A. that the property involved in a financial transaction, B. represents the proceeds of some form of unlawful activity, II. A. conducts or B. attempts to conduct such a financial transaction III. which in fact involves the proceeds of specified unlawful activity IV. with the intent to promote the carrying on of specified unlawful activity. The knowledge element is the subject of a special definition which allows a conviction without the necessity of proving that the defendant knew the exact particulars of the underlying offense or even its nature. The "proceeds" may be tangible or intangible, for example, cash, things of value, or things with no intrinsic value, for example, checks written on depleted accounts. Nor need "proceeds" be confined to the profits realized from the predicate offense, that is, the "specified unlawful activity." Section 1956 specifically defines "proceeds" as "any property derived from or obtained or retained, directly or indirectly through some form of unlawful activity, including the gross receipts of such activity." The "financial transaction" necessary to satisfy that element of the crime may take virtually any shape that involves the disposition of something representing the proceeds of an underlying crime, including a disposition as informal as handing cash over to someone else. The statutory definition of the necessary "financial transaction" provides the basis for federal jurisdiction. To qualify, the transaction must be one that affects interstate or foreign commerce or must involve a financial institution whose activities affect such commerce. The "intent to promote" element of the offense can be satisfied by proof that the defendant used the proceeds to continue a pattern of criminal activity or to enhance the prospect of future criminal activity. To establish an intent to promote, "the government must show the transaction at issue was conducted with the intent to promote the carrying on of a specified unlawful activity. It is not enough to show that a money launderer's actions resulted in promoting the carrying on of specified unlawful activity. Nor may the government rest on proof that the defendant engaged in 'knowing promotion' of the unlawful activity. Instead, there must be evidence of intentional promotion. In other words, the evidence must show that the defendant's conduct not only promoted a specified unlawful activity but that he engaged in it with the intent to further the progress of that activity." The government must also establish that proceeds of the transaction are derived from a predicate offense and that they are intended to promote a predicate offense. All RICO predicate offenses are automatically money laundering predicate offenses. The RICO predicate offense list includes state gambling felonies as well as violations of the Travel Act and the Illegal Gambling Business Act. The elements of the travel or transportation version of promotional money laundering are comparable, but distinctive. They apply to anyone who I.A. transports, B. transmits, C. transfers, or D. attempts transport, transmit, or transfer II. a monetary instrument or funds III. A. 1. from a place in the United States 2. to or through a place outside the United States or B. 1. to a place in the United States 2. from a place outside the United States IV. with the intent to promote the carrying on of an specified unlawful activity. One of the distinctive features of the transportation promotional money laundering provision is that the transported, transmitted, or transferred funds do not have to be the proceeds of a predicate offense. The defendant, however, must be shown to have transmitted, transferred, or transported the funds with the intent to promote a predicate offense. The measure by which that question will be judged is the same as that used in the case of a transactional promotion offense, discussed above. Section 1956 is subject to general federal law with regard to accomplice and conspirator liability, except that it permits the same punishment for conspirators as for simple launderers. The "concealment" offenses share several common elements with the promotion offenses of section 1956. For instance the transaction offense, like the promotion transaction offense in all but one aspect, proscribes I . knowing A. that the property involved in a financial transaction B. represents the proceeds of some form of unlawful activity, II. A. conducts or B. attempts to conduct such a financial transaction III. which in fact involves the proceeds of specified unlawful activity (A)(i) IV. knowing that the transaction is designed in whole or in part to conceal or disguise the nature, location, the source, the ownership, or the control of the proceed of specified unlawful activity. The fourth and distinctive element of the transactional concealment offense covers more than simple spending and more than simple concealment of the proceeds. Concealment must be designed to concern, that is, it must be purposeful concealment. The courts have made it clear that conviction for the concealment offense requires proof of something more than simply spending the proceeds of a predicate offense. That having been said, the line between innocent spending and criminal laundering is not always easily discerned. "Evidence of a purpose to conceal can come in many forms including: [deceptive] statements by a defendant probative of intent to conceal; unusual secrecy surrounding the transactions; structuring the transaction to avoid attention; depositing illegal profits in the bank account of a legitimate business; highly irregular features of the transaction; using third parties to conceal the real owner; a series of unusual financial moves cumulating in the transaction; or expert testimony on practices of criminals." The transportation concealment offense tracks both the transportation promotional and the transaction concealment offense. Like the promotional offense and unlike the transaction offense, the government must prove that the defendant knew of the tainted nature of the transported funds. The transportation concealment offense covers anyone who I.A. transports, B. transmits, C. transfers, or D. attempts transport, transmit, or transfer II. a monetary instrument or funds III. A. 1. from a place in the United States 2. to or through a place outside the United States or B. 1. to a place in the United States 2. from a place outside the United States IV. knowing that the monetary instrument or funds represent the proceeds of unlawful activity V. knowing the transportation, transmission, or transfer is designed in whole or in part to conceal or disguise the nature, location, the source, the ownership, or the control of the proceed of specified unlawful activity. The concealment clause requires that concealment be the motivating force, at least in part, for the transportation. Subsection 1956(h) imposes the same penalties for conspiracy as for substantive violations of the section. Otherwise, the general accomplice and conspiracy principles of law apply throughout the section. The tax evasion and structured transactions or report evasion ("smurfing") offenses shadow the promotion and concealment offenses. A tax evasion, laundering prosecution requires the government to show that the defendant acted intentionally rather than inadvertently, but not that the defendant knew that his conduct violated the tax laws. Similarly, conviction for the smurfing offense does not require a showing that the defendant knew that his conduct was criminal as long as the government establishes that the defendant acted with the intent to frustrate a reporting requirement. Here too, the general principles of law applying to accomplices and conspirators apply. The final crime found in section 1956 is a "sting" offense, the proscription drafted to permit the prosecution of money launderers taken in by undercover officers claiming they have proceeds from illegal gambling or other predicate offenses in need of cleansing. The provision has promotional, concealment, and report evasion components. Section 1956 does not make spending tainted money a crime, but section 1957 does. Using most of the same definitions as section 1956, the elements of 1957 cover anyone who I. A. in the United States, B. in the special maritime or territorial jurisdiction of the United States, or C. outside the United States if the defendant is an American, II. knowingly III. A. engages or B. attempts to engage in IV. a monetary transaction V. [in or affecting interstate commerce] VI. in criminally derived property that A. is of a greater value than $10,000 and B. is derived from specified unlawful activity. Federal jurisdiction flows from the definition of the tainted monetary transaction, that is a transaction, "in or affecting interstate or foreign commerce" or one involving a financial institution. The government must also prove that the defendant knew the monetary instrument came from some criminal activity, but not that the defendant knew that the underlying crime was a money laundering predicate. The predicate offense and the money laundering offense must be separate, distinct crimes, but the standard is met when the defendant deposits a check representing the proceeds of a completed offense. Acquittal of the predicate offense is no bar to conviction under the section. The $10,000 threshold must be crossed at the time of the transaction. Proceeds worth less at the time of transaction, but more thereafter, do not qualify. The definition of the term "proceeds" added to section 1956 after Santos applies with equal force to section 1957: "the term 'proceeds' means any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, include the gross receipts of such activity." The requisite monetary transaction may involve any number of "financial institutions"—a bank, credit union, any of the statutorily designated high-cash flow businesses, or any comparable business designated by the Secretary of the Treasury. The statute, however, expressly exempts monetary transactions of the accused, necessary to secure legal representation in criminal proceedings. Constitutional objections initially greeted the prospect of prosecuting illegal Internet gambling. Principal among these have been questions as to Congress's legislative power under the Commerce Clause, restrictions imposed by the First Amendment's guarantee of free speech, and due process concerns about the regulation of activities occurring at least in part overseas. Congress possesses no legislative power that cannot be traced to the Constitution. Among its Constitutionally enumerated powers, Congress enjoys the authority "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes ... [and] To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers." Over the years, the Supreme Court has regularly confirmed the enormous breadth of Congress's legislative prerogatives under the Commerce Clause and the Necessary and Proper Clause. It has reminded us on occasion, however, that Congress's Commerce Clause power is not without limit. Lopez and Morrison , are perhaps the best known of these reminders. Lopez held that the Congress lacked the authority under the Commerce Clause to enact the Gun-Free School Zones Act, which outlawed possession of a firearm within 1,000 feet of a school, 514 U.S. at 551. In doing so, Lopez mapped Congress's Commerce Clause powers: First, Congress may regulate the use of the channels of interstate commerce.... Heart of Atlanta Motel, [ Inc. v. United States , 379 U.S. 241, 256 (1964)]("'[T]he authority of Congress to keep the channels of interstate commerce free from immoral and injurious uses has been frequently sustained and is no longer open to question'"). Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or persons or things in interstate commerce, even through the threat may come only from intrastate activities. See, e.g., ... Perez [v. United States , 402 U.S. 146, 150 (1971)] ("[F]or example, the destruction of an aircraft (18 U.S.C. §32), or ... thefts from interstate shipments (18 U.S.C. §659"). Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e. , those activities that substantially affect interstate commerce. Since the Gun-Free School Zones Act addressed neither the channels nor the content of commerce, it had to find coverage under the power to regulate matters that "substantially affect" interstate or foreign commerce. This it could not do. It was devoid of any economic component and so could claim no kinship to earlier cases approving Congressional regulation of various forms of intrastate economic activity that substantially affected interstate commerce, such as, "regulation of intrastate coal mining, intrastate extortionate credit transactions [loan sharking], restaurants utilizing substantial interstate supplies, inns and hotels catering to interstate guests, and production and consumption of homegrown wheat." Moreover, the act lacked the kind of explicit restraints or guidelines that might have confined its application to instances more clearly within the Commerce power. Its criminal proscription contained no "commerce" element; it did not, for example, outlaw possession of a firearm, which had been transported in interstate commerce , within 1,000 feet of a school. Its enactment occurred without the accompaniment of legislative findings or declarations of purpose that might have guided appropriate enforcement limitations. The act's overreaching was all the more troubling because it sought to bring federal regulation to school activities, an area where the states "historically have been sovereign." Morrison echoed Lopez , quoting it extensively in the course of an opinion that found that the Commerce Clause did not empower Congress to create a federal civil remedy for the victims of gender-motivated violence. Other opinions confirm that the Commerce Clause must be read in light of the principles of federalism reflected in the Tenth Amendment. For instance, the Clause does not empower Congress to compel the states to exercise their sovereign legislative or executive powers to implement a federal regulatory scheme. These limitations, notwithstanding, the federal appellate courts have conclude that a gambling business, legal or illegal, is a commercial activity, and as a consequence, may be regulated under the Commerce Clause. Gambling implicates First Amendment free speech concerns on two levels. Gambling is communicative by nature. Gambling also relies on advertising and a wide range of auxiliary communication services. Historically, gambling itself has been considered a vice and consequently beyond the protection of the First Amendment. There is every reason to believe that illegal gambling remains beyond the shield of the First Amendment. Gone, however, is the notion that the power to outlaw a vice includes the power to outlaw auxiliary speech when the underlying vice remains unregulated. The Supreme Court made this readily apparent when it approved an advertising ban on gambling illegal at the point of broadcast, but invalidated an advertising ban on gambling lawful at the point of broadcast. Early commentators suggested application of federal criminal law to offshore Internet gambling entrepreneurs implicated due process, personal jurisdiction concerns, as understood in civil cases. There, the Supreme Court has explained that The Due Process Clause protects an individual's liberty interest in not being subject to the binding judgments of a forum with which he has established no meaningful 'contacts, ties, or relations.' International Shoe Co. v. Washington , 326 U.S. [310], at 319. By requiring that individuals have fair warning that a particular activity may subject them to the jurisdiction of a foreign sovereign, the Due Process Clause gives a degree of predictability to the legal system that allows potential defendants to structure their primary conduct with some minimum assurance as to where that conduct will and will not render them liable to suit,' World-Wide Volkswagen Corp. v. Woodson , 444 U.S. 286, 297 (1980) . . . . [T]he constitutional touchstone remains whether the defendant purposefully established minimum contacts in the forum State. Although it has been argued that foreseeability of causing injury in another State should be sufficient to establish such contacts there when policy considerations so require, the Court has consistently held that this kind of foreseeability is not a sufficient benchmark for exercising personal jurisdiction. Instead, the foreseeability that is critical to due process analysis ... is that the defendant's conduct and connection with the forum State are such that he should reasonably anticipate being haled into court there. The lower federal appellate courts, called upon to apply these principles in Internet commercial litigation, have concluded that suing nonresident parties doing business on the Internet where they have a real and continuous presence or where they caused an injury does not offend due process requirements. Yet, more than a passive Internet site is required; the critical test is often the level of commercial activity associated with the website. In a criminal law context, some courts describe a due process requirement that demands a nexus between the United States and the circumstances of the offense. A few look to international law principles to provide a useful measure to determine whether the nexus requirement has been met; others consider the principles at work in the minimum contacts test for personal jurisdiction. At the heart of these cases is the notion that due process expects that a defendant's conduct must have some past, present, or anticipated locus or impact within the United States before he can fairly be held criminally liable for it in an American court. The commentators have greeted this analysis with some hesitancy, and some courts have simply rejected it. Transmission of wagering information; penalties (a) Whoever being engaged in the business of betting or wagering knowingly uses a wire communication facility for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest, or for the transmission of a wire communication which entitles the recipient to receive money or credit as a result of bets or wagers, or for information assisting in the placing of bets or wagers, shall be fined under this title or imprisoned not more than two years, or both. (b) Nothing in this section shall be construed to prevent the transmission in interstate or foreign commerce of information for use in news reporting of sporting events or contests, or for the transmission of information assisting in the placing of bets or wagers on a sporting event or contest from a State or foreign country where betting on that sporting event or contest is legal into a State or foreign country in which such betting is legal. (c) Nothing contained in this section shall create immunity from criminal prosecution under any laws of any State. (d) When any common carrier, subject to the jurisdiction of the Federal Communications Commission, is notified in writing by a Federal, State, or local law enforcement agency, acting within its jurisdiction, that any facility furnished by it is being used or will be used for the purpose of transmitting or receiving gambling information in interstate or foreign commerce in violation of Federal, State or local law, it shall discontinue or refuse, the leasing, furnishing, or maintaining of such facility, after reasonable notice to the subscriber, but no damages, penalty or forfeiture, civil or criminal, shall be found against any common carrier for any act done in compliance with any notice received from a law enforcement agency. Nothing in this section shall be deemed to prejudice the right of any person affected thereby to secure an appropriate determination, as otherwise provided by law, in a Federal court or in a State or local tribunal or agency, that such facility should not be discontinued or removed, or should be restored. (e) As used in this section, the term "State" means a State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, or a commonwealth, territory or possession of the United States. Prohibition of illegal gambling businesses (a) Whoever conducts, finances, manages, supervises, directs, or owns all or part of an illegal gambling business shall be fined under this title or imprisoned not more than five years, or both. (b) As used in this section— (1) "illegal gambling business" means a gambling business which— (i) is a violation of the law of a State or political subdivision in which it is conducted; (ii) involves five or more persons who conduct, finance, manage, supervise, direct, or own all or part of such business; and (iii) has been or remains in substantially continuous operation for a period in excess of thirty days or has a gross revenue of $2,000 in any single day. (2) "gambling" includes but is not limited to pool-selling, bookmaking, maintaining slot machines, roulette wheels or dice tables, and conducting lotteries, policy, bolita or numbers games, or selling chances therein. (3) "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States. (c) If five or more persons conduct, finance, manage, supervise, direct, or own all or part of a gambling business and such business operates for two or more successive days, then, for the purpose of obtaining warrants for arrests, interceptions, and other searches and seizures, probable cause that the business receives gross revenue in excess of $2,000 in any single day shall be deemed to have been established. (d) Any property, including money, used in violation of the provisions of this section may be seized and forfeited to the United States. All provisions of law relating to the seizure, summary, and judicial forfeiture procedures, and condemnation of vessels, vehicles, merchandise, and baggage for violation of the customs laws; the disposition of such vessels, vehicles, merchandise, and baggage or the proceeds from such sale; the remission or mitigation of such forfeitures; and the compromise of claims and the award of compensation to informers in respect of such forfeitures shall apply to seizures and forfeitures incurred or alleged to have been incurred under the provisions of this section, insofar as applicable and not inconsistent with such provisions. Such duties as are imposed upon the collector of customs or any other person in respect to the seizure and forfeiture of vessels, vehicles, merchandise, and baggage under the customs laws shall be performed with respect to seizures and forfeitures of property used or intended for use in violation of this section by such officers, agents, or other persons as may be designated for that purpose by the Attorney General. (e) This section shall not apply to any bingo game, lottery, or similar game of chance conducted by an organization exempt from tax under paragraph (3) of subsection (c) of section 501 of the Internal Revenue Code of 1954, as amended, if no part of the gross receipts derived from such activity inures to the benefit of any private shareholder, member, or employee of such organization except as compensation for actual expenses incurred by him in the conduct of such activity. Interstate and foreign travel or transportation in aid of racketeering enterprises (a) Whoever travels in interstate or foreign commerce or uses the mail or any facility in interstate or foreign commerce, with intent to— (1) distribute the proceeds of any unlawful activity; or (2) commit any crime of violence to further any unlawful activity; or (3) otherwise promote, manage, establish, carry on, or facilitate the promotion, management, establishment, or carrying on, of any unlawful activity, and thereafter performs or attempts to perform— (A) an act described in paragraph (1) or (3) shall be fined under this title, imprisoned not more than 5 years, or both; or (B) an act described in paragraph (2) shall be fined under this title, imprisoned for not more than 20 years, or both, and if death results shall be imprisoned for any term of years or for life. (b) As used in this section (i) "unlawful activity" means (1) any business enterprise involving gambling, liquor on which the Federal excise tax has not been paid, narcotics or controlled substances (as defined in section 102(6) of the Controlled Substances Act), or prostitution offenses in violation of the laws of the State in which they are committed or of the United States, (2) extortion, bribery, or arson in violation of the laws of the State in which committed or of the United States, or (3) any act which is indictable under subchapter II of chapter 53 of title 31, United States Code, or under section 1956 or 1957 of this title and (ii) the term "State" includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States. (c) Investigations of violations under this section involving liquor shall be conducted under the supervision of the Attorney General. 31 U.S.C. 5363. Prohibition on acceptance of any financial instrument for unlawful internet gambling No person engaged in the business of betting or wagering may knowingly accept, in connection with the participation of another person in unlawful Internet gambling— (1) credit, or the proceeds of credit, extended to or on behalf of such other person (including credit extended through the use of a credit card); (2) an electronic fund transfer, or funds transmitted by or through a money transmitting business, or the proceeds of an electronic fund transfer or money transmitting service, from or on behalf of such other person; (3) any check, draft, or similar instrument which is drawn by or on behalf of such other person and is drawn on or payable at or through any financial institution; or (4) the proceeds of any other form of financial transaction, as the Secretary and the Board of Governors of the Federal Reserve System may jointly prescribe by regulation, which involves a financial institution as a payor or financial intermediary on behalf of or for the benefit of such other person. 31 U.S.C. 5366. Criminal penalties (a) In general.—Any person who violates section 5363 shall be fined under title 18, imprisoned for not more than 5 years, or both. (b) Permanent injunction.—Upon conviction of a person under this section, the court may enter a permanent injunction enjoining such person from placing, receiving, or otherwise making bets or wagers or sending, receiving, or inviting information assisting in the placing of bets or wagers. 31 U.S.C. 5367. Circumventions prohibited Notwithstanding section 5362(2), a financial transaction provider, or any interactive computer service or telecommunications service, may be liable under this subchapter if such person has actual knowledge and control of bets and wagers, and— (1) operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made, or at which unlawful bets or wagers are offered to be placed, received, or otherwise made; or (2) owns or controls, or is owned or controlled by, any person who operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made, or at which unlawful bets or wagers are offered to be placed, received, or otherwise made. 31 U.S.C. 5365. Civil remedies (a) Jurisdiction.—In addition to any other remedy under current law, the district courts of the United States shall have original and exclusive jurisdiction to prevent and restrain restricted transactions by issuing appropriate orders in accordance with this section, regardless of whether a prosecution has been initiated under this subchapter. (b) Proceedings.— (1) Institution by Federal government.— (A) In general.—The United States, acting through the Attorney General, may institute proceedings under this section to prevent or restrain a restricted transaction. (B) Relief.—Upon application of the United States under this paragraph, the district court may enter a temporary restraining order, a preliminary injunction, or an injunction against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal Rules of Civil Procedure. (2) Institution by State attorney general.– (A) In general.—The attorney general (or other appropriate State official) of a State in which a restricted transaction allegedly has been or will be initiated, received, or otherwise made may institute proceedings under this section to prevent or restrain the violation or threatened violation. (B) Relief.—Upon application of the attorney general (or other appropriate State official) of an affected State under this paragraph, the district court may enter a temporary restraining order, a preliminary injunction, or an injunction against any person to prevent or restrain a restricted transaction, in accordance with rule 65 of the Federal Rules of Civil Procedure. (3) Indian lands.– (A) In general.—Notwithstanding paragraphs (1) and (2), for a restricted transaction that allegedly has been or will be initiated, received, or otherwise made on Indian lands (as that term is defined in section 4 of the Indian Gaming Regulatory Act)– (i) the United States shall have the enforcement authority provided under paragraph (1); and (ii) the enforcement authorities specified in an applicable Tribal-State Compact negotiated under section 11 of the Indian Gaming Regulatory Act (25 U.S.C. 2710) shall be carried out in accordance with that compact. (B) Rule of construction.—No provision of this section shall be construed as altering, superseding, or otherwise affecting the application of the Indian Gaming Regulatory Act. (c) Limitation relating to interactive computer services.– (1) In general.—Relief granted under this section against an interactive computer service shall– (A) be limited to the removal of, or disabling of access to, an online site violating section 5363, or a hypertext link to an online site violating such section, that resides on a computer server that such service controls or operates, except that the limitation in this subparagraph shall not apply if the service is subject to liability under this section under section 5367; (B) be available only after notice to the interactive computer service and an opportunity for the service to appear are provided; (C) not impose any obligation on an interactive computer service to monitor its service or to affirmatively seek facts indicating activity violating this subchapter; (D) specify the interactive computer service to which it applies; and (E) specifically identify the location of the online site or hypertext link to be removed or access to which is to be disabled. (2) Coordination with other law.—An interactive computer service that does not violate this subchapter shall not be liable under section 1084(d) of title 18, except that the limitation in this paragraph shall not apply if an interactive computer service has actual knowledge and control of bets and wagers and— (A) operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made or at which unlawful bets or wagers are offered to be placed, received, or otherwise made; or (B) owns or controls, or is owned or controlled by, any person who operates, manages, supervises, or directs an Internet website at which unlawful bets or wagers may be placed, received, or otherwise made, or at which unlawful bets or wagers are offered to be placed, received, or otherwise made. (d) Limitation on injunctions against regulated persons.—Notwithstanding any other provision of this section, and subject to section 5367, no provision of this subchapter shall be construed as authorizing the Attorney General of the United States, or the attorney general (or other appropriate State official) of any State to institute proceedings to prevent or restrain a restricted transaction against any financial transaction provider, to the extent that the person is acting as a financial transaction provider. 31 U.S.C. 5364. Policies and procedures to identify and prevent restricted transactions (a) Regulations.—Before the end of the 270-day period beginning on the date of the enactment of this subchapter, the Secretary and the Board of Governors of the Federal Reserve System, in consultation with the Attorney General, shall prescribe regulations (which the Secretary and the Board jointly determine to be appropriate) requiring each designated payment system, and all participants therein, to identify and block or otherwise prevent or prohibit restricted transactions through the establishment of policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit the acceptance of restricted transactions in any of the following ways: (1) The establishment of policies and procedures that– (A) allow the payment system and any person involved in the payment system to identify restricted transactions by means of codes in authorization messages or by other means; and (B) block restricted transactions identified as a result of the policies and procedures developed pursuant to subparagraph (A). (2) The establishment of policies and procedures that prevent or prohibit the acceptance of the products or services of the payment system in connection with a restricted transaction. (b) Requirements for policies and procedures.—In prescribing regulations under subsection (a), the Secretary and the Board of Governors of the Federal Reserve System shall– (1) identify types of policies and procedures, including nonexclusive examples, which would be deemed, as applicable, to be reasonably designed to identify and block or otherwise prevent or prohibit the acceptance of the products or services with respect to each type of restricted transaction; (2) to the extent practical, permit any participant in a payment system to choose among alternative means of identifying and blocking, or otherwise preventing or prohibiting the acceptance of the products or services of the payment system or participant in connection with, restricted transactions; (3) exempt certain restricted transactions or designated payment systems from any requirement imposed under such regulations, if the Secretary and the Board jointly find that it is not reasonably practical to identify and block, or otherwise prevent or prohibit the acceptance of, such transactions; and (4) ensure that transactions in connection with any activity excluded from the definition of unlawful internet gambling in subparagraph (B), (C), or (D)(i) of section 5362(10) are not blocked or otherwise prevented or prohibited by the prescribed regulations. (c) Compliance with payment system policies and procedures.—A financial transaction provider shall be considered to be in compliance with the regulations prescribed under subsection (a) if— (1) such person relies on and complies with the policies and procedures of a designated payment system of which it is a member or participant to– (A) identify and block restricted transactions; or (B) otherwise prevent or prohibit the acceptance of the products or services of the payment system, member, or participant in connection with restricted transactions; and (2) such policies and procedures of the designated payment system comply with the requirements of regulations prescribed under subsection (a). (d) No liability for blocking or refusing to honor restricted transactions.—A person that identifies and blocks a transaction, prevents or prohibits the acceptance of its products or services in connection with a transaction, or otherwise refuses to honor a transaction— (1) that is a restricted transaction; (2) that such person reasonably believes to be a restricted transaction; or (3) as a designated payment system or a member of a designated payment system in reliance on the policies and procedures of the payment system, in an effort to comply with regulations prescribed under subsection (a),shall not be liable to any party for such action. (e) Regulatory enforcement.—The requirements under this section shall be enforced exclusively by– (1) the Federal functional regulators, with respect to the designated payment systems and financial transaction providers subject to the respective jurisdiction of such regulators under section 505(a) of the Gramm-Leach-Bliley Act and section 5g of the Commodities Exchange Act; and (2) the Federal Trade Commission, with respect to designated payment systems and financial transaction providers not otherwise subject to the jurisdiction of any Federal functional regulators (including the Commission) as described in paragraph (1). 31 U.S.C. 5362. Definitions In this subchapter: (1) Bet or wager.—The term "bet or wager"– (A) means the staking or risking by any person of something of value upon the outcome of a contest of others, a sporting event, or a game subject to chance, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome; (B) includes the purchase of a chance or opportunity to win a lottery or other prize (which opportunity to win is predominantly subject to chance); (C) includes any scheme of a type described in section 3702 of title 28; (D) includes any instructions or information pertaining to the establishment or movement of funds by the bettor or customer in, to, or from an account with the business of betting or wagering; and (E) does not include— (i) any activity governed by the securities laws (as that term is defined in section 3(a)(47) of the Securities Exchange Act of 1934 for the purchase or sale of securities (as that term is defined in section 3(a)(10) of that Act); (ii) any transaction conducted on or subject to the rules of a registered entity or exempt board of trade under the Commodity Exchange Act; (iii) any over-the-counter derivative instrument; (iv) any other transaction that— (I) is excluded or exempt from regulation under the Commodity Exchange Act; or (II) is exempt from State gaming or bucket shop laws under section 12(e) of the Commodity Exchange Act or section 28(a) of the Securities Exchange Act of 1934; (v) any contract of indemnity or guarantee; (vi) any contract for insurance; (vii) any deposit or other transaction with an insured depository institution; (viii) participation in any game or contest in which participants do not stake or risk anything of value other than— (I) personal efforts of the participants in playing the game or contest or obtaining access to the Internet; or (II) points or credits that the sponsor of the game or contest provides to participants free of charge and that can be used or redeemed only for participation in games or contests offered by the sponsor; or (ix) participation in any fantasy or simulation sports game or educational game or contest in which (if the game or contest involves a team or teams) no fantasy or simulation sports team is based on the current membership of an actual team that is a member of an amateur or professional sports organization (as those terms are defined in section 3701 of title 28) and that meets the following conditions: (I) All prizes and awards offered to winning participants are established and made known to the participants in advance of the game or contest and their value is not determined by the number of participants or the amount of any fees paid by those participants. (II) All winning outcomes reflect the relative knowledge and skill of the participants and are determined predominantly by accumulated statistical results of the performance of individuals (athletes in the case of sports events) in multiple real-world sporting or other events. (III) No winning outcome is based— (aa) on the score, point-spread, or any performance or performances of any single real-world team or any combination of such teams; or (bb) solely on any single performance of an individual athlete in any single real-world sporting or other event. (2) Business of betting or wagering.—The term "business of betting or wagering" does not include the activities of a financial transaction provider, or any interactive computer service or telecommunications service. (3) Designated payment system.—The term "designated payment system" means any system utilized by a financial transaction provider that the Secretary and the Board of Governors of the Federal Reserve System, in consultation with the Attorney General, jointly determine, by regulation or order, could be utilized in connection with, or to facilitate, any restricted transaction. (4) Financial transaction provider.—The term "financial transaction provider" means a creditor, credit card issuer, financial institution, operator of a terminal at which an electronic fund transfer may be initiated, money transmitting business, or international, national, regional, or local payment network utilized to effect a credit transaction, electronic fund transfer, stored value product transaction, or money transmitting service, or a participant in such network, or other participant in a designated payment system. (5) Internet.—The term "Internet" means the international computer network of interoperable packet switched data networks. (6) Interactive computer service.—The term "interactive computer service" has the meaning given the term in section 230(f) of the Communications Act of 1934 (47 U.S.C. 230(f)). (7) Restricted transaction.—The term "restricted transaction" means any transaction or transmittal involving any credit, funds, instrument, or proceeds described in any paragraph of section 5363 which the recipient is prohibited from accepting under section 5363. (8) Secretary.—The term "Secretary" means the Secretary of the Treasury. (9) State.—The term "State" means any State of the United States, the District of Columbia, or any commonwealth, territory, or other possession of the United States. (10) Unlawful internet gambling.— (A) In general.—The term "unlawful Internet gambling" means to place, receive, or otherwise knowingly transmit a bet or wager by any means which involves the use, at least in part, of the Internet where such bet or wager is unlawful under any applicable Federal or State law in the State or Tribal lands in which the bet or wager is initiated, received, or otherwise made. (B) Intrastate transactions.—The term "unlawful Internet gambling" does not include placing, receiving, or otherwise transmitting a bet or wager where— (i) the bet or wager is initiated and received or otherwise made exclusively within a single State; (ii) the bet or wager and the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and placed in accordance with the laws of such State, and the State law or regulations include— (I) age and location verification requirements reasonably designed to block access to minors and persons located out of such State; and (II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with such State's law or regulations; and (iii) the bet or wager does not violate any provision of—(I) the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.); (II) chapter 178 of title 28 (commonly known as the "Professional and Amateur Sports Protection Act"); (III) the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or (IV) the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.). (C) Intratribal transactions.—The term "unlawful Internet gambling" does not include placing, receiving, or otherwise transmitting a bet or wager where— (i) the bet or wager is initiated and received or otherwise made exclusively— (I) within the Indian lands of a single Indian tribe (as such terms are defined under the Indian Gaming Regulatory Act); or (II) between the Indian lands of 2 or more Indian tribes to the extent that intertribal gaming is authorized by the Indian Gaming Regulatory Act; (ii) the bet or wager and the method by which the bet or wager is initiated and received or otherwise made is expressly authorized by and complies with the requirements of— (I) the applicable tribal ordinance or resolution approved by the Chairman of the National Indian Gaming Commission; and (II) with respect to class III gaming, the applicable Tribal-State Compact; (iii) the applicable tribal ordinance or resolution or Tribal-State compact includes— (I) age and location verification requirements reasonably designed to block access to minors and persons located out of the applicable Tribal lands; and (II) appropriate data security standards to prevent unauthorized access by any person whose age and current location has not been verified in accordance with the applicable tribal ordinance or resolution or Tribal-State Compact; and (iv) the bet or wager does not violate any provision of— (I) the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.); (II) chapter 178 of title 28 (commonly known as the "Professional and Amateur Sports Protection Act"); (III) the Gambling Devices Transportation Act (15 U.S.C. 1171 et seq.); or (IV) the Indian Gaming Regulatory Act (25 U.S.C. 2701 et seq.). (D) Interstate horseracing .— (i) In general.—The term "unlawful Internet gambling" shall not include any activity that is allowed under the Interstate Horseracing Act of 1978 (15 U.S.C. 3001 et seq.). (ii) Rule of construction regarding preemption.—Nothing in this subchapter may be construed to preempt any State law prohibiting gambling. (iii) Sense of Congress.—It is the sense of Congress that this subchapter shall not change which activities related to horse racing may or may not be allowed under Federal law. This subparagraph is intended to address concerns that this subchapter could have the effect of changing the existing relationship between the Interstate Horseracing Act and other Federal statutes in effect on the date of the enactment of this subchapter. This subchapter is not intended to change that relationship. This subchapter is not intended to resolve any existing disagreements over how to interpret the relationship between the Interstate Horseracing Act and other Federal statutes. (E) Intermediate routing.—The intermediate routing of electronic data shall not determine the location or locations in which a bet or wager is initiated, received, or otherwise made. (11) Other terms.– (A) Credit; creditor; credit card; and card issuer.—The terms "credit", "creditor", "credit card", and "card issuer" have the meanings given the terms in section 103 of the Truth in Lending Act (15 U.S.C. 1602). (B) Electronic fund transfer.—The term "electronic fund transfer"— (i) has the meaning given the term in section 903 of the Electronic Fund Transfer Act (15 U.S.C. 1693a), except that the term includes transfers that would otherwise be excluded under section 903(6)(E) of that Act; and (ii) includes any fund transfer covered by Article 4A of the Uniform Commercial Code, as in effect in any State. (C) Financial institution.—The term "financial institution" has the meaning given the term in section 903 of the Electronic Fund Transfer Act, except that such term does not include a casino, sports book, or other business at or through which bets or wagers may be placed or received. (D) Insured depository institution.—The term "insured depository institution"— (i) has the meaning given the term in section 3(c) of the Federal Deposit Insurance Act (12 U.S.C. 1813(c)); and (ii) includes an insured credit union (as defined in section 101 of the Federal Credit Union Act). (E) Money transmitting business and money transmitting service.—The terms "money transmitting business" and "money transmitting service" have the meanings given the terms in section 5330(d) (determined without regard to any regulations prescribed by the Secretary thereunder). 18 U.S. C. 1962 . Prohibited activities (a) It shall be unlawful for any person who has received any income derived, directly or indirectly, from a pattern of racketeering activity or through collection of an unlawful debt in which such person has participated as a principal within the meaning of section 2, title 18, United States Code, to use or invest, directly or indirectly, any part of such income, or the proceeds of such income, in acquisition of any interest in, or the establishment or operation of, any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. A purchase of securities on the open market for purposes of investment, and without the intention of controlling or participating in the control of the issuer, or of assisting another to do so, shall not be unlawful under this subsection if the securities of the issuer held by the purchaser, the members of his immediate family, and his or their accomplices in any pattern or racketeering activity or the collection of an unlawful debt after such purchase do not amount in the aggregate to one percent of the outstanding securities of any one class, and do not confer, either in law or in fact, the power to elect one or more directors of the issuer. (b) It shall be unlawful for any person through a pattern of racketeering activity or through collection of an unlawful debt to acquire or maintain, directly or indirectly, any interest in or control of any enterprise which is engaged in, or the activities of which affect, interstate or foreign commerce. (c) It shall be unlawful for any person employed by or associated with any enterprise engaged in, or the activities of which affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the conduct of such enterprise's affairs through a pattern of racketeering activity or collection of unlawful debt. (d) It shall be unlawful for any person to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section. 18 U.S.C. 1961 . Definitions As used in this chapter– (1) "racketeering activity" means (A) any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), which is chargeable under State law and punishable by imprisonment for more than one year; (B) any act which is indictable under any of the following provisions of title 18, United States Code: Section 201 (relating to bribery), section 224 (relating to sports bribery), sections 471, 472, and 473 (relating to counterfeiting), section 659 (relating to theft from interstate shipment) if the act indictable under section 659 is felonious, section 664 (relating to embezzlement from pension and welfare funds), sections 891-894 (relating to extortionate credit transactions), section 1028 (relating to fraud and related activity in connection with identification documents), section 1029 (relating to fraud and related activity in connection with access devices), section 1084 (relating to the transmission of gambling information), section 1341 (relating to mail fraud), section 1343 (relating to wire fraud), section 1344 (relating to financial institution fraud), section 1425 (relating to the procurement of citizenship or nationalization unlawfully), section 1426 (relating to the reproduction of naturalization or citizenship papers), section 1427 (relating to the sale of naturalization or citizenship papers), sections 1461-1465 (relating to obscene matter), section 1503 (relating to obstruction of justice), section 1510 (relating to obstruction of criminal investigations), section 1511 (relating to the obstruction of State or local law enforcement), section 1512 (relating to tampering with a witness, victim, or an informant), section 1513 (relating to retaliating against a witness, victim, or an informant), section 1542 (relating to false statement in application and use of passport), section 1543 (relating to forgery or false use of passport), section 1544 (relating to misuse of passport), section 1546 (relating to fraud and misuse of visas, permits, and other documents), sections 1581-1592 (relating to peonage, slavery, and trafficking in persons), section 1951 (relating to interference with commerce, robbery, or extortion), section 1952 (relating to racketeering), section 1953 (relating to interstate transportation of wagering paraphernalia), section 1954 (relating to unlawful welfare fund payments), section 1955 (relating to the prohibition of illegal gambling businesses), section 1956 (relating to the laundering of monetary instruments), section 1957 (relating to engaging in monetary transactions in property derived from specified unlawful activity), section 1958 (relating to use of interstate commerce facilities in the commission of murder-for-hire), section 1960 (relating to illegal money transmitters), sections 2251, 2251A, 2252, and 2260 (relating to sexual exploitation of children), sections 2312 and 2313 (relating to interstate transportation of stolen motor vehicles), sections 2314 and 2315 (relating to interstate transportation of stolen property), section 2318 (relating to trafficking in counterfeit labels for phonorecords, computer programs or computer program documentation or packaging and copies of motion pictures or other audiovisual works), section 2319 (relating to criminal infringement of a copyright), section 2319A (relating to unauthorized fixation of and trafficking in sound recordings and music videos of live musical performances), section 2320 (relating to trafficking in goods or services bearing counterfeit marks), section 2321 (relating to trafficking in certain motor vehicles or motor vehicle parts), sections 2341-2346 (relating to trafficking in contraband cigarettes), sections 2421-24 (relating to white slave traffic), sections 175-178 (relating to biological weapons), sections 229-229F (relating to chemical weapons), section 831 (relating to nuclear materials); (C) any act which is indictable under title 29, United States Code, section 186 (dealing with restrictions on payments and loans to labor organizations) or section 501(c) (relating to embezzlement from union funds), (D) any offense involving fraud connected with a case under title 11 (except a case under section 157 of this title), fraud in the sale of securities, or the felonious manufacture, importation, receiving, concealment, buying, selling, or otherwise dealing in a controlled substance or listed chemical (as defined in section 102 of the Controlled Substances Act), punishable under any law of the United States, (E) any act which is indictable under the Currency and Foreign Transactions Reporting Act, (F) any act which is indictable under the Immigration and Nationality Act, section 274 (relating to bringing in and harboring certain aliens), section 277 (relating to aiding or assisting certain aliens to enter the United States), or section 278 (relating to importation of alien for immoral purpose) if the act indictable under such section of such Act was committed for the purpose of financial gain, or (G) any act that is indictable under any provision listed in section 2332b(g)(5)(B); (2) "State" means any State of the United States, the District of Columbia, the Commonwealth of Puerto Rico, any territory or possession of the United States, any political subdivision, or any department, agency, or instrumentality thereof; (3) "person" includes any individual or entity capable of holding a legal or beneficial interest in property; (4) "enterprise" includes any individual, partnership, corporation, association, or other legal entity, and any union or group of individuals associated in fact although not a legal entity; (5) "pattern of racketeering activity" requires at least two acts of racketeering activity, one of which occurred after the effective date of this chapter and the last of which occurred within ten years (excluding any period of imprisonment) after the commission of a prior act of racketeering activity; (6) "unlawful debt" means a debt (A) incurred or contracted in gambling activity which was in violation of the law of the United States, a State or political subdivision thereof, or which is unenforceable under State or Federal law in whole or in part as to principal or interest because of the laws relating to usury, and (B) which was incurred in connection with the business of gambling in violation of the law of the United States, a State or political subdivision thereof, or the business of lending money or a thing of value at a rate usurious under State or Federal law, where the usurious rate is at least twice the enforceable rate; (7) "racketeering investigator" means any attorney or investigator so designated by the Attorney General and charged with the duty of enforcing or carrying into effect this chapter; (8) "racketeering investigation" means any inquiry conducted by any racketeering investigator for the purpose of ascertaining whether any person has been involved in any violation of this chapter or of any final order, judgment, or decree of any court of the United States, duly entered in any case or proceeding arising under this chapter; (9) "documentary material" includes any book, paper, document, record, recording, or other material; and (10) "Attorney General" includes the Attorney General of the United States, the Deputy Attorney General of the United States, the Associate Attorney General of the United States, any Assistant Attorney General of the United States, or any employee of the Department of Justice or any employee of any department or agency of the United States so designated by the Attorney General to carry out the powers conferred on the Attorney General by this chapter. Any department or agency so designated may use in investigations authorized by this chapter either the investigative provisions of this chapter or the investigative power of such department or agency otherwise conferred by law. 18 U.S.C. 1956 . Laundering of monetary instruments. (a)(1) Whoever, knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity, conducts or attempts to conduct such a financial transaction which in fact involves the proceeds of specified unlawful activity— (A)(i) with the intent to promote the carrying on of specified unlawful activity; or (ii) with intent to engage in conduct constituting a violation of section 7201 or 7206 of the Internal Revenue Code of 1986; or (B) knowing that the transaction is designed in whole or in part— (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the property involved in the transaction, whichever is greater, or imprisonment for not more than twenty years, or both. For purposes of this paragraph, a financial transaction shall be considered to be one involving the proceeds of specified unlawful activity if it is part of a set of parallel or dependent transactions, any one of which involves the proceeds of specified unlawful activity, and all of which are part of a single plan or arrangement. (2) Whoever transports, transmits, or transfers, or attempts to transport, transmit, or transfer a monetary instrument or funds from a place in the United States to or through a place outside the United States or to a place in the United States from or through a place outside the United States— (A) with the intent to promote the carrying on of specified unlawful activity; or (B) knowing that the monetary instrument or funds involved in the transportation, transmission, or transfer represent the proceeds of some form of unlawful activity and knowing that such transportation, transmission, or transfer is designed in whole or in part— (i) to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds of specified unlawful activity; or (ii) to avoid a transaction reporting requirement under State or Federal law, shall be sentenced to a fine of not more than $500,000 or twice the value of the monetary instrument or funds involved in the transportation, transmission, or transfer whichever is greater, or imprisonment for not more than twenty years, or both. For the purpose of the offense described in subparagraph (B), the defendant's knowledge may be established by proof that a law enforcement officer represented the matter specified in subparagraph (B) as true, and the defendant's subsequent statements or actions indicate that the defendant believed such representations to be true. (3) Whoever, with the intent— (A) to promote the carrying on of specified unlawful activity; (B) to conceal or disguise the nature, location, source, ownership, or control of property believed to be the proceeds of specified unlawful activity; or (C) to avoid a transaction reporting requirement under State or Federal law, conducts or attempts to conduct a financial transaction involving property represented to be the proceeds of specified unlawful activity, or property used to conduct or facilitate specified unlawful activity, shall be fined under this title or imprisoned for not more than 20 years, or both. For purposes of this paragraph and paragraph (2), the term "represented" means any representation made by a law enforcement officer or by another person at the direction of, or with the approval of, a Federal official authorized to investigate or prosecute violations of this section. (b) Penalties.— (1) In general.—Whoever conducts or attempts to conduct a transaction described in subsection (a)(1) or (a)(3), or section 1957, or a transportation, transmission, or transfer described in subsection (a)(2), is liable to the United States for a civil penalty of not more than the greater of— (A) the value of the property, funds, or monetary instruments involved in the transaction; or (B) $10,000. (2) Jurisdiction over foreign persons.—For purposes of adjudicating an action filed or enforcing a penalty ordered under this section, the district courts shall have jurisdiction over any foreign person, including any financial institution authorized under the laws of a foreign country, against whom the action is brought, if service of process upon the foreign person is made under the Federal Rules of Civil Procedure or the laws of the country in which the foreign person is found, and– (A) the foreign person commits an offense under subsection (a) involving a financial transaction that occurs in whole or in part in the United States; (B) the foreign person converts, to his or her own use, property in which the United States has an ownership interest by virtue of the entry of an order of forfeiture by a court of the United States; or (C) the foreign person is a financial institution that maintains a bank account at a financial institution in the United States. (3) Court authority over assets.—A court may issue a pretrial restraining order or take any other action necessary to ensure that any bank account or other property held by the defendant in the United States is available to satisfy a judgment under this section. (4) Federal receiver.— (A) In general.—A court may appoint a Federal Receiver, in accordance with subparagraph(B) of this paragraph, to collect, marshal, and take custody, control, and possession of all assets of the defendant, wherever located, to satisfy a civil judgment under this subsection, a forfeiture judgment under section 981 or 982, or a criminal sentence under section 1957 or subsection (a) of this section, including an order of restitution to any victim of a specified unlawful activity. (B) Appointment and authority.—A Federal Receiver described in subparagraph (A)— (i) may be appointed upon application of a Federal prosecutor or a Federal or State regulator, by the court having jurisdiction over the defendant in the case; (ii) shall be an officer of the court, and the powers of the Federal Receiver shall include the powers set out in section 754 of title 28, United States Code; and (iii) shall have standing equivalent to that of a Federal prosecutor for the purpose of submitting requests to obtain information regarding the assets of the defendant— (I) from the Financial Crimes Enforcement Network of the Department of the Treasury; or (II) from a foreign country pursuant to a mutual legal assistance treaty, multilateral agreement, or other arrangement for international law enforcement assistance, provided that such requests are in accordance with the policies and procedures of the Attorney General. (c) As used in this section— (1) the term "knowing that the property involved in a financial transaction represents the proceeds of some form of unlawful activity" means that the person knew the property involved in the transaction represented proceeds from some form, though not necessarily which form, of activity that constitutes a felony under State, Federal, or foreign law, regardless of whether or not such activity is specified in paragraph (7); (2) the term "conducts" includes initiating, concluding, or participating in initiating, or concluding a transaction; (3) the term "transaction" includes a purchase, sale, loan, pledge, gift, transfer, delivery, or other disposition, and with respect to a financial institution includes a deposit, withdrawal, transfer between accounts, exchange of currency, loan, extension of credit, purchase or sale of any stock, bond, certificate of deposit, or other monetary instrument, use of a safe deposit box, or any other payment, transfer, or delivery by, through, or to a financial institution, by whatever means effected; (4) the term "financial transaction" means (A) a transaction which in any way or degree affects interstate or foreign commerce (i) involving the movement of funds by wire or other means or (ii) involving one or more monetary instruments, or (iii) involving the transfer of title to any real property, vehicle, vessel, or aircraft, or (B) a transaction involving the use of a financial institution which is engaged in, or the activities of which affect, interstate or foreign commerce in any way or degree; (5) the term "monetary instruments" means (i) coin or currency of the United States or of any other country, travelers' checks, personal checks, bank checks, and money orders, or (ii) investment securities or negotiable instruments, in bearer form or otherwise in such form that title thereto passes upon delivery; (6) the term "financial institution" includes— (A) any financial institution, as defined in section 5312(a)(2) of title 31, United States Code, or the regulations promulgated thereunder; and (B) any foreign bank, as defined in section 1 of the International Banking Act of 1978 (12 U.S.C. 3101); (7) the term "specified unlawful activity" means— (A) any act or activity constituting an offense listed in section 1961(1) of this title except an act which is indictable under subchapter II of chapter 53 of title 31; (B) with respect to a financial transaction occurring in whole or in part in the United States, an offense against a foreign nation involving— (i) the manufacture, importation, sale, or distribution of a controlled substance (as such term is defined for the purposes of the Controlled Substances Act); (ii) murder, kidnapping, robbery, extortion, destruction of property by means of explosive or fire, or a crime of violence (as defined in section 16); (iii) fraud, or any scheme or attempt to defraud, by or against a foreign bank (as defined in paragraph 7 of section 1(b) of the International Banking Act of 1978)); (iv) bribery of a public official, or the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official; (v) smuggling or export control violations involving— (I) an item controlled on the United States Munitions List established under section 38 of the Arms Export Control Act (22 U.S.C. 2778); or (II) an item controlled under regulations under the Export Administration Regulations (15 C.F.R. Parts 730-774); (vi) an offense with respect to which the United States would be obligated by a multilateral treaty, either to extradite the alleged offender or to submit the case for prosecution, if the offender were found within the territory of the United States; or (vii) trafficking in persons, selling or buying of children, sexual exploitation of children, or transporting, recruiting or harboring a person, including a child, for commercial sex acts; (C) any act or acts constituting a continuing criminal enterprise, as that term is defined in section 408 of the Controlled Substances Act (21 U.S.C. 848); (D) an offense under section 32 (relating to the destruction of aircraft), section 37 (relating to violence at international airports), section 115 (relating to influencing, impeding, or retaliating against a Federal official by threatening or injuring a family member), section 152 (relating to concealment of assets; false oaths and claims; bribery), section 175c (relating to the variola virus), section 215 (relating to commissions or gifts for procuring loans), section 351 (relating to congressional or Cabinet officer assassination), any of sections 500 through 503 (relating to certain counterfeiting offenses), section 513 (relating to securities of States and private entities), section 541 (relating to goods falsely classified), section 542 (relating to entry of goods by means of false statements), section 545 (relating to smuggling goods into the United States), section 549 (relating to removing goods from Customs custody), section 554 (relating to smuggling goods from the United States), section 641 (relating to public money, property, or records), section 656 (relating to theft, embezzlement, or misapplication by bank officer or employee), section 657 (relating to lending, credit, and insurance institutions), section 658 (relating to property mortgaged or pledged to farm credit agencies), section 666 (relating to theft or bribery concerning programs receiving Federal funds), section 793, 794, or 798 (relating to espionage), section 831 (relating to prohibited transactions involving nuclear materials), section 844(f) or (i) (relating to destruction by explosives or fire of Government property or property affecting interstate or foreign commerce), section 875 (relating to interstate communications), section 922(1) (relating to the unlawful importation of firearms), section 924(n) (relating to firearms trafficking), section 956 (relating to conspiracy to kill, kidnap, maim, or injure certain property in a foreign country), section 1005 (relating to fraudulent bank entries), 1006 (relating to fraudulent Federal credit institution entries), 1007 (relating to fraudulent Federal Deposit Insurance transactions), 1014 (relating to fraudulent loan or credit applications), section 1030 (relating to computer fraud and abuse), 1032 (relating to concealment of assets from conservator, receiver, or liquidating agent of financial institution), section 1111 (relating to murder), section 1114 (relating to murder of United States law enforcement officials), section 1116 (relating to murder of foreign officials, official guests, or internationally protected persons), section 1201 (relating to kidnaping), section 1203 (relating to hostage taking), section 1361 (relating to willful injury of Government property), section 1363 (relating to destruction of property within the special maritime and territorial jurisdiction), section 1708 (theft from the mail), section 1751 (relating to Presidential assassination), section 2113 or 2114 (relating to bank and postal robbery and theft), section 2252A (relating to child pornography) where the child pornography contains a visual depiction of an actual minor engaging in sexual explicit conduct, section 2260 (production of certain child pornography for importation into the United States), section 2280 (relating to violence against maritime navigation), section 2281 (relating to violence against maritime fixed platforms), section 2319 (relating to copyright infringement), section 2320 (relating to trafficking in counterfeit goods and services), section 2332 (relating to terrorist acts abroad against United States nationals), section 2332a (relating to use of weapons of mass destruction), section 2332b (relating to international terrorist acts transcending national boundaries), section 2332g (relating to missile systems designed to destroy aircraft), section 2332h (relating to radiological dispersal devices), or section 2339A or 2339B (relating to providing material support to terrorists), section 2339C (relating to financing of terrorism), or 2339D (relating to receiving military-type training from a foreign terrorist organization) of this title, section 46502 of title 49, United States Code, a felony violation of the Chemical Diversion and Trafficking Act of 1988 (relating to precursor and essential chemicals), section 590 of the Tariff Act of 1930 (19 U.S.C. 1590) (relating to aviation smuggling), section 422 of the Controlled Substances Act (relating to transportation of drug paraphernalia), section 38(c) (relating to criminal violations) of the Arms Export Control Act, section 11 (relating to violations) of the Export Administration Act of 1979, section 206 (relating to penalties) of the International Emergency Economic Powers Act, section 16 (relating to offenses and punishment) of the Trading with the Enemy Act, any felony violation of section 15 of the Food and Nutrition Act of 1978 [7 U.S.C.A. 2024] (relating to supplemental nutrition assistance program benefits fraud) involving a quantity of benefits having a value of not less than $5,000, any violation of section 543(a)(1) of the Housing Act of 1949 [42 U.S.C. 1490s(a)(1)] (relating to equity skimming), any felony violation of the Foreign Agents Registration Act of 1938, or section 92 of the Atomic Energy Act of 1954 (42 U.S.C. 2122)(relating to prohibitions governing atomic weapons), any felony violation of the Foreign Corrupt Practices Act; ENVIRONMENTAL CRIMES (E) a felony violation of the Federal Water Pollution Control Act (33 U.S.C. 1251 et seq.), the Ocean Dumping Act (33 U.S.C. 1401 et seq.), the Act to Prevent Pollution from Ships (33 U.S.C. 1901 et seq.), the Safe Drinking Water Act (42 U.S.C. 300f et seq.), or the Resources Conservation and Recovery Act (42 U.S.C. 6901 et seq.); or (F) any act or activity constituting an offense involving a Federal health care offense; (8) the term "State" includes a State of the United States, the District of Columbia, and any commonwealth, territory, or possession of the United States; and (9) the term "proceeds" means any property derived from or obtained or retained, directly or indirectly, through some form of unlawful activity, including gross receipts of such activity. (d) Nothing in this section shall supersede any provision of Federal, State, or other law imposing criminal penalties or affording civil remedies in addition to those provided for in this section. (e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of the Department of Homeland Security as the Secretary of Homeland Security may direct, and with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Secretary of Homeland Security, the Postal Service, and the Attorney General. Violations of this section involving offenses described in paragraph (c)(7)(E) may be investigated by such components of the Department of Justice as the Attorney General may direct, and the National Enforcement Investigations Center of the Environmental Protection Agency. (f) There is extraterritorial jurisdiction over the conduct prohibited by this section if— (1) the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States; and (2) the transaction or series of related transactions involves funds or monetary instruments of a value exceeding $10,000. (g) Notice of conviction of financial institutions.—If any financial institution or any officer, director, or employee of any financial institution has been found guilty of an offense under this section, section 1957 or 1960 of this title, or section 5322 or 5324 of title 31, the Attorney General shall provide written notice of such fact to the appropriate regulatory agency for the financial institution. (h) Any person who conspires to commit any offense defined in this section or section 1957 shall be subject to the same penalties as those prescribed for the offense the commission of which was the object of the conspiracy. (i) Venue.—(1) Except as provided in paragraph (2), a prosecution for an offense under this section or section 1957 may be brought in— (A) any district in which the financial or monetary transaction is conducted; or (B) any district where a prosecution for the underlying specified unlawful activity could be brought, if the defendant participated in the transfer of the proceeds of the specified unlawful activity from that district to the district where the financial or monetary transaction is conducted. (2) A prosecution for an attempt or conspiracy offense under this section or section 1957 may be brought in the district where venue would lie for the completed offense under paragraph (1), or in any other district where an act in furtherance of the attempt or conspiracy took place. (3) For purposes of this section, a transfer of funds from 1 place to another, by wire or any other means, shall constitute a single, continuing transaction. Any person who conducts (as that term is defined in subsection (c)(2)) any portion of the transaction may be charged in any district in which the transaction takes place. 18 U.S.C. 1957 . Engaging in monetary transactions in property derived from specified unlawful activity (a) Whoever, in any of the circumstances set forth in subsection (d), knowingly engages or attempts to engage in a monetary transaction in criminally derived property that is of a value greater than $10,000 and is derived from specified unlawful activity, shall be punished as provided in subsection (b). (b)(1) Except as provided in paragraph (2), the punishment for an offense under this section is a fine under title 18, United States Code, or imprisonment for not more than ten years or both. (2) The court may impose an alternate fine to that imposable under paragraph (1) of not more than twice the amount of the criminally derived property involved in the transaction. (c) In a prosecution for an offense under this section, the Government is not required to prove the defendant knew that the offense from which the criminally derived property was derived was specified unlawful activity. (d) The circumstances referred to in subsection (a) are—(1) that the offense under this section takes place in the United States or in the special maritime and territorial jurisdiction of the United States; or (2) that the offense under this section takes place outside the United States and such special jurisdiction, but the defendant is a United States person (as defined in section 3077 of this title, but excluding the class described in paragraph (2)(D) of such section). (e) Violations of this section may be investigated by such components of the Department of Justice as the Attorney General may direct, and by such components of the Department of the Treasury as the Secretary of the Treasury may direct, as appropriate and, with respect to offenses over which the Department of Homeland Security has jurisdiction, by such components of the Department of Homeland Security as the Secretary of Homeland Security may direct, and with respect to offenses over which the United States Postal Service has jurisdiction, by the Postal Service. Such authority of the Secretary of the Treasury, the Secretary of Homeland Security, and the Postal Service shall be exercised in accordance with an agreement which shall be entered into by the Secretary of the Treasury, the Secretary of Homeland Security, the Postal Service, and the Attorney General. (f) As used in this section– (1) the term "monetary transaction" means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term does not include any transaction necessary to preserve a person's right to representation as guaranteed by the sixth amendment to the Constitution; (2) the term "criminally derived property" means any property constituting, or derived from, proceeds obtained from a criminal offense; and (3) the terms "specified unlawful activity" and "proceeds" have the meaning given those terms in section 1956 of this title. 8 U.S.C. 1101(a)(43)(D),(J) (definition of aggravated felony (grounds for deportation of an alien) includes violations of 18 U.S.C. 1956 & 1957 (money laundering) and 18 U.S.C. 1084(interstate transmission of gambling information), 1955 (gambling business), 1962 (RICO)) 8 U.S.C. 1101(f)(4),(5) (no one whose income is derived from gambling and no one with 2 or more gambling convictions can be consider of good moral character)(grounds to deny entry into the U.S.) 8 U.S.C. 1182(a)(2)(D)(iii) (excludable aliens include those coming to the U.S. to engage in commercialized vice)(grounds for denying entry and for deportation of aliens who were excludable at the time of entry) 12 U.S.C. 25a (national banks may not participate in lotteries or related activities) 12 U.S.C. 339 (state member banks (members of Federal Reserve) may not participate in lotteries or related activities) 12 U.S.C. 1463 (federal savings associations may not participate in lotteries or related activities) 12 U.S.C. 1829a (state nonmember but federally insured banks may not participate in lotteries or related activities) 15 U.S.C. 1171 to 1178 (unlawful interstate or international transportation of gambling devices) 15 U.S.C. 3001 to 3007 (Interstate Horseracing Act) 18 U.S.C. 224 (bribery with intent to influence the outcome of a sporting event) 18 U.S.C. 1081 to 1083 (gambling ships) 18 U.S.C. 1084 (interstate or international transmission of wagering information) 18 U.S.C. 1301 (interstate or international transportation of lottery tickets) 18 U.S.C. 1302 (mailing lottery tickets or related matter) 18 U.S.C. 1303 (postal officials acting as lottery agents) 18 U.S.C. 1304 (broadcasting lottery information) 18 U.S.C. 1305 (fishing contests exempted) 18 U.S.C. 1306 (penalties for violating 12 U.S.C. 25a, 339, and 1829a) 18 U.S.C. 1307 (exemptions for state-run lotteries) 18 U.S.C. 1511 (obstructing state or local law enforcement officials to facilitate an illegal gambling business) 18 U.S.C. 1952 (interstate or foreign travel or use of the mails to facilitate illegal activities defined to include business enterprises involving gambling) 18 U.S.C. 1953 (interstate or foreign transportation of wagering paraphernalia) 18 U.S.C. 1955 (engaging in an illegal gambling business) 18 U.S.C. 1956 (money laundering of funds associated with any of a list of predicate offenses which includes), by way of 18 U.S.C. 1961, 18 U.S.C. 1955) 18 U.S.C. 1957 (engaging in financial transactions involving funds derived from any of the crimes in the money laundering predicate list, e.g., 18 U.S.C. 1955) 18 U.S.C. 1959 (violent crimes in aid of racketeering defined to include 18 U.S.C. 1955, again by way of 18 U.S.C. 1961) 18 U.S.C. 1961-1965 (racketeer influenced and corrupt organizations (RICO) prohibits patterned use of predicate crimes to acquire or operate an enterprise affecting interstate or foreign commerce; predicate crime list includes 18 U.S.C. 1955) 19 U.S.C. 1305 (prohibits the importation of lottery tickets or advertisements for lotteries, inter alia) 25 U.S.C. 2701 to 2721 (regulation of Indian gaming) 26 U.S.C. 4401 to 4405 (federal taxes on wagers) 26 U.S.C. 4411 to 4424 (gambling occupation tax) 26 U.S.C. 5723 (tobacco products manufactured in or imported into the U.S. may not include lottery tickets) 28 U.S.C. 3701 to 3704 (protection of professional and amateur sports from gambling) 31 U.S.C. 5361 to 5367 (Unlawful Internet Gambling Enforcement Act) 39 U.S.C. 3005 (restrictions on mailing lottery-related) | This is a summary of the federal criminal statutes implicated by conducting illegal gambling using the Internet. Gambling is primarily a matter of state law, reinforced by federal law in instances where the presence of an interstate or foreign element might otherwise frustrate the enforcement policies of state law. State officials and others have expressed concern that the Internet may be used to bring illegal gambling into their jurisdictions. Illicit Internet gambling implicates at least seven federal criminal statutes. It is a federal crime (1) to conduct an illegal gambling business under the Illegal Gambling Business Act, 18 U.S.C. 1955; (2) to use the telephone or telecommunications to conduct an illegal gambling business involving sporting events or contests under the Wire Act, 18 U.S.C. 1084; (3) to use the facilities of interstate commerce to conduct an illegal gambling business under the Travel Act, 18 U.S.C. 1952; (4) to conduct the activities of an illegal gambling business involving either the collection of an unlawful debt or a pattern of gambling offenses, the Racketeer Influenced and Corrupt Organizations (RICO) provisions, 18 U.S.C. 1962; (5) to launder the proceeds from an illegal gambling business or to plow them back into such a business under money laundering provisions of 18 U.S.C. 1956; (6) to spend more than $10,000 of the proceeds from an illegal gambling operation at any one time and place under the money laundering provisions, 18 U.S.C. 1957; or (7) for a gambling business to accept payment for illegal Internet gambling under the Unlawful Internet Gambling Enforcement Act (UIGEA), 31 U.S.C. 5361-5367. Enforcement of these provisions has been challenged on constitutional grounds. Attacks based on the Commerce Clause, the First Amendment's guarantee of free speech, and the Due Process Clause have enjoyed little success. The commercial nature of a gambling business seems to satisfy doubts under the Commerce Clause. The limited First Amendment protection afforded crime facilitating speech encumbers free speech objections. The due process arguments raised in contemplation of federal prosecution of offshore Internet gambling operations suffer when financial transactions with individuals in the United States are involved. Citations to state and federal gambling laws, and the text of the statutes cited above, are included. This report appears in abridged form, without footnotes, full citations, or supplementary material, as CRS Report RS21984, Internet Gambling: An Abridged Overview of Federal Criminal Law. Related CRS reports include CRS Report RS22749, Unlawful Internet Gambling Enforcement Act (UIGEA) and Its Implementing Regulations, and CRS Report R41614, Remote Gaming and the Gambling Industry. |
E ach year Congress provides funding for a variety of grant programs through the Department of Justice (DOJ). These programs provide support to state, local, and tribal governments and nonprofit organizations for a variety of criminal justice-related purposes, such as combatting violence against women, reducing backlogs of DNA evidence, supporting community policing, assisting crime victims, promoting prisoner reentry, and improving the functioning of the juvenile justice system. Congress funds these programs through five accounts in the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act: Violence Against Women Programs; Research, Evaluation, and Statistics; State and Local Law Enforcement Assistance; Juvenile Justice Programs; and Community Oriented Policing Services. This report provides an overview of congressional actions to fund DOJ's grant programs through these accounts for FY2017. The report also provides information on FY2016 appropriations for DOJ's grant programs. The Office on Violence Against Women (OVW) was established to administer programs created under the Violence Against Women Act (VAWA) of 1994. These programs provide financial and technical assistance to communities around the country to facilitate the creation of programs, policies, and practices designed to improve criminal justice responses related to domestic violence, dating violence, sexual assault, and stalking. The Obama Administration's FY2017 request for OVW was $489 million, 1.9% more than the FY2016 appropriation of $480 million. The Obama Administration also proposed transferring $326 million from the Crime Victims Fund to the OVW. The Obama Administration's FY2017 request was mostly in line with the FY2016 appropriation, but it requested increases for grants to encourage arrests in domestic violence cases and enforce protection orders (+$11 million), civil legal assistance (+$8 million), grants to combat violence on college campuses (+$6 million), grants to combat abuse against the elderly (+$1 million), and grants to strengthen tribal justice systems' response to domestic violence on tribal lands (+$3 million). Additionally, the Obama Administration proposed funding two new initiatives through set-asides from other grant programs: reducing firearm lethality in domestic violence cases and enhancing colleges' and universities' responses to instances of campus sexual assault. Finally, the Obama Administration's request proposed reducing funding for the Service-Training-Officers-Prosecutors (STOP) Formula Grant program by $15 million. In the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ), Congress adopted the Obama Administration's proposal to supplement direct appropriations for OVW with a $326 million transfer from the Crime Victims Fund. However, Congress largely declined to support the rest of the Obama Administration's proposals. The act increased funding for grants to encourage arrests in domestic violence cases and enforce protection orders and grants to strengthen tribal justice systems' response to domestic violence on tribal lands, but not at the level proposed by the Obama Administration. Congress also declined to support the Obama Administration's proposal to reduce funding for STOP grants. For FY2017, Congress funded STOP grants at an amount equal to the FY2016 appropriation. The Office of Justice Programs (OJP) manages and coordinates the National Institute of Justice; Bureau of Justice Statistics; Office of Juvenile Justice and Delinquency Prevention; Office of Victims of Crimes; Bureau of Justice Assistance; Office of Sex Offender Sentencing, Monitoring, Apprehending, Registering, and Tracking; and related grant programs. The Research, Evaluation, and Statistics account (formerly the Justice Assistance account) funds the operations of the Bureau of Justice Statistics and the National Institute of Justice, among other things. The Obama Administration requested $154 million for this account for FY2017, a 32.8% increase over the FY2016 appropriation of $116 million. It requested increases in funding for the Bureau of Justice Statistics (+$17 million) and the National Institute of Justice (+$12 million) along with a $2 million increase for the forensic sciences improvement program. The Administration requested funding for two new initiatives: a clearinghouse for information on evidence-based programs ($3 million) and an incident-based crime statistics program ($10 million). The Administration also proposed funding for research on domestic radicalization under this account rather than the State and Local Law Enforcement Assistance account. Congress provided $89 million for the Research, Evaluation, and Statistics account for FY2017. The decrease in funding for FY2017 (-23.3%) is largely the result of Congress moving funding for the Regional Information Sharing System to the Community Oriented Policing Services account. The State and Local Law Enforcement Assistance account includes funding for a variety of grant programs to improve the functioning of state, local, and tribal criminal justice systems. Some examples of programs that have traditionally been funded under this account include the Edward Byrne Memorial Justice Assistance Grant (JAG) program, the Drug Courts program, the State Criminal Alien Assistance Program (SCAAP), and DNA backlog reduction grant programs. The Obama Administration's FY2017 request for the State and Local Law Enforcement Assistance account was $1.098 billion, which was 22.1% less than the FY2016 appropriation of $1.409 billion. The Administration proposed eliminating funding for the State Criminal Alien Assistance Program (SCAAP, -$210 million); the Paul Coverdell Forensic Sciences Improvement Program (-$14 million); grants to assist trafficking victims (-$45 million); the John R. Justice program, which helps with student loan forgiveness for attorneys in public service (-$2 million); and the tribal assistance program (-$30 million). However, it proposed to fund grants to assist trafficking victims with deposits to the Crime Victims Fund. The Obama Administration also proposed to use 7% of the funding under the State and Local Law Enforcement Assistance, Juvenile Justice Programs, and Research, Evaluation, and Statistics accounts to support tribal justice programs. In addition, it proposed reducing funding for the JAG program (-$93 million, though this is largely the result of eliminating the set-aside for security at the Presidential Nominating Conventions), the National Criminal History Improvement program (-$23 million), and DNA backlog reduction initiatives (-$20 million). While the Obama Administration proposed eliminating or reducing funding for several programs under the State and Local Law Enforcement Assistance account, it has also proposed increasing funding for reentry initiatives authorized under the Second Chance Act (+$32 million), programs for children exposed to violence (+$15 million), grants for residential substance abuse treatment (+$2 million), and programs to assist people with mental illness in the criminal justice system (+$4 million). In addition, the Obama Administration requested funding for several new programs under the State and Local Law Enforcement Assistance account, including $10 million for the Byrne Incentive Grant program, which would have made supplemental grants to JAG program grantees who choose to use a portion of their JAG funding to support programs or initiatives that are evidence-based, or are promising and will be coupled with rigorous evaluation to determine their effectiveness; $15 million for the Byrne Competitive Grant program to implement evidence-based and data-driven strategies on issues of national significance; $20 million for grants and technical assistance to state, local, and tribal courts and juvenile and criminal justice agencies to support efforts to improve the perception of fairness in the juvenile and criminal justice systems and to build community trust; $5 million for the Violence Reduction Network, which would allow cities to develop data-driven, evidence-based strategies to reduce violence by consulting directly with and receiving coordinated training and technical assistance from multiple DOJ components; and $6 million for grants to counter violent extremism. Congress reduced funding for the State and Local Law Enforcement Assistance account by 9.1%, or $128 million, for FY2017. Some of the reduction is due to Congress choosing to fund several programs—Project Safe Neighborhoods, the John R. Justice program, grants for capital litigation improvement and wrongful conviction review, and programs under the Prison Rape Elimination Act—as set-asides from the JAG program instead of funding them as individual line items under the State and Local Law Enforcement Assistance account. Congress also reduced top-line funding for JAG by $73 million. After accounting for set-asides, available funding for the JAG program decreased from $347 million for FY2016 to $335 million for FY2017. The Consolidated Appropriations Act eliminates funding for tribal assistance programs (-$30 million). However, Congress authorized DOJ to use up to 7% of the funding available under the State and Local Law Enforcement Assistance, Juvenile Justice Programs, and Community Oriented Policing Services account, with a few exceptions, for tribal justice assistance programs. Congress also provided $103 million under the State and Local Law Enforcement Assistance account for an opioid initiative. However, most of the funding for this initiative is not new. Rather, funding for the initiative comes from the following programs: Drug Courts ($43 million), Veterans Treatment Courts ($7 million), Residential Substance Abuse Treatment ($14 million), Prescription Drug Monitoring ($14 million), and programs to address individuals with mental illness in the criminal justice system ($12 million). All of these programs were funded through the State and Local Law Enforcement Assistance account in FY2016. In addition, Congress provided $13 million under the opioids initiative for programs authorized by the Comprehensive Addiction and Recovery Act of 2016 ( P.L. 114-198 ). The act directs DOJ to use funding for the programs under the opioid initiative to "address opioid abuse reduction consistent with underlying program authorities." Congress declined to fund any of the new programs proposed by the Obama Administration. The Juvenile Justice Programs account includes funding for grant programs to reduce juvenile delinquency and help state, local, and tribal governments improve the functioning of their juvenile justice systems. For FY2017, the Obama Administration requested $334 million for the Juvenile Justice Programs account, a 23.8% increase over the FY2016 appropriation of $270 million. The Administration's FY2017 request included proposals to increase funding for the Juvenile Justice and Delinquency Prevention Act (JJDPA) Part B formula grants program (+$17 million), Title V grants (+$24.5 million), and the Community-based Violence Prevention Initiative (+$10 million). The Obama Administration also requested that funding be restored to the Juvenile Accountability Block Grants ($30 million), which were eliminated in FY2014. In addition, the Administration requested $20 million for a Smart on Juvenile Justice Initiative, which would have provided supplemental incentive grant awards to foster better outcomes for system-involved youth. Finally, the Obama Administration proposed to reduce funding for youth mentoring grants (-$32 million), investigation and prosecution of child abuse programs (-$9 million), and the missing and exploited children program (-$5 million). Congress appropriated $247 million for the Juvenile Justice Programs account for FY2017, an 8.6% reduction compared to the FY2016 appropriation. Congress reduced funding for some programs under the Juvenile Justice Programs account: JJDPA Part B state formula grants (-$3 million), youth mentoring grants (-$10 million), and Title V grants (-$3 million). Congress also chose to fund the Community-based Violence Prevention Initiative, which was a separate line item in the Juvenile Justice Program account in FY2016, as a set-aside from the Title V grant program. Congress declined to fund any of the new programs proposed by the Obama Administration. The Community Oriented Policing Services (COPS) Office awards grants to state, local, and tribal law enforcement agencies throughout the United States so they can hire new officers, train them in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. The Obama Administration's FY2017 request for COPS was $74 million more than the FY2016 appropriation of $212 million. The Obama Administration requested a $42 million increase in funding for the COPS hiring program. The Administration's request would also have established the Tribal Resources Grant program and training and technical assistance on COPS's collaborative reform model as separate line items in the account rather than as set-asides from the funding for the hiring program. Congress appropriated $222 million for the COPS account for FY2017, a 4.5% increase in funding compared to the FY2016 appropriation. Congress increased funding for the COPS hiring program from $187 million to $195 million, but after set-asides are accounted for, actual funding for the hiring program remained unchanged ($137 million). Congress also provided a $3 million increase in funding for the Anti-heroin Task Forces program. For FY2017, Congress provided funding for the Regional Information Sharing System (RISS) under the COPS account. P.L. 115-31 requires this funding to be transferred to OJP. Congress also set-aside $8 million from the COPS hiring program for the POLICE Act of 2016 ( P.L. 114-199 ). The act allows COPS grants to be used for active shooter training. As a part of its FY2017 budget request for DOJ, the Administration requested $500 million for the 21 st Century Justice Initiative. This proposed initiative would have been a new mandatory program that would have invested $5 billion—$500 million a year for 10 years—in criminal justice reform efforts. The initiative would have used federal funding to promote innovative approaches to reducing both crime and unnecessary incarceration. The program would have focused on achieving three objectives: reducing crime, reversing practices that have led to unnecessarily long sentences and unnecessary incarceration, and building community trust. States would have been able to use this funding to focus on one or more of the following objectives for their adult and juvenile systems: (1) examining and changing state laws and policies that contribute to unnecessarily long sentences and unnecessary incarceration, without sacrificing public safety; (2) promoting critical advancements in community-oriented policing; and (3) providing comprehensive diversion and reentry services. In addition, this initiative would have dedicated 10% of the funding for reform efforts in the federal criminal justice system, including improving skills, education, mental health, addiction, and other recidivism-reduction programming in the Bureau of Prisons. Congress declined to provide funding for this program. | Each year Congress provides funding for a variety of grant programs through the Department of Justice (DOJ). These programs are used to fund state, local, and tribal governments and nonprofit organizations for a variety of criminal justice-related purposes, such as efforts to combat violence against women, reduce backlogs of DNA evidence, support community policing, assist crime victims, promote prisoner reentry, and improve the functioning of the juvenile justice system. Congress funds these programs through five accounts in the annual Commerce, Justice, Science, and Related Agencies (CJS) appropriations act: Violence Against Women Programs; Research, Evaluation, and Statistics; State and Local Law Enforcement Assistance; Juvenile Justice Programs; and Community Oriented Policing Services. For FY2017, the Obama Administration requested a total of $2.361 billion for these five accounts. The Obama Administration's FY2017 request for DOJ's grant accounts included proposals to change the funding levels of several DOJ grant programs. First, the Obama Administration proposed to transfer $326 million from the Crime Victims Fund to the Office on Violence Against Women (OVW). It also proposed to eliminate funding for the State Criminal Alien Assistance Program (-$210 million), and reduce funding for other programs, such as the National Criminal History Improvement program (-$23 million), and DNA backlog reduction initiatives (-$20 million). However, the Obama Administration proposed increases for grants to encourage arrests in domestic violence cases and enforcement of protection orders (+$11 million), grants authorized under the Second Chance Act (+$32 million), and programs for children exposed to violence (+$15 million). It also proposed funding a variety of new programs and initiatives, such as the Byrne Incentive Grant program ($10 million), the Byrne Competitive Grant program ($15 million), and the Violence Reduction Network ($5 million). Finally, it proposed restoring funding to the Juvenile Accountability Block Grant (+$30 million), which was eliminated in FY2014. Congress provided a total of $2.320 billion for DOJ's five grant accounts, an amount that is 6.7% less than the FY2016 appropriation and 1.8% less than the Administration's request. Funding for three of the five grant accounts decreased for FY2017, the exceptions being Violence Against Women Programs (+$2 million) and the Community Oriented Policing Services (+$10 million). However, the increase in funding for the Community Oriented Policing Services account is largely attributable to Congress moving funding for the Regional Information Sharing System from the Research, Evaluation, and Statistics account to the Community Oriented Policing Services account. Congress, by and large, did not support many of the Obama Administration's proposals that would have eliminated funding for particular programs, increased funding for existing programs, or provided funding for new programs. However, Congress did adopt the proposal to supplement direct appropriations for the Office on Violence Against Women with a $326 million transfer from the Crime Victims Fund. |
During the first several months of 2008, a number of lenders curtailed or ceased their participation in the Federal Family Education Loan (FFEL) program, citing reasons that include difficulties in raising capital through the securitization of student loan debt and reductions in lender subsidies enacted under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84 ). Concerns were raised that if lender participation in the FFEL program decreased substantially or if a substantial portion of lenders ceased lending to students who attend certain institutions of higher education, large numbers of students might face difficulty in obtaining FFEL program loans. Concerns were also raised about access to borrowing opportunities for students who have come to rely on private (non-federal) student loans because they have exhausted their eligibility for federal student loans. Legislation pertaining to federal student loans was active in the 110 th Congress. On October 27, 2007, the CCRAA was enacted, which made numerous changes to the federal student loan programs. On April 14, 2008, in response to concerns about the continued availability of FFEL program loans, the House Committee on Education and Labor reported H.R. 5715 ( H.Rept. 110-583 ), the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA). On April 17, 2008, the bill was passed by the House of Representatives. Action on the House bill closely followed introduction of S. 2815 , the Strengthening Student Aid for All Act, in the Senate on April 3, 2008. Both bills would amend the HEA to address concerns about the continued availability of federal student loans. On April 30, 2008, the Senate amended and passed H.R. 5715 ; and on May 1, 2008, the House approved H.R. 5715 , as amended and passed by the Senate. On May 7, H.R. 5715 was enacted as P.L. 110-227 . The ECASLA grants temporary authority to the Secretary of Education (the Secretary), until July 1, 2009, to purchase student loans previously made under the FFEL program. It also makes other changes to the FFEL, William D. Ford Federal Direct Loan (DL), and American Competitiveness Grant programs (discussed below). Later in the 110 th Congress, the Higher Education Opportunity Act (HEOA; P.L. 110-315 ) was enacted to amend, extend, and establish new programs under the Higher Education Act. The HEOA includes several amendments to provisions that had been enacted under the ECASLA. Most recently, the temporary authority of the Secretary of Education to purchase FFEL program loans was extended through July 1, 2010, under P.L. 110-350 . The federal government operates two major student loan programs: the FFEL program, authorized under Title IV, Part B of the Higher Education Act (HEA), and the DL program, authorized under Title IV, Part D of the HEA. These programs make available loans to undergraduate, graduate and professional students, and the parents of undergraduate dependent students, to help them finance the costs of postsecondary education. Together, these programs constitute the largest source of direct aid supporting students' postsecondary educational pursuits. In award year (AY) 2008-2009, it is estimated that these programs will provide $72 billion in new loans to students and their parents. Under the FFEL program, loan capital is provided by private lenders, and the federal government guarantees lenders against loss through borrower default, death, permanent disability, or, in limited instances, bankruptcy. Under the DL program, the federal government provides the loans to students and their families, using federal capital (i.e., funds from the U.S. Treasury). The two programs rely on different sources of capital and different administrative structures, but essentially disburse the same set of loans: Subsidized Stafford Loans and Unsubsidized Stafford Loans for undergraduate, graduate and professional students; PLUS Loans for graduate and professional students and parents of undergraduate dependent students; and Consolidation Loans through which borrowers may combine their federal student loans into a single loan payable over a longer term, which varies according to the combined loan balance. The loans made through the FFEL and DL programs are low-interest loans, with maximum interest rates for each type of loan established by statute. Subsidized Stafford Loans are need-based loans and are only available to students demonstrating financial need. The Secretary pays the interest that accrues on Subsidized Stafford Loans while borrowers are in school, during a six-month grace period, and during authorized periods of deferment. Unsubsidized Stafford Loans and PLUS Loans are non-need-based loans and are available to borrowers without regard to their financial need. Borrowers are fully responsible for paying the interest that accrues on these loans. In the 110 th Congress, bills were introduced in the Senate ( S. 2815 ) and the House ( H.R. 5715 ) to amend the HEA to ensure the continued availability of federal student loans. These bills were designed to address a separate set of issues than bills that had been passed by the Senate ( S. 1642 ) and the House ( H.R. 4137 ) to reauthorize the HEA. In both S. 2815 and H.R. 5715 , a number of amendments would affect loans made under both the FFEL and DL programs, while other amendments would apply only to the FFEL program. As introduced, both S. 2815 and H.R. 5715 would have amended the HEA to increase borrowing limits for Unsubsidized Stafford Loans; delay the start of repayment for parent borrowers of PLUS Loans; update procedures for ensuring the availability of lender-of-last-resort (LLR) loans under the FFEL program; and authorize the Secretary to purchase loans previously made under the FFEL program. S. 2815 would have also amended the HEA to establish a negative expected family contribution (EFC) for use in need analysis, a change intended to broaden student eligibility for need-based federal student aid. In contrast, H.R. 5715 , as introduced in the House, contained language to amend the HEA to extend eligibility to borrow PLUS Loans, under extenuating circumstances, to individuals with adverse credit, if their adverse credit was the result of being no more than 180 days delinquent on home mortgage payments. Finally, H.R. 5715 also expressed a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans. On May 7, 2008, H.R. 5715 , the Ensuring Continued Access to Student Loans Act of 2008, was enacted as P.L. 110-227 . It amends the HEA by increasing annual and aggregate borrowing limits for Unsubsidized Stafford Loans to undergraduate students; delaying the start of repayment for parent borrowers of PLUS Loans; extending eligibility for individuals with adverse credit to borrow PLUS Loans, under extenuating circumstances; revising procedures for ensuring the availability of lender-of-last-resort (LLR) loans under the FFEL program; temporarily authorizing the Secretary to purchase loans previously made under the FFEL program at no net cost to the federal government; and expanding eligibility for aid provided through American Competitiveness (AC) Grants and Science and Mathematics Access to Retain Talent (SMART) Grants. The Ensuring Continued Access to Student Loans Act of 2008 also expresses a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans for students and their families; and that any action taken by these entities should not limit the Secretary's authority with regard to the LLR program, nor the Secretary's authority to purchase loans previously made under the FFEL program. The ECASLA also requires the Government Accountability Office (GAO) to evaluate the impact that increases in federal student loan limits may have on tuition, fees, room and board, and on the borrowing of private (non-federal) student loans. The remainder of this report provides a brief overview of amendments made to the HEA under the Ensuring Continued Access to Student Loans Act of 2008 to address the continued availability of access to federal student loans. The report also identifies instances in which ECASLA amendments were further amended by other laws (e.g., the HEOA). The amounts students may borrow in need-based Subsidized Stafford Loans and non-need-based Unsubsidized Stafford Loans are constrained by statutory loan limits. One set of limits applies to the annual and aggregate amounts students may borrow in Subsidized Stafford Loans. Another set of limits applies to the total annual and aggregate amounts students my borrow in combined Subsidized Stafford Loans and Unsubsidized Stafford Loans (hereafter, referred to as total Stafford Loans). The terms and conditions for Subsidized Stafford Loans are more favorable to students than for Unsubsidized Stafford Loans. As a form of need-based aid, the eligibility of students to borrow Subsidized Stafford Loans is contingent on their demonstrating financial need. In contrast, students may qualify to borrow Unsubsidized Stafford Loans without regard to their financial need. Both annual and aggregate loan limits vary by student dependency status and educational level. In any year, a student may borrow Subsidized Stafford Loans in amounts up to the lesser of (a) the applicable annual Subsidized Stafford Loan limits, or (b) the student's unmet financial need. In any year, a student may borrow total Stafford Loans in amounts up to the lesser of (a) the applicable annual total Stafford Loan limits, or (b) the amount remaining after subtracting other financial assistance the student is expected to receive, from the cost of attendance (COA) at the school the student attends. Aggregate loan limits constrain the amounts students may borrow in Subsidized Stafford Loans and total Stafford Loans, overall. Until the enactment of the ECASLA, the same annual Subsidized Stafford Loan limits and total Stafford Loan limits applied to dependent undergraduate students for each comparable educational level. However, annual total Stafford Loan limits that were higher than annual Subsidized Stafford Loan limits applied to independent undergraduate students, graduate and professional students, and dependent undergraduate students whose parents are unable to obtain PLUS Loans, for each comparable educational level. In most instances, loan limits were established by statute; however, aggregate total Stafford Loan limits for independent undergraduate students, graduate students and professional students had been set by the Secretary according to regulation. The ECASLA amended annual and aggregate borrowing limits for total Stafford Loans for dependent undergraduate students, independent undergraduate students, and dependent undergraduate students whose parents are unable to obtain a PLUS Loan, effective for loans first disbursed on or after July 1, 2008. Technical changes to these amended loan limits were made under the HEOA. Amended loan limits are presented in Table 1 . In general, effective July 1, 2008, annual total Stafford Loan limits were increased by $2,000 above previously applicable loan limits for undergraduate students enrolled in degree or certificate programs. With this change, annual total Stafford Loan limits were for the first time made greater than the corresponding annual Subsidized Stafford Loan limits for dependent undergraduate students enrolled in degree or certificate programs. Annual total Stafford Loan limits were also increased by $2,000 for independent undergraduate students enrolled in a preparatory coursework necessary for enrollment in an undergraduate degree or certificate program. Effective July 1, 2008, aggregate total Stafford Loan limits for undergraduate dependent students were increased by $8,000, from $23,000 to $31,000. For independent undergraduate students, and dependent undergraduate students whose parents are unable to obtain a PLUS Loan, the ECASLA established a statutory aggregate total Stafford Loan limit of $57,500, which is an increase of $11,500 above the previously applicable limit of $46,000, which had been specified by regulation. Finally, the ECASLA requires the Comptroller General to conduct a five-year study to evaluate the impact of increases in federal student loan limits on prices for tuition, fees, room and board; and on the borrowing of private (non-federal) student loans. Interim and follow-up reports on results of the study must be provided to the House Committee on Education and Labor and the Senate Committee on Health, Education, Labor, and Pensions. Prior to the enactment of the ECASLA, PLUS Loans made to parents, graduate students, and professional students entered repayment upon the loan being fully disbursed, with repayment commencing within 60 days. (In contrast, Stafford Loans enter repayment the day after six months following the borrower ceasing to be enrolled in school on at least a half-time basis, with the first payment being due within the next 60 days.) Nonetheless, borrowers of PLUS Loans have been eligible to defer repayment of their loans for a variety of reasons, to include while they are enrolled in school. However, deferments have not been available to parent borrowers of PLUS Loans for the period while the dependent student on whose behalf the loan was made is enrolled in school. The ECASLA amended the HEA to permit borrowers of parent PLUS Loans to extend the period between disbursement and the commencement of repayment. Effective July 1, 2008, parent borrowers of PLUS Loans were granted the option of delaying the commencement of repayment until six months after the date the dependent student on whose behalf the PLUS Loan was made ceases to carry at least a half-time workload. (In accordance with this amendment, deferments would remain available only during periods when the borrower, as opposed to the student on whose behalf the loan was made, meets the conditions required to qualify.) Under the HEOA, the terms and conditions of PLUS Loans were further amended to permit parent borrowers to request a deferment for any period during which the student on whose behalf the loan was borrowed would qualify for a deferment. This change applies to loans for which the first disbursement is made on or after July 1, 2008. Interest begins accruing on PLUS Loans when the loan is first disbursed. Parent borrowers who delay the commencement of repayment have the option of paying the interest as it accrues or having accrued interest capitalized (i.e., added to the principal balance of the loan) no more frequently than quarterly. Failure to pay the interest as it accrues may increase the principal balance of a loan above the amount initially borrowed. To be eligible to borrow PLUS Loans, individuals may not have an adverse credit history, as determined pursuant to regulations promulgated by the Department of Education (ED). Under regulations promulgated by ED prior to the enactment of the ECASLA, lenders were required to obtain at least one credit report on all applicants for PLUS Loans; and unless extenuating circumstances existed, lenders were required to consider an applicant to have an adverse credit history if the applicant was 90 days or more delinquent on a debt payment; or if, within the past five years, the applicant "has been the subject of a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt." Regulations have also required lenders to retain a record of the basis for determining that extenuating circumstances existed for any borrower, such as an updated credit report, or documentation from the creditor that the borrower has made satisfactory arrangements to repay the debt. The ECASLA amended the HEA to specify certain extenuating circumstances under which eligible lenders may extend PLUS Loans to individuals who otherwise would have been determined to have adverse credit histories. This amendment permitted eligible lenders to determine that extenuating circumstances existed, if during the period from January 1, 2007, through December 31, 2009, an applicant was no more than 180 days delinquent on mortgage payments for a primary residence or medical bill payments; or if an applicant was no more than 89 days delinquent on any other debt payments. The HEOA further amended this provision, effective July 1, 2008, to specify that extenuating circumstances exist only if an applicant is no more than 180 days delinquent on mortgage payments for a primary residence or medical bills. Eligible borrowers have long been regarded as having an entitlement to obtain Stafford Loans; although they have not been regarded as having an entitlement to borrow PLUS Loans due to the requirement to be credit-worthy. State guaranty agencies must establish lender-of-last-resort programs through which loans must be made available to eligible students who are otherwise unable to obtain them from an eligible lender. In general, students become eligible to borrow LLR loans upon their receipt of no more than two rejected loan applications from eligible lenders. Students applying for LLR loans must not be subject to any additional eligibility requirements beyond what is otherwise required under the FFEL program and must receive a response from the LLR lender within 60 days of filing an application. A guaranty agency may designate an eligible lender as an LLR lender; or the guaranty agency itself may function as the lender-of-last-resort. An eligible lender serving as an LLR lender makes loans in the same manner it makes other FFEL program loans, using private capital. As an incentive for lenders to make LLR loans, the lender insurance percentage in the case of borrower default is 100% on LLR loans, as opposed to 97% in the case of other loans. A guaranty agency serving as an LLR lender may also make LLR loans using its available funds. If a guaranty agency becomes unable to ensure that LLR loans are made available to eligible students—either by an LLR lender, or by making the loans itself—the HEA provides the Secretary with authority to take a range of actions to restore the availability of LLR loans. Prior to the enactment of the ECASLA, the HEA authorized the Secretary to make emergency advances of federal funds to guaranty agencies for purposes of making available LLR loans, if the Secretary determined that (a) borrowers eligible for Subsidized Stafford Loans were unable to obtain such loans; (b) that the guaranty agency had the capability to provide LLR loans, but could not do so without an advance of federal capital; and (c) that it would be cost-effective to advance such funds. The HEA also specified that the Secretary was authorized to make emergency advances of federal capital funds to another guaranty agency for purposes of making LLR loans, if the Secretary determined that the designated guaranty agency for a state did not have the capacity to make available LLR loans. However, while the statute authorized the Secretary to advance funds to guaranty agencies for purposes of making LLR loans, it did not clearly provide, nor identify, a source of funds for the Secretary to draw upon to make such advances. This ambiguity in the statute led to deliberation over the extent of the Secretary's authority to advance funds to guaranty agencies for purposes of making LLR loans. Under the ECASLA, several amendments were made to the LLR program. These are briefly described below. Previously, the HEA specified that guaranty agencies had an obligation to ensure that LLR loans would be made available to students eligible to borrow Subsidized Stafford Loans, but who were unable to obtain them. In accordance with Department of Education regulations implementing the LLR program, a lender-of-last-resort would be required to make Subsidized Stafford Loans and Unsubsidized Stafford Loans available to students eligible to receive Subsidized Stafford Loans; and would be permitted to make Unsubsidized Stafford Loans and PLUS Loans available to other eligible borrowers. Under the ECASLA, the LLR program is amended to require guaranty agencies to make LLR loans available to students and parents who are eligible for, but unable to obtain, Subsidized Stafford Loans, Unsubsidized Stafford Loans, or PLUS Loans; or who attend an institution designated for institution-wide student qualification for LLR loans (described below). As noted above, under prior law, individual students became eligible to borrow LLR loans upon the receipt of two rejected loan applications. The ECASLA amended the LLR program to temporarily authorize the Secretary, through June 30, 2009, to also designate institutions for institution-wide participation in the LLR program, at an institution's request. P.L. 110-350 further extends this authority through June 30, 2010. In order to designate an IHE for institution-wide participation, the Secretary may require an IHE to demonstrate that, despite due diligence, it has been unable to secure the commitment of FFEL program lenders to make loans to students attending the institution; demonstrate that the number or percentage of students attending the institution who are unable to obtain FFEL program loans exceeds a minimum threshold; and meet other requirements as determined appropriate by the Secretary. Institution-wide student qualification makes all students who attend the institution, and the parents of dependent students who attend the institution, eligible to borrow LLR loans. In implementing this provision, ED is requiring institutions seeking designation for institution-wide student qualification for LLR loans to demonstrate that, through coordination with the guaranty agency designated for its state, the institution has made a minimum of three attempts to find eligible lenders willing to make conventional (non-LLR) FFEL program loans and that at least 80% of the students and parents of students at the institution have been unable to obtain conventional FFEL program loans. Institutions must provide documentation of this information to the guaranty agency. The guaranty agency will then forward this information, along with its opinion of the institution's eligibility, to ED, which will make a final determination. Statutory and regulatory provisions of the FFEL program establish the maximum interest rates and fees that may be paid by borrowers. Lenders in the FFEL program have often competed for borrowers by offering different packages of interest rate and fee discounts. To attract borrowers, lenders may pay origination fees or default fees without passing on the cost to students. Similarly, to attract loan business, guaranty agencies may opt to pay the default fee. In accordance with the ECASLA amendments, LLR lenders are prohibited from offering any borrower benefits on LLR loans (e.g., waiving or reducing origination or default fees, or reducing interest rates) that are more favorable to borrowers than the maximum interest rates, origination fees and default fees, and other terms and conditions applicable to FFEL program loans. Certain special requirements apply to guaranty agencies with respect to the operation of LLR program. Among these, guaranty agencies must ensure that information about the availability of LLR loans is provided to institutions of higher education in the states the guaranty agency serves. Also, under the LLR program, guaranty agencies are exempted from the otherwise applicable prohibition against providing inducements to FFEL program lenders to secure the designation of the guaranty agency as the insurer of its loans. The amendments to the LLR program enacted under the ECASLA make guaranty agencies and lenders subject to the prohibitions on inducements specified in the HEA at §§ 428(b)(3) and 435(d)(5), respectively. The amendments also prohibit guaranty agencies and lenders that operate as lenders-of-last-resort from advertising, marketing or promoting LLR loans, other than the provision of required information about LLR loans, to IHEs. The ECASLA also requires the Secretary to review the Department's regulations on prohibited inducements by guaranty agencies to lenders; and, as necessary, to revise them to ensure that guaranty agencies do not engage in improper inducements with respect to the operation of the LLR program. The review was required to be completed within 90 days of enactment; and a report provided to House Committee on Education and Labor, and the Senate Committee on Health, Education, Labor, and Pensions within 180 days of enactment. As noted above, previously the Secretary was required to determine that certain conditions are met prior to advancing funds to guaranty agencies for purposes of making LLR loans. Under the ECASLA, provisions of the LLR program were revised to specify that the Secretary may advance funds to guaranty agencies for making LLR loans if (a) eligible borrowers are unable to obtain Subsidized Stafford Loans, Unsubsidized Stafford Loans, or PLUS Loans under the FFEL program, or an IHE has been designated for institution-wide qualification for LLR loans; (b) that the guaranty agency has the capability to provide LLR loans, but cannot do so without an advance of federal capital; and (c) that it would be cost-effective to advance such funds. Effective with enactment of the ECASLA, mandatory appropriations are provided for the Secretary to make emergency advances of federal funds to guaranty agencies for purposes of making loans as lenders-of-last-resort. The ECASLA amends the HEA to grant the Secretary temporary authority to purchase loans previously made under the FFEL program. The DL program is amended to authorize funding for the Secretary, in consultation with the Secretary of the Treasury, to purchase, or enter into forward commitments to purchase, Subsidized Stafford Loans, Unsubsidized Stafford Loans, and PLUS Loans (but not Consolidation Loans) first disbursed on or after October 1, 2003, and before July 1, 2009, upon arriving at a determination that there is an inadequate availability of capital to meet demand for new loans. P.L. 110-350 extends this temporary authority to apply to loans disbursed on or after October 1, 2003, and before July 1, 2010. The Secretary may purchase loans only if doing so is determined to be in the best interest of the United States. In addition, the purchase of FFEL program loans, and the cost of servicing such loans, must be determined jointly by the Secretaries of Education and the Treasury, and the Director of the Office of Management and Budget (OMB) to result in no net cost to the federal government. The Secretaries of Education and the Treasury, and the Director of OMB are required to jointly publish a notice in the Federal Register that establishes the terms and conditions for purchasing FFEL program loans, that outlines the methodology and factors considered in determining the purchase price of loans, and that describes how loans will be purchased at a price that will result in no net cost to the government. The HEOA further amends the terms of purchase to specify that upon the purchase of loans by the Secretary, guaranty agencies shall cease to have any obligations, responsibilities or rights with respect to such loans, and the federal guarantee shall cease to be in effect with respect to defaults that occur on such loans after the date of purchase. Lenders selling loans to the Secretary must use the proceeds from the sale to ensure their continued participation as lenders under the FFEL program and to originate new FFEL program loans. The Secretary may also enter into a contract with lenders to continue servicing loans purchased, if the cost of doing so would not exceed the cost to the government of otherwise servicing the loans, and if it is determined to be in the best interest of borrowers. On May 21, 2008, the Secretary of Education issued a "Dear Colleague" letter briefly outlining the Secretary's initial plans to implement the authority granted under the ECASLA to purchase loans made under the FFEL program. The Secretary initially identified two options. Under the first option, the Loan Purchase Commitment program, ED would enter into agreements by July 1, 2009, to purchase FFEL program loans originated for the 2008-2009 academic year. ED would purchase loans "at a price equal to the sum of (i) par value, (ii) accrued interest (net of Special Allowance Payments), (iii) the 1% origination fee paid to the Department, and (iv) a fixed amount of $75 per loan (used to defray the lender's estimated administrative costs)." Lenders entering into agreements with ED for the purchase of their loans would have until September 30, 2009, to complete the sale. Upon completion of the sale of loans, ED would obtain control over loan servicing. This option has also come to be referred to as the Loan Purchase ("Put") program. Under the second option, the Loan Participation Purchase program, ED would purchase "participation interests" in short-term trusts comprised of pools of FFEL program loans originated for the 2008-2009 academic year. The price of participation interests would be established at an amount determined to provide ED a yield equal to the commercial paper rate plus 50 basis points. ED would hold participation interests in short-term trusts of FFEL program loans until September 30, 2009, at the latest. Afterwards, trusts could refinance the loans in the private market, or sell the loans to ED under the first option. This option has also come to be referred to as the Purchase of Participation Interests (PPI) program. On July 1, 2008, the Department of Education, the Department of the Treasury, and OMB published a notice in the Federal Register outlining the terms and conditions of the Department's authority to purchase loans under the ECASLA. This notice presents summaries of the terms and conditions of the Loan Purchase Commitment program and the Loan Participation Purchase program as well as an explanation of the methodology used to determine that the programs will result in no net cost to the government. On November 10, 2008, the Secretary announced the continuation of the Put and PPI programs for the 2009-2010 academic year. Also on November 10, 2008, the Secretary announced plans to establish a program making all fully disbursed FFEL program loans made for the period between October 1, 2003, and July 1, 2009 (other than Consolidation Loans), eligible for transfer to Asset-Backed Commercial Paper (ABCP) Conduits. Under the ABCP Conduit program, an eligible lender trustee would create a pool of loans, called a conduit, into which other lenders would transfer ownership of their loans. Commercial paper, backed by the loans in the pool, would then be sold to private investors and the proceeds of the sale would be used to repay the lenders that had transferred their loans to the conduit. In order to ensure liquidity to the purchasers of the student loan ABCP, the Department of Education would enter into a forward purchase commitment, or "Put" option, with the eligible lender trustees that create ABCP Conduits. By entering into a forward purchase commitment, the Department would promise to purchase student loans held in the ABCP Conduit at a future date for a pre-arranged price. The terms and conditions, and pricing structure for the ABCP Conduit program are forthcoming and will be published by the Department in the Federal Register . On November 18, 2008, as an additional measure to assist in ensuring the continued availability of student loans, the Secretary announced the short-term extension of the Loan Purchase ("Put") program to loans made for the 2007-2008 academic year. Under the program, the Department will purchase certain fully disbursed FFEL program loans (other than Consolidation Loans) made for the 2007-2008 academic year. Details of the extension of the Loan Purchase program will be published in the Federal Register ; however, in general, the Department will purchase these loans for 97% of the amount of principal and interest owed by the borrower. The Department intends to purchase up to $500 million in eligible loans made for the 2007-2008 academic year each week until the earlier of the implementation of the ABCP Conduit, or February 28, 2009. The ECASLA expresses a sense of Congress that institutions such as the Federal Financing Bank, the Federal Reserve, and Federal Home Loan Banks, in consultation with the Secretaries of Education and the Treasury, should consider using available authorities to assist in ensuring continued access to federal student loans. It also states that any action taken by such entities should not limit nor delay the Secretary's authority to implement the LLR program or the authority to purchase loans previously made under the FFEL program. The ECASLA requires all savings generated by the act to be used for Academic Competitiveness Grants, which are provided to students who are eligible for Pell Grants and who meet certain academic requirements. These grants, first established by the Deficit Reduction Act of 2005 ( P.L. 109-171 ), are comprised of two award types: Academic Competitiveness (AC) Grants for first- and second- year undergraduates who have completed a rigorous secondary school program; and SMART Grants for third- and fourth- year undergraduates majoring in certain fields of science, mathematics, or a critical foreign language. Effective July 1, 2009, the AC Grant and SMART Grant programs are amended to expand eligibility. For both programs, students will no longer be required to be United States citizens as a condition for eligibility. Also, students enrolled at least half-time will become eligible for both AC Grants and SMART Grants. (Prior to July 1, 2009, students must be enrolled full-time). For both programs, grants will be required to be awarded in the same manner as Pell Grants, and eligibility for awards will be based on a student's grade level as opposed to academic year. The ECASLA amendments authorize AC Grants to be awarded to students enrolled in certificate programs at two-year and four-year degree-granting institutions. They also clarify eligibility requirements for awarding first-year AC Grants to students who attended private secondary schools or were home-schooled, as well as those who obtained college credit while in high school. The amendments make students eligible to receive SMART Grants for the fifth year of enrollment in five-year undergraduate programs. Finally, the amendments extend eligibility for SMART Grants to students who attend institutions that offer a single liberal arts curriculum leading to a baccalaureate degree under which students are not permitted by the institution to declare a major in a particular subject area, if their coursework and grade point average meet certain criteria. | Federal student loans are made available under two major loan programs authorized under the Higher Education Act (HEA) of 1965, as amended: the Federal Family Education Loan (FFEL) program, authorized by Title IV, Part B, of the HEA; and the William D. Ford Federal Direct Loan (DL) program, authorized by Title IV, Part D, of the HEA. Under the FFEL program, private lenders make loans and the federal government guarantees lenders against loss due to borrower default, death, permanent disability, or, in limited instances, bankruptcy. Under the DL program, the federal government lends directly to students and their families, using federal capital (i.e., funds from the U.S. Treasury). The FFEL program is the successor program to the guaranteed student loan (GSL) program, originally enacted under Title IV, Part B, of the HEA. It is the older and larger of the two major federal student loan programs. During the first several months of 2008, a number of FFEL program lenders curtailed or ceased their participation in the FFEL program, citing reasons that include difficulties in raising capital through the securitization of student loan debt and reductions in lender subsidies enacted under the College Cost Reduction and Access Act of 2007 (CCRAA; P.L. 110-84). Concerns were raised that if lender participation in the FFEL program decreased substantially or if a substantial portion of lenders ceased lending to students who attend certain institutions of higher education (IHEs), large numbers of students might face difficulty in obtaining FFEL program loans. In addition, concerns were raised about access to borrowing opportunities for students who have come to rely on private (non-federal) student loans because they had exhausted their eligibility for federal student loans. Legislation pertaining to federal student loans was active in the 110th Congress. On October 27, 2007, the CCRAA was enacted, which made numerous changes to the federal student loan programs. On May 6, 2008, H.R. 5715, the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA; P.L. 110-227) was enacted to grant the Secretary of Education temporary authority, through July 1, 2009, to purchase student loans made under the FFEL program and to make other programmatic changes. On August 14, 2008, the HEA was amended and extended under the Higher Education Opportunity Act (HEOA; P.L. 110-315). The HEOA amended certain provisions that had been enacted under the ECASLA. The temporary authority of the Secretary of Education to purchase FFEL program loans was extended through July 1, 2010, under P.L. 110-350. The Secretary of Education has established several loan purchase programs under the authority granted by the ECASLA, as amended. This report reviews changes to the federal student loan programs initiated under the ECASLA to address concerns about the continued availability of federal student loans. It will be updated as warranted. |
The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs to enhance small business access to capital; contracting programs to increase small business opportunities in federal contracting; direct loan programs for businesses, homeowners, and renters to assist their recovery from natural disasters; and small business management and technical assistance training programs to assist business formation and expansion. Congressional interest in the SBA's programs has increased in recent years, primarily because they are viewed as a means to stimulate economic activity and create jobs. This report opens with an assessment of the economic research on net job creation (employment gains related to business startups and expansions minus employment losses related to business deaths and contractions) to identify the types of businesses that appear to create the most jobs. That research suggests that business startups play an important role in job creation, but have a more limited effect on net job creation over time because about one-third of all startups close by their second year of existence and fewer than half of all startups are still in business after five years. However, the influence of small business startups on net job creation varies by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job creation over time whereas startups with 20-499 employees tend to have a positive employment effect, as do surviving younger businesses of all sizes (in operation for one year to five years). This information's possible implications for Congress and the SBA are then examined. For example, since its formation one of the SBA's primary goals has been to promote business competition within the various industrial classifications as a means to deter monopoly and oligarchy formation within those industries. As part of that effort, the SBA provides assistance to all qualifying businesses that meet its size standards. About 97% of all business concerns currently meet the SBA's eligibility criteria. Given congressional interest in job creation, this report examines the potential consequences of targeting SBA assistance to a narrower group, small businesses that are the most likely to create and retain the most jobs. In addition, the Government Accountability Office (GAO) has argued that the SBA's program performance measures provide limited information about the impact of its programs on participating small businesses because those measures focus primarily on output, such as the number of loans approved and funded, rather than outcomes, such as how well the small businesses do after receiving SBA assistance. Given congressional interest in job creation, this report examines the potential consequences of adding net job creation as a SBA program performance measure. This report also examines the arguments for providing federal assistance to small businesses, noting that policymakers often view job creation as a justification for such assistance whereas economists argue that over the long term federal assistance to small businesses is likely to reallocate jobs within the economy, not increase them. Nonetheless, most economists support federal assistance to small businesses for other purposes, such as a means to correct a perceived market failure related to the disadvantages small businesses experience when attempting to access capital and credit. The following sections provide an assessment of employment dynamics in the United States, starting with the latest economic data available from the U.S. Bureau of the Census concerning the number and employment of small and large enterprises, establishments, and firms (small is defined here as having fewer than 500 employees and large as having 500 or more employees). This is followed by an assessment of job gains and losses (sometimes referred to as "churning") by small and large establishments (including opening/startup establishments) using data available from the U.S. Department of Labor's Bureau of Labor Statistics (BLS). Assessments of employment dynamics usually examine the employment decisions of establishments, firms, and/or enterprises. An establishment "is a single physical location where one predominant activity occurs." A firm "is an establishment or a combination of establishments" and is often "defined by its unique Employer Identification number (EIN) issued by the Internal Revenue Service (IRS)." An enterprise "is a firm or a combination of firms that engages in economic activities which are classified into multiple industries. An enterprise may report under one or a number of EINs." Each of these units of analysis provide information that is useful for understanding employment dynamics. As the BLS explains: The perception is that multiunit businesses act as a whole rather than as a collection of individual establishments. On the one hand, it could be that larger multiunit businesses make more unified decisions to control hiring, close a plant or store, or lay off workers during economic downturns. This argument supports the use of a higher level of aggregation than the establishment level. On the other hand, businesses might make such decisions on the basis of each establishment's profitability, product line, and longer term prospects for contributions to the overall business. Why restrict hiring at a fully profitable and growing location when other locations are suffering from insufficient demand? In this case, the firm may act more like a set of individual establishments rather than a unified set of establishments. Generally speaking, "the net employment change remains the same for all levels of aggregation, but the magnitude of gross job flows varies with the unit of analysis chosen." There is "a higher level of churning when job flows are estimated at a lower level of aggregation (the establishment)" and a lower level of churning "at a higher level of aggregation (the enterprise or firm) [because] expansions in some units offset contractions in other units, leaving job flows at a lesser magnitude." In 2016 (the most recent available data), there were nearly 7.76 million employer establishments, over 24.81 million non-employer (self-employed) establishments, and over 5.95 million employer firms. As shown in Table 1 , small employer enterprises (fewer than 500 employees) provided almost half (47.3%) of all jobs in 2016. As shown in Table 2 , from 2010 to 2018, opening/startup establishments (establishments with positive employment in March of the current year following zero employment in March of the previous year) have accounted for just under 30% of all employment gains (new jobs) in the United States each year since 2011. By definition, opening/startup establishments do not affect employment losses, which result from establishments contracting or closing. As shown in Table 3 , from 2010 to 2018, small establishments (establishments with average employment of fewer than 500 employees from March of the current year to March of the previous year) have accounted for about two-thirds of net employment gains in the United States each year since 2011. As shown in Table 4 , from 2010 to 2018, large establishments (establishments with an average employment of 500 employees or more from March of the current year to March of the previous year) have accounted for just under 30% of all employment gains (new jobs) in the United States each year since 2011. Until recently, the prevailing view among economists was that although small businesses, defined as firms with fewer than 500 employees, and large businesses "provide roughly equivalent shares of jobs, the major part of job generation and destruction takes place in the small firm sector, and small firms provide the greater share of net new jobs." For example, in 2010, a SBA study found that over the previous 15 years small businesses accounted for about 65% of private-sector net job creation. Also, as shown in Table 3 , small businesses have continued to account for about two-thirds of net new jobs since 2010. However, as the availability of data concerning the life cycle of firms and establishments has improved, and the number of studies examining the relationship between job creation and business size has increased, the prevailing view that small businesses, as a whole, are responsible for the majority of net job creation has been challenged. For example, some researchers have found considerable variation in the role of small businesses in net job creation across different time periods. In some time intervals, small businesses accounted for virtually all job growth and in others they accounted for about the same proportion of new jobs as their share of existing jobs. Some researchers have also argued that the role of small businesses in net job creation is overstated because most new jobs are created by new businesses and most new businesses (startups) are small because the resources needed to launch larger businesses are relatively difficult to obtain. They argue that many startups (defined as businesses in operation for less than a year), and the jobs they create, disappear within a few years. For example, several studies have found that about 20% of all startups close in their first year, one-third close within two years, and fewer than half of all startups are still in business after five years. Another study, an analysis of job creation in the United States from 1994 to 2006, found that startups with fewer than 20 employees had "a strong positive initial effect" on employment growth in the year the business was formed, but that positive employment effect decreased over time and was negligible after six years. However, that study also found that startups with 20-499 employees had a positive employment effect that increases after its first year in operation, reaches a maximum after five years, and then moderates. The positive employment effect from these firms continued to remain positive over the entire time period studied (1994-2006). The authors asserted that these larger small businesses were "able to increase their level of productivity sooner after entry" than startups with fewer than 20 employees "due to their size and preconditions," such as better access to capital, and, as a result, were in a better position to "challenge existing firms and increase the competitiveness of surviving existing firms." The study's authors argued that their findings suggest that the age of a business is a more important factor in understanding business employment dynamics than the size of a business: Our findings emphasize the critical role played by startups in U.S. employment growth dynamics. We document a rich "up or out" dynamic of young firms in the U.S. That is, conditional on survival, young firms grow more rapidly than their more mature counterparts. However, young firms have a much higher likelihood of exit so that the job destruction from exit is also disproportionately high among young firms. More generally, young firms are more volatile and exhibit higher rates of gross job creation and destruction…. Understanding the process of job creation by private sector businesses requires understanding this dynamic. Policies that favor various simply defined classes of businesses (e.g., by size) and ignore this fundamental dynamic will likely have limited success. A 2012 study using U.S. Census Bureau employment data from 1998 to 2011 also found that the age of a business is a more important factor in understanding business employment dynamics than the size of a business. The study's authors found that young firms, defined as firms in their first two years of existence, have higher job creation and job destruction rates than older firms, higher rates of net job creation than older firms, and exhibit significantly higher worker churning (job switching) than older firms. In sum, the prevailing view of the economic literature concerning startups is that they have a significant role in job creation because, by definition, they add jobs to the economy in their founding year and, for the most part, are not old enough to eliminate them yet. However, the positive effect of startups on net job creation diminishes over time because "most businesses start small, stay small, and close just a few years after opening." Several economic studies have argued that in any given year nearly all net job creation in the United States since 1980 has occurred in businesses that are less than five years old. This would seem to suggest that if the SBA were to target its resources to promote net job creation that it would consider targeting those resources to small businesses that are less than five years old. However, other studies have found that startups account for nearly all of the positive employment effect of businesses that are less than five years old in any given year and, as mentioned previously, the positive employment effect of startups diminishes over time. For example, one study found that, in 2005, nearly all net job creation in that year came from businesses that were less than six years old. However, when the employment effect of startups was separated from the employment effect of businesses in operation for one to five years, startups accounted for nearly all of that year's net job creation and relatively young businesses (in operation for one year to five years) accounted for most of that year's job losses. Another study found that startups accounted for a significant number of new jobs, but that "the bulk of job flows take place in existing firms' expansions and contractions." The study also found that continuing firms accounted for 69% of the net jobs created from 1993 to mid-2008 and firm turnover (firm births minus deaths) accounted for 31% of the net jobs created over that time period. A 2010 study examined the employment effect of employer firms from 1977 to 2005 as they aged from birth to year five. The study found that, overall, relatively young businesses (in operation for one year to five years) are net job destroyers, but that the net job creation among surviving firms over the first five years of their existence was able to partially balance out the jobs lost by failed and shrinking businesses that started in the same year that they did. The study found that although about half of all firms fail within five years "when a given cohort of startups reaches age five, their employment level is 80% of what it was when it began." The authors argued that their findings suggest that "it is true that new startups matter" in net job creation even though "many firms fail in their first few years," but that "if we are looking for employment that lasts" it is the surviving startups that "are vital." Another study examined the shares of net job creation, in 2007, from businesses of different ages in an attempt to isolate the contribution of businesses that have survived for at least one year. The study found that net job creation, in 2007, came primarily from three sources: startups, surviving young businesses (in operation for one to five years), and the oldest (and largest) surviving businesses (in operation for more than 28 years). They found relatively little net job creation, in 2007, from businesses that were in operation for at least 6 years but less than 28 years. The authors called this a "barbell effect, with job creation occurring at the youngest and oldest ends of the firm age spectrum, and mostly flat in between." The authors noted that they were unable to break out the effects of mergers and acquisitions on their findings, but that they suspected the net addition of jobs in the oldest (and largest) businesses came primarily from the acquisition of younger businesses that "pioneer innovations" that create jobs. The authors also found "very little relationship" between the amount of small business employment in an industry and that industry's job growth. They did find what they termed "an incredibly tight relationship" between any particular industry's job growth and the performance of young businesses (less than six years old) within that industry. They concluded that this relationship suggested that "young companies are the engines of job creation." A study using Census Bureau employment data from 1980 to 2009 reached a similar conclusion. The study's author found that "young businesses, not necessarily small businesses, are responsible for the substantial majority of net job creation in the U.S. economy." Also, another study, using Census Bureau employment data from 1998 to 2011, found that young firms, defined as employers in the first two years of existence, had much higher job creation rates than older firms, higher job destruction rates than older firms, and, overall, higher net job creation rates than older firms. Specifically, the study's authors found that "for the youngest firms, the net job creation rate in [economic] booms exceeds 10% and, even in the recent recession, exceeded 6%. In contrast, the net job creation rates for mature businesses are positive in [economic] booms and negative in recessions." The finding that "young companies are the engines of job creation" seems to contradict the previously mentioned finding that businesses between the ages of one year and five years are net job destroyers. Both findings are supported by empirical evidence. The explanation for the different findings is largely due to the way the studies treat the role of startups in net job creation. If the job creation that occurs from startups is excluded from the analysis, then the evidence seems to suggest that older businesses have a larger role in net job creation than younger businesses. If the job creation that occurs from startups is included in the analysis, then the evidence seems to suggest that younger businesses have a larger role in net job creation than older businesses. Also, as mentioned previously, if the analysis focuses on business survivors, then the evidence seems to suggest that the "barbell effect" takes place, with younger businesses and much older (and larger) businesses having a larger role in net job creation than businesses that are in operation for at least 6 years but less than 28 years. Because most small businesses start and remain small, some economists have focused their research on the role of what the SBA and others refer to as "high-impact" businesses (sometimes referred to as gazelles), instead of the relative roles of small versus large businesses, in job creation. High-impact businesses are defined as having sales that have doubled over the most recent four-year period and have an employment growth quantifier of two of more over the same time period. The employment growth quantifier equals the product of a firm's absolute change and percent change in employment. High-impact businesses account for a relatively small percentage of businesses (typically 5% to 6% of all businesses with employees), yet account for "almost all [net] job creation in the economy." An analysis of employment in the United States from 1994 to 2006 found that there were 352,114 high-impact businesses during the 1994-1998 four-year time period, 299,973 during the 1998-2002 four-year time period, and 376,605 during the 2002-2006 four-year time period. The study found that high-impact businesses accounted for nearly all employment growth in the economy; came in all sizes (e.g., from 1994 to 2006, businesses with fewer than 20 employees accounted for 93.8% of high-impact businesses and 33.5% of job growth among high-impact businesses; businesses with 20-499 employees accounted for 5.9% of high-impact businesses and 24.1% of job growth among high-impact businesses; and businesses with 500 or more employees accounted for 0.3% of high-impact businesses and 42.4% of job growth among high-impact businesses); existed in all regions, all states, and all counties; tended to be located in a metropolitan area (77.6% compared with 22.4% in a rural area), and within 20 miles of a central business district (53.2%); existed in nearly all industries; and on average, were smaller and younger than other businesses, but "the average high-impact business is not a startup and has been in operation for about 25 years." The study's authors argued that the presence of high-impact businesses in "virtually all" industrial classifications throughout the 1994-2006 time period "suggests that economies that are more diversified will grow more rapidly than ones that are more specialized" and "therefore, encouraging diversity as a policy seems to make much more sense than targeting select industries" for assistance. A follow-up study of high-impact businesses and their effect on net job creation in the United States found that there were 368,262 high-impact businesses during the 2004-2008, four-year time period, representing about 6.3% of all firms with employees. The study found that high-impact businesses accounted for nearly all net employment growth during the 2004-2008 time period, came in all sizes (95.3% had fewer than 20 employees, 4.5% had 20-499 employees, and 0.2% had 500 or more employees), existed in all regions and states, were relatively evenly distributed across all industries, regardless of whether the industries were stagnant, growing, or declining, and tended to be located in an urban area (85%). The study also found that high-impact businesses were, on average, younger than other businesses across all three business size categories. Specifically, high-impact businesses with fewer than 20 employees were, on average, in business for 17 years compared with 22 years for other businesses with fewer than 20 employees. High-impact businesses with 20-499 employees were, on average, in business for 25 years compared with 33 years for other businesses with 20-499 employees. Also, high-impact businesses with 500 or more employees were, on average, in business for 33 years compared with 51 years for other businesses with 500 or more employees. The study also found that high-impact businesses were more productive (as measured by revenue per employee) than other businesses during the 2004-2008 time period, and the number of women-owned high-impact businesses was proportionate to the number of women-owned non-high-impact businesses. Using Census Bureau employment data from 1980 to 2011, a 2013 Kauffman Foundation study found that new businesses (aged one to five years) in 14 industries "with very high shares of employees in the STEM fields of science, technology, engineering, and math … played an outsized role in job creation" and while these industries were once relatively geographically concentrated in just a few states they "are becoming increasingly geographically dispersed." Hathaway, the study's author, argued that most nascent entrepreneurs report that they are not interested in building "a high-growth business." Instead, most nascent entrepreneurs report that they plan to remain small and focus on providing an existing service to an existing customer base rather than creating new services or building a new customer base. In contrast, he argued that entrepreneurs in information and communications high-technology industries (such as manufacturers of computer and peripheral equipment, communications equipment, and semiconductor and other electronic equipment; software publishers; and internet service providers) and in other high-technology industries (such as pharmaceutical and medicine manufacturing; aerospace product and parts manufacturing; architectural, engineering, and related services; and scientific research-and-development services) are more growth oriented and behave differently than other entrepreneurs. He found that over the last three decades these 14 industries had experienced rapid employment grown, even though they had experienced significant employment losses during "the dot-com bust" in the early 2000s and "Great Recession of 2008 and 2009." He noted that despite these downturns, surviving young firms in the 14 high-technology industries provided net job creation rates "more than twice that of businesses across the economy." The author concluded his analysis by arguing that job creation and business formation dynamics vary across industries and that "the next few years of data releases will provide critical insights into the state of economic dynamism and entrepreneurship in the United States." Economic research on net job creation suggests that startups play a very important role in job creation, but have a more limited effect on net job creation over time because about one-third of all startups close by their second year of existence and fewer than half of all startups are still in business after five years. However, that research also suggests that the influence of small startups on net job creation varies by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job creation over time while startups with 20-499 employees tend to have a positive employment effect "that continued to increase for five years after their formation before decreasing." This finding would suggest that, if providing assistance to startups was used as a factor in SBA program performance or in the distribution of SBA assistance, the startup's size should also be taken into consideration. Economic research on net job creation also suggests that net job creation is concentrated among a relatively small group of surviving "high-impact" businesses that are younger and smaller than the typical business, but also have, on average, been in operation for 25 years. This finding suggests that all three groups of businesses—startups, younger small businesses (in operation for one year to five years), and high-impact businesses—are important contributors to net job creation. In addition, recent economic research suggests that employment dynamics vary across U.S. industries, with entrepreneurs in some industries providing a greater emphasis on employment expansion than in other industries. In sum, current economic research on the dynamics of net job creation does not provide a definitive answer concerning how to identify those businesses that are most likely to contribute to net job creation. However, that research does suggest that small business startups, especially those with at least 20 employees, play a large role in net job creation, as do surviving younger businesses (in operation for one year to five years). It does not, as of yet, provide criteria to predict, with any degree of certainty, which of the surviving younger businesses will emerge as high-impact businesses. The Small Business Act of 1953 (P.L. 83-163, as amended) authorized the SBA and justified the agency's existence on the grounds that small businesses were essential to the maintenance of the free enterprise system: The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured. The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation. Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed. It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect insofar as is possible the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts for supplies and services for the Government be placed with small-business enterprises, and to maintain and strengthen the overall economy of the Nation. In economic terms, the congressional intent was to use the SBA to deter the formation of monopolies and the market failures they cause by eliminating competition in the marketplace. The congressional emphasis on deterring monopoly formation could help to explain the SBA's historical reliance on factors related to promoting business competition within the various industrial classifications, as opposed to using other factors, such as job creation, when formulating its industry size standards. The Small Business Act did not mention the SBA's role in job creation. However, in 1954, Wendell Barnes, the SBA's second Administrator, was asked at a congressional hearing to discuss the SBA's role in supporting small businesses. He testified that part of the SBA's mission was to provide credit to small businesses to enable them to "provide additional employment." For many years, economists and others have argued that providing federal assistance to small businesses is justified because small businesses are perceived to be at a disadvantage, compared with other businesses, in accessing capital and credit. In their view, lenders are less likely to lend to small businesses than to larger businesses because small businesses tend to be younger and have less credit history than larger businesses. Also, lenders may be reluctant to lend to small businesses with innovative products because it might be difficult to collect enough reliable information to correctly estimate the risk for such products. As GAO has reported: Limited evidence from economic studies suggests that some small businesses may face constraints in accessing credit because of imperfections such as credit rationing in the conventional lending market. Some studies showed, for example, that lenders might lack the information needed to distinguish between creditworthy and non-creditworthy borrowers and thus could "ration" credit by not providing loans to all creditworthy borrowers. Several studies we reviewed generally concluded that credit rationing was more likely to affect small businesses, because lenders could face challenges obtaining enough information on these businesses to assess their risk. Others have supported federal assistance to small businesses because they believe that small business ownership provides an opportunity for minorities, women, and immigrants to increase their income and independence and to move into the economic mainstream of the American economy. In their view, businesses owned by these demographic groups face even greater barriers in obtaining access to capital and credit than other small business owners due to discrimination and their higher likelihood of locating their business in a low or moderate income community. Operating a business in a low or moderate income community is often viewed by lenders as increasing the risk that the business owner will be unable to repay the loan. In recent years, advocates of providing federal assistance to small businesses have focused increased attention on the SBA's role in job creation. For example, the SBA has argued that "improving access to credit by small businesses is a crucial step in supporting economic recovery and job creation." Economists generally do not view job creation as a justification for providing federal assistance to small businesses. They argue that in the long term such assistance will likely reallocate jobs within the economy, not increase them. In their view, jobs arise primarily from the size of the labor force, which depends largely on population, demographics, and factors that affect the choice of home versus market production (e.g., the entry of women in the workforce). However, economic theory does suggest that increased federal spending may result in additional jobs in the short term. For example, the SBA reported in September 2010 that small business funding provided by P.L. 111-5 , the American Recovery and Reinvestment Act of 2009, created or retained 785,955 jobs. The following sections examine the potential consequences of using net job creation as a SBA program performance measure and for targeting SBA assistance. That assistance is currently available to businesses that are located in the United States, are a for-profit operating business, qualify as small under the SBA's size requirements, and, for loan guarantees, demonstrate a need for the desired credit and are certified by a lender that the desired credit is unavailable on reasonable terms and conditions from nonfederal sources without the SBA's assistance. About 97% of all business concerns currently meet the SBA's eligibility criteria. GAO has argued that the SBA's program performance measures provide limited information about the impact of its programs on participating small businesses because those measures focus primarily on output, such as the number of loans approved and funded, rather than outcomes, such as how well the small businesses do after receiving SBA assistance. GAO has recommended that the SBA devise program performance measures based on outcomes to enable Congress to determine "how well the agency is meeting its strategic goal of helping small businesses succeed." At least one economist has argued that Congress should consider "including performance benchmarks in government loan programs" as "useful assessment tools for distinguishing companies with exceptional capacities and promise" for economic growth and job creation. Under this proposal, the government's guarantee would increase "to a ceiling in accordance with the number of benchmarks an applicant satisfies, though meeting some base-level benchmarks would be required of all applicants." Congress has required the SBA to use outcome-based performance measures for some of its programs. For example, borrowers in the SBA's 504/CDC (Certified Development Company) loan guaranty program, except small manufacturers, are required to create or retain at least one job for every $75,000 of project debenture. Small manufacturers (defined as a small business with its primary North American Industry Classification System Code in Sectors 31, 32, and 33, and having all of its production facilities in the United States) must create or retain one job per $120,000 of project debenture. The SBA also requires its management and technical assistance training program counselors to report information concerning job creation and retention. In addition, as mentioned previously, the SBA released estimates of the number of jobs created and retained by its loan guaranty programs as part of its implementation of P.L. 111-5 , the American Recovery and Reinvestment Act of 2009. The SBA's Office of Advocacy also periodically commissions independent studies of job creation and net job creation by small businesses to draw attention to "the contributions and challenges of small businesses in the U.S. economy." Given increased congressional interest in job creation, it could be argued that using net job creation as an outcome-based performance measure for the SBA's programs might enhance congressional oversight by providing Congress additional information concerning the nature of the jobs created by the SBA's programs, such as whether the jobs (and recipient small businesses) last or disappear relatively soon. Congress could use this information to compare programs and as a factor in its deliberations concerning SBA funding and priorities. The counterargument is that implementing net job creation as a SBA program performance measure is not necessarily easy. For example, decisions would have to be made concerning how to count part-time workers and seasonal workers, whether to take into account salaries and benefits, how long to track the small business's employment levels, how to keep reporting requirements manageable for small business owners, and whether to rely on self-reporting, independent consultants, or SBA staff to gather and verify the data. Economists might also argue that using net job creation as a SBA program performance criteria is inappropriate because economic theory suggests that in the long run such assistance does not create additional jobs, it reallocates them within the economy. Some small businesses might also object, worried that the use of net job creation as a SBA program performance measure might result in them receiving less SBA assistance than they would otherwise receive. Given increased congressional interest in job creation, it could be argued that using net job creation as a factor in the targeting of the SBA's assistance might enhance congressional efforts to promote job growth. Job growth has been one of the top domestic priorities of recent Congresses. The counterargument is that there is little evidence to prove that providing a subsidy to small businesses that currently create the most jobs will be the most effective means of promoting job growth. For example, it could be argued that successful small businesses may not need SBA assistance because their success enables them to attract capital and credit from private sources. Also, given the constantly evolving nature of the economy, the businesses that create the most jobs in the economy change over time. The SBA would need to update its criteria periodically to account for these changes. It could also be argued that using net job creation as a factor in allocating SBA assistance is premature because, given the evolving nature of the economic literature, there is no consensus concerning the criteria that should be used to identify businesses that are the most likely to have a positive effect on net job creation. In addition, economists might oppose the use of net job creation to target SBA assistance for the same reason they might oppose using net job creation as a SBA program performance measure—because economic theory suggests that in the long run such assistance does not create additional jobs, it reallocates them within the economy. Some small businesses might also object, worried that using net job creation as a factor in allocating SBA assistance might eliminate or reduce the SBA assistance that they would otherwise receive. It could also be argued that the SBA already takes net job creation into account, at least to a limited degree, in its loan guaranty programs. By guaranteeing less than 100% of the SBA loan amount issued by private lenders, the SBA subjects lenders to losses on defaulted loans (ranging from 10% to 50% of the loan amount depending on the SBA program). It could be argued that lenders take into account the borrower's likelihood of repayment (survival) and, therefore, the borrower's potential for having a positive effect on net job creation, before issuing a SBA guaranteed loan to protect their financial investment. As a result, the lending process, arguably, helps to weed out those firms that are most likely to have a negative effect on net job creation. However, it could also be argued that because lenders are required to certify that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without the SBA's assistance, SBA borrowers are, by definition, at greater risk of failing than others and, therefore, are also less likely than others to have a positive effect on net job creation. It could also be argued that the SBA's Small Business Investment Company (SBIC) program already takes net job creation into account, at least indirectly. Under the SBIC program, the SBA guarantees debentures (loan obligations) that are sold to investors. The revenue generated by the sale of the debenture is then invested by certified small business investment companies in small businesses. When making those investments, small business investment companies take into account many factors, including the business's potential for economic growth. As a result, it could be argued that the SBIC program takes into account the borrower's likelihood of having a positive effect on net job creation and, unlike the SBA's loan guaranty programs, does not have to certify that the desired credit is unavailable to the applicant on reasonable terms and conditions from nonfederal sources without the SBA's assistance. The counterargument is that the SBIC program is much smaller than the SBA's business loan guaranty programs (e.g., the SBA guarantees between $3 billion and $4 billion in SBIC debentures annually compared with nearly $30 billion in business loan guarantees) and the SBA does not use net job creation as a primary factor in allocating those resources. Finally, it could be argued that using net job creation as a factor in the allocation of SBA assistance will not have much effect on net job creation because the SBA's loan programs represent a relatively small share of the capital accessed by small businesses in any given year. Following this line of argument, it could be argued that a more effective strategy for promoting job creation would be to focus on policies affecting the broader economy rather than the SBA. Economic research on net job creation suggests that startups play a very important role in job creation, but have a more limited effect on net job creation over time because about one-third of all startups close by their second year of existence and fewer than half of all startups are still in business after five years. However, economic research also suggests that the influence of small startups on net job creation varies by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job creation over time whereas startups with 20-499 employees tend to have a positive employment effect "that continued to increase for five years after their formation before decreasing." This finding would suggest that, if providing assistance to startups was used as a factor in SBA program performance or in the distribution of SBA assistance, the startup's size should also be taken into consideration. The economic research on net job creation also suggests that net job creation is concentrated among a relatively small group of surviving "high-impact" businesses that are younger and smaller than the typical business, but also have, on average, been in operation for 25 years. This finding suggests that all three groups of businesses—startups, young small businesses (in operation for one year to five years), and surviving high-impact businesses—are important contributors to net job creation. As mentioned previously, recent economic research suggests that employment dynamics vary across U.S. industries, with entrepreneurs in some industries providing a greater emphasis on employment expansion than entrepreneurs in other industries. In sum, economic research on the dynamics of net job creation does not provide a definitive answer concerning how to identify those businesses that are most likely to contribute to net job creation. However, that research does suggest that small business startups, especially those with at least 20 employees, play a large role in net job creation, as do surviving younger businesses (in operation for one year to five years). The economic literature does not, as of yet, provide criteria to predict, with any degree of certainty, which of the surviving younger businesses will emerge as high-impact firms. Nonetheless, given the heightened congressional interest in net job creation, increased attention to the fact that the SBA is not specifically designed to promote net job creation and does not use net job creation as a program performance measure may lead to additional analysis that can better inform the debate over whether the SBA should use net job creation as an outcome-based program performance measure or as a factor in the allocation of its assistance. | The Small Business Administration (SBA) administers several programs to support small businesses, including loan guaranty programs, disaster loan programs, management and technical assistance training programs, and federal contracting programs. Congressional interest in these programs has increased in recent years, primarily because they are viewed as a means to stimulate economic activity and create jobs. This report examines the economic research on net job creation to identify the types of businesses that appear to create the most jobs. That research suggests that business startups play an important role in job creation, but have a more limited effect on net job creation over time because fewer than half of all startups are still in business after five years. However, the influence of small business startups on net job creation varies by firm size. Startups with fewer than 20 employees tend to have a negligible effect on net job creation over time whereas startups with 20-499 employees tend to have a positive employment effect, as do surviving younger businesses of all sizes (in operation for one year to five years). This report then examines the possible implications this research might have for Congress and the SBA. For example, the SBA provides assistance to all qualifying businesses that meet its size standards. About 97% of all businesses currently meet the SBA's eligibility criteria. Given congressional interest in job creation, this report examines the potential consequences of targeting small business assistance to a narrower group, small businesses that are the most likely to create and retain the most jobs. In addition, the Government Accountability Office (GAO) has recommended that the SBA use outcome-based program performance measures, such as how well the small businesses do after receiving SBA assistance, rather than focusing on output-based program performance measures, such as the number of loans approved and funded. GAO has argued that using outcome-based program performance measures would better enable the SBA to determine the impact of its programs on participating small businesses. Given congressional interest in job creation, this report examines the potential consequences of adding net job creation as an outcome-based SBA program performance measure. This report also examines the arguments for providing federal assistance to small businesses, noting that policymakers often view job creation as a justification for such assistance whereas economists argue that over the long term federal assistance to small businesses is likely to reallocate jobs within the economy, not increase them. Nonetheless, most economists support federal assistance to small businesses for other purposes, such as a means to correct a perceived market failure related to the disadvantages small businesses experience when attempting to access capital and credit. |
Individuals and businesses lend their accumulated savings to borrowers. In exchange, borrowers give lenders a debt instrument. These debt instruments, typically called bonds, represent a promise by borrowers to pay interest income to lenders on the principal (the amount of money borrowed) until the principal is repaid to the lenders. When a municipal (state or local) government issues bonds, the principal (or proceeds) is typically used to finance the construction of capital facilities, but may also be used for cash management purposes when revenue collections do not match spending needs during the fiscal year. Since public capital facilities provide services over a long period of time, it makes financial and economic sense to pay for the facilities over a similarly long period of time. This is particularly true for state and local governments, whose taxpayers lay claim to the benefits from these facilities by dint of residency and relinquish their claim to benefits when they move. Given the demands a market-oriented society places on labor mobility, taxpayers are reluctant to pay today for state and local capital services to be received in the future. The state or local official concerned with satisfying the preferences of constituents may therefore elect to match the timing of the payments to the flow of services, precisely the function served by long-term bond financing. An attempt to pay for capital facilities "up front" is likely to result in a less than optimal rate of public capital formation. State and local governments are also faced with the necessity of planning their budget one to two years in advance. This requires a balancing of revenue forecasts against forecasts of the demand for services and spending. Not infrequently, unforeseen circumstances can undermine the forecast and cause a revenue shortfall, which must be financed with short-term borrowing, or "notes." In addition, even when the forecasts are met, the timing of expenditures may precede the arrival of revenues, creating the necessity to borrow within an otherwise balanced fiscal year. Finally, temporarily high interest rates that prevail at the time bonds are issued to finance a capital project may induce short-term borrowing in anticipation of a drop in rates. The federal government intervenes in the public capital market by granting the debt instruments of state and local governments a unique privilege—the exemption of interest income earned on these bonds from federal income tax. The tax exemption lowers the cost of capital for state and local governments, which should then induce an increase in state and local capital formation. The lower cost of capital arises because in most cases investors would be indifferent between taxable bonds (e.g., corporate bonds) that yield a 10% rate of return before taxes and tax-exempt bonds of equivalent risk that yield a 6.5% return. The taxable bond interest earnings carry a tax liability (35% of the interest income in most cases), making the after-tax return on the two bonds identical at 6.5%. Thus, state and local governments could raise capital from investors at an interest cost 3.5 percentage points (350 basis points) lower than a borrower issuing taxable debt. Generally, the degree to which tax-exempt debt is favored is measured in a variety of ways. Two are fairly common: the yield spread and the yield ratio. The yield spread is the difference between the interest rate on taxable bonds (corporate bonds or U.S. Treasury bonds) and the interest rate on tax-exempt municipal bonds of equivalent risk. In recent decades, the spread between tax-exempt and taxable bonds has declined as underlying interest rates have declined. The greater the yield spread, the greater are the nominal savings to state and local governments as measured by the interest rates they would have to pay if they financed with taxable debt. The yield ratio (which is an average rate on tax-exempt bonds divided by an average rate on a taxable bond of like term and risk) adjusts the spread for the level of interest rates. A lower ratio implies a greater savings to state and local governments relative to taxable debt. As the ratio approaches one, however, tax-exempt borrowing approaches that of taxable borrowing. Variation in the cost of state and local borrowing relative to the cost of taxable borrowing arises from changes in the demand for and supply of both tax-exempt and taxable bonds. Demand for tax-exempt bonds depends upon the number of investors, their wealth, statutory tax rates, and alternative investment opportunities. Supply depends upon the desire of the state and local sector for capital facilities and their ability to engage in conduit financing (issuing state or local government bonds and passing the proceeds through to businesses or individuals for their private use). Almost all of the factors which influence demand and supply are affected by federal tax policy and fiscal policy. The direct cost to the federal government of this interest exclusion is the individual and corporate income tax revenue forgone. Consider the aforementioned case where a 35% marginal tax rate corporate investor who purchases a 6.5% tax-exempt bond with principal of $1,000 that is to be repaid after 20 years. Each year for 20 years this taxpayer receives $65 in tax-exempt interest income. Each year the federal government forgoes collecting $35 of revenue because the revenue loss is based upon the yield the taxpayer forgoes. For example, if the investor had purchased a taxable bond carrying a 10% interest rate, he would have received $100 in interest income and paid $35 in income taxes on that income. The annual federal revenue loss (or tax expenditure) on the outstanding stock of tax-exempt bonds issued for public purposes is reported in the Analytical Perspectives section of the Budget every year. The estimates since 1994 are displayed in Table 1 . Because they are based upon the outstanding stock of public-purpose tax-exempt bonds, it takes time for some legislative changes to show up in these data. The amount of forgone tax revenue from the exclusion of interest income on public-purpose tax-exempt bonds is substantial; $20.5 billion in 2016. Over the 2017 to 2026 budget window, the estimated loss of revenue is expected to be $422.8 billion, or the 15 th -largest tax expenditure. When first introduced in 1913, the federal income tax excluded the interest income earned by holders of the debt obligations of states and their political subdivisions from taxable income. It was asserted by many that any taxation of this interest income would be unconstitutional because the exemption was protected by the Tenth Amendment and the doctrine of intergovernmental tax immunity. The U.S. Supreme Court rejected this claim of constitutional protection in 1988 in South Carolina v. Baker (485 U.S. 505). Although the legal basis for the subsidy is statutory rather than constitutional, the subsidy may be justified on economic grounds. Economic theory suggests that certain types of goods and services, such as a street light, will not be provided in the "optimal" amounts by the private sector because some of the benefits are consumed collectively. The nation's welfare can be increased by public provision of these goods and services, some of which are best provided by state or local governments. Certain goods and services provided by state or local governments, however, benefit both residents, who pay local taxes, and nonresidents, who pay minimal if any local taxes. Since state and local taxpayers are likely to be unwilling to provide these services to nonresidents without compensation, it is probable that state and local services will be under provided. In theory, the cost reduction provided by the exemption of interest income compensates state and local taxpayers for benefits provided to nonresidents. This encourages the governments to provide the optimal amount of public services. State and local governments were estimated to have $3.043 trillion in debt issuances outstanding at the end of the third quarter in 2017. Total debt issuances have slowly increased in the past few years, but have been relatively flat since 2008, when debt outstanding equaled $2.968 trillion. Municipal debt outstanding increased from 2008 to 2010, which may have represented issuances used to cover unexpected shortfalls due to reduced revenues and increased expenditure demands following the Great Recession. The lack of growth in debt outstanding in recent years could be explained by a hesitation to engage in new long-term capital projects given the budget challenges and economic uncertainties facing municipal governments. State and local debt can be classified based on (1) the maturity (or term), which is the length of time before the principal is repaid; (2) the type of security , which is the financial backing for the debt; (3) the use of the proceeds for either new facilities or to refinance previously issued bonds; and (4) whether the type of activity being financed has a public or a private purpose. The risk associated with a bond is also an important factor, as nearly every bond issued by a state or local government is rated based on the probability of default. The privately managed rating agencies incorporate all of the above factors as well as the financial health of the entity issuing the bonds when arriving upon a bond rating. The higher the default risk, the lower the rating. State and local governments must borrow money for long periods of time and for short periods of time. Long-term debt instruments are usually referred to as bonds, and carry maturities in excess of one year. Short-term debt instruments are usually referred to as notes, and carry maturities of 12 months or less. If the notes are to be paid from specific taxes due in the near future, they usually are called tax anticipation notes (TANs); if from anticipated intergovernmental revenue, they are called revenue anticipation notes (RANs). If the notes are to be paid from long-term borrowing (e.g., bonds), they are called bond anticipation notes (BANs). Tax anticipation notes and revenue anticipation notes are often grouped together and referred to as tax and revenue anticipation notes (TRANs). Table 1 displays the volume of long-term and short-term borrowing since 1992. Long-term borrowing dominates state and local debt activity in most years, with the long-term share peaking in 2016 at 92.5% of this market. Another important characteristic of tax-exempt bonds is the security provided to the bondholder. General obligation (GO) bonds pledge the full faith and credit of the issuing government. The issuing government makes an unconditional pledge to use its powers of taxation to honor its liability for interest and principal repayment. Revenue bonds, or non-guaranteed debt, pledge only the revenue from a specific tax or the earnings from the project financed with the bonds. Should these revenues or earnings prove to be inadequate to honor these commitments, the issuing government is under no obligation to use its taxing powers to finance the shortfall. Some revenue bonds are issued with credit enhancements provided by insurance or bank letters of credit that guarantee payment upon such a revenue shortfall. Figure 2 displays the breakdown between long-term GO and revenue bonds since 1992. The long-term market has been and continues to be dominated by revenue bonds. The revenue bond share has fluctuated between 60% and 72% from 1992 through 2016. All tax-exempt interest income attributable to state and local governments does not appear in the form of bonds. Governments may enter into installment purchase contracts and finance leases for which the portion of the installment or lease payment to a vendor is tax exempt. For example, computer equipment or road building equipment could be leased from a vendor using a rental agreement or an installment sales contract. Under this type of agreement, the monthly payments to the vendor are large enough to cover the vendor's interest expense on the funds borrowed to purchase the equipment which was leased to the government. The portion that is attributable to interest income is not included in the vendor's taxable income. Such transactions are often referred to as municipal leasing. Lease rental revenue bonds and certificates are variations on revenue bonds. An authority or nonprofit corporation issues bonds, builds a facility with the proceeds, and leases the facility to a municipality. Security for the bonds or certificates is based on the lease payments from the municipalities. When the bonds are retired, the facility belongs to the lessee (the municipality). An advantage to this type of arrangement is that many states' constitutional and statutory definitions do not consider this type of financing to be debt because the lease payments are annual operating expenses based upon appropriated monies. The leasing technique has also been used to provide tax-exempt funds to nonprofit organizations. A municipality issues the bonds for the construction of a facility that is leased to a nonprofit hospital or university. Again, security for the bonds is based on the lease payments. Long-term tax-exempt bond issues also can be characterized by their status as new issues or refunding issues (refundings). New issues represent bonds issued to finance new capital facilities. Refundings usually are made to replace outstanding bonds with bonds that carry lower interest rates or other favorable terms. As such, the refunding bonds usually do not add to the stock of outstanding bonds or the capital stock. The proceeds of the refunding bonds are used to pay off the remaining principal of the original bond issue, which is retired. Advance refunding bonds, however, do add to the outstanding stock of bonds without adding to the stock of capital. Advance refunding bonds are issued prior to the date on which the original bonds are refunded, so that for a period of time there are two bond issues outstanding to finance the same capital facilities. The 2017 tax revision ( P.L. 115-97 ) repealed the exclusion of interest income on advance refunding bonds issued after December 31, 2017. Figure 3 shows the changes in new-issue and refunding municipal bonds from 1992 through 2016. The volume of refunding shares varies widely, depending to a great extent on changes in the relative magnitudes of taxable and tax-exempt interest rates. Note that the 1993 increase in the top marginal individual income tax rates may have increased the demand for tax-exempt bonds (see Figure 2 ). Higher tax rates make tax-exempt bonds more attractive relative to taxable bonds, all other things being equal. The increased demand and accompanying lower interest rates may have prompted state and local governments to replace outstanding issues with refunding bonds that carried lower interest rates. In contrast, refundings dropped considerably in 1999 and 2000. The decline could have been in response to higher interest rates or to strong economic conditions in most states which minimized the need for debt finance generally. The story is reversed from 2001 to 2003 as the economy slowed and state budgets were strained by lower tax revenue collections. Refundings issues in 2003 were more than double the amount of new issues in 2000. In 2005, GO bonds and refunding bond volume peaked, likely reflecting the historically low interest rates on tax-exempt debt. The low rate environment since 2011 has also pushed up the share of refunding issues. An important characteristic of tax-exempt bonds is the purpose or activity for which the bonds are issued. Most of the tax legislation pertaining to tax-exempt bonds over the last 30 years reflects an effort to restrict tax preferences to bonds issued for activities that satisfy some broadly defined "public" purpose, that is, for which federal taxpayers are likely to receive substantial benefits. Bonds are considered to be for a public purpose if they satisfy either of two criteria: less than 10% of the proceeds are used directly or indirectly by a non-governmental entity; or less than 10% of the bond proceeds are secured directly or indirectly by property used in a trade or business. Bonds that satisfy either of these tests are termed "governmental" bonds and can be issued without federal limit. Bonds that fail both of these tests are termed "private-activity" bonds (PABs) because they provide significant benefits to private individuals or businesses. These projects are ineligible for tax-exempt financing. Activities which fail the two tests but are considered to provide both public and private benefits have been termed eligible or qualified PABs. These selected activities can be financed with tax-exempt bonds. Table 2 provides the dollar value of new issues of tax-exempt private-activity bonds and their share of total private-activity volume capacity for 2014 and 2015. Figure 4 provides historical data on the portion of PAB volume to total bond volume. All tax-exempt private-activity bonds are subject to restrictions that do not apply to governmental bonds, chief among them was the now-repealed ability to issue advance refundings and the inclusion of the interest income in the alternative minimum income tax base. In addition, the annual dollar value of all bonds issued for most of these activities by all governmental units within a state is limited to the greater of $105 per resident or $311.38 million in 2018. The cap has been adjusted for inflation since 2004. The annual volume cap applies to the total of bonds issued primarily for but not limited to multi- and single-family housing, industrial development, exempt facilities, student loans, and bond-financed takeovers of investor-owned utilities (usually electric utilities). Bonds issued for several activities classified as private are not subject to the volume cap if the facilities are governmentally owned. These activities are airports, docks, and wharves; nonprofit organization facilities; high-speed inter-urban rail facilities; and solid waste disposal facilities that produce electric energy. Table 3 below reports the estimated tax expenditure for selected private activities that qualify for financing with tax-exempt debt. Recently, Congress has further expanded the types of private activities eligible for tax-exempt financing and has increased the capacity for selected activities and issuers. A brief description of legislation that Congress has enacted since 2001 follows below. As part of the Economic Growth and Tax Relief Reconciliation Act of 2001 ( P.L. 107-16 ), a new type of tax-exempt private-activity bond was created beginning on January 1, 2002. The act expanded the definition of "an exempt facility bond" to include bonds issued for qualified public educational facilities. Bonds issued for qualified educational facilities are not counted against a state's private-activity volume cap. However, the qualified public educational facility bonds have their own volume capacity limit equal to the greater of $10 multiplied by the state population or $5 million. The Job Creation and Worker Assistance Act of 2002 (JCWA; P.L. 107-147 ) created the New York Liberty Zone (NYLZ) in the wake of the September 11, 2001, terrorist attacks. The legislation included several tax benefits for the NYLZ intended to foster economic revitalization within the NYLZ. Specifically, the so-called "Liberty Bond" program allows New York State (in conjunction and coordination with New York City) to issue up to $8 billion of tax-exempt private-activity bonds for qualified facilities in the NYLZ. Qualified facilities follow the exempt facility rules within Section 142 of the IRC. The original deadline to issue the bonds was January 1, 2005, but was extended to January 1, 2014, by the American Taxpayer Relief Act ( P.L. 112-240 ). In 2004, the American Jobs Creation Act ( P.L. 108-357 ) created bonds for "qualified green building and sustainable design projects." The bonds are exempt from the state volume cap and are instead limited to an aggregate of $2 billion for bonds issued between January 1, 2005, and October 1, 2009. This legislation created a new type of tax-exempt private activity bond for the construction of rail to highway (or highway to rail) transfer facilities. The national limit is $15 billion and the bonds are not subject to state volume caps for private activity bonds. The Secretary of Transportation allocates the bond authority on a project-by-project basis. The hurricanes that struck the Gulf region in late summer 2005 prompted Congress to create a tax-advantaged economic development zone intended to encourage investment and rebuilding in the Gulf region. The Gulf Opportunity Zone (GOZ) was comprised of the counties where the Federal Emergency Management Agency (FEMA) declared the inhabitants to be eligible for individual and public assistance. Based on proportion of state personal income, the Katrina-affected portion of the GOZ represents approximately 73% of Louisiana's economy, 69% of Mississippi's, and 18% of Alabama's. Specifically, the "Gulf Opportunity Zone Act of 2005" (GOZA 2005, P.L. 109-135 ) contained two provisions that expanded the amount of private-activity bonds outstanding and language to relax the eligibility rules for mortgage revenue bonds. The most significant is the provision that increased the volume cap for private-activity bonds issued for Hurricane Katrina recovery in Alabama, Louisiana, and Mississippi (identified as the Gulf Opportunity Zone, or "GO Zone"). GOZA 2005 added $2,500 per person in the federally declared Katrina disaster areas in which the residents qualified for individual and public assistance. The increased volume capacity added approximately $2.2 billion for Alabama, $7.8 billion for Louisiana, and $4.8 billion for Mississippi in aggregate over five years. The legislation defined "qualified project costs" that are eligible for bond financing as (1) the cost of any qualified residential rental project (26 §142(d)); and (2) the cost of acquisition, construction, reconstruction, and renovation of (i) nonresidential real property (including fixed improvements associated with such property); and (ii) public utility property (26 §168(i)(10)), in the GOZ. The additional capacity was to have been issued before January 1, 2011. The second provision allowed for advance refunding of certain tax-exempt bonds. Under GOZA 2005, governmental bonds issued by Alabama, Louisiana, and Mississippi could be advance refunded an additional time and exempt facility private-activity bonds for airports, docks, and wharves once. Private-activity bonds are otherwise not eligible for advance refunding (see earlier discussion of advance refunding). In response to the housing crisis of 2008, Congress included two provisions in the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289 ) that were intended to assist the housing sector. First, HERA provided that interest on qualified private activity bonds issued for (1) qualified residential rental projects, (2) qualified mortgage bonds, and (3) qualified veterans' mortgage bonds would not be subject to the AMT. In addition, HERA also created an additional $11 billion of volume cap space for bonds issued for qualified mortgage bonds and qualified bonds for residential rental projects. The cap space was designated for 2008 but could have been carried forward through 2010. In response to the financial crisis and economic recession, Congress included several bond-related provisions in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). Three provisions were intended to make bond finance less expensive for the designated projects. One expanded the definition of qualified manufacturing facilities (under §144(a)(12)(C)) to include the creation and production of intangible property including patents, copyrights, formulae, etc. Before ARRA, only tangible property was eligible. The second created a new category of private activity bond called "recovery zone facility bonds." The bonds were to be used for investment in infrastructure, job training, education, and economic development in economically distressed areas. The bonds, which were subject to a separate national cap of $15 billion, were allocated to the states based on the decline in employment in 2008. The bonds were eligible to be issued in 2009 and 2010. A third provision provided $2 billion for tribal governments to issue tax-exempt bonds for economic development purposes. The tax code currently allows tribal governments to issue debt for "essential government services" only. Many economic development projects would not have qualified absent this ARRA provision. Many individuals and businesses make money by engaging in arbitrage, borrowing money at one interest rate and lending that borrowed money to others at a higher interest rate. The difference between the rate at which one borrows and the rate at which one lends produces arbitrage earnings. At its most basic level, it is the primary activity of commercial banks—pay depositors an interest rate of "x" and use the deposits to make commercial, automobile, and home loans at "x + y" interest rate. In this context, arbitrage is a time-honored and appropriate financial market activity. That is not the case in the tax-exempt bond market. State and local governments do not pay federal income tax, and absent federal constraint, have unlimited capacity to issue debt at low interest rates and reinvest the bond proceeds in higher-yielding taxable debt instruments, thereby earning arbitrage profits. Unchecked, state and local governments could substitute arbitrage earnings for a substantial portion of their own citizens' tax effort. Congress has decided that such arbitrage should be limited, and that tax-exempt bond proceeds must be used as quickly as possible to pay contractors for the construction of the capital facilities for which the bonds were issued. Since it is impossible for bonds to be issued precisely when contractors must be paid for their expenses incurred in building public capital facilities, the tax law provides a three-year period to spend an increasing share of the bond proceeds. Bond issues that have unspent proceeds in excess of the allowed amounts during this three-year spend-down schedule must rebate any arbitrage earnings to the Department of the Treasury. Bond issues are considered to be taxable arbitrage bonds if a governmental unit, in violation of the arbitrage restriction in the tax code, invested a substantial portion of the proceeds "to acquire higher yielding investments, or to replace funds which were used directly or indirectly to acquire higher yielding investments." Tax Credit Bonds (TCBs) are an alternative to tax-exempt bonds that offer investors a federal tax credit or the issuer a direct payment proportional to the bond's value in lieu of a federal tax exemption. Most TCBs currently in circulation were designated for a specific purpose, location, or project. TCB issuers use the proceeds for public school construction and renovation; clean renewable energy projects; refinancing of outstanding government debt in regions affected by natural disasters; conservation of forest land; investment in energy conservation; and for economic development purposes. The 2017 tax revision ( P.L. 115-97 ) repealed the authority to issue new TCBs after December 31, 2017. TCBs that provided for new issuances in 2017 include Qualified Zone Academy Bonds (QZABs) and Qualified School Construction Bonds (QSCBs); the authority to issue other TCBs had expired prior to the 2017 tax revision. Bonds that are no longer issued may still be held by the public and thus receive a federal tax credit or direct payment. For more information on tax credit bonds, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis . Legislative interest has typically focused on altering the tax treatment of state and local debt to provide a more economically efficient subsidy with a lower federal revenue cost. There are three primary types of proposals that include changes to state and local government bonds—capping the preference, eliminating the preference, and changing the preference to a direct issuer subsidy. These three types have each featured in legislative proposals from recent years. An early version of the 2017 tax revision ( H.R. 1 ) that was passed in the House included provisions that would repeal authority to issue PABs and eliminate the use of tax-exempt bonds to fund professional sports stadiums. P.L. 115-97 as enacted did not include those provisions, however. The Congressional Budget Office (CBO) "Revenue Options" report proposed eliminating the tax exemption for new qualified private activity bonds which would generate a budget savings of $28 billion over the 2017 to 2026 budget window. The direction of future changes to the federal tax code will likely dictate which modifications, if any, are made to the tax treatment of state and local government debt. Hilhouse, Albert M. Municipal Bonds: A Century of Experience (New York: Prentice-Hall, 1936). The classic history of the use and development of municipal bonds from their introduction in the 19 th century. U.S. Senate. Committee on the Budget. Tax Expenditures: Compendium of Background Material on Individual Provisions . S.Prt. 113-32. 113 th Congress, 2 nd session, December 2014. Provides description, revenue loss estimate, and economic analysis of the effects of governmental bonds and each major category of private-activity bond. Zimmerman, Dennis. The Private Use of Tax-Exempt Bonds: Controlling Public Subsidy of Private Activity (Washington: The Urban Institute Press, 1991). Provides institutional background: history, legal framework, and industry characteristics. Provides discussion of tax-exempt bonds as an economic policy tool affecting: intergovernmental fiscal relations, the federal budget deficit, efficient resource allocation, and tax equity. Provides a history and economic analysis of tax-exempt bond legislation from 1968 to 1989. Auction Rate Securities (ARSs) are long-term debt obligations with the unique feature of adjustable or variable interest rates. In contrast to long-term, fixed rate securities, issuers go to auction periodically (anywhere from every 7 to 35 days) to reset the interest rate on the debt outstanding. The auction mechanism and interest rate parameters vary by issuer (and issue), though most use what is termed a "Dutch auction" where each bidder submits a bid for the amount they are willing to purchase at a given interest rate. All bids are ordered from lowest interest rate to highest interest rate and the rate where the market clears, that is, where all bonds would be purchased, establishes the new ARS rate received by all bidders. ARSs typically have a "call option" where the issuer can buy the ARS back at par (face value) at any scheduled auction and then retire the debt. Most ARSs are insured by the issuer because they do not carry a "put" option that would allow bondholders to sell the bonds at a specified price to the issuer or a designated third party. The bond insurance reduces risk and thus interest rate, making the bonds less costly to issuers. For this reason, ARSs are heavily influenced by credit ratings, and typically require bond insurance to make them marketable. The existing holders of ARSs offer bids as well as new bidders. If all bids of both existing bond holders and new participants fail to clear the market, the auction is termed a "failed auction." In this scenario, the original agreement with the bondholder stipulates a "reservation" interest rate the issuer must pay in the event of a failed auction at least until the next successful auction. Because the reservation rate is typically higher than market interest rates, issuers of ARSs would prefer to avoid paying the reservation rate. The issuance of ARSs grew considerably from 1988 through 2007. In 1988, the Bond Buyer identified one ARS issue valued at $25 million; none were issued in 1987. In 2004, the peak year, 438 ARS bonds valued at $42.5 billion were issued. No ARSs have been issued since 2007, roughly corresponding to the beginning of the financial crisis, when 322 were sold for a total value of $38.7 billion. | This report provides information about state and local government debt. State and local governments issue debt instruments in exchange for the use of individuals' and businesses' savings. This debt obligates state and local governments to make interest payments for the use of these savings and to repay, at some time in the future, the amount borrowed. State and local governments may finance capital facilities with debt rather than out of current tax revenue to more closely align benefits and tax payments. There was just over $3 trillion in state and local debt outstanding in the third quarter of 2017. The federal government subsidizes the cost of most state and local debt by excluding the interest income from federal income taxation. This tax exemption is granted in part because it is believed that state and local capital facilities will be underprovided if state and local taxpayers have to pay the full cost. The federal government also provides a tax preference through tax credit bonds (TCBs), which either provide investors with a federal tax credit in lieu of interest payments or a direct payment to the issuer. P.L. 115-97, the 2017 tax revision, repealed the authority to issue TCBs beginning in 2018. For more on TCBs, see CRS Report R40523, Tax Credit Bonds: Overview and Analysis. State and local debt is issued as bonds, to be repaid over a period of time greater than one year and perhaps exceeding 20 years, and as notes, to be repaid within one year. General obligation bonds are secured by the promise to repay with general tax revenue, and revenue bonds are secured with the promise to use a specific stream of tax revenue. Most debt is issued to finance new capital facilities, but some is issued to refund a prior bond issue (usually to take advantage of lower interest rates). Tax-exempt bonds issued for some activities are classified as governmental bonds and can be issued without federal constraint because most of the benefits from the capital facilities are enjoyed by the general public. Many tax-exempt revenue bonds are issued for activities Congress has classified as private because most of the benefits from the activities appear to be enjoyed by private individuals and businesses. The annual volume of a subset of these tax-exempt private-activity bonds (PABs) is capped. For more on private activity bonds, see CRS Report RL31457, Private Activity Bonds: An Introduction. Arbitrage bonds devote a substantial share of the proceeds to the purchase of assets with higher interest rates than that being paid on the tax-exempt bonds. Such arbitrage bonds are not tax exempt because Congress does not want state and local governments to issue tax-exempt bonds and use the proceeds to earn arbitrage profits. The arbitrage profits could substitute for state and local taxes. A number of tax reform proposals have been introduced that would modify the tax treatment of state and local government bonds. Another policy issue is whether constraints should be relaxed on the types of activities, such as infrastructure spending, for which entities can issue tax-exempt debt. The list of activities that classify tax-exempt private-activity bonds—and whether they should be included in the volume cap—is another area of potential change or reform. The 2017 tax revision repealed authority to issue TCBs and advanced refunding bonds, but did not otherwise modify tax-exempt bonds or PABs. |
The sunset concept provides for programs and agencies to terminate automatically according to a predetermined schedule unless explicitly renewed by law. Sunset measures usually contain two elements: an action-forcing mechanism, carrying the ultimate threat of elimination, and a framework or guidelines for the systematic review and evaluation of past performance. The idea of sunset thus stresses legislative oversight of government agencies, so as to further economy and efficiency and control the growth of government, or "bureaucratic sprawl." Termination of budget authority for a program or agency after a specified time is perhaps the most commonly employed mechanism. Other possible action-forcing tools include periodic expiration of the organic statute establishing an agency, or of the rules and regulations issued by an agency. Ideally, the timetable for review places functionally related programs on the same schedule. The sunset idea was refined and popularized by the Colorado chapter of the public interest group Common Cause, as a consequence of the frustrations experienced in efforts to reform Colorado's regulatory structure. Perhaps borrowing from the western imagery of the cowboy riding off into the sunset, agencies subject to sunset provisions were to "fade into the sunset," unless, following oversight review, the legislature acted to extend their existence. Or sunset might be viewed as the inescapable "end of the day" for terminated agencies. In 1976, Colorado became the first state to enact a sunset law. By 1982, sunset measures had been considered in all 50 state legislatures, and 36 states had enacted some version of the sunset review process, "representing a remarkably rapid diffusion of a state innovation." However, state experiences proved to be mixed. By 1990, 12 of the 36 states with sunset laws had "ceased the use of this legislative oversight mechanism because of high monetary and temporal costs of sunset review, intensive lobbying by vested interests, unfulfilled expectations of agency termination, low levels of citizen participation, and other perceived problems." Still, the study stated, "Results indicate that sunset has resulted in some agency terminations and, more importantly, numerous substantive, procedural, and crosscutting modifications aimed at increasing accountability, efficiency, and effectiveness in state agencies." Since 1978, most editions of The Book of the States , compiled by the Council of State Governments (COSG), have included a table titled "Summary of Sunset Legislation." States having a sunset review process are identified by scope of the framework: C for comprehensive, R for regulatory, S for selective, and D for discretionary. A careful review of the table included in the 2010 edition, derived from 2009 COSG surveys, suggests that 24 states have an active sunset review process. The COSG table further indicates that nine states have terminated or suspended their sunset procedures, while in two of those states sunset-like reviews continue. Three states have never had a sunset review process. A second source of data on state sunset laws comes from the Council on Licensure, Enforcement, and Regulation (hereafter referred to as CLEAR). While the CLEAR chart uses categories that are differently conceived from those used by COSG, one category appears of special interest for historical evolution of state sunset laws, namely, where the sunset law has been repealed, terminated, or suspended. A tabulation of the CLEAR chart indicates 13 states in this category. In addition to the nine identified in the COSG table, in at least three states sunset laws apparently were terminated or repealed and subsequently reinstated, and another termination is coded as "discretionary" by COSG. The record of the sunset process in Texas is of special interest, both because it is generally recognized as one of the more active state efforts and because recent federal legislative proposals borrow from that model. The website of the Texas advisory commission offers a 70-page Guide to the Texas Sunset Process , noting that the sunset process in Texas "is guided by a 12-member body appointed by the Lieutenant Governor and the Speaker of the House of Representatives. Assisting the Commission is a staff whose reports provide an assessment of an agency's programs, giving the Legislature the information needed to draw conclusions about program necessity and workability." According to the Guide , since the Texas sunset process began in 1978, 58 agencies have been abolished and another 12 agencies have been consolidated, for an estimated savings of nearly $783.7 million. When reviewing the accomplishments of sunset in Texas, however, it is well to recall that the Texas Sunset Advisory Commission, while ultimately saved by its supporters in the Texas legislature, was nearly abolished in 1993. At the federal level, over 70 bills were introduced in the 94 th Congress (1975-1976) proposing various sunset arrangements, and sunset measures have continued to be introduced in each subsequent Congress. Many hearings have been held on sunset measures, and several bills have been reported, but the only floor action occurred in the 95 th Congress. On October 11, 1978, the Senate passed S. 2 , the Program Reauthorization and Evaluation Act, by vote of 87-1. Unlike some of the earlier frameworks proposed for a federal sunset process, some bills introduced in the last 15 years have incorporated a commission approach. In 1997, H.R. 2939 (105 th Congress) was introduced by Representative Kevin Brady of Texas. Modeled on the Texas sunset process, the bill called for establishment of a 12-member "Federal Agency Sunset Commission," to review and make recommendations at least every 12 years regarding the reorganization or abolishment of each federal agency, with the schedule for review to be determined by the commission. The Speaker of the House and the majority leader of the Senate were to appoint the members, each naming four congressional Members and two private citizens "with experience in the operation and administration of Government programs." Each agency was to be abolished within a year of completion of the commission's review, unless Congress acted to continue the agency. In September 1998, the House Subcommittee on Government Management, Information, and Technology held a hearing on the bill. Representative Brady and four other Members provided testimony in favor of the bill. Arguably the most serious criticism of the bill raised at the 1998 hearing concerned potential constitutional problems with the commission framework. An advisory opinion from the Department of Justice provided for the record referenced the INS v. Chada decision by the Supreme Court in 1983 (462 U.S. 919), and concluded the following: Because this bill [ H.R. 2939 ] would allow the abolishment of a statutorily created executive agency, not through legislation passed in conformity with Article I, but at the discretion and in accordance with a timetable imposed by a twelve-member Commission composed of eight members of Congress and four persons selected by the Speaker of the House and the majority leader, unless Congress affirmatively decides to adopt legislation preserving the agency, it violates the constitutionally required separation of powers. In 1999, Congressman Brady, along with 92 cosponsors, introduced a revised bill, H.R. 2128 (106 th Congress), a modified version of the sunset commission legislation containing two noteworthy additions. First, a new subsection was added under "Review and abolishment of federal agencies" relating to extensions that would have allowed the deadline for abolishment of the agency, absent congressional action to reauthorize it, to be extended for an additional two years if approved by a super-majority of the House and the Senate. Second, a new section was added providing for compilation by the three congressional support agencies of a "Program Inventory." In language reminiscent of federal sunset measures dating back to the 1970s (including S. 2 in the 95 th Congress), the section would have directed the Comptroller General of the General Accounting Office (now designated the Government Accountability Office) and the Director of the Congressional Budget Office, in cooperation with the Director of the Congressional Research Service, to prepare an inventory of federal programs within each agency for the purpose of advising and assisting Congress and the commission in carrying out the requirements of the act. On June 28, 2001, Representative Brady reintroduced virtually the same bill, now called the "Abolishment of Obsolete Agencies and Federal Sunset Act," in the 107 th Congress as H.R. 2373 . On April 23, 2002, the House Government Reform Subcommittee on Civil Service, Census, and Agency Organization held a hearing on H.R. 2373 , at which Texas Representatives Brady and Jim Turner, who had both served in the Texas legislature, testified in favor of the bill. The witness from the Office of Management and Budget (OMB) testified in general support of a sunset review process for the federal government. While acknowledging possible constitutional issues to be resolved, subsequently detailed in a letter from the Justice Department, the OMB spokesman noted that the sunset commission as outlined in the legislation was similar to the proposal for a sunset review board that President Bush endorsed during the 2000 campaign. In final days of the 107 th Congress, a substitute amendment to H.R. 2373 was circulated for comment, but no formal consideration of it occurred before adjournment. Congressman Brady introduced a measure virtually identical to H.R. 2373 , as H.R. 1227 in the 108 th Congress, but the bill received no further action. In the Analytical Perspectives volume of the President's budget submission for FY2006, sent to Congress on February 7, 2005, several budget process reform proposals were endorsed by the President. Among the actions requested, the Administration called for establishment of a federal sunset commission to provide a process by which programs undergo the regular scrutiny brought about by having to defend their existence. Programs would be reviewed according to a schedule enacted by Congress. The Commission would consider proposals to retain, restructure, or terminate programs. Programs would automatically terminate according to the schedule unless Congress took some action to reauthorize them. Discussion of reform proposals in the FY2006 budget submission also called for creation of results commissions, "to consider and revise Administration proposals to improve the performance of programs or agencies by restructuring or consolidating them." Congress would establish a results commission to address a particular program or policy area where duplicative or overlapping functions are found. If the President were to approve a commission reform proposal, the measure then would be considered by Congress under expedited procedures. In March 2005, during House consideration of H.Con.Res. 95 , the FY2006 budget resolution, Representative Hensarling offered a substitute amendment on behalf of the Republican Study Committee (RSC). Section 503 of the Hensarling amendment contained a Sense of the House provision that "legislation providing for the orderly abolishment of obsolete Agencies and providing a federal sunset for government programs should be enacted during this Congress." Although the amendment was opposed by the House leadership and defeated by a vote of 102-320, a Sense of the Senate provision regarding a commission to review the performance of programs was included in H.Con.Res. 95 as reported from conference and agreed to by both chambers. The Senate language appeared to reflect the results commission idea more than sunset, although neither type of commission was explicitly referenced. Provisions for a commission to eliminate waste, fraud, and abuse, a commission arguably similar to that envisaged in the Sense of the Senate language, were included in an omnibus budget reform bill, H.R. 2290 , the Family Budget Protection Act of 2005, introduced on May 11, 2005. On June 30, 2005, OMB released a legislative proposal titled "The Government Reorganization and Program Performance Improvement Act of 2005," to create the framework for the two types of commissions—sunset and results—mentioned in the FY2006 budget submission. Bills incorporating the draft language were introduced in both chambers on July 14, 2005. Senator Craig Thomas introduced S. 1399 , in most respects mirroring the language in the OMB proposal. In the House, two bills were introduced. The Government Reorganization and Improvement of Performance Act, H.R. 3276 , introduced by Representative Jon Porter with Representative Tom Davis and Representative Kevin Brady as cosponsors, would have authorized the establishment of results commissions. The Federal Agency Performance Review and Sunset Act, H.R. 3277 , introduced by Representative Brady for himself and Representatives Davis and Porter, would have established a Sunset Commission (SC) and review process for the federal government. On July 14, Representative Brady also reintroduced his sunset commission bill as H.R. 3282 . H.R. 3277 , unlike H.R. 3282 , would have required that the schedule for review and termination of agencies and programs be enacted into statute, arguably a key factor in concerns of constitutionality. Provisions relating to the establishment and functioning of the sunset commission in H.R. 3277 and in Section 4 of S. 1399 were very similar, but the structure and language in the two bills were not identical. Both would have established a federal sunset commission, consisting of seven members, to be appointed by the President in consultation with congressional leaders. Programs and agencies were to be reviewed by the commission at least once every 10 years, according to the schedule for review proposed by the President and enacted into law. The commission was to be empowered to obtain information from federal agencies, to hold hearings, and to consider any publicly available evaluations and assessments, including those by OMB. The bills would have required the commission to use six stipulated criteria in conducting the reviews, including cost effectiveness and extent of duplication or conflict with other agencies and programs. The commission would have provided the President with an annual report containing its assessment of each agency and program reviewed during the preceding year, along with its recommendations on how to improve the results achieved and whether to abolish any agency or program. The President would have then submitted his recommendations to Congress on the respective agencies and programs, along with the report of the sunset commission and any draft legislation needed to implement the recommendations. A program or agency was to be abolished two years after the date of submission of the President's recommendation regarding its future unless the agency or program was reauthorized or received up to a two-year deadline extension pursuant to law. The Senate bill differed from the OMB draft and H.R. 3277 with respect to at least one significant feature. Both the OMB draft and H.R. 3277 contained a noteworthy exemption with regard to certain regulations and their enforcement: "No regulations to protect the environment, health, safety, or civil rights shall sunset under this Act," nor shall any program relating to enforcing said regulations "sunset unless provision is made for the continued enforcement of those regulations." Provisions for exemptions from sunset termination were not found in S. 1399 . On September 27, 2005, the House Subcommittee on Federal Workforce and Agency Organization held a hearing on H.R. 3276 and H.R. 3277 . Testimony was received from an OMB official and from five witnesses from the private sector. In May 2006, the House leadership announced plans to bring sunset legislation quickly to the House floor, along with other budget process reforms favored by the Republican Study Committee, in return for RSC backing of the FY2007 budget resolution. In the effort to craft a consensus bill, attention came to focus on H.R. 3282 (Brady bill), and on H.R. 2470 , sponsored by Representative Todd Tiarht, which was to create a "Commission on the Accountability and Review of Federal Agencies (CARFA)," modeled on the Base Realignment and Closure Commission (BRAC) approach. Although it addressed similar concerns to those of a sunset measure, the CARFA approach did not contain an action-forcing mechanism whereby agencies and programs would terminate absent congressional action, whereas H.R. 3282 (and H.R. 3277 ) did have such provisions. On July 14, 2006, Representative Tiahrt introduced a revised version of H.R. 2470 as H.R. 5766 . On July 19, the House Government Reform Committee held a hearing on H.R. 3282 and H.R. 5766 receiving testimony in support from Representatives Brady and Tiahrt, and from two private sector witnesses who opposed the bills. Markup of both bills followed the next day. On July 20, 2006, H.R. 5766 , as amended, was reported favorably by a vote of 15-12, and H.R. 3282 , by a vote of 15-14, both largely along straight party lines. Floor action on both bills had been scheduled for June 27, but House leaders, apparently concerned with growing opposition, decided to postpone action. No further action occurred in the 109 th Congress. On February 5, 2007, President Bush, in his budget submission for FY2008, again endorsed creation of a federal sunset commission and called for enactment of a bill incorporating provisions of the Administration's proposal sent to Congress in 2005: The Sunset Commission would consider Presidential proposals to retain, restructure, or terminate agencies and programs according to a schedule set by Congress. Agencies and programs would automatically terminate according to the schedule unless reauthorized by the Congress. Support for results commissions was also reiterated: "Results Commissions would consider and revise Administration proposals to restructure or consolidate programs or agencies to improve their performance." In the budget submission for FY2009 transmitted on February 4, 2008, President Bush reaffirmed his support for a federal sunset commission. In reviewing the need for such a structure, the discussion in one of the budget documents stated the following: The Federal Government's ability to serve the American people is often hampered by poorly designed programs or uncoordinated, overlapping programs trying to achieve the same objective. Today, almost 25 percent of assessed programs on which the Government spends almost $150 billion a year have been determined to be either ineffective or unable to demonstrate results. In the 110 th Congress, Senator John Cornyn introduced a new sunset measure, S. 1731 , the United States Authorization and Sunset Commission Act, on June 28, 2007. Congressman Brady introduced H.R. 5794 , a bill virtually identical to H.R. 3282 (109 th Congress), renamed the Federal Sunset Review Act of 2008, on April 15, 2008. In the 111 th Congress, Representative Brady and Senator Cornyn reintroduced their respective sunset commission bills. The Federal Sunset Act of 2009 ( H.R. 393 ) was introduced by Representative Brady and 16 original cosponsors on January 9, 2009, and referred to the House Committee on Oversight and Government Reform. The provisions of H.R. 393 also were included as a separate title in three budget reform bills. The Spending Reform Act of 2009 ( H.R. 311 , Title II), to cap discretionary spending, eliminate wasteful and duplicative agencies, reform entitlement programs, and reform the congressional earmark process, was introduced by Representative Brady and 16 original cosponsors on January 8, 2009. The bill was referred to the Committee on the Budget, and, in addition, to the Committees on Rules, and Oversight and Government Reform, for consideration of those provisions falling within their respective jurisdictions, and for a period to be determined by the Speaker. The Responsible Government Empowerment Act of 2009 ( H.R. 534 , Title I), to improve the ability of Congress to set spending priorities and enforce spending limits, was introduced by Representative Randy Neugebauer on January 14, 2009. The bill was referred jointly to the Committees on House Budget, House Rules, and House Oversight and Government Reform, and subsequently to the Subcommittee on Government Management, Organization, and Procurement. The Spending, Deficit, and Debt Control Act of 2009 ( H.R. 3964 , Title IV, Subsection A), to reform federal budget procedures, to impose spending and deficit limits, to provide for sustainable fiscal future, and for other purposes, was introduced on October 29, 2009, by Representative Hensarling along with 20 cosponsors. The bill was referred to the Committee on the Budget, and, in addition, to the Committees on Rules, Appropriations, Oversight and Government Reform, and Ways and Means, for consideration of those provisions falling within their respective jurisdictions, and for a period to be determined by the Speaker. Senator Cornyn and four cosponsors introduced S. 926 , the United States Authorization and Sunset Commission Act of 2009, on April 29, 2009; the bill was referred to the Senate Committee on Homeland Security and Governmental Reform. In remarks accompanying the introduction of the bill, Senator Cornyn stated that the bill represented an important step to making sure that Congress gets back to the hard work of oversight to determine if programs actually fulfill their stated purposes or yield some unintended or counterproductive results. Periodic assessments are essential to good government and this is what the Commission will provide to Congress and to taxpayers across the country. In the first session of the 111 th Congress, the Congressional Budget Resolution for FY2010, S.Con.Res. 13 , as passed by the Senate provided for the establishment of a deficit-reduction reserve fund for the bipartisan congressional sunset commission. Such a reserve fund was not among those included in the House-passed version, however, nor was it retained in the conference version of S.Con.Res. 13 , as approved by both chambers. H.R. 393 would have created a Federal Agency Sunset Commission (FASC) to review the efficiency of and public need for federal agencies and would have provided for the abolishment of agencies for which a public need did not exist. The FASC would have consisted of 12 members appointed by the Speaker of the House and the Senate majority leader. Of the six members appointed by the leaders of the respective chambers, four would have been Members of Congress, with not more than two from the same political party. Within one year after its establishment, the commission would have submitted to Congress a schedule for the review of all federal agencies and advisory committees by the commission, at least once every 12 years, and for the abolishment of each agency following the review absent congressional reauthorization. Agencies performing similar or related functions would have been scheduled for review at the same time. Then the commission would have commenced its annual reviews, utilizing the 19 criteria specified in the bill in reviewing and evaluating the efficiency and public need for each agency. By September 1 of each subsequent year, the commission would have reported to the President and Congress, and recommended whether each agency reviewed that year should be abolished or reorganized and whether functions of other agencies should be consolidated, transferred, or reorganized. The FASC also would have submitted draft legislation to carry out the recommendations. Under the sunset provisions in the bill, an agency would have been abolished within one year of the commission's review, unless the agency received statutory extension. The bill would have allowed the deadline for abolishing an agency to be extended for an additional two years by legislation enacted by a super majority of the House of Representatives and the Senate. The commission also would have reported to Congress on all legislation introduced that would establish a new agency or a new program to be carried out by an existing agency. H.R. 393 would have directed the Comptroller General of the Government Accountability Office and the Director of the Congressional Budget Office, in cooperation with the Director of the Congressional Research Service, to prepare an inventory of federal programs within each agency for the purpose of advising and assisting Congress and the commission in carrying out the requirements of the act. S. 926 would have created the United States Authorization and Sunset Commission (USASC), with membership consisting of four Representatives and four Senators, appointed by the Speaker of the House and the Senate majority leader, respectively, with no more than two from each chamber of the same political party. The bill would have required the USASC to submit to Congress, not later than 18 months after this act's enactment and at least once every 10 years thereafter, a legislative proposal (referred to as the Commission Schedule and Review bill) that would have included a schedule of review and abolishment of agencies and programs. The bill would have required that the schedule contain a time line for review by the USASC and proposed abolishment of (1) at least 25% (as measured in dollars) of unauthorized agencies or programs; and (2) if applicable, at least 25% of the programs identified by the Office of Management and Budget (OMB), through a review program similar to the Program Assessment Rating Tool (PART, created and used during the Administration of George W. Bush), as ineffective or results not demonstrated. The bill would have required that agencies performing similar or related functions be reviewed concurrently. S. 926 set forth criteria that would have been used by the USASC in conducting its reviews. The bill would have required the USASC to submit to Congress and the President every two years a report that analyzed and included, as appropriate, proposals and legislative provisions to reauthorize, reorganize, consolidate, expand, or transfer any agency or program having undergone its scheduled review. Both the schedule and review bill and legislative proposals accompanying reports from the USASC would have been subject to expedited procedures during their consideration by Congress. Another bill, H.R. 5407 , the Program Reform Commission Act, was introduced by Representative Adam Smith on May 26, 2010, and referred to the Oversight and Government Reform Committee. The bill would have established a Program Review Commission within the legislative branch to review and identify unnecessary federal programs; to make recommendations for termination, modification, or retention of such programs; and to express the sense of the Congress that the House and Senate should promptly consider legislation to make the statutory changes needed to implement the recommendations. Since the only action-forcing mechanism consisted of sense of the Congress provisions, H.R. 5407 was not strictly speaking a sunset bill. Similarly, H.R. 2142 , the Government Efficiency, Effectiveness, and Performance Improvement Act, as amended and enacted as P.L. 111-352 , lacked automatic termination provisions absent congressional action, but contained more binding program review and assessment requirements. The new law strengthened the Government Performance and Results Act of 1993 (GPRA) by requiring agencies to identify high-priority goals cutting across agency programs and to perform frequent evaluations of progress toward achieving those goals. P.L. 111-352 required a review of government programs at least once every five years to assess their performance and improve their operations. A preliminary and final list of programs to be assessed each year was to be prepared by the OMB Director. On June 14, 2010, H.R. 2142 , as amended, was reported favorably by the Committee on Oversight and Government Reform, and approved by the House by voice vote under suspension of the rules on June 16, 2010. During committee markup of H.R. 2142 on May 20, 2010, Representative Schock offered an amendment. His amendment proposed to add a new section at the end of the substitute version, to establish a Federal Program Sunset Commission, consisting of eight Members of Congress, along with four members not serving in Congress. The commission would prepare and submit to Congress a schedule for reviewing federal programs, and prepare and submit to Congress and the President an annual report due by September 1. The report would contain an analysis of the efficiency and need of each federal program subject to review that year; recommendations on whether each federal program should be abolished or reorganized; and recommendations for consolidation, transfer, or reorganization of similar functions from other federal programs. The commission would submit to Congress and the President draft legislation to carry out the recommendations included in the annual report. Each federal program would then be abolished within one year of its review by the commission unless reauthorized by Congress. The amendment was defeated by vote of 17 nays to 11 yeas. Another bill with an action-forcing mechanism was introduced in the second session. On June 22, 2010, Representative Nye, with 29 original cosponsors, introduced H.R. 5568 , the Stop Waste by Eliminating Excessive Programs (SWEEP) Act, "to create a means to review and abolish Federal programs that are inefficient, duplicative, or in other ways wasteful of taxpayer funds." Key provisions of the SWEEP Act included the following: the creation of a Federal Programs Sunset Commission (FPSC) as a bipartisan legislative body, with all members appointed by the congressional leadership and excluding any officer or employee of the executive branch and with powers to hold hearings, obtain official data from executive agencies, and issue subpoenas; the Comptroller General of the Government Accountability Office (GAO) to prepare a preliminary and then a final program inventory organized by program areas reflective of national needs and agency missions, and with assistance from the Director of the Congressional Research Service and compilation of required budgetary information from the Director of the Congressional Budget Office; the commission to establish the schedule for review of each program, arranged by functional category, at least once every 10 fiscal years; the commission to review all government-funded programs to determine their merit in proven outcomes, cost-effective record, scope of interest, and whether there exist programs receiving funding for duplicative purposes; the commission to report to Congress annually on programs that should be abolished, consolidated, transferred, reorganized, or remain untouched, and include in the report implementation bills to bring about any recommended actions (such as abolishment); and the bill provided expedited procedures to facilitate prompt congressional consideration and action, including an up or down vote, on legislation combining, reorganizing, or abolishing wasteful programs as recommended by the commission, thereby reducing unnecessary government spending. On October 13, 2010, Representative Issa, then serving as ranking minority Member on the House Oversight and Government Reform Committee (who became chair in the 112 th Congress), called for the establishment of a federal program sunset commission in an op-ed piece appearing in Investor 's Business Daily . The proposed sunset commission would have been bipartisan, consisting of experts from outside the federal government. According to Representative Issa, such "an independent commission would foster objectivity without playing favorites among political constituencies. Within one year of a commission review, a failing program would have been abolished automatically unless reauthorized by Congress." The proposal did not include endorsement of any specific sunset bill pending in the 111 th Congress. The article was largely silent regarding significant features, such as appointment of members, criteria for evaluating programs, and commission powers and structure. In the view of journalist Robert Brodsky, one clue about operations of the sunset commission as envisaged by Representative Issa "can be found in the failed amendment" to H.R. 2142 . As discussed already, the amendment offered during markup by Representative Schock also would have established a federal program sunset commission. One significant difference between the Shock amendment and a sunset commission as outlined by Representative Issa concerned membership. In the amendment version, 8 of the 12 members of the sunset commission would have been Members of Congress, whereas under Representative Issa's proposal all commission members would have been independent nongovernmental experts. The following discussion highlights some similarities and differences between three bills introduced in the 111 th Congress to establish a sunset commission, H.R. 393 (Brady bill), S. 926 (Cornyn bill), and H.R. 5568 (SWEEP bill). With respect to scope of coverage, both H.R. 393 and S. 926 referred to the definition of federal agency in 5 U.S.C. 105. The actual coverage, however, would have depended upon decisions taken subsequent to enactment. H.R. 5568 did not include a definition of agency, but instead focused on programs, as defined in 31 U.S.C. 1115(g)(6). In all three bills the sunset commission would have drafted and submitted to Congress the schedule for review. With respect to membership, all three bills called for a 12-member bipartisan commission, consisting of eight Members of Congress and four others. Under H.R. 393 six members of the commission would have been named, respectively, by the Speaker of the House and the Senate majority leader. S. 926 and H.R. 5568 both would have consisted of the following: two Democrats would be appointed from the House of Representatives by the Speaker, and from the Senate by the majority leader, and, likewise, two Republicans would be appointed from each chamber with the consent of the respective minority leaders. In addition, under S. 926 the Director of the Congressional Budget Office and the Comptroller of the Government Accountability Office would have served as non-voting ex officio members of the commission. All three bills would called for the commission chair to appoint a staff director. S. 926 would have had the chair appoint other personnel as needed, whereas H.R. 393 and H.R. 5568 would have delegated appointment of other staff to the director. With regard to administrative support, H.R. 393 would have had the General Services Administration (GSA) provide such services to the commission on a reimbursable basis. In contrast, S. 926 would have authorized the commission to receive administrative support services from GSA or GAO on a nonreimbursable basis. H.R. 5568 , however, did not address the matter of administrative support for the commission. H.R. 393 and S. 926 contained action-forcing mechanisms that would have terminated programs and agencies following the sunset reviews, unless reauthorized in law. Provisions in H.R. 393 would have abolished an agency within one year of the commission's review, absent statutory extension, and would have allowed for enactment of legislation extending the deadline for abolishing an agency for an additional two years. S. 926 would have abolished any agency or program two years after the commission had completed its review absent reauthorization. H.R. 5568 would have established a sunset review process that "should ensure that Congress considers the reports and recommendations of the commission in a timely fashion." H.R. 5568 also contained a sense of Congress provision "that no funds should be appropriated for programs abolished by Congressional action taken as a result of this Act" (§105). The bills each specified criteria to be utilized in carrying out the program reviews. H.R. 393 contained the stronger provisions for transparency and public involvement in the sunset reviews. With respect to information gathering, the House bill would have required that the FASC conduct public hearings and provide an opportunity for public comment on the abolishment of the agency. The FASC also would have consulted with the chairman and ranking minority Member of the congressional oversight committees, as well as GAO and OMB. There was no reference to public hearings or public comment in S. 926 and H.R. 5568 ; the bills simply provided that the respective commissions, in carrying out the provisions of the act, might hold hearings, take testimony, and receive evidence. S. 926 would have provided expedited procedures for congressional action on the review schedule, and the expedited procedures would apply as well to the Commission Schedule and Review bill and other legislative proposals submitted to Congress by the USASC. H.R. 5568 would have provided for expedited procedures in consideration of any draft bills accompanying the annual report of the FPSC to implement recommended abolishment of programs. No expedited procedures were included in H.R. 393 . On the other hand, H.R. 393 and H.R. 5568 contained provisions for compilation of a program inventory by the legislative support agencies, whereas S. 926 did not call for a program inventory. Two of the bills would have authorized the appropriation of funds to carry out the duties of the respective commissions. S. 926 contained commonly used "such sums as may be necessary" language, while H.R. 393 would have required that amounts appropriated for commission operations be offset by reductions in spending for other programs. H.R. 5568 did not authorize any appropriation of funds. Finally, all three bills included sunset provisions for the commission itself. Under H.R. 393 , the commission would have terminated on December 31, 2033; and under S. 926 , on December 31, 2039. The FPSC would have had the shortest life span, since H.R. 5568 stipulated that the commission would terminate 11 years after the date of enactment of the SWEEP Act, unless reauthorized by Congress. Representative Kevin Brady, departing from his practice in the last six Congresses, has not reintroduced a sunset commission bill in the 112 th Congress. On January 7, 2011, he introduced an arguably more expansive measure, H.R. 235 , the Cut Unsustainable and Top-Heavy Spending Act of 2011 or "CUTS Act," however, which calls for the "Mandatory Elimination of Duplicative Government programs." As provided in Section 11 of H.R. 235 , the OMB director and agency heads "shall work" with the chairs and ranking Members of the relevant authorizing committees and appropriations subcommittees "to consolidate programs with duplicative goals, missions, and initiatives." Within 120 days following enactment, the OMB director would compile and submit to Congress a listing of federal programs "with duplicative goals, missions, and initiatives with recommendations for consolidation or elimination." Absent congressional action within 60 days of receipt of the OMB report, the department secretaries and agency heads would be required to carry out the OMB recommendations as submitted to Congress. On February 10, 2011, Representative Schock, along with three cosponsors, introduced H.R. 606 , the Federal Program Sunset Commission Act, which was referred to the Government Oversight and Reform Committee. This sunset measure in the 112 th Congress, incorporates some different provisions from those seen in the amendment offered by Representative Schock during mark-up of H.R. 2142 in the 111 th Congress (already discussed). For example, departing from the Texas model of a legislative sunset commission, H.R. 606 would provide for a 10-member commission appointed by the President with the advice and consent of the Senate. Half of the commissioners would consist of former Members of Congress (not more than three of the same party), while the other five members would represent non-legislators with "expertise in the operation and administration of Federal programs." Congressional leaders would provide the President with a list of recommended nominees. On March 16, 2011, Senator John Cornyn proposed S.Amdt. 186 to S. 493 , a small business reauthorization bill. The amendment would add a new title at the end of S. 493 , to be called the United States Authorization and Sunset Commission Act of 2011, which contains some provisions similar to those seen in S. 926 in the 111 th Congress. On May 2, 2011, Senate Majority Leader Harry Reid filed a cloture motion to close debate on S. 493 . In his remarks, Senator Reid spoke of the effort to work out an agreement to have votes on certain amendments to the small business bill in order to get closer to final passage, referring to the example of the Cornyn amendment [to establish a bipartisan sunset commission for the purpose of improving oversight and eliminating wasteful government spending] included in the agreement, "having absolutely nothing—no relevance—nothing being germane to this bill." On May 4, the cloture motion was defeated, and no further action has occurred on S. 493 nor on S.Amdt. 186 . Supporters of sunset commission measures suggest that there are too many overlapping and ineffective federal programs that contribute to the growing federal deficit, and that the existing structure of congressional committees does not encourage systematic review of similar agencies and programs. This view arguably is substantiated by data provided in a 2011 report prepared by the Government Accountability Office (GAO), in compliance with a new statutory mandate. The law requires GAO to "identify federal programs, agencies, offices, and initiatives, either within departments or governmentwide, which have duplicative goals or activities." According to sunset proponents, the perception that congressional reviews of many programs are sporadic and inadequate is also evidenced by the number of unauthorized appropriations. Therefore, those favoring a federal sunset commission contend, an action-forcing mechanism—such as threat of termination—is necessary; a sunset commission, they continue, would assist Congress in performing its oversight function, thereby reducing fraud, waste, and abuse. President Bush alluded to some of these possible benefits in support of a sunset commission in his budget submissions for FY2006, FY2007, and FY2008. In 2010, President Obama's deficit reduction commission suggested creation of a Cut-and-Invest Committee, similar to a sunset commission, noting that such an entity "has been recommended many times, and has found bipartisan support." According to a draft document of the commission, such a committee would review each federal agency, look for outdated, duplicative, under-performing, low-priority, or unnecessary programs, and consider changes to improve each agency's operation. After its review, the Cut-and-Invest Committee would submit a report to Congress containing an analysis of each agency, and give recommendations as to which programs should be reauthorized, abolished, consolidated, reorganized, or otherwise substantively changed. Congress would be required to draft legislation carrying out the recommendations. Advocates of a federal sunset commission sometimes contend that the viability and usefulness of sunset commissions has been demonstrated in states such as Texas. In remarks in the 112 th Congress on March 16, 2011, when calling up his amendment No. 186 to establish a bipartisan sunset commission, Senator Cornyn noted that his proposal has been "modeled after the sunset process that my State [Texas] instituted in 1977, which has been enormously successful. It has eliminated more than 50 different State agencies and saved taxpayers in the hundreds of millions of dollars." Some figures regarding the outcome of sunset reviews in Texas have already been noted. With respect to the fiscal impact of commission recommendations, the Texas Sunset Advisory Commission has reported, "Estimates from reviews conducted between 1982 and 2009 indicate a potential 27-year savings of approximately $783.7 million, compared with expenditures of $28.6 million for the Sunset Commission. Based on these estimates every dollar spend on the Sunset process has earned the State more than $27 in return." Critics of the sunset commission measures counter that such bills would burden Congress with a tremendous workload for mandatory reauthorization of agencies and programs and might prove infeasible to carry out, or alternatively, result in perfunctory reviews. A sunset commission might increase congressional personnel costs, since additional staff would be needed to assist the commission in its review activities. Opponents of sunset commissions also contend that the fast-track and automatic termination provisions would grant substantial power to the new commission and might potentially result in termination of important programs. As suggested in an article critical of Senator Cornyn's 2011 proposal: "Eight members of Congress would have power usually reserved to whole committees in both houses, and Congress as a whole would be left with just a single set of recommendations in one bill, potentially involving hundreds of programs related to education, the environment, workers, housing, nutrition, transportation, and other vital issues and constituencies." Critics of sunset commissions also point to lack of transparency in the activities of some commission measures. For example, a sunset commission such as that proposed in S.Amdt. 186 may not be required to hold open meetings or hearings or to otherwise provide for public participation in commission deliberations. Some disapproving of a federal sunset commission further note that a key feature of the sunset process is that programs and agencies would terminate after the submission of the commission's report and recommendations to Congress, unless they receive statutory extensions. This means that following congressional approval of a reauthorization bill, the measure would have to go to the President in order to be signed into law. If the President were to veto the bill, a two-thirds majority in both chambers would be necessary to override the veto and extend the life of the program or agency. The possibility of a popular program or agency being eliminated by a President, with the support of one-third of the House and Senate, arguably would represent a significant transfer of power from Congress to the executive branch. | The sunset concept provides for programs and agencies to terminate automatically on a periodic basis unless explicitly renewed by law. Beginning in the 107th Congress, Representative Kevin Brady introduced a series of bills to create a federal sunset commission, modeled on the sunset review process in Texas (including most recently H.R. 393 in the 111th Congress). Former President George W. Bush called for creation of a federal sunset commission in his FY2006 budget submission. Bills reflecting an Office of Management and Budget (OMB) draft proposal were introduced in the 109th Congress, and the Government Reform Committee voted to report H.R. 3282 favorably, but no further action occurred. In the 110th Congress, with the budget submissions for FY2008 and FY2009, President Bush reaffirmed his support for passage of the Administration's proposal to create a federal sunset commission. In addition to the Brady bill (H.R. 5794), a new sunset measure, S. 1731, was introduced on June 28, 2007, by Senator John Cornyn. In the 111th Congress, Representative Brady reintroduced his sunset commission bill as H.R. 393, the Federal Sunset Act of 2009. Senator Cornyn likewise reintroduced his measure as S. 926, the United States Authorization and Sunset Commission Act of 2009. Provisions very similar to those in H.R. 393 also were found as a separate title in at least three budget reform bills in the 111th Congress, including H.R. 311 (Title II), H.R. 534 (Title I), and H.R. 3964 (Title IV, Subtitle A). In the second session, two sunset-related measures, absent action-forcing provisions, were introduced as H.R. 5407 and H.R. 2142, with the latter, as amended, eventually enacted as P.L. 111-352. H.R. 5568, the Stop Waste by Eliminating Excessive Programs (SWEEP) Act, was introduced by Representative Glenn Nye. In the 112th Congress, a newly formulated sunset commission bill, H.R. 606, the Federal Program Sunset Commission Act, was introduced on February 10, 2011, by Representative Aaron Schock and cosponsors. Representative Brady introduced a bill with sunset-like provisions but no commission (H.R. 235 §11). On March 16, 2011, Senator Cornyn proposed provisions previously seen in his sunset commission measure as an amendment (S.Amdt. 186 to S. 493). Supporters of sunset commission measures suggest that there are too many overlapping and ineffective federal programs that contribute to the growing federal deficit, and that the existing structure of congressional committees does not encourage systematic review of similar agencies and programs. According to sunset proponents, congressional reviews of many programs are sporadic and inadequate, as evidenced by the number of unauthorized appropriations. An action-forcing mechanism—such as threat of termination—is necessary; a sunset commission would assist Congress in performing its oversight function, thereby reducing fraud, waste, and abuse. Critics of the sunset commission measures counter that such bills would burden Congress with a tremendous workload for mandatory reauthorization of agencies and programs. Consequently, such measures may prove infeasible to carry out, or alternatively, result in perfunctory reviews. Sunset commissions might increase congressional personnel costs, since additional staff would be needed to assist the commission in its review activities. Opponents further contend that the review and reauthorization process would pose a special threat to certain kinds of programs, such as those which provide a safety net for the most vulnerable in society. This report will be updated as events warrant. |
The Runaway and Homeless Youth Act (RHYA) was enacted in 1974 as Title III of the Juvenile Justice and Delinquency Prevention Act ( P.L. 93-415 ). RHYA authorizes funding for grant programs that provide direct services to youth—the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP)—and related training, research, and other activities. These programs and activities are administered by the Family and Youth Services Bureau in the Department of Health and Human Services' (HHS) Administration for Children and Families. The Basic Center Program provides temporary shelter, counseling, and after care services to runaway and homeless youth under age 18 and their families, while the Transitional Living Program is targeted to older youth ages 16 to 21. Youth who use the TLP receive longer-term housing with supportive services. The Street Outreach Program provides education, treatment, counseling, and referrals for runaway, homeless, and street youth who have been subjected to or are at risk of being subjected to sexual abuse and exploitation. RHYA has been reauthorized approximately every five years since the 1970s. Most recently, in the second session of the 110 th Congress, the President signed into law the Reconnecting Homeless Youth Act ( P.L. 110-378 ) to extend existing programs and authorize new activities under RHYA for FY2009 through FY2013. P.L. 110-378 represents a compromise between provisions that were included in two bills— H.R. 5524 and S. 2982 —to reauthorize RHYA. On March 4, 2008, Representative John Yarmuth introduced H.R. 5524 , the Reconnecting Homeless Youth Act of 2008. The bill was referred to the House Education and Labor Committee, but was not taken up by the committee. On June 9, 2008, the House approved the bill by voice vote under suspension of the rules. The version of the bill that was passed contained most of the same provisions as the original version. On May 6, 2008, Senator Patrick Leahy introduced S. 2982 , the Runaway and Homeless Youth Protection Act. On May 22, 2008, the Senate Judiciary Committee passed S. 2982 , which included an amendment that substituted the introduced version with a similar version of the bill. On September 25, 2008, S. 2982 was approved by the Senate. The Senate-passed version is different from the version that passed the Judiciary Committee and includes many of the same provisions as those in H.R. 5524 . The House approved S. 2982 on September 26, 2008, and the President signed it into law as P.L. 110-378 on October 8, 2008. This report first provides a broad overview of P.L. 110-378 , followed by a more detailed summary of the law's provisions. The second section discusses the issues that were raised during hearings in the 110 th Congress about runaway and homeless youth, and the provisions in P.L. 110-378 that, in part, address these issues. Table A-1 at the end of the report provides a side-by-side comparison of P.L. 110-378 with prior law, current regulation, and H.R. 5524 . As shown in the table, notable differences include funding authorization levels, the authorization for a national homeless youth awareness campaign (as proposed by H.R. 5524 ), length of stay at RHYA-funded programs, and the definitions of runaway youth and homeless youth. The Reconnecting Homeless Youth Act of 2008 ( P.L. 110-378 ) reauthorizes programs for runaway and homeless youth, expands congressional oversight of these programs, and establishes new activities. The major provisions of the law relate to funding for the Basic Center Program, Transitional Living Program, and Street Outreach Program; requirements for grantees that receive BCP and TLP grants; and accountability of programs and activities authorized under RHYA. Funding. P.L. 110-378 authorizes FY2009 appropriation levels for the BCP, TLP, and related activities that exceed the levels authorized for FY2004 by $35 million (these are the only recent years for which Congress has specified authorized appropriation levels). The law also increases the authorized annual minimum levels of BCP funding available for states and territories. It further requires HHS to reallocate unused BCP funds from one state to another. The amount allocated to states for FY2009 and FY2010 may not be lower than the amount appropriated to the states in FY2008. Requirements. P.L. 110-378 allows youth to remain in a program funded under the BCP and TLP longer they were able to under the prior law, although the law imposes additional criteria for youth who stay longer at TLP-funded programs. The law also changes the definition of "homeless youth" to permit youth older than age 18 and 22 to stay at BCP- and TLP-funded programs, respectively, but only under certain circumstances. Another change made by the law specifies that in funding grants for research and other projects related to runaway and homeless youth, HHS is to give priority to applicants that serve diverse youth and represent diverse geographic regions of the U.S. (The term "diverse" is not defined.) Other requirements pertain to BCP and TLP plans submitted by grant applicants. Accountability. P.L. 110-378 requires HHS to promulgate regulations that specify performance standards for public and non-profit entities that receive BCP, TLP, and SOP grants. The law further requires HHS to periodically submit to Congress an incidence and prevalence study of runaway and homeless youth ages 13 to 26, as well as the characteristics of a representative sample of these youth. HHS must consult with the U.S. Interagency Council on Homelessness in developing the study. The law also directs the Government Accountability Office (GAO) to evaluate the process by which organizations apply for BCP, TLP, and SOP, including HHS's response to these applicants. GAO is to submit a report on its findings to Congress. The discussion below provides more details of these provisions. The prior law ( P.L. 108-96 ) to reauthorize the Runaway and Homeless Youth Act authorized funding for all parts of the Runaway and Homeless Youth Act, except the Street Outreach Program, at $105 million for FY2004 and such sums as may be necessary for FY2005 through FY2008. The Street Outreach Program was authorized to receive such sums as may be necessary for FY2004 through FY2008. For all parts of RHYA, except the SOP and the new incidence and prevalence study provisions, the Reconnecting Homeless Youth Act of 2008 authorizes $140 million for FY2009 and such sums as may be necessary for FY2010 through FY2013. The law authorizes $25 million for the SOP for FY2009 and such sums as may be necessary for FY2010 through FY2013. Finally, the law authorizes such sums as may be necessary for the study for FY2009 through FY2013. Funding for the Basic Center Program and related training and other activities is allocated among states (including the District of Columbia) and the territories, and is distributed by HHS on a competitive basis to community-based organizations. As the law existed prior to the enactment of P.L. 110-378 , each state and territory received a minimum annual allotment of $100,000 and $45,000, respectively, in BCP funds. P.L. 110-378 increases the annual minimum funding available for each state to $200,000 and for each territory to $70,000. The law also provides that funding for each state in FY2009 and FY2010 is to be no less than the amount allotted to that state for FY2008 (the bill is silent on a minimum for territories in those years). Further, unlike prior law, P.L. 110-378 enables the HHS Secretary to reallot any funds that have not been obligated before the end of a fiscal year for a state to the other states. The law does not specify the criteria for re-allotting the funds. The new law does not change the funding structure for the Transitional Living Program and Street Outreach Program. Funds for these programs are allocated competitively by HHS to community-based organizations. P.L. 110-378 changes program requirements related to (1) the length of time that youth are eligible to stay in Basic Center Program and Transitional Living Program facilities; (2) the definition of homeless youth and runaway youth; (3) BCP and TLP plans submitted by applicants; and (4) applicants that are to be prioritized under the Street Outreach Program. The Reconnecting Homeless Youth Act of 2008 authorizes longer periods in which a youth may stay at a program funded by the BCP or TLP. Current regulation specifies that youth may remain at a BCP shelter for up to 15 days. However, P.L. 110-378 permits youth to stay at a shelter for up to 21 days. The new law continues to allow youth to remain at TLP projects for up to 540 days (18 months) or longer for youth under age 18 and adds that a youth may remain in the program for a continuous period of 635 days (approximately 21 months) under "exceptional circumstances." This term means circumstances in which a youth would benefit to an unusual extent from additional time in the program. The new law further authorizes that a youth in a TLP who has not reached age 18 on the last day of the 635-day period may, in exceptional circumstances and if otherwise qualified for the program, remain in the program until his or her 18 th birthday. Under the law as it existed prior to the enactment of the Reconnecting Homeless Youth Act of 2008, "homeless youth" for purposes of the BCP was defined as an individual younger than age 18 for whom it is not possible to live in a safe environment with a relative and for whom no other safe alternative living arrangement exists. P.L. 110-378 amends the first clause to define "homeless youth" as an individual younger than age 18, or an older maximum age if the BCP center is located in a state or locality with a law or regulation that permits this higher age. For purposes of the TLP, the prior law defined "homeless youth" as an individual age 16 through 21 for whom it is not possible to live in a safe environment with a relative and for whom no other safe alternative living arrangement exists. P.L. 110-378 changes the first clause of the definition to include an individual ages 16 through 22, or an age exceeding 22 years old on the last day the youth is permitted under law to be at the shelter, so long as the participant enters the TLP project prior to reaching age 22. (As mentioned above, P.L. 110-378 permits a stay of 540 days, or up to 635 days if the youth would greatly benefit from being in the program.) Finally, under current regulation, a "runaway youth" is defined as a person under age 18 who absents himself or herself from home or place of legal residence without the permission of his or her family . P.L. 110-378 enacts similar language that defines "runaway youth" as an individual who leaves home or place of residence without the permission of his or her parent or legal guardian. As required under the previous law, applicants for TLP funding were required to submit a plan to the HHS Secretary specifying that they would provide, directly or indirectly, shelter and services, among other types of assistance. The Reconnecting Homeless Youth Act of 2008 amends the law to require that applicants provide, by a grant, agreement, or contract, shelter, services, and other assistance. Also under P.L. 110-378 , applicants for TLP and BCP grants must develop an adequate emergency preparedness and management plan. Under the law as it existed prior to enactment of the Reconnecting Homeless Youth Act of 2008, HHS was to prioritize non-profit private agencies with experience in providing services to runaway and homeless youth, including youth living on the street, when awarding grants under the Street Outreach Program. P.L. 110-378 requires that HHS also give priority to public agencies with experience in serving runaway and homeless youth. P.L. 110-378 also makes changes to the priority areas for awarding grants for research, evaluation, demonstration, and service projects concerning runaway and homeless youth. Under the prior law, HHS could prioritize projects that addressed one of nine priority areas. P.L. 110-378 modifies the language regarding two of these priority areas. For one of the priority areas, regarding access to quality health care, the law changes the reference from projects addressing mental health care to projects addressing behavioral health care. For the other priority area, regarding access to education, the law adds that the projects should decrease high school dropout rates, increase rates of attaining a secondary school diploma or its recognized equivalent, or increase placement and retention in postsecondary education or advanced workforce training programs. The law also inserts as a tenth priority area projects that assist youth in obtaining and maintaining safe and stable housing. Finally, P.L. 110-378 makes a change pertaining to applicants that apply for grants to implement projects in one of the priority areas. Under the previous law, HHS was to give priority consideration to applicants with experience working with runaway and homeless youth. P.L. 110-378 adds that HHS is to ensure selected applicants represent diverse geographic regions of the U.S. and carry out projects that serve diverse youth. "Diverse" is not defined in the law. The Reconnecting Homeless Youth Act of 2008 includes provisions that seek to improve accountability of programs and activities authorized by RHYA, including requiring HHS to establish performance standards for BCP, TLP, and SOP grantees; directing GAO to evaluate the process by which grants are awarded under the three programs; and requiring HHS to periodically submit a report to Congress that contains estimates of runaway and homeless youth and certain characteristics of the population. The Reconnecting Homeless Youth Act of 2008 requires that within one year after its enactment (October 8, 2009), HHS is to issue rules that specify performance standards for public and non-profit entities that receive BCP, TLP, and SOP grants. In developing the regulations, HHS is to consult with stakeholders in the runaway and homeless youth policy community. The law further requires that HHS integrate the performance standards into the grantmaking, monitoring, and evaluations processes for the BCP, TLP, and SOP. As they existed prior to the enactment of P.L. 110-378 , the RHYA statute and accompanying regulations did not explicitly set forth performance standards for the grantees. However, grantees were (and are) collectively expected to meet certain performance measures established by the Office of Management and Budget's (OMB) Program Assessment Rating Tool (PART) process. The performance measures are as follows: achieve the proportion of youth served in the TLP entering safe and appropriate settings directly after exiting care at 85% by FY2008 and maintain this level through FY2010 (this is known as a long-term outcome measure); improve funding efficiency by increasing the percentage of youth who complete the TLP by graduating or who leave ahead of schedule because of other opportunities (this is known as a long-term efficiency measure); increase the percentage of TLP youth participants who are engaged in community service and service learning activities while in the program (this is known as a outcome measure); and increase the proportion of youth who are prevented from running away through BCP in-home or off-site services (this is known as an outcome measure). Data for these outcome measures are collected from each grantee through the NEO-RHYMIS (National Extranet Optimized Runaway and Homeless Youth Management Information System) reporting system, which includes a range of data elements on the characteristics and short-term outcomes of youth receiving services through the BCP, TLP, and SOP. Further, during the grant application process, described below, applicants must discuss the results or benefits expected from their programs. For example, applicants are advised to identify quantitative outcomes for their proposed projects that will fulfill the program purpose and scope of services, as described in RHYA and the grant announcement. The Reconnecting Homeless Youth Act of 2008 directs the Government Accountability Office to examine the process by which organizations apply for BCP, TLP, and SOP grants. Specifically, GAO is to submit to Congress findings and recommendations relating to (1) HHS's written responses to and other communications with unsuccessful applicants to determine if the information in the responses is conveyed clearly; (2) the content of the grant applications and other associated documents to determine if these materials are presented in a way that gives an applicant a clear understanding of the information that is to be provided and the terminology used in the materials; (c) the peer review process (if any) for the grants; (d) the typical time frame for responding to applicants and the efforts made by HHS to communicate about delayed funding decisions; and (e) the plans for implementation of technical assistance and training authorized under RHYA, and the effect of such programs on the application process for the grantees. Applicants for BCP, TLP, and SOP grants are currently evaluated and rated by an independent review panel made up of non-federal reviewers who are experts in the field of runaway and homeless youth issues. The review panel uses evaluation criteria to assign a score up to 100 for each applicant and to identify the application's strengths and weaknesses. The criteria are established in regulation and described in greater detail in the grant announcements. As set forth in the grant announcements, these criteria include the extent to which the application identifies the services that will be provided, as required by and consistent with RHYA, among other requirements; demonstrates the organizational capacity necessary to oversee federal grants through an explanation of the organization's fiscal controls and governance structure, among other requirements; identifies quantitative outcomes for the proposed project that will fulfill the program purpose and scope of services as described in RHYA and the grant announcement, among other requirements; describes clear and appropriate program objectives that will fulfill the program purpose, as well as a clear need for the proposed project through a discussion of the conditions of youth and families in the area to be served, among other requirements; includes an organizational chart that demonstrates the relationship between all positions, including consultants, sub-grants and/or contractors, to be funded through the grant, among other requirements; and includes a detailed line-item budget for the federal and non-federal share of project costs and demonstrates how cost estimates were derived. As further described in the grant announcements, the review panel's assigned scores assist the FYSB Associate Commissioner and program staff in considering applications. Applications are generally ranked in order of the average scores assigned by reviewers; however, the scores, in combination with other factors, determine whether an application is funded. These other factors include, but are not limited to, comments of reviewers and government officials, HHS staff evaluation and input, geographic distribution, previous program performance of applicants, compliance with grant terms under previous HHS grants, audit reports, investigative reports, and an applicant's progress in resolving any final audit disallowance on previous FYSB or other federal agency grants. According to HHS, because RHYA grants are highly competitive, well-qualified applicants may not receive funding. Further, in some years, applicants with scores in the 90s have not been awarded grants because such a large number of applicants receive scores of 100 or close to 100. HHS does not have an appeals process for unsuccessful applicants. However, in accordance with HHS's Awarding Agency Grants Administration Manual (AAGAM), unsuccessful applicants are notified by letter that they were not awarded funding, with a full explanation of the reasons the application was not funded. The letter contains a compilation of review comments outlining the strengths and weaknesses of their application as identified by the panel of non-federal reviewers. Compilations are also available for successful applications, however, they are only sent at the request of these applicants. Scores are not automatically sent to any applicants but are available upon request. The precise number of homeless and runaway youth is unknown due to their residential mobility and other factors, and RHYA, as authorized through FY2008, was silent on whether HHS or any other entity was to approximate this number. Runaway and homeless youth often eschew the shelter system for locations or areas that are not easily accessible to shelter workers and others who count the homeless and runaways. Determining the number of homeless and runaway youth is further complicated by the lack of a standardized methodology for counting the population and inconsistent definitions of what it means to be homeless or a runaway. In response to a 2002 congressional request through the appropriations process, HHS submitted a report to Congress in 2003 that discusses a plan for developing estimates of the incidences of runaway, throwaway, homeless, and street experiences among youth, as well as a plan for regularly monitoring incidence trends. The Reconnecting Homeless Youth Act of 2008 seeks to determine the number of youth who have run away or are homeless by requiring HHS to estimate at five year intervals, beginning within two years of the enactment of P.L. 110-378 (October 8, 2010), the incidence and prevalence of the runaway and homeless youth population ages 13 to 26. The law also directs HHS to assess the characteristics of these youth. HHS is required to conduct a survey of and direct interviews with a representative sample of homeless youth ages 13 to 26 to determine past and current socioeconomic characteristics; barriers to obtaining housing and other services; and other information HHS determines useful, in consultation with states and other entities concerned with youth homelessness. HHS is to consult with the federal Interagency Council on Homelessness about the studies overall. The new law does not specify the methodology for carrying out the studies, except to say that HHS should make the estimate based on the best quantitative and qualitative social science research methods available. Further, if HHS enters into an agreement with a non-federal entity to carry out the assessment, the entity is to be a non-governmental organization or individual determined by HHS to have expertise in this type of research. As mentioned above, the law authorized such sums as may be necessary for FY2009 through FY2013 to conduct the study. The studies must be submitted to the House Education and Labor Committee and Senate Judiciary Committee, and made available to the public. During the 110 th Congress, the House and Senate conducted hearings on the challenges facing runaway and homeless youth and the federally funded services to assist the population. The issues raised included inadequate levels of funding for RHYA grantees, limited information about the outcomes of runaway and homeless youth, and the need for greater education and workforce opportunities for these youth. The Reconnecting Homeless Youth Act of 2008 incorporates provisions that, in part, address the three issues. At a hearing conducted by the Senate Judiciary Committee on April 29, 2008, service providers and advocates for runaway and homeless youth raised concerns that funds appropriated under RHYA have not been adjusted for increases in the cost of living. A provider in Vermont explained that his RHYA-funded programs have been level-funded since 1994, while costs have risen significantly. These same concerns were highlighted at a July 24, 2007, hearing on runaway, homeless, and missing children, conducted by the House Education and Labor Committee Subcommittee on Healthy Families and Communities. Further, the Government Accountability Office described in its February 2008 report on disconnected youth that funding has remained stagnant for federal youth programs, including those funded by RHYA. The report states: "While overall Transitional Living Program funding increased in FY2002 to support a greater number of programs, the amount available to individual local programs—capped at $200,000—has not changed since 1992. One [runaway and homeless] program director explained that considering increases in the cost of operation, this amount funds only part of one staff rather than three as in previous years." An analysis of per grantee award amounts from FY2004 through FY2007 indicates that BCP and TLP funding has remained stable or has declined slightly. For example, $44.4 million in BCP funds was awarded to 345 grantees for FY2004, resulting in an average grant of $128,734. For FY2007, approximately $43.3 million was awarded to 336 grantees, with an average grant amount of about $128,821. Average TLP award amounts declined over the period from FY2004 through FY2007. For FY2004, 194 grantees shared $36,744,000 in TLP funds, resulting in an average grant of $189,402. The average grant award decreased to $181,558 for FY2007, when 190 grantees shared $34,496,000 in TLP funds. In response to concerns about funding, the Reconnecting Homeless Youth Act of 2008 increases the authorization of appropriations in at least one year (FY2009) for the BCP, TLP, and SOP, and increases the minimum BCP awards for states and territories. However, for most programs—including those authorized under the Runaway and Homeless Youth Act—Congress has passed, and the President has enacted, a continuing resolution for FY2009 ( P.L. 110-329 ), which in most cases, provides for the same level of funding as in FY2008. The resolution extends until March 9, 2009, and does not reflect final funding levels for FY2009. At the hearings held by the Senate Judiciary Committee and House Education and Labor Subcommittee on Healthy Families and Communities, former runaway and homeless youth discussed the challenges of living on the street, such as the inability to find work and connect to school. One witness at the Senate Judiciary hearing described the assistance he received at a TLP-funded program that now employs him as a manager for the program. He explained that through intensive case management, he was empowered to stop using drugs and to live independently. Yet little is known about the outcomes of runaway and homeless youth generally. Local grantee organizations have limited information about youth after they receive services, and research on whether youth experience homelessness as adults is dated. Some grantees may decide to follow up with youth who received services, but HHS does not require longitudinal data collection. HHS's 2007 report to Congress, Promising Strategies to End Youth Homelessness , states that longer-term studies of runaway and homeless youth are challenging because of the youth's transient nature. Further, knowledge about effective strategies for serving these youth is limited and few, if any, studies appear to have been conducted to determine the costs and benefits of these interventions. To glean more information about the runaway and homeless youth population, the Reconnecting Homeless Youth Act of 2008 requires HHS to determine the incidence and prevalence of runaway and homeless youth and to report on the socio-demographic and other characteristics of the population. Although not a specified goal of the act, this information may help practitioners and social science researchers develop effective interventions for the population. Efforts are currently underway at HHS to learn more about the youth who are served by the Transitional Living Program. In August 2007, HHS approved a sub-contract to Abt Associates to conduct an evaluation of the TLP at select grantee sites. The study seeks to describe the outcomes of youth who participate in the program and to isolate and describe factors that may have contributed to their successes or challenges, including service delivery approaches, personal characteristics, and local circumstances. HHS (through the Family and Youth Services Bureau) and Abt researchers have conducted three site visits to TLP grantees (in Dallas, Texas; Portland, Oregon; and Wichita, Kansas) and a series of consultations with HHS and outside experts to inform the design of the study. FYSB has not yet selected the TLP survey sites for the study itself; however, the sites will likely have extensive experience working with runaway and homeless youth and have been awarded continuous TLP funding for at least three years after the survey commences. These sites will work to ensure that after receiving training, staff will be sufficiently capable of administering the survey instruments. The sites will also need to be large enough to capture an adequate sample size. Youth participants will complete surveys at entry and while receiving services through a survey administered by their TLP programs. They will also complete surveys for up to one year after leaving the program. Youth will self-report the data to a website six months and twelve months after exiting. Evaluators will compare the individual outcomes of each youth to his or her benchmark data. The youth surveys are pending executive branch review, and FYSB expects to begin collecting the data by the end of calendar year 2008. FYSB anticipates making preliminary information available before the last surveys are completed. Further, FYSB expects to maintain the self-reporting website indefinitely as a means of tracking TLP graduates after the formal study is complete. HHS issued a proposed information collection request for public comment about the evaluation in the Federal Register on August 25, 2008. On June 19, 2007, the House Ways and Means Subcommittee on Income Security and Family Support held a hearing on disconnected and disadvantaged youth, with a focus on runaway youth. Witnesses described "disconnected youth" as those youth who have weak social networks of family, friends, and communities that can provide assistance such as employment connections, health insurance coverage, housing, tuition and other financial assistance, and emotional support. They also discussed measurable characteristics to indicate whether youth are disconnected, such as the lack of high school or college attendance coupled with not having a job over a specific period of time (e.g., one year). Runaway and homeless youth are vulnerable to becoming disconnected because of separation from their families, absence from school, and non-participation in the economy. Family conflict—rooted in abuse and neglect, school problems, and drug and alcohol abuse—can compel youth to leave home. Family disconnectedness is also evident among many runaway and homeless youth involved in the foster care system. These youth are brought to the attention of child welfare services because of incidents of abuse and neglect. Further, youth "aging out" of the foster care system experience homelessness at a greater rate than their counterparts in the general population due, in part, to family disconnectedness. Some gay and lesbian youth also experience family disassociation when they come out about their sexuality. Some runaway and homeless youth spend time out of school while they are away from a permanent home. The FY2007 NEO-RHYMIS survey indicated that about 20% of youth were not attending school regularly before entering the Basic Center Program. Of youth in the Transitional Living Program, 21% had dropped out of school. Some homeless youth face barriers to attending school because of transportation problems and the absence of parents and guardians who can provide records and permission for youth to participate in school activities. Finally, some runaway and homeless youth are removed from the formal economy and resort to illegal activity, including stealing and selling drugs in exchange for cash. Other such youth are too young to work legally or experience mental health and other challenges that make working difficult. The Reconnecting Homeless Youth Act of 2008 seeks to fund research projects that focus on connecting youth to work and school. The act amends RHYA to require HHS to give priority to research, evaluation, demonstration, and service projects that increase access to education and career pathways for runaway and homeless youth. These projects must be intended to help decrease high school dropout rates, increase rates of attaining a secondary school diploma or its equivalent, or increase placement and retention in postsecondary education or advanced workforce training programs. | The Runaway and Homeless Youth Act (RHYA) was signed into law in 1974 as Title III of the Juvenile Justice and Delinquency Prevention Act (P.L. 93-415). RHYA authorizes funding for programs to support runaway and homeless youth, as well as related training, research, and other activities. These programs and activities are administered by the Family and Youth Services Bureau (FYSB) in the Department of Health and Human Services' (HHS) Administration for Children and Families. In the second session of the 110th Congress, Congress passed and the President signed into law the Reconnecting Homeless Youth Act of 2008 (P.L. 110-378) to extend existing programs and establish new activities under RHYA for FY2009 through FY2013. The law represents a compromise between provisions that were included in two bills introduced in the 110th Congress: H.R. 5524 and S. 2982. On March 4, 2008, Representative John Yarmuth introduced H.R. 5524, the Reconnecting Homeless Youth Act of 2008, which passed the House on June 9, 2008. On May 6, 2008, Senator Patrick Leahy introduced S. 2982, the Runaway and Homeless Youth Protection Act, which passed the Senate on September 25, 2008. The House approved S. 2982 on September 26, and the President signed it into law as P.L. 110-378 on October 8, 2008. This report discusses P.L. 110-378 and includes a table with a side-by-side comparison of its provisions to those in H.R. 5524, as well as to the law and regulations as they existed prior to the enactment of S. 2982. The new law amends and adds provisions related to program funding, requirements, and accountability. It extends the authorization of appropriations for the three programs under RHYA that provide direct services to youth: the Basic Center Program (BCP), Transitional Living Program (TLP), and Street Outreach Program (SOP). Unlike prior law, P.L. 110-378 enables HHS to reallot any unused BCP funds from one state to other states and permits youth to remain in BCP and TLP shelters for a longer period. Another change made by the law requires HHS to regularly submit a report to Congress that describes the incidence and prevalence of runaway and homeless youth. The law also directs the Government Accountability Office to report to Congress on the process by which HHS awards BCP, TLP, and SOP grants. The provisions of P.L. 110-378 reflect issues raised by policymakers and advocates about RHYA during the reauthorization process. One issue was the amount of funding allocated to grantees under the three direct-service programs. Grantees expressed the concern that although Congress has periodically increased funding authorization for these programs, funding for individual grantees has remained relatively stable over time. A second issue was the lack of outcome data for youth who run away or experience homelessness. Finally, the bill addresses issues related to the educational and workforce needs of runaway and homeless youth. This report will not be updated. |
This report discusses key base closure developments, beginning with the 105th Congress andcontinuing into the 107th Congress. The most recent notable development has been the December28, 2001 signing into law ( P.L. 107-107 ) of legislation, initially sponsored by Senator Carl Levin andSenator John McCain, to conduct one new base closure round in 2005. The legislation extends andamends the 1990 base closure and realignment Act ( P.L. 101-510 ) that expired after the 1995 round. All action on the 451 installations scheduled to be closed and realigned by the 1988, 1991, 1993, and 1995 BRAC commissions was completed by the end of FY2001, as scheduled. (2) Ninety-seven installations were major military bases. According to the most recent estimates, theseBRAC closures and realignments have produced net savings of about $16.7 billion, and annualrecurring savings thereafter of about $6.6 billion. (3) It was widely acknowledged, at the time of the 1995 round, that additional base closures wouldbe necessary, given the continuing downward trend in defense spending and force structure (unitsand personnel). Two years later, the Department of Defense began to press its case in earnest. OnMay 19, 1997, Secretary of Defense William Cohen released a long awaited report, the QuadrennialDefense Review (QDR). In the report, a major review of military strategy and capabilities, he calledfor two more rounds of closures, one in 1999 and the second in 2001. He explained that, despite fourprevious rounds, the downsizing of DOD's base structure had fallen behind the downsizing of itsforce structure. He pointed out that Since the first base closure round, force structure has come down by 33% and will have declined by a total of 36% when we finish the reductions underthe QDR. During the same period, we will have reduced domestic infrastructure by 21%.... We mustshed more weight. (4) He further explained that closing more bases was dictated not only by the need to achieve a proper balance between infrastructure and force structure, but also by the need to secure significantsavings that would allow DOD to fund adequately future readiness and weapons acquisitionprograms. He stated that without the savings from new rounds of closing, DOD would behard-pressed to fulfill its missions and responsibilities in the future. Secretary of Defense Cohen's plan to begin new rounds of closures within the next five yearswas met with a decided lack of enthusiasm on Capitol Hill. Many Members expressed deep concernover the likely economic and political fallout in their districts from any such new rounds. Bothdefense committees of the House and Senate, during their mark-ups of the FY1998 DODauthorization bills, declined to support new base closure legislation. On June 12, 1997, the SenateArmed Services Committee narrowly failed, on a 9-9 vote, to approve a proposal to authorize twomore rounds of base closing in 1999 and 2001. The next day, Senator Carl Levin, the committee'sranking Democrat, along with Senator John McCain, Senator Dan Coats, and Senator Charles Robb,pledged to push for more base closings when the DOD authorization bill went to the floor. SenatorLevin said that, if Congress was serious about having funds for new weapons, it was necessary toreduce excess infrastructure. On July 9, the full Senate voted 66-33 against the McCain-Levin initiative and in support of a substitute amendment that delayed any new base closings until DOD developed "accountingtechniques" to accurately measure the costs and savings from previous and future rounds. Under thesubstitute amendment, sponsored by Senator Byron Dorgan, Senator Trent Lott, and Senator TomDaschle, DOD was required to prepare and submit its cost/savings report to Congress "in a timelymanner." Although no specific date was set, the provision stipulated that the report must becompleted with adequate time for Congress to authorize another round of base closings in 2001. In the House National Security Committee, opposition to a new round of closures was considerably stronger. Representative Joel Hefley, chairman of the subcommittee on militaryinstallations, indicated that there should be no new base closure rounds for at least five years. He,as well as others, questioned DOD's estimate of actual savings, especially in the short- andmedium-term, given the substantial up-front costs of shutting down bases. Although DOD officialshave claimed net savings, beginning in FY1996 and increasing into the future, the CongressionalBudget Office, in a December 1996 report, stated that it was unable to confirm or assess thoseestimates. (5) Congressional opponents, further, objected to rushing into new rounds of closures without a complete and thorough understanding of the military implications of previous rounds. In this regard,they also questioned the validity of DOD's major premise that there should be a one-to-onecorrelation between the percentage of reduction in end-strength and in base closings. Despite the lack of broad support on Capitol Hill, senior DOD officials, as well as the President, continued to press for new rounds of base closures in the near future. Both Secretary of DefenseCohen and the retiring Chairman of the Joint Chiefs of Staff, Gen. John Shalikashvili, issuedstatements in September 1997 calling for more base closures as a way of making funds available fortop priority weapons programs. (6) On November 10,the Secretary of Defense and other seniorPentagon officials announced a series of reforms, titled "Defense Reform Initiative" (DRI), thatincluded two additional rounds of base closures in 2001 and 2005. These rounds, it was asserted,would eventually result in annual savings of about $1.4 billion each, or a total of $2.8 billion. (7) Thisfigure represented about half of the overall $6 billion annual savings anticipated from DRI actionsthat include, in addition to base closings, increased outsourcing to private industry, shifting topaperless contracting, administration, and publishing, and reducing the number of personnelemployed by the Office of the Secretary of Defense and other agencies, departments, and activities. Further support for two, or more, new rounds of base closures came from the December 1997 report entitled Transforming Defense: National Security in the 21st Century . (8) Members of theDOD-sponsored National Defense Panel that prepared the report strongly urged Congress and theDefense Department to "move quickly to restore the base realignment and closure process." Theycalled for closures to begin "earlier than the current 2001-2005 department proposal." In hisendorsement of the panel's findings, Secretary of Defense Cohen emphasized, as he had in the past,the importance of two additional BRAC rounds as a means of financing and accelerating thetransformation of U.S. military capabilities. (9) A highly contentious aspect of the base closure debate involved President Clinton's actionsconcerning the last of the four rounds. The 1995 base closure commission had recommended theclosing of two of the Air Force's five major maintenance depots: at McClellan Air Force Base (CA)and Kelly Air Force Base (TX). The recommendation had been justified on the grounds that all fivedepots were operating at under 50% capacity, and that significant savings could be achieved bytransferring McClellan's and Kelly's workloads to the three remaining depots in Utah, Oklahoma,and Georgia. (10) President Clinton vigorously opposed closing McClellan and Kelly depots, arguing that California and Texas had already suffered disproportionately from effects of the three previousclosure rounds. (11) He moved to prevent furtherloss of jobs in California and Texas by directing thatprivate firms be allowed to assume the work on site -- otherwise known as "privatization-in-place." Opponents of the President, however, were quick to charge him with unprecedented politicalmeddling in the base closing process. They accused him of trying to curry favor with the people ofvote-rich California and Texas, vital in his bid for reelection. (12) Legislators from Oklahoma, Georgia, and Utah opposed the privatization plan, believing that it deprived their local populations of jobs that would have been otherwise created under the initialrecommendation of the 1995 base closure commission. Also, they knew that the existingprivatization plan, if permitted to proceed, left their depots highly vulnerable to closure wheneverthe next round of base reductions occurred. (13) Resentment among some Members over President Clinton's 1995 intervention persisted until the end of his second term. His action was repeatedly cited by congressional opponents as reasonfor their opposition to any new base closure rounds. (14) Some Members sought to block DOD fromproceeding with plans to privatize depot maintenance work at McClellan and Kelly air force bases. On June 5, 1997, the House military readiness subcommittee approved an amendment to the FY1998defense authorization bill prohibiting privatization at the two depots unless the Secretary of Defensecertified that the three remaining depots were operating at an efficient 80% capacity. These otherdepots, as mentioned above, were operating at approximately 50% capacity. The full House NationalSecurity Committee approved the measure on June 16. Similar depot language was approved by thefull Senate Armed Services Committee on June 17. However, in the face of a threatened filibusterby the four Senators representing California and Texas, the depot-related provisions were removedfrom the DOD authorization bill prior to floor consideration. (15) In floor debate, on June 23, 1997, Representative Terry Everett led an effort to delete the depot-related restrictions in the House FY1998 defense authorization bill. His amendment wasdefeated by a vote of 145 to 278. In the other chamber, Senator Inhofe spearheaded an effort torestore depot-restrictions to the Senate bill. He and his co-sponsors, however, withdrew theiramendment on July 11, just before its floor consideration. In conference committee, the depot-related language in the House bill became a major bone of contention and obstacle to reaching final agreement on the FY1998 defense authorization bill. Asof early October, it was reportedly the only remaining issue to be resolved. Neither of the opposingcamps seemed willing to yield -- with one side threatening filibuster and/or veto if public-privatedepot competition at McClellan and Kelly air force bases were not allowed to go forward, and theother side insisting that without language prohibiting depot competition, there would be no bill. Aresolution was achieved by the Senate and House conferees and reported on October 23 ( H.Rept.105-340 ). Under the compromise agreement, the limit on depot work that could be done by privatecontractors was increased from 40% to 50%. On the other hand, a broadened definition of the "corework" that must be done by government depots served to offset the benefits to private contractorsof their percentage increase. On October 28, the House passed the conference report by a vote of 286 to 123. On the following day, the Senate debated the conference report's provisions regarding depot maintenanceoperations at length, but did not move to a final vote. A bid by Senator Kay Bailey Hutchison topostpone a final vote on the FY1998 defense authorization until January 18, 1998 was denied. OnNovember 6, the Senate reached final agreement, passing the conference report by a vote of 90 to10. President Clinton signed the bill into law on November 18 ( P.L. 105-85 ). In the FY1998 defense authorization act cited above, Congress included language (Section2824) that prohibited DOD from taking any concrete steps towards planning and implementing newbase closures until it had submitted a report on "costs and savings attributable to the first four roundsof closure and realignment; and on the need, if any, for additional rounds." The detailedrequirements set forth in the Dorgan Amendment included ten "Elements" and eight "Methods ofPresenting Information." The deadline for delivery of the report was set for "no later than thePresident's submission to Congress of the budget for FY2000" (January-February 1999). On April 2, 1998, far in advance of the deadline, the Department of Defense submitted its report to Congress. (16) Secretary of Defense Cohen, inhis introductory statements, stressed several keypoints in calling for new base closure and realignment legislation in the current year. He stated thatthe base structure was, currently, 23% in excess of what was needed, and that savings from two newrounds of closings would provide vital funding for modernization of weapons systems and improvedreadiness. He reminded Congress that while the defense budget was down 40% and force structure36%, base structure had declined only 21%. He cited several other examples of the significantimbalance between force and base structures. The number of Navy ships was scheduled to drop by46% between 1989 and 2003; while berthing space would decline by only 18%. The number ofArmy soldiers was slated to fall 43% in the same period, compared with only a 7% planned reductionin classroom space. The base closure report, in providing information requested by Congress in Section 2824, claimed that the closure costs of the 1988 and 1993 rounds were less than the Pentagon's originalestimate. It asserted that the costs of the 1991 and 1995 rounds, when completed, would be roughlyequal to the estimates. The report claimed that the resulting savings from the shutdown of bases andfacilities during BRAC's 1988-1995 rounds would exceed initial estimates. More specifically, DODexpected net total savings of about $14 billion through 2001. Annual savings, thereafter, wereestimated at $5.6 billion. These figures were later revised upward by the Department of Defense andGeneral Accounting Office. (17) The two new rounds of closures in 2001 and 2005 sought by the Pentagon were expected to produce, after implementation, additional savings of about $3 billion a year. As required byCongress in Section 2824, both CBO and GAO were to review and comment on the accuracy andreliability of the report's findings. Other significant features of the base closure report included (1)a recommendation by DOD to apply the model of previous independent base closure commissionsfor the two rounds proposed for 2001 and 2005; and (2) a statement touting the successful economicrecovery from base closures of many impacted communities. A subsequent Air Force memo (April 26) added fuel to the controversy over base closures. The memo reportedly cited John D. Podesta, the White House deputy chief of staff, as having triedthrough a DOD official, to encourage Lockheed Martin Corporation to go after some of the depotmaintenance work at McClellan Air Force Base and keep the work in Sacramento. (18) Membersadamantly opposed to keeping depot maintenance work at both McClellan AFB and Kelly AFBaccused the Administration of continuing to meddle in the base closure process. The level ofsuspicion increased, as did the level of rhetoric, with Members issuing forceful statements inopposition to new base closures, such as "dead on arrival,""smoking gun," and "over my deadbody." (19) Reaction on Capitol Hill to the April 2, 1998 report's call for two new base closure rounds was similar to that of the previous year -- strong and widespread resistance. The House NationalSecurity Committee remained broadly opposed to any closings in the near future. This degree ofopposition was mirrored also in the House as a whole. The Senate Armed Services Committee wasmore evenly divided on the issue than the House committee. In its mark-up session, the Senatecommittee defeated by a 10-8 margin a proposed new round of base closures in 2001 (press releasedated May 8, 1998). Senator John McCain and Senator Carl Levin, principal co-sponsors of newBRAC legislation the previous year (as well as in 1997), indicated that they were prepared, however,to seek support for passage of a floor amendment during Senate consideration of the FY1999 defenseauthorization bill ( S. 2057 / S. 2060 ). In the end, with sentiment of themajority clearly running against them, the Senators abandoned their initiative. (20) In floor action (June 25), the Senate voted 48-45 in support of an amendment to the FY1999 defense authorization bill that would have made it more difficult for the Pentagon to move aheadwith base closings. Amendment No. 2981, sponsored by Senator James Inhofe, would haverestricted the Administration from closing bases with 225 or more civilian personnel (a reductionfrom the current threshold of 300 set in law). It would also have restricted the Pentagon fromrealigning bases with 750 civilian personnel, or more than "40% of the total number of civilianpersonnel authorized to be employed at such military installation." Further, the amendment wouldhave prevented the Pentagon from closing a base within four years after completing a realignmentof such base. The intent of this provision was to delay, if not block, the Department of Defense fromquickly moving to close a particular base by reducing the number of civilian employees to less than225. In addition, the Inhofe amendment expressed congressional opposition to any new rounds ofclosures and realignments until all actions from previous rounds had been completed. The Inhofe amendment was dropped from the FY1999 defense authorization bill during conference. The Congressional Budget Office submitted its review of DOD's base realignment and closurereport on July 1, 1998. (21) It stated that the reportprovided most, but not all, of the information thatthe Congress had requested. It found DOD's estimates of savings from previous closure rounds, asfully implemented, consistent with its own estimates: $5.6 billion as compared to $5 billion. However, CBO explained that the firm measures of BRAC savings requested by the Congress "donot -- and cannot exist." It elaborated, as follows: BRAC savings are really avoided costs -- costs that DOD would have incurred if BRAC actions had not taken place. Because those avoided costs arenot actual expenditures, DOD cannot observe them and record them in its financial records. As aresult, DOD can only estimate savings rather than actually measurethem. In its review, CBO observed that DOD's report had provided a clear and coherent summary of why future base closure rounds would produce significant savings. It noted, however, that DODprovided "little analysis of those data or insight into the number and types of installations that mightbe closed in the event of future BRAC rounds." Other significant CBO findings included: An analysis of the likely impact of future base closures on local communities cannot be attempted until the specific communities are identified; even then,it would be very difficult to do. DOD was unable to locate some of the requested data, including the original cost and savings estimates that it gave to the BRACcommissions. Estimates of BRAC costs and savings would be more accurate if they included [DOD's] environmental and caretaker costs for some bases after thesix-year implementation period is over. The General Accounting Office submitted its review of DOD's report on November 13, 1998. (22) It was longer and provided more supporting detail than the CBO review. GAO gave DOD generallygood grades. It said that, overall, DOD had provided most of the information required by Section2824. GAO affirmed that the four previous BRAC closure rounds would result in substantial netsavings. It noted, however, that "DOD's report should be viewed as providing a roughapproximation of costs and savings rather than precise accounting." It pointed out that "DOD's datasystems do not capture all savings associated with BRAC actions, nor has DOD established aseparate system to track BRAC savings." Other significant GAO findings included DOD's analysis of operational and readiness indicators has shown no long-term problems affecting military capabilities that can be related to BRAC actions. This general conclusion is also consistent with our prior work. DOD's report emphasizes that communities affected by prior BRAC actions appear to be rebounding economically. We also have found this to be thecase, although our work also shows that some communities are faring better thanothers. DOD's report suggests that proposed BRAC rounds in 2001 and 2005 would be conducted like prior rounds. DOD's legislative proposal requestingauthority to conduct two additional BRAC rounds provides a good starting point for consideringfuture legislation, should the Congress decide to authorize additionalrounds. A "front-burner" issue for Congress at the outset of the 106th Congress was whether toauthorize a new round of base closings. At a November 1998 American Bar Association symposiumon national security, the general counsel of the Senate Armed Services Committee predicted that"There will be a significant attempt to put BRAC in the FY2000 authorization bill, which may wellsucceed." (23) On January 20, 1999, Senator JohnMcCain, along with Senator Carl Levin, sponsoreda bill ( S. 258 ) calling for two new rounds in 2001 and 2003. In support of the bill,Senator McCain pointed to the 23% excess capacity in infrastructure claimed by DOD, and said thatit was "unconscionable" for anyone to avoid looking at the billions of dollars to be saved by closingand realigning more bases. (24) In an effort to winsupport, he and his cosponsors offered twosignificant changes in the law. First, the whole BRAC selection process would begin and finish twomonths later in calendar year 2001 than in previous rounds. It would give a new President theopportunity to nominate members of a base closure commission. Second, privatization-in-placewould not be permitted in closing installations unless the new base closure commission explicitlyrecommended it. Secretary of Defense William Cohen stressed, at almost every opportunity during the early part of the year, the importance of further base closures. In speaking to the Illinois legislature on January28, 1999, he stated that the most politically challenging aspect of his effort to improve DODefficiency and save money was base closures. He said: I know that BRAC is now seen as a four-letter word, but I must tell you that the vast sums of money we waste on unneeded facilities is robbing our menand women in uniform of needed training, modern weapons, and a better quality of life. .... The twoadditional rounds we will fight for this year will ultimately save $20 billion [during implementation]and generate $3 billion annually [thereafter]. Despite such appeals, many Members of Congress remained opposed to new rounds, at least for the time-being, because of widespread fear among constituents over such closings. This wasunderscored in hearings on February 2 before the House Armed Services Committee (formerly,House National Security Committee), when Secretary of Defense Cohen's call for two more closurerounds reportedly received a cool response. More ominously, from the Pentagon's perspective, theSenate Armed Services Committee voted on May 12 and 13 against authorizing any new rounds ofclosings during its mark-up of the FY2000 defense authorization bill ( S. 1059 ). OnMay 26, the full Senate rejected a last-ditch effort by Senator John McCain and Senator Carl Levinto revive their base closure initiative during floor debate and passage of the defense bill. The 60 to40 vote marked the third year in a row that DOD's attempt to win support in the Senate to shut downmore bases had been blocked. With opposition to base closures even stronger in the House, mostobservers believed that DOD's high priority initiative had been effectively quashed for the remainderof the year -- if not longer. In the second session of the 106th Congress, the Administration's FY2000 DOD budget proposal sought authority to close more military bases in the years 2003 and 2005. Deputy Defense SecretaryJohn Hamre emphasized that it was a particularly opportune time for Congress to take the initiativesince the national economy was so strong. (25) Inan effort to win the support of Congress, Secretaryof Defense Cohen said that the base closing process needed to be improved -- that there were toomany bureaucratic obstacles in the transition to private use of a closed base. Also, he contended thatthe failure to close more bases would cost the Pentagon as much as $20 billion that could be betterspent on upgrading and building new weapon systems, as well as increasing the performance levelsof U.S. fighting forces. He also pledged that politics would not be permitted to intrude in any futurebase closure rounds. (26) Congress, however, chose not to authorize any new rounds of closures in the year 2000. In floor debate, on June 7, 2000, the Senate defeated an amendment to the FY2001 defense authorization bill,once again sponsored by Senator McCain and Senator Levin. The amendment, which would haveauthorized two new rounds in 2003 and 2005, was rejected by a vote of 63 to 35. The positions ofthe opposing sides in the debate reflected the same concerns expressed in previous years. In the early stages of the 107th Congress, one of DOD's top agenda items was securingauthority for additional military base closures and realignments. On February 27, 2001, Senator CarlLevin and Senator John McCain introduced a bill ( S. 397 ) to authorize two new roundsof base closures in 2003 and 2005. The Taxpayers for Common Sense (TCS), a national budgetwatchdog organization, immediately applauded the initiative and said in a February 27 press releasethat the initiative "would save billions for other important defense priorities." It estimated the costof maintaining excess military bases at about $3.6 billion each year and said that projected Pentagonsavings could amount to as much as $21 billion through 2015 if the military were allowed to closebases in 2003 and 2005. (27) Senator Kay Bailey Hutchison, however, expressed a different point of view in an Austin TX editorial article. (28) She noted a trend towardincreasing restrictions on U.S. military training inlocations abroad, such as Germany, Okinawa, Korea, and Puerto Rico, and she suggested that it "castinto doubt the wisdom of prematurely closing more domestic military bases." She also drewattention to the fact that some BRAC decisions, such as at Reese Air Force Base, TX, and Fort Hood,TX, are now regarded as having been mistakes. In the case of the latter installation, the BRACdecision has been essentially reversed. On June 27, 2001, the Department of Defense urged Congress to approve another round of base closures and realignments. It noted that the DOD's military infrastructure had an excess capacityof approximately 25%. (29) Later, on August 2,2001, the Pentagon outlined its proposal in greaterdetail. It called for a single, new round of base closings and consolidations, beginning in 2003. Theterm "BRAC" was dropped and replaced by a new title called the "Efficient Facilities Initiative of2001 (EFI)." (30) It also introduced a new approach for reducing excess infrastructure, based on the experience of Brooks Air Force Base, San Antonio, TX. As a demonstration project, approved by Congress,Brooks AFB was permitted to transfer its property to the local community. In turn, the city leasedback to the base commander property that the service needed to continue its mission. Other detailsof DOD's base closure and realignment proposal conformed, in most respects, to the base-closurelaws of past years. In the Senate Armed Services Committee, Members grappled with the two base closure proposals -- S. 397 and the Administration's plan. They ultimately agreed upon, and recommended, a series of provisions incorporating elements of both. Meeting in closed session onSeptember 6, 2001, the committee voted 17 to 8 for a new round. On September 25, 2001, the full Senate approved a new round of base closures and realignments in 2003 by a margin of 53 to 47 -- after an effort by Senator Jim Bunning to shelve theproposal failed. It was, for the Senate proponents of base closure, their first success in five years ofeffort. Immediately prior to the vote, General Henry H. Shelton had sent a letter to Senator JohnWarner, ranking Republican on the Armed Services Committee, stating that the country "cannotafford the costs associated with carrying this excess infrastructure." (31) In a separate letter, Secretaryof Defense Rumsfeld stressed that the current struggle with terrorist groups made it all the more"imperative to convert excess capacity into war-fighting ability." (32) Opponents of the proposal, however, argued that the current war on terrorism, coupled with an uncertain economy, made it the worst time to start closing bases. Minority Leader Trent Lott said:"At a time our reserves are being called up to support our military ... we're going to say, 'Oh, by theway, we're going to look at closing your base. I think the timing is not good.'" (33) Supporters of the initiative, on the other hand, emphasized the importance of putting aside home-state interest in favor of making certain the military enjoyed the full range of resources neededto combat terrorism. Senator John McCain asserted: "This is the time we should place our trust inthe Commander-in-Chief and the Secretary of Defense and the Chairman of the Joint Chiefs ofStaff." (34) No base-closing language was included in the House of Representatives FY2002 defense authorization bill. Indeed, shortly following passage of the Senate bill, Representative James Hansenreportedly stated that the House would oppose the Senate's provision: "We're going to hangtough." (35) In conference, the House and Senate leaders stood by their respective positions, while resolving most of the other issues on their agenda. The stalemate over base closures lasted for several weeks,holding up passage of S. 1438 . In the absence of a compromise, Senator John McCainreportedly warned that the President might veto the defense bill. (36) Senior negotiators finally agreedto a compromise on December 10, and unveiled it to the public on December 12, 2001. ThePresident signed the defense authorization bill ( P.L. 107-107 ) on December 28, 2001. The conference report retains most of the former 1990 BRAC Act language, but makes some important changes and modifications that are set forth below. (37) Congress (Sec. 3001) (1) Extend the authority of the 1990 base closure and realignment act to authorize one new round in 2005 Secretary of Defense (Sec. 3002) (1) Submit a force structure plan to include detailed information on end strength and force levels, etc. (2) Submit (at Sec/Def's discretion) revised force structure plan with FY2006 budget. (3) Review all types of installation and take into account anticipated need for, and availability of, overseas bases in future. Include: (a) inventory of military installations (b) description of categories of excess infrastructure (c) economic analysis of options for eliminating or reducing excess infrastructure,including efficiencies from joint use (4) Certify (after submitting force structure plan and infrastructure inventory) whether need exists for closure and realignment. If so, certify that it would provide annual net savings withinsix years. If Sec/Def fails to provide certification, the process is terminated. (5) Ensure that military value is the primary consideration in the making of recommendations for closing or realigning military installations. Commission (Sec. 3003-3004) (1) Increase number of members from 8 to 9. (2) Permit Sec/Def to testify before commission on any commission-proposed addition of a base. Decision to add a base must be supported by at least 7 commissioners. Also, Sec/Defmust also be given opportunity to testify on other changes proposed by commission. (3) Prohibit privatization-in-place of closed or realigned bases prohibited, unless specifically recommended by commission and determined to be the most cost-effective option. In May 1997, two years after the 1995 base closure commission completed its task, theDepartment of Defense announced that two further closure rounds were needed in 1999 and 2001in order to reduce its excess infrastructure. The proposal met with little enthusiasm on the part ofmost Members of Congress. Subsequent appeals by Secretary of Defense Cohen in 1998, 1999, and2000 fared no better. In 2001, however, Secretary of Defense Rumsfeld succeeded in winningapproval from Congress for a new round. He had to settle, however, for a round in 2005, rather thanhis preferred date of 2003. As a result of the new BRAC, many communities next to military bases are worried about the survival of their installations. Various strategies have been developed, both defensive and offensive.First, and foremost, community leaders are working diligently to keep their military units/functionsat home. On the other hand, they are not averse to acquiring units/functions from other parts of thecountry. In the latter case, success would almost certainly ensure a base's survival in the next round. A serious concern of many communities near military bases is the growing impact of "range encroachment" -- the process whereby bases are progressively hemmed in by urban growth,competition for air space, protection of endangered species, and other factors that may detract froma base's desirability to the Department of Defense or the BRAC commission. If allowed to continueunabated, such encroachment can have the effect of de-valuing installations to the point that theymay become prime candidates for closure in 2005. Table 1. 2005 BRAC Timeline Source: U.S. Congress. House of Representatives, National Defense Authorization Act for FiscalYear 2002, Conference Report ( H.Rept. 107-333 ), December 12, 2001, p. 331-341 and 792-795. a Also, Sec/Def publishes criteria in Federal Register . b If President does not send nominations by required date, process is terminated. c President prepares report containing approval or disapproval. d Congress has 45 days to pass motion of disapproval, or Commission's list becomes law. | Ninety-seven major military bases were recommended for closure and realignment by the 1988, 1991, 1993, and 1995 base realignment and closure (BRAC) commissions. Action on all 451installations (major and minor) from the first four rounds was completed by the end of FY2001, asscheduled. The U.S. General Accounting Office has estimated that these closures and realignmentsproduced net savings of about $16.7 billion as of the end of FY2001 and will continue to producean estimated annual recurring savings thereafter of about $6.6 billion. In mid-1997, Secretary of Defense William Cohen called for two new rounds of base closures and realignments. He explained that, while four previous rounds had achieved significant savings,it was important to continue the process of closing underutilized facilities. Despite DOD pressure,most Members of Congress were reluctant to support authorization of new base closure legislation,at least for the foreseeable future. The reasons given included, among others, grass-roots oppositionfrom communities likely to be affected and President Clinton's "intervention" in the 1995 baseclosure commission's recommendations regarding McClellan and Kelly air force bases. Of the twochambers, the House of Representatives expressed the stronger and more united opposition. In theSenate, proponents of new base closure rounds have attempted to attach amendments to each year'sdefense authorization bill since 1997, achieving success only toward the end of 2001. The principal advocates in Congress for new base closures have been Senator John McCain and Senator Carl Levin. On February 27, 2001, they introduced legislation ( S. 397 ) toauthorize two new closure rounds in 2003 and 2005. On August 3, 2001, the Secretary of Defensesubmitted his own proposal to Congress, calling for one additional round in 2003. On September6, 2001, the Senate's defense panel incorporated elements of both proposals and passed the measureby a vote of 17 to 8. Later, in Senate floor debate (September 24, 2001), the Levin/McCain initiativepassed by a margin of 53 to 47. However, many Members of the House were reluctant to support S. 397 , thus creating an impasse in the conference phase that delayed final passage of the FY2002 defenselegislation. Finally, on December 12, 2001, the conferees reached a compromise. They agreed toauthorize one new round of base closures in 2005. They also added language that revised variousaspects of previous base closure law -- the most notable of which, perhaps, will be the enhancedrole and influence of the Secretary of Defense in the base closure selection process. President Bushsigned the defense authorization bill into law ( P.L. 107-107 ) on December 28, 2001. This report will be updated as warranted. |
RS21314 -- International Law and the Preemptive Use of Force Against Iraq Updated April 11, 2003 Until recent decades customary international law deemed the right to use force and even to go to war to be an essentialattribute of every state. As one scholar summarized: It always lies within the power of a State to endeavor to obtain redress for wrongs, or to gain political or other advantages over another, not merely by the employment of force, but also bydirectrecourse to war. (1) Within that framework customary international law also consistently recognized self-defense as a legitimate basis for theuse of force: An act of self-defense is that form of self-protection which is directed against an aggressor or contemplated aggressor. No act can be so described which is not occasioned by attack or fear ofattack. When acts of self-preservation on the part of a State are strictly acts of self-defense, they are permitted by the lawofnations, and are justified on principle, even though they may conflict with the ... rights of otherstates. (2) Moreover, the recognized right of a state to use force for purposes of self-defense traditionally included the preemptive useof force, i.e., the use of force in anticipation of an attack. Hugo Grotius, the father of international law,stated in theseventeenth century that "[i]t be lawful to kill him who is preparing to kill." (3) Emmerich de Vattel a century later similarlyasserted: The safest plan is to prevent evil, where that is possible. A Nation has the right to resist the injury another seeks to inflict upon it, and to use force ... against the aggressor. It may even anticipatetheother's design, being careful, however, not to act upon vague and doubtful suspicions, lest it should run the risk ofbecoming itself the aggressor. (4) The classic formulation of the right of preemptive attack was given by Secretary of State Daniel Webster in connection withthe famous Caroline incident. In 1837 British troops under the cover of night attacked and sank anAmerican ship, the Caroline , in U.S. waters because the ship was being used to provide supplies to insurrectionists againstBritish rule inCanada headquartered on an island on the Canadian side of the Niagara River. The U.S. immediately protested this"extraordinary outrage" and demanded an apology and reparations. The dispute dragged on for several years beforetheBritish conceded that they ought to have immediately offered "some explanation and apology." But in the courseof thediplomatic exchanges Secretary of State Daniel Webster articulated the two conditions essential to the legitimacyof thepreemptive use of force under customary international law. In one note he asserted that an intrusion into the territoryofanother state can be justified as an act of self-defense only in those "cases in which the necessity of that self-defenseisinstant, overwhelming, and leaving no choice of means and no moment for deliberation." (5) In another note he asserted thatthe force used in such circumstances has to be proportional to the threat: It will be for [Her Majesty's Government] to show, also, that the local authorities of Canada, even supposing the necessity of the moment authorized them to enter the territories of theUnitedStates at all, did nothing unreasonable or excessive; since the act, justified by the necessity of self-defence, mustbe limitedby that necessity, and kept clearly within it. (6) Both elements - necessity and proportionality - have been deemed essential to legitimate the preemptive use of force incustomary international law. (7) However, with the founding of the United Nations, the right of individual states to use force was purportedly curbed. TheCharter of the UN states in its Preamble that the UN was established "to save succeeding generations from thescourge ofwar"; and its substantive provisions obligate Member States of the UN to "settle their international disputes bypeacefulmeans" (Article 2(3)) and to "refrain in their international relations from the threat or use of force against theterritorialintegrity or political independence of any State, or in any manner inconsistent with the Purposes of the UnitedNations"(Article 2(4)). In place of the traditional right of states to use force, the Charter creates a system of collectivesecurity inwhich the Security Council is authorized to "determine the existence of any threat to the peace, breach of the peace,or actof aggression" and to "decide what measures shall be taken ... to maintain international peace and security" (Article39). Although nominally outlawing most uses of force in international relations by individual States, the UN Charter doesrecognize a right of nations to use force for the purpose of self-defense. Article 51 of the Charter provides: Nothing in the present Charter shall impair the inherent right of individual or collective self-defence if an armed attack occurs against a Member of the United Nations, until the Security Councilhastaken measures necessary to maintain international peace and security. (8) The exact scope of this right of self-defense, however, has been the subject of ongoing debate. Read literally, Article 51'sarticulation of the right seems to preclude the preemptive use of force by individual states or groupings of states andtoreserve such uses of force exclusively to the Security Council. Measures in self-defense, in this understanding, arelegitimate only after an armed attack has already occurred. (9) Others contend that Article 51 should not be construed so narrowly and that "it would be a travesty of thepurposes of theCharter to compel a defending state to allow its assailant to deliver the first, and perhaps fatal, blow ...." (11) To read Article51 literally, it is said, "is to protect the aggressor's right to the first strike." (12) Consequently, to avoid this result, someassert that Article 51 recognizes the "inherent right of individual or collective self-defence" as it developed incustomaryinternational law prior to adoption of the Charter and preserves it intact. The reference to that right not beingimpaired "ifan armed attack occurs against a Member of the United Nations," it is said, merely emphasizes one importantsituationwhere that right may be exercised but does not exclude or exhaust other possibilities. (13) In further support of this view, it is argued that the literal construction of Article 51 simply ignores the reality that the ColdWar and other political considerations have often paralyzed the Security Council and that, in practice, states havecontinuedto use force preemptively at times in the UN era and the international community has continued to evaluate thelegitimacyof those uses under Article 51 by the traditional constraints of necessity and proportionality. The followingexamplesillustrate several aspects of these contentions: In 1962 President Kennedy, in response to photographic evidence that the Soviet Union was installing medium range missiles in Cuba capable of hitting the United State, imposed a naval "quarantine" on Cuba in order"tointerdict ... the delivery of offensive weapons and associated material." (14) Although President Kennedy said that thepurpose of the quarantine was "to defend the security of the United States," the U.S. did not rely on the legal conceptofself-defense either as articulated in Article 51 or otherwise as a justification for its actions. Abram Chayes, theLegalAdviser to the State Department at that time, later explained the decision not to rely on that justification asfollows: In retrospect ... I think the central difficulty with the Article 51 argument was that it seemed to trivialize the whole effort at legal justification. No doubt the phrase "armed attack" must beconstruedbroadly enough to permit some anticipatory response. But it is a very different matter to expand it to includethreateningdeployments or demonstrations that do not have imminent attack as their purpose or probable outcome. To acceptthatreading is to make the occasion for forceful response essentially a question for unilateral national decision thatwould notonly be formally unreviewable, but not subject to intelligent criticism, either .... Whenever a nation believed thatinterests,which in the heat and pressure of a crisis it is prepared to characterize as vital, were threatened, its use of force inresponsewould become permissible .... In this sense, I believe that an Article 51 defence would have signalled that theUnited Statesdid not take the legal issues involved very seriously, that in its view the situation was to be governed by nationaldiscretion,not international law. (15) In 1967 Israel launched a preemptive attack on Egypt and other Arab states after President Nasser had moved his army across the Sinai toward Israel, forced the UN to withdraw its peacekeeping force from the Sinaiborder, andclosed the port of Aqaba to Israeli shipping, and after Syria, Iraq, Jordan, and Saudi Arabia all began moving troopsto theborders of Israel. In six days it routed Egypt and its Arab allies and had occupied the Sinai Peninsula, the WestBank, andthe Gaza Strip. Israel claimed its attack was defensive in nature and necessary to forestall an Arab invasion. BoththeSecurity Council and the General Assembly rejected proposals to condemn Israel for its "aggressive"actions. (16) On June 7, 1981, Israel bombed and destroyed a nuclear reactor under construction in Iraq. Assertingthat Iraq considered itself to be in a state of war with Israel, that it had participated in the three wars with Israel in1948,1967, and 1973, that it continued to deny that Israel has a right to exist, and that its nuclear program was for thepurpose ofdeveloping weapons capable of destroying Israel, Israel claimed that "in removing this terrible nuclear threat to itsexistence, Israel was only exercising its legitimate right of self-defense within the meaning of this term ininternational lawand as preserved also under the United Nations Charter." (17) Nonetheless, the Security Council unanimously "condemn[ed]the military attack by Israel in clear violation of the Charter of the United Nations and the norms of internationalconduct"and urged the payment of "appropriate redress." (18) Thus, in both theory and practice the preemptive use of force appears to have a home in current international law. Itsclearest legal foundation is in Chapter VII of the UN Charter. Under Article 39 the Security Council has theauthority todetermine the existence not only of breaches of the peace or acts of aggression that have already occurred but alsoof threatsto the peace; and under Article 42 it has the authority to "take such action by air, sea, or land forces as may benecessary tomaintain or restore international peace and security." These authorities clearly seem to encompass the possibilityof thepreemptive use of force. Less clear is whether international law currently allows the preemptive use of force by anation orgroup of nations without Security Council authorization. That would seem to be permissible only if Article 51 is read notliterally but as preserving the use of force in self-defense as traditionally allowed in customary international law. As noted,the construction of Article 51 remains a matter of debate. But so construed, Article 51 would not preclude thepreemptiveuse of force by the U.S. against Iraq or other sovereign nations. To be lawful, however, such uses of force wouldneed tomeet the traditional requirements of necessity and proportionality. As the examples listed above illustrate, the requirement of necessity is most easily met when an armed attack is clearlyimminent, as in the case of the Arab-Israeli War of 1967. But beyond such obvious situations, as Abram Chayesargued,the judgment of necessity becomes increasingly subjective; and there is at present no consensus either in theory orpracticeabout whether the possession or development of weapons of mass destruction (WMD) by a rogue state justifies thepreemptive use of force. Most analysts recognize that if overwhelmingly lethal weaponry is possessed by a nationwillingto use that weaponry directly or through surrogates (such as terrorists), some kind of anticipatory self-defense maybe amatter of national survival; and many - including the Bush Administration - contend that international law oughtto allow,if it does not already do so, for the preemptive use of force in that situation. (19) But many states and analysts are decidedlyreluctant to legitimate the preemptive use of force against threats that are only potential and not actual on thegrounds thejustification can easily be abused. Moreover, it remains a fact that the international community judged Israel'sdestructionof Iraq's nuclear reactor site in 1981 to be an aggressive act rather than an act of self-defense. Iraq has become an occasion to revisit the issue. Iraq had not attacked the U.S., nor did it appear to pose an imminent threatof attack in traditional military terms. As a consequence, it seems doubtful that the use of force against Iraq couldbedeemed to meet the traditional legal tests justifying preemptive attack. But Iraq may have possessed WMD, andit mayhave had ties to terrorist groups that seek to use such weapons against the U.S. If evidence is forthcoming on bothof thoseissues, then the situation necessarily raises the question that the Bush Administration articulated in its nationalsecuritystrategy, i.e. , whether the traditional law of preemption ought to be recast in light of the realities ofWMD, rogue states, andterrorism. Iraq likely will not resolve that question, but it is an occasion to crystallize the debate. | On March 19, 2003, the United States, aided by Great Britain and Australia,initiated a military invasion of Iraq. Both the U.S. and Great Britain contended that they had sufficient legalauthority touse force against Iraq pursuant to Security Council resolutions adopted in 1990 and 1991. But President Bush alsocontended that, given the "nature and type of threat posed by Iraq," the U.S. had a legal right to use force "in theexercise ofits inherent right of self defense, recognized in Article 51 of the UN Charter." Given that the U.S. had notpreviously beenattacked by Iraq, that contention raised questions about the permissible scope of the preemptive use of force underinternational law. This report examines that issue as it has developed in customary international law and under theUnitedNations Charter. It will be updated as events warrant. (For historical information on the preemptive use of forceby theU.S., see CRS Report RS21311, U.S. Use of Preemptive Military Force.) |
The United States now has approximately 130,000 troops in Iraq and another 30,000 supporttroops in Kuwait, a force that some senior U.S. military officials believe stretches the country'scombat capabilities , especially in the event of a major crisis in Korea or elsewhere. The BushAdministration wishes NATO countries to send forces to Iraq to reduce the demands on U.S. forces,and to spread the costs of stabilization and reconstruction. Key allies acknowledge the possibilityof a NATO role, but first wish to see a new U.N. mandate and greater sharing of decision-makingwith both the U.N. and the allies. Some other allies appear to reject involvement in a U.S.-led force,as a NATO force would be, and prefer a force with a substantial U.N. role. In a broader context, unresolved issues from earlier disputes among the allies also intrude in the debate over possible NATO involvement. These issues include the causes of the war in Iraq, therole of the U.N. in NATO out-of-area operations, the military capabilities of the allies, and theeffects of Iraq's evolution on the Middle East as a whole. In addition, vestiges of a dispute overallied assistance to Turkey in February 2003 before the war with Iraq remain a cause for frictionbetween the United States and several allies. This section will first briefly review the debate in NATO over the last two years about alliedmissions outside Europe. It will then discuss several related issues, primarily those generated byallied disagreement over the reasons for war with Iraq, that affect any possible decision by Europeangovernments to contribute forces to stabilize Iraq. There follows a discussion of the evolution of theAdministration's position on its objectives for post-war Iraq and the necessary force levels to achievethose objectives. The section closes with an examination of how many European forces might beavailable for Iraq, and the relation of force levels to costs. NATO members agreed in principle in 2002 that allied forces might be sent beyond Europe to combat threats to member states' security. In May 2002, the allies agreed that "to carry out the fullrange of its missions, NATO must be able to field forces that can move quickly to wherever they areneeded, sustain operations over distance and time, and achieve their objectives." Several monthsearlier, Defense Secretary Donald Rumsfeld, when asked what NATO's area of operations shouldbe, responded, "The only way to deal with the terrorist network that's global is to go after it whereit is." On July 9, 2003, he told the Senate Foreign Relations Committee that the Administrationwould "certainly want assistance from NATO and from NATO countries" in stabilizing Iraq. (1) Thosewho favor a NATO role in Iraq cite the recent precedent of the allied force in Afghanistan. TheInternational Security Assistance Force (ISAF) in Afghanistan has 4,800 troops, including a smallU.S. contingent, that came under NATO command on August 11, 2003. Its commander on theground is a German general. Its objective is to bring stability to Kabul. (An additional 9,000 U.S.forces, not under NATO command, continue combat operations outside Kabul.) In early October2003, NATO agreed in principle to extend the NATO force to the town of Kunduz. Before the conflict in Iraq, some Administration officials made a case for NATO involvement in post-war Iraq. They contended that only NATO had the capability for force generation,intelligence, and planning for a peace operation. NATO has had experience in Bosnia, Kosovo, andAfghanistan in leading stabilization forces. The bombing of U.N. headquarters in Baghdad onAugust 19 may signal a continuation of violent resistance to any outside entity, whether military orcivilian, be it NATO or the U.N. (2) NATO's agreement in principle to send forces outside Europe and the precedent of ISAF mask a range of issues that must be resolved before the European allies might send troops to Iraq. Someallied governments believe that the Bush Administration should have involved NATO more closelyin the conflict in Afghanistan in late 2001 to build an international political base for using militaryforce against terrorism. A more narrow range of allied governments believes that the Administrationoverrode their preference for allowing U.N. WMD inspections to run their course in Iraq in late 2002and 2003, that the Administration pushed aside the U.N. as a centerpiece for building aninternational coalition against the government of Saddam Hussein, and that the Administration wentto war precipitately, without establishing firm evidence of WMD in or Al Qaeda links to Iraq. In February 2003, several allies resisted a U.S. effort to send NATO forces to defend Turkey in the event of an attack by Iraq. They opposed such a move because they viewed it as anAdministration maneuver to imply NATO endorsement of the impending conflict with Iraq. Theseexperiences have led the allies to demand a greater share of decision-making and more authority forthe U.N. in Iraq before committing military forces to that country, issues that will be discussed ina later section of this report. (3) Both President Bush and Secretary of Defense Rumsfeld have previously said that U.S. forces in Iraq are adequate to stabilize the country and to accomplish Administration objectives there. InJune 2003, President Bush said that the United States has in Iraq "the force necessary to deal withthe security situation." On August 20, Secretary Rumsfeld said, "At the moment, the conclusion ofthe responsible military officials is that the force levels are where they should be." (4) Deputy Secretary of Defense Paul Wolfowitz testified to Congress that the purpose of the U.S. occupation is to build "a free, democratic, peaceful Iraq" that will not threaten friends of the UnitedStates with "illegal weapons. A free Iraq that will not be a training ground for terrorists...[and] willnot destabilize the Middle East. A free Iraq can set a hopeful example to the entire region and leadother nations to choose freedom." He added that by bringing in military forces from other countries,U.S. forces could be drawn down. (5) On September23, 2003, in a speech at the U.N., President Bushsaid that "Iraq as a democracy will have great power to inspire the Middle East. The advance ofdemocratic institutions in Iraq is setting an example that others, including the Palestinian people,would be wise to follow." (6) There are views, some within the United States government, that contend that the force levels in Iraq cannot be maintained without severe stress on U.S. forces. The United States Army has 33active-duty combat brigades, of which only three are available today for new missions. Twenty-oneare overseas, including 16 in Iraq. A CBO study released September 3 found that the U.S. Armycould not maintain170,000-180,000 forces in Iraq and Kuwait past March 2004 without activatingmore National Guard and Reserve units, or calling upon foreign forces. General John Abizaid,CENTCOM commander, placed the figure at a lower level. He said that the United States could notsustain the current level of 130,000 troops without rotating active duty, reserve, and National Guardforces into Iraq by spring 2004, absent international forces to replace them. (7) Other estimates put the level of forces needed in Iraq at a higher figure than that given by the Administration. A Rand Corporation official has given an estimate of 300,000-500,000 troops.Former Army Chief of Staff General Eric Shinseki said that several hundred thousand troops wouldbe needed. Some of these estimates do not cite democracy and influence on regional governmentsto develop representative institutions as goals of the occupation; rather, they generally cite "stability"as the key objective. (8) One defense analyst providesa more sobering perspective, noting that the U.S.political as well as military strategy is deficient to bring stability to Iraq. In his view, the UnitedStates lacks properly trained forces, such as peacekeepers and military police, for the job; the essenceof Iraq's need is for civilian training for administrators and establishment of civil institutions, butIraq is now being administered by the Department of Defense, which is not prepared for such amission, according to this view. (9) NATO is providing a measure of assistance in Iraq to Poland, which has formed a multinational force that became operational in part of its originally assigned sector September 3. NATO's NorthAtlantic Council decided on May 21, 2003, to provide Poland allied assets for force planning,communications, logistics, and establishment of a headquarters. The operation is not technically aNATO operation. Poland leads a contingent of 9,000 troops from a variety of countries, some ofwhich are not NATO members, from north of Basra into the central part of the country. Thebombing of a major mosque in Najaf, which took the life of an important Shi'ite cleric, led the U.S.government to delay Poland's takeover of that city, which is in the Polish sector, for at least severalweeks. Some observers, while crediting Warsaw with a willingness to undertake a dangerousmission, believe that some of the forces are not trained to NATO standards. (10) The United States willpay Poland $250 million to cover primarily logistics and communication costs for its force. On August 26, 2003, NATO SACEUR (Supreme Allied Commander Europe) General James Jones floated the idea that the Polish-led force might eventually be expanded and transformed intoa NATO-led force, a step that would require the approval of all allies. (11) Several factors could limit the availability of forces from NATO countries. Several allies -- such as France, Italy, Britain, and Germany -- are already contributing to stability operations inBosnia, Kosovo, the Ivory Coast, and Afghanistan. NATO Secretary General George Robertson,who favors a NATO force for Iraq, has said that a maximum of 80,000 troops from European NATOcountries might be available. A more realistic figure might be in the range of 40,000-50,000, he said,given NATO governments' obligations in current operations. Another key factor that could affect contributions from NATO governments is the limited deployability and sustainability of most of their forces. Only Britain and France have a developedcapability for deploying and sustaining forces. Some allies, such as Germany, have large numbersof conscripts that serve short periods in the armed forces. Such troops are not suitable for servingin a stabilization force. (12) Cost is also a major factor in the effort both to stabilize Iraq and to involve allied governments there. If forces sent to Iraq could stabilize the country and allow the Iraqis to rebuild their economy,then an Iraqi government could eventually assume more of the expense of reconstruction over thelong term. Current operational costs for U.S. forces in Iraq are approximately $4 billion per month. Reconstruction costs would be in addition to this figure. For FY2004, the Administration has askedCongress for $20.3 billion for Iraq's reconstruction, and another for $51 billion for militaryoperations there. (13) Before the war, some Administration officials had predicted Iraq would stabilize quickly after the conflict, and have sufficient revenues to pay for its own rebuilding. On March 27, 2003, DeputyDefense Secretary Wolfowitz told Congress that "we are dealing with a country that can reallyfinance its own reconstruction, and relatively soon." (14) Such a situation might have produced anenvironment where a functioning Iraqi government could have borne more costs, sold industrialassets to private investors in and outside Iraq, and contracted to pay private companies to rebuild thecountry over time. The World Bank estimated in early October 2003 that Iraq would need $36billion through 2007, in addition to the $20.3 billion requested by the Administration, to rebuild. Iraqi oil revenues may reach an annual estimated figure of $14 billion in that period. (15) A donors'conference will be held in Madrid on October 23-24, where an estimated $2 billion will be pledged. European companies appear reluctant to enter Iraq until stability returns, and until a government viewed as "legitimate" is put into place. International oil executives, for example, are openlydoubtful of investing the $30-40 billion estimated to be necessary to rebuild Iraq's petroleumindustry unless there is a legitimate, popularly backed, government in Baghdad with which they cannegotiate contracts in a transparent process. (16) There is a gulf between Administration views and those of most allied governments on sendingEuropean forces to Iraq. There is also a range of views among allied governments. Key Europeangovernments, such as France and Germany, want a strong U.N. role in Iraq, and a new U.N.resolution to outline that role. Several important allies, including France, Germany, and Turkey,opposed the U.S. decision to use force against Iraq, and instead favored continuing the U.N. WMDinspections there. Some NATO governments do not want their forces to serve under U.S. command,especially under U.N. Security Council (UNSC) Resolution 1483, which gives the United States andBritain power as an "occupying" authority. Moreover, most European governments have objectivesthat differ from those of the Administration. In general, they do not believe that, in the currentcontext, building democratic institutions in Iraq and making Iraq a model for peaceful, representativegovernment that will inspire peace in the region, including settlement of the Arab-Israeli conflict,are attainable objectives. They also place strong emphasis on multilateralism, and wish to see thegeneral stature of the United Nations enhanced. On the other hand, some allies, particularlycountries that joined NATO recently, support Administration policy, and wish to forge a long-termstrategic partnership with the United States. Administration officials had previously said that UNSC 1483 was sufficient for introducing a NATO or broader multinational force into Iraq. They continue to oppose any resolution that woulddilute the Coalition Provisional Authority (CPA), established by UNSC 1483 as the "occupying"power, or weaken U.S. military authority. Deputy Secretary of Defense Wolfowitz has said that anew U.N. resolution would be acceptable "provided it doesn't put limitations on what AmbassadorBremer [the U.S. official who heads the CPA] and our people can do in Iraq that are crucial forspeeding up transition to normalcy and allow us to hand over power to Iraqis...." (17) TheAdministration has drafted a new resolution that is now before the UNSC. The draft resolutionreportedly calls for a U.S.-led U.N. stabilization force, and for Iraq's U.S.- appointed GoverningCouncil, working with Ambassador Bremer, to submit a timetable for writing a constitution andholding elections. Secretary Powell said that under the draft resolution, Bremer would continue toplay "a dominant political role." (18) SecretaryPowell has also said that the Governing Council couldoversee drafting of a constitution by spring 2004, with elections by the end of 2004. The U.N. Security Council, which includes France, Russia, and Britain as permanent members with veto powers, has endorsed the current Iraqi Governing Council as a step towards providing theIraqi people real power. Germany is now on the Security Council as a rotating member, having avote but not a veto. The CPA chose the members of the Governing Council. Three governments-- France, Germany, and Russia -- issued a joint statement on May 21, 2003, in which they praisedUNSC 1483 because it gave the U.N. a measure of involvement; placed the action of the CPA underinternational law and limited the CPA's actions; and allowed the U.N. to monitor Iraqi oil revenues. At the same time, they described the resolution as only a first step, asked that the U.N. be given anincreased role, and that a "calendar" be established for putting in place "a legitimate andinternationally recognized administration in Iraq." In addition, they asked that contracts for thereconstruction of Iraq be opened to competitive bidding. (19) The British government's perspective on governing Iraq is in evolution. British forces were actively engaged in Iraq during the conflict. Britain commands a force of approximately 11,000troops in the southern part of the country, and is an "occupying power" under UNSC 1483. At thesame time, Britain has reportedly been more open to a greater U.N. role in Iraq than theAdministration, and a more rapid turnover of power to the Iraqis. London has a keen interest inending European divisions over policy towards Iraq. Britain has reportedly proposed that somemembers of the Governing Council should quickly form a provisional government, then form acommittee to draft a constitution, and prepare for national elections. British Prime Minister TonyBlair is under political pressure for his possible role in creating a dossier that appears to haveprovided misleading information to the House of Commons about weapons of mass destruction inIraq, although Blair insists that this was not intentional. Public support for Blair and for Britain'sinvolvement in Iraq has plunged since the end of the conflict. (20) Among the allies, France has the most explicit requirements for supporting a new U.N. resolution, although French officials say that they will not veto a new U.S. resolution. AmongFrance's conditions for supporting a new resolution are: The U.N. should play the "primary role" in "supplying humanitarian aid, supporting the reconstruction of Iraq, and assisting in the creation of an interim Iraqi authority."Secretary General Annan should replace Ambassador Bremer as the principal outside politicalauthority for Iraq. Iraq must have "a precise calendar" for a process of securing a legitimate government, with no involvement of an outside government or entity in an "arbitrary choice ofleaders." Such a government must be "legitimate" and "pluralist,"with a new constitution writtenunder U.N. auspices. The Governing Council and the cabinet that it has chosen could represent"sovereignty"; within a month, the Governing Council and the cabinet could name a provisionalgovernment. A personal representative of Secretary General Annan would report regularly to the Security Council on conditions in Iraq, and would advise the provisional government on aphased transfer of authority to it. A constitution could be drafted by the end of 2003, under U.N.auspices, and elections could be held in spring 2004. The United States could continue to head an international military force, under U.N. auspices, to bring stability to Iraq. There should be international supervision within international law of Iraqi oil production, "with a transparent mechanism that assures the Iraqi people that they will not bedispossessed of their riches." (21) While the French government has not explicitly opposed a NATO operation, it is clear that France prefers a force mandated by the U.N. with a clear mission. French President Chirac and GermanChancellor Schroeder contend that the U.S. draft resolution gives insufficient authority to the U.N.and to the Iraqi people. France has offered to train the Iraqi military and police, but has indicatedthat it will not send forces to Iraq, nor make a contribution to the donors' conference until atransparent international mechanism for accepting donors' funds is established. A range of views is evident in other countries. The German government has said that it might send troops to Iraq, but that they would not serve under UNSC 1483 because the resolution embodiesthe idea of an "occupying power." Some German officials say, however, that Berlin is more likelyto seek involvement in civilian reconstruction rather than to supply forces; such projects as assistingin institution-building, including a court system, or developing infrastructure such as water and oilpipelines, might be attractive to Germany. Norway has a strong tradition of sending peacekeepingforces, but its government does not want to be associated with the occupying force outlined in UNSC1483. (22) On October 7, 2003, Turkey agreed in principle to send forces to Iraq. The Bush Administration has reportedly asked Ankara for 10,000 troops. However, the Governing Councilopposes a Turkish contingent on the grounds that no neighboring country should send forces, andbecause the Ottoman Empire's control of Iraq until 1919 left a bitter legacy. U.S.-Turkish relationshave been strained since March 2003, when the Turkish parliament refused to allow U.S. forces todeploy to Iraq from Turkish territory. Some Bush Administration officials, including DeputyDefense Secretary Wolfowitz, sharply criticized Turkey as a result. (23) Ankara already has 5,000 troops deployed in northern Iraq to act against Turkish Kurdish elements that have committed acts of terrorism against Turkish interests. These forces are underTurkish, and not U.S., command. There has been tension between Turkish and U.S. forces innorthern Iraq. Foreign Minister Gül has said that there must be "a separate sector under Turkishcommand and a separate chain of command" if more Turkish forces are sent to Iraq. (24) The Spanish government strongly supported the Bush Administration's decision to go to war against Iraq and is now contributing peacekeeping forces. At the same time, Spain has beenimplicitly critical of current Administration policy in Iraq, particularly the Governing Council chosenby U.S. officials. Foreign Minister Palacio has urged immediate efforts to begin a constitutionalprocess in Iraq. "The process cannot be sequestered by the local interests of a small number ofIraqis, nor can it be imposed from without. Iraqis must be the main protagonists throughout.... Animpartial third party, preferably with the intervention of the United Nations, should identify thesestakeholders." (25) A number of NATO members have already sent or will send forces to Iraq. The Italian government will send 3,000 troops to create security zones, serve as military police, and search forweapons of mass destruction. (26) Several European allies, and virtually all the NATO candidate states, place strategic relations with the United States above considerations for a stronger U.N. role. While these governments maydesire a new U.N. resolution that encourages a broader role for multilateral institutions in Iraq, theybelieve that their own future security lies with close relations with the United States. As alreadynoted, Poland may eventually lead a force of approximately 22 countries, some of which are sendingsmall contingents. Polish officials would welcome a general NATO force in Iraq. Hungary and theCzech Republic, among current NATO members, also place great importance on an enhancedstrategic partnership with the United States, and have committed to sending small numbers of troops. On July 10, 2003, the Senate passed an amendment, offered by Sen. Biden, to the ForeignRelations Authorization Act, S. 925 , urging the President to request that NATO "raisea force for deployment in post-war Iraq similar to what it has done in Afghanistan, Bosnia andKosovo...." It also calls upon the U.N. to provide military and police forces "to promote security andstability in Iraq and resources to help rebuild and administer Iraq." The bill is pending in the Senate. In the House, Mr. Bereuter, Mr. Wexler, and Mr. Lantos proposed an amendment identical to theBiden amendment to H.R. 1950 . It was adopted, and the bill was passed on July 16. Members in both houses and both parties have called upon the Administration to send more U.S.troops to Iraq as well. Senator Lugar said on July 29 that "overall the United States mission in Iraqcontinues to hang in the balance," and added that "coalition efforts in Iraq must undergo furtherinternationalization to be successful and affordable." (27) The debate between the United States and some of its European allies over an enhancedEuropean role in Iraq poses a range of problems with important implications. The Administrationdesires international troop contributions, but on terms that do not dilute U.S. political and militarycontrol over Iraq. Administration officials wish to preserve pre-war political objectives: thedemocratization of Iraq; elimination of weapons of mass destruction and terrorist operations; anda residual moderating effect upon the rest of the Middle East, including possible settlement of theArab-Israeli conflict. Key Europeans allies, to some extent including Britain, seek an international force with a strong U.N. voice. Some of these allies doubt, and even disparage as unrealistic, the Administration's goalsof a democratic Iraq and a consequent moderation of Middle Eastern politics by these means. Theyhave openly doubted the existence of an active Iraqi WMD program and any significant connectionbetween the Hussein regime and terrorists. In a broader perspective, virtually all European allieswish to see international problems solved in a multilateral framework, and believe that theAdministration damaged this goal when it cut short U.N. inspections in Iraq and went to war. Thesegovernments wish to restore a measure of credibility to the use of multilateral institutions ininternational affairs. (28) For these reasons, someNATO governments are hesitant to send their troopsto operate under U.S. leadership in Iraq. The conflicting positions of the Bush Administration andthese allies on these points raises the question whether the Administration would alter its positionas a compromise to obtain the 45,000-80,000 European troops that might be available. Some allies, such as Poland and Norway, and most of the seven candidate states for NATO membership, support key elements of Administration policy in Iraq in part because they wish toforge an enduring strategic partnership with the United States. They do not believe that either theEuropean Union or the U.N. can provide for their own security, although EU membership is a vitalinterest for them. Poland, for example, had bad experiences with French (and British) securityguarantees before World War II, and the Warsaw Treaty Organization was an alliance imposed uponcentral Europe that was solely for the benefit of its leader, the Soviet Union. With such recenthistory fresh in their minds, many central European leaders wish to tie themselves closely to theUnited States, although they still wish to see a measure of U.N. involvement in Iraq that will supplyinternational legitimacy to their tasks there. France, most vocally, and Germany are in the forefront of countries calling for a strong U.N. presence and guidance in Iraq. The current French government has aspirations to lead an EU thateventually develops a military capability suitable at least to provide a measure of defense forEuropean countries. President Chirac advocates a "multipolar" world, with the European Unionacting as a pole to balance U.S. power. Few, if any, European governments have expressedenthusiasm about such French leadership and ideas, and many have sharply opposed them. Beyondaspirations for such leadership, France, joined by Germany, has a strong belief that tying themselvesto U.S. leadership in Iraq augurs ill for their relations with a future sovereign Iraqi government, (29) andrisks alienating a broad range of Arab states hostile to the U.S. occupation. France's call for a"pluralistic" government in Iraq is at least a step removed from the U.S. objective of a "democratic"government. France's position on this point is shared in most European capitals, and is likely moreacceptable to Arab governments as well. At the same time, in France, Germany, and other allied states, there are influential voices that do not wish to see the United States fail to bring stability and at least a measure of representativegovernment to Iraq. Several possible gains for European governments are apparent should amoderate Iraq, close to the United States, emerge: a chastened Iran, more hesitant in the pursuit ofweapons of mass destruction and promotion of Islamic radicalism; an intimidated Syria, morecautious in its interference in regional affairs and support for terrorism; and a peace process free ofan Iraqi government adamantly opposed to a settlement of Arab-Israeli differences. Failure of theU.S. effort in Iraq has potentially great negative consequences: further disaffection with U.S.leadership of NATO; a renewal of radical Islam in the Middle East, with regimes hostile to westerngovernments; and exacerbation of tensions in the Arab-Israeli peace process. For these reasons,these observers believe that European governments criticizing the United States should seek anaccommodation over Iraq with the Bush Administration. (30) A wide range of European officials appears to be seeking a compromise. Several options have been suggested. Such a compromise might provide the United States with overall leadership of aU.N.-approved administration and military force in Iraq, but with individual allies in command ofdifferent geographic sectors, as is the case, for example, in Bosnia and Kosovo. It might containelements of the French position, particularly a timetable for elections and establishment of an Iraqigovernment chosen by the Iraqi people or representatives of various groups in Iraq. In addition, thecompromise might include a transparent economic development regime that provides companiesfrom a range of countries access to contracts for reconstruction. Such a compromise could free U.S.forces for availability elsewhere; provide European (and other) governments with a voice in Iraq'sfuture, and legitimacy through a U.N. imprimatur; and shift part of the financial burden forreconstruction from the U.S. government to other governments and to the international privatesector. A key disadvantage for the Bush Administration might be the surrender of some of itspolitical objectives in Iraq, such as the quest for a democratic government, that would be a modelfor the region. | Bush Administration officials have said that they wish to see NATO countries contribute forces to bring stability to Iraq, possibly as part of a U.S.-led NATO or U.N. force. Key European alliessuch as France and Germany would first like to see a new U.N. mandate that would includeobjectives, such as a timetable for turnover of authority to Iraqis and a transparent process forimproving Iraq's petroleum industry, that the Administration now opposes. Some European alliesdo not wish to serve under a U.S. command in Iraq; other European allies already have troops in Iraq. Administration officials are concerned that greater international involvement in governing Iraq could deflect the United States from achieving some of its stated goals for that country's future. Such goals include establishing a democracy there that would influence other Middle Easterngovernments to follow a similar course, and easing of the Arab-Israeli conflict. Some Europeansargue that these goals are unattainable in the framework established by the U.S.-led occupation. Atthe same time, involvement of European forces, if a common outlook could be worked out, couldfree some U.S. forces for other missions, dampen international criticism of U.S. management of Iraq,and spread costs for reconstructing Iraq to other countries and the private sector. See also CRS Report RL31339 , Iraq: U.S. Regime Change Efforts and Post-War Governance , CRS Report RL31701, Iraq: U.S. Military Operations, and CRS Report RL31843(pdf) , Iraq: ForeignContributions to Operation Iraqi Freedom, Peacekeeping Operations, and Reconstruction . This report will be periodically updated. |
Presidential signing statements are official pronouncements issued by the President contemporaneously to the signing of a bill into law that, in addition to commenting on the law generally, have been used to forward the President's interpretation of the statutory language; to assert constitutional objections to the provisions contained therein; and, concordantly, to announce that the provisions of the law will be administered in a manner that comports with the administration's conception of the President's constitutional prerogatives. While the history of presidential issuance of signing statements dates to the early 19 th century, the practice has become the source of significant controversy in the modern era as Presidents have increasingly employed the statements to assert constitutional objections to congressional enactments. The number and scope of such assertions in the George W. Bush Administration in particular gave rise to extensive debate over the issuance of signing statements, with the American Bar Association (ABA) publishing a report declaring that these instruments are "contrary to the rule of law and our constitutional separation of powers" when they "claim the authority or state the intention to disregard or decline to enforce all or part of a law ... or to interpret such a law in a manner inconsistent with the clear intent of Congress." However, in analyzing the constitutional basis for, and legal effect of, presidential signing statements, it becomes apparent that no constitutional or legal deficiencies adhere to the issuance of such statements in and of themselves. Rather, it appears that the appropriate focus of inquiry in this context is on the assertions of presidential authority contained therein, coupled with an examination of substantive executive action taken or forborne with regard to the provisions of law implicated in a presidential signing statement. Applying this analytical rubric, it seems evident that the issues involved center not on the simple issue of signing statements, but rather on the view of presidential authority that governs the substantive actions of the administration in question. This report focuses on the use of signing statements by recent administrations, with particular emphasis on the Administrations of George W. Bush and Barack Obama. There is no explicit constitutional provision authorizing the issuance of presidential signing statements. Article I of the Constitution provides only that the President "shall sign" a bill of which he approves, while in vetoing a measure the President is required to return the measure "with his Objections to that House in which it shall have originated." However, Presidents have issued such statements since the Monroe Administration, and there is little evident constitutional or legal support for the proposition that the President may be constrained from issuing a statement regarding a provision of law. The first controversy arising in this context stemmed from a signing statement issued by Andrew Jackson in 1830 that raised objections to an appropriations bill that involved internal improvements. The bill specifically addressed road examinations and surveys. In his signing statement President Jackson declared that the road in question, which was to reach from Detroit to Chicago, should not extend beyond the territory of Michigan. A subsequently issued House report criticized Jackson's action, characterizing it as in effect constituting a line item veto. Likewise, a signing statement issued by President Tyler in 1842 expressing doubts about the constitutionality of a bill regarding the apportionment of congressional districts was characterized by a select committee of the House as "a defacement of the public records and archives." Perhaps sensitized by this rebuke, Presidents Polk and Pierce apologized for the issuance of signing statements, noting that such action departed from the traditional practice of notifying Congress of the approval of a bill via an oral message from the President's private secretary. This conception of a signing statement as an unusual instrument was again noted by President Grant in 1875, when he declared that his use of a signing statement was an "unusual method of conveying the notice of approval." Signing statements remained comparatively rare through the end of the 19 th century, but had become common instruments by 1950. President Truman, for instance, issued nearly 16 signing statements per year, on average, with the figure steadily increasing up to the modern day. Concurrent with the rise in the number of statements issued, the use of signing statements to voice constitutional objections to acts of Congress has become increasingly prevalent over the past 60 years. This type of executive action began in earnest during the Reagan Administration, as one aspect of a comprehensive strategy employed by the Reagan Administration to assert aggressively the constitutional prerogatives of the presidency. President Reagan expanded the use and impact of the presidential signing statement, transforming it into a mechanism for the assertion of presidential authority and intent. President Reagan issued 250 signing statements, 86 of which (34%) objected to one or more of the statutory provisions signed into law. One key aspect of President Reagan's approach in this context centered on attempts to establish the signing statement as part of the legislative history of an enactment, and, concordantly, to persuade courts to take the statements into consideration in judicial rulings. This goal was illustrated in a memorandum drafted by Samuel A. Alito, Jr., then serving in the Office of Legal Counsel (OLC) of the Department of Justice, announcing a "primary objective" to "ensure that Presidential signing statements assume their rightful place in the interpretation of legislation." To this end, Attorney General Edwin Meese III entered into an agreement in 1986 with the West Publishing Company for signing statements to be included in the legislative histories contained in its U.S. Code Congressional and Administrative News publication. This strategy met with a degree of success in two major Supreme Court cases that were decided during this time period. In INS v. Chadha , which struck down as unconstitutional the congressional practice of subjecting various executive branch actions to a legislative veto, the Court noted that "11 Presidents, from Mr. Wilson through Mr. Reagan, who have been presented with this issue have gone on record at some point to challenge congressional vetoes as unconstitutional." Likewise, in Bowsher v. Synar , which struck down provisions of the Gramm-Rudman Deficit Reduction Act on the basis that they impermissibly imbued a legislative branch officer with executive authority, the Court noted: "[i]n his signing statement, the President expressed his view that the act was constitutionally defective because of the Comptroller General's ability to exercise supervisory authority over the President." While these citations by the Court lend credence to the validity of signing statements as constitutional presidential instruments, it does not appear that the statements were in fact relied upon in any determinative degree by the Court. Indeed, as discussed in further detail below, the contents of signing statements do not seem to have factored prominently in judicial decisions. One of the most significant conflicts involving a presidential signing statement in the Reagan Administration arose from the President's statement accompanying the signing of the Deficit Reduction Act of 1984. In that statement, the President took issue with provisions of the bill constituting the Competition in Contracting Act, announcing his "vigorous objection to certain provisions that would unconstitutionally attempt to delegate to the Comptroller General ... the power to perform duties and responsibilities that in our constitutional system may be performed only by officials of the executive branch." The President further stated that he was "instructing the Attorney General to inform all executive branch agencies as soon as possible with respect to how they may comply with the provisions of the bill in a manner consistent with the Constitution." President Reagan was specifically objecting to an automatic stay provision that prohibited the award of government contracts during any period where the Comptroller General was investigating complaints that an agency had not complied with the competitive bidding procedures required by the act. Subsequent to this declaration, the Director of the Office of Management and Budget (OMB) issued OMB Bulletin 85-8, instructing federal agencies not to cooperate with the Government Accountability Office's (GAO's) efforts to implement the act. Given that the actions taken by the relevant agencies pursuant to the specific instructions contained in the bulletin directly impacted contractors, the issue was ripe for judicial review. A judicial ruling issued in March of 1985 upheld the conferral of power at issue. However, the Administration persisted in its refusals to give effect to the terms of the act, acceding only in the face of additional rulings on the issue as well as a vote by the House Judiciary Committee to eliminate funds for the Office of the Attorney General from the budget. The Administration of President George H. W. Bush (Bush I) continued to employ signing statements to further presidential prerogatives, issuing 228 signing statements, 107 of which (47%) raised constitutional or legal objections. In particular, the Bush I Administration was highly sensitive to perceived encroachments upon executive power by Congress, as illustrated by an OLC opinion drafted by Deputy Attorney General William P. Barr. In this memo, Barr identified 10 categories of legislative action he considered constitutionally problematic and noted that the Administration had objected to many of these perceived intrusions through the issuance of signing statements. One category that was consistently acted upon by the Bush I Administration was protection of presidential authority under the Appointments Clause of the Constitution. For example, upon signing the National and Community Services Act of 1990 into law, President Bush issued a statement declaring that provisions in the bill establishing a Board of Directors charged with administering a National and Community Services Act Commission were unconstitutional due to the requirement that certain appointees were to be drawn from a pool of nominees forwarded by the Speaker of the House of Representatives and the majority leader of the Senate. President Bush specifically noted that such a requirement exceeded the authority of Congress in the appointment context and declared that he would treat the requirement as being "without legal force or effect." The President further directed the Attorney General "to prepare remedial legislation for submission to the Congress during its next session, so that the act can be brought into compliance with the Constitution's requirements." Congress subsequently passed a bill remedying the constitutionally challenged provisions. Additionally, upon signing the Dayton Heritage Preservation Act of 1992 into law, President Bush issued a statement objecting to language in the bill that directed the Secretary of Interior to make appointments of individuals to the Dayton Aviation Heritage Commission based on the recommendations of local officials, stating that since "[t]he majority of members are effectively selected by various nonfederal officials and thus are not appointed in conformity with the Appointments Clause of the Constitution," he was signing the bill "on the understanding that the commission will serve only in an advisory capacity and will not exercise Government power." The Bush I Administration subsequently refused to make any appointments to the commission until this concern was addressed in remedial legislative action in 1995. The Bush I Administration also continued to pursue a strategy of employing signing statements to influence the interpretation of the legislative history accompanying a bill. However, as in the Reagan Administration, it is not apparent that these efforts were successful. While the policy aims of his Administration might have differed, President Clinton's conception of executive power revealed itself to be largely consonant with the philosophical underpinnings of the Reagan and Bush I Administrations. Accordingly, President Clinton also made active use of signing statements as a mechanism to assert presidential prerogatives. President Clinton issued 381 signing statements, 70 of which (18%) voiced concerns or objections. President Clinton also relied upon the OLC to produce memoranda not only in support of the issuance of signing statements generally, but also asserting presidential authority to refuse to enforce unconstitutional statutes. Regarding the former, then Assistant Attorney General Walter Dellinger prepared an OLC memorandum asserting that the issuance of signing statements to "make substantive legal, constitutional or administrative pronouncements," was well established, and that these uses "generally serve legitimate and defensible purposes." In a subsequent memorandum, Assistant Attorney General Dellinger declared that "there are circumstances in which the President may appropriately decline to enforce a statute that he views as unconstitutional." In support of this "general proposition" that Mr. Dellinger "believe[d] to be uncontroversial," the memorandum pointed to what he argued was "significant judicial approval," and "consistent and substantial executive practice." It is important to note that while the Dellinger memorandum asserted that the President has an "enhanced responsibility to resist unconstitutional provisions that encroach upon the constitutional power of the Presidency," the memo nonetheless acknowledged that the "Supreme Court plays a special role in resolving disputes about the constitutionality of enactments." Accordingly, the memorandum advised: As a general matter, if the President believes that the Court would sustain a particular provision as constitutional, the President should execute the statute, notwithstanding his own beliefs about the constitutional issue. If, however, the President, exercising his independent judgment, determines both that a provision would violate the Constitution and that it is probable that the Court would agree with him, the President has the authority to decline to execute the statute. The memorandum went on to advise that in deciding whether to refuse to enforce a provision of law, the President should weigh "the effect of compliance with the provision on the constitutional rights of affected individuals and on the executive branch's constitutional authority," with a focus on the likelihood of whether that compliance or non-compliance would permit judicial resolution of the issue. While this recommendation appears to be based on a determination that it would be more appropriate to limit a refusal to enforce a law to situations that "would afford the Supreme Court an opportunity to review the constitutional judgment of the legislative branch," the memorandum nonetheless declared that some encroachments would not be justiciable, and that in such instances the President "must shoulder the responsibility of protecting the constitutional role of the presidency." In light of this conception of presidential power, it is not surprising that the Clinton signing statements often contained broad constitutional pronouncements similar to those of the Reagan and Bush I Administrations, ranging from the foreign affairs power to the Recommendation Clause. Regarding the latter, in a signing statement accompanying the Balanced Budget Act of 1997, President Clinton took objection to a provision requiring the Secretary of Health and Human Services to develop certain legislative proposals, declaring that he would "construe this provision in light of my constitutional duty and authority to recommend to the Congress such legislative measures as I judge necessary and expedient, and to supervise and guide my subordinates, including the review of their proposed communications to Congress." Like his predecessor, President Clinton also guarded presidential appointment prerogatives, objecting to provisions he perceived as impinging upon executive authority in that context. For example, in a statement issued along with the enactment of the Coast Guard Authorization Act of 1997, President Clinton likewise objected to a provision of the bill that purported to require the designation of certain commission members exercising executive power from persons recommended by local officials or organizations. President Clinton declared that "[t]he Appointments Clause does not permit such restrictions to be imposed upon the executive branch's powers of appointment. Therefore I will not interpret [this provision] of the act as binding, and I direct the Secretary of Transportation to regard the designations and recommendations arising from it as advisory only." While signing statements that raise constitutional objections or signal an intention to refuse to enforce a provision in law are usually generalized in nature, President Clinton's statement accompanying the National Defense Authorization Act for Fiscal Year 2000 provides a stark example of a substantive presidential directive being included within a statement itself. The act established the National Nuclear Security Administration (NNSA), a new, semi-autonomous agency within the Department of Energy to manage and oversee the operational and security activities of the department's nuclear weapons laboratories. In his signing statement, the President expressed misgivings with respect to structural arrangements within the new agency and the limitations on the Secretary of Energy's ability to direct and control the activities and personnel of the NNSA, but did not suggest that the legislation raised constitutional issues. In particular, the President objected to what he saw as the isolation of the personnel and contractors of the NNSA from direction by department officials outside the new agency; the limitation on the Secretary's ability to employ his statutory authorities to direct the activities and personnel of the NNSA both personally and through designated subordinates; the uncertainty whether the department's duty to comply with the procedural and substantive requirements of environmental laws would be fulfilled under the new arrangement; the removal of the Secretary's direct authority over certain sensitive classified programs; and the potentially deleterious effect of the creation of redundant support functions in the areas of procurement, personnel, public affairs, legal affairs, and counterintelligence. To ensure that these perceived deficiencies do not, in his view, undermine the Secretary's statutory responsibilities in the area, the President directed the Secretary to assume the duties and functions of the new office of Under Secretary for Nuclear Security and to "guide and direct" all NNSA personnel by using his authority, "to the extent permitted by law," to assign any departmental officer or employee to a concurrent office within NNSA. The Secretary is also directed to "mitigate" the risks to the chain of command between him and subordinate agency personnel presented by the legislation's redundant functions "to the extent permissible under law." The President indicated that he might not submit a nominee for Under Secretary for Nuclear Security until action was taken by Congress to remedy the identified deficiencies and to "harmonize" the Secretary's authorities with those vested in the Under Secretary. Whereas the statement issued by President Reagan in response to the Competition in Contracting Act was typical of presidential signing statements in that it contained a generalized constitutional objection to a provision in a bill, followed by subsequent particularized and substantive presidential action, President Clinton's NNSA statement was uncharacteristically direct, laying out the specific actions that were to be taken in order to ensure the vitiation of the provisions President Clinton deemed objectionable. As noted by Professor Philip J. Cooper, this statement did not simply raise a generalized constitutional objection or signal an intent to refuse to enforce the provisions at issue, but, rather, constituted an "order to do that which the Congress had expressly rejected." Like its predecessors, the Administration of George W. Bush (Bush II) employed the signing statement to voice constitutional objections to, or concerns with, congressional enactments, or to enunciate the Administration's interpretation of an enactment it deemed ambiguous. However, while the nature and scope of the objections raised by the Bush II Administration mirrored those of prior Administrations, the sheer number of challenges contained in the signing statements indicated the Administration was using the presidential instrument relative to all levels and elements of the executive branch and to assert aggressively presidential prerogatives in its relations with the Congress and the judiciary. These factors, in turn, generated a significant degree of controversy regarding the issuance of presidential signing statements. At first glance, it does not appear that President Bush departed significantly from prior practice in the signing statement context, having issued 161 signing statements as compared to 381 during the Clinton Administration. However, the qualitative difference in the Bush II approach becomes apparent when considering the number of individual challenges or objections to statutory provisions that were contained in his statements. Of President Bush's 161 signing statements, 127 (79%) contain some type of constitutional challenge or objection, as compared to 70 (18%) during the Clinton Administration. Even more significant, however, is the fact that these 127 signing statements were typified by multiple constitutional and statutory objections, containing challenges to more than 1,000 distinct provisions of law. Contributing to the controversy was the high profile of several of the provisions to which President Bush objected. For instance, in the signing statement accompanying the USA PATRIOT Improvement and Reauthorization Act of 2005, President Bush declared that provisions requiring the executive branch to submit reports and audits to Congress would be construed "in a manner consistent with the President's constitutional authority to supervise the unitary executive branch and to withhold information the disclosure of which could impair foreign relations, national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties." Likewise, in the signing statement accompanying the law that contained the McCain Amendment (as part of the Detainee Treatment Act) prohibiting the use of torture, or cruel, inhuman, or degrading treatment of prisoners, the President declared that the executive branch would construe that provision "in a manner consistent with the constitutional authority of the President to supervise the unitary executive branch and as Commander in Chief ... [in order to protect] the American people from further terrorist attacks." While the number of provisions challenged or objected to by President Bush gave rise to controversy, it is important to note that the substance of his signing statements did not appear to differ substantively from those issued by either Presidents Reagan or Clinton. As with those Administrations, the majority of the Bush II signing statements made generalized objections to perceived encroachments on executive authority. Moreover, in almost all instances where President Bush raised a constitutional concern or objection, he stated that he would construe the provision at issue in a manner that will avoid his concerns. Relatedly, in some statements that raised constitutional objections, President Bush declared that he would comply with the provision at issue "as a matter of comity." Professor Philip J. Cooper characterized the constitutional objections raised by President Bush as falling across 17 categories, ranging from generalized assertions of presidential authority to supervise the "unitary executive branch" to federalism limits imposed by the Supreme Court in United States v. Printz . The Bush II Administration was particularly prolific in issuing signing statements that objected to provisions that it claimed infringed on the President's power over foreign affairs (oftentimes with regard to requirements that the Administration take a particular position in negotiations with foreign powers); provisions that required the submission of proposals or recommendations to Congress (asserting that they interfere with the President's authority under the Recommendations Clause to "recommend such Measures as he shall judge necessary and expedient"); provisions that imposed disclosure or reporting requirements (on the ground that such provisions may interfere with the President's authority to withhold sensitive or privileged information); conditions and qualifications on executive appointments (asserting infringement on the President's authority pursuant to the Appointments Clause); and legislative veto provisions (on the ground that they violate bicameralism and presentment requirements as established in INS v. Chadha ). While the substance of the Bush II signing statements appears to be comparable to that of previous administrations, the nature and sheer number of provisions challenged or objected to indicates that there is nonetheless a qualitative difference to the Bush II Administration's use of this instrument. As has been widely noted, President Bush "emphatically endorsed the unitariness of the executive branch," and took steps to assert sole presidential authority over his Administration. In addition to actions taken to prosecute the War on Terror, President Bush exercised significant control over the agency rulemaking process, and issued executive orders claiming authority to control the release of presidential records and to classify and reclassify information that implicated national security concerns. The Bush II Administration also exercised significant control over the release of information relating to internal executive branch deliberations, as in the Vice President's refusal to disclose information regarding the activities of the National Energy Policy Development Group to the Government Accountability Office (leading to the litigation in Walker v. Cheney ). When viewed through the prism of the Administration's actions in these contexts, it seems evident that the Bush II signing statements were an integral part of the Administration's efforts to further its broad view of presidential prerogatives and to assert functional and determinative control over all elements of the executive decision-making process. Furthermore, the dramatic increase in the number of provisions challenged and objected to by President Bush has been widely seen as being aimed at altering the conception of presidential authority not only in the internal operations of the executive branch, but with respect to Congress, the courts, and the public. As touched upon above, the large bulk of the signing statements the Bush II Administration issued did not apply particularized constitutional rationales to specific scenarios, nor do they contain explicit, measurable refusals to enforce a law. Instead, the statements made broad and largely hortatory assertions of executive authority that made it effectively impossible to ascertain what factors, if any, might lead to substantive constitutional or interpretive conflict in the implementation of an act. The often vague nature of these constitutional challenges, coupled with the pervasive manner in which they were raised in numerous signing statements could thus be interpreted as an attempt by the Administration to object systematically to any perceived congressional encroachment, however slight, with the aim of inuring the other branches of government and the public to the validity of such objections and the attendant conception of presidential authority that will presumably follow from sustained exposure and acquiescence to such claims of power. Like its predecessors, the Administration of President Barack Obama has continued to employ presidential signing statements to voice constitutional objections to congressional enactments, or to enunciate the Administration's interpretation of an enactment it has deemed ambiguous. However, the Obama Administration has used the signing statement as a vehicle for asserting constitutional objections to duly enacted statutes with significantly less frequency than prior administrations. The Administration has issued 20 signing statements, of which 10 (50%) contain constitutional challenges to an enacted statutory provision. Upon entering office, President Obama issued a memorandum to the heads of the executive departments outlining the new Administration's policy on the use of signing statements. While noting that that the interpretive instrument "can be abused," the President asserted that using signing statements to raise constitutional objections to statutes serves "a legitimate function in our system, at least when based on well-founded constitutional objections." Accordingly, the President announced his intent to curb prior abuses and mitigate the commonly articulated objections to the use of the signing statement. The President proceeded to establish the foundational principles of his Administration's approach to signing statements. The Administration would attempt to communicate constitutional objections to Congress in the early stages of the legislative process so as to avoid the necessity of a signing statement; only base objections on "well-founded" interpretations of the Constitution; identify any constitutional objection "with sufficient specificity" to ensure that the legal nature and basis of the objection is clear; and announce an intent to construe a provision so as to avoid a constitutional problem "only if that construction is a legitimate one." The President also directed all executive branch agencies to "seek the advice of the Attorney General before relying" on previously issued signing statements "as the basis for disregarding, or otherwise refusing to comply with, any provision of a statute." While the frequency with which the Obama Administration has asserted constitutional objections to enacted statutory provisions represents a departure from previous administrations, the types of objections within the signing statements that the President has issued have generally mirrored those of previous administrations. The Obama Administration has continued to register familiar constitutional objections to perceived infringements on the President's authority in foreign affairs and as Commander in Chief, as well as violations of the Appointments Clause. For example, a December 23, 2011, signing statement asserted constitutional challenges based on the President's authority in foreign affairs and as Commander in Chief; infringements on his ability to communicate and negotiate with foreign governments, receive the assistance of senior advisers, and to recommend legislation to Congress; and objections to numerous legislative veto provisions. In addition to objections associated with the President's authority in foreign affairs, some of the Administration's most common objections have pertained to the President's relationship with Congress and the separation of powers—generally focusing on Congress's authority to obtain information from the executive branch. Although the Obama Administration signing statements do not refer to "executive privilege" by name as the legal justification for these objections, the context of a number of signing statements indicates that executive privilege is, at least in part, the legal doctrine being asserted. For example, upon signing the Omnibus Appropriations Act of 2009, the President issued a signing statement referencing a provision that prohibited the use of appropriated funds to pay the salary of any federal employee who interferes with communications between Members of Congress and other federal employees. The President noted that he did not "interpret this provision to detract from my authority to direct the heads of executive departments to supervise, control, and correct employees' communications with the Congress in cases where such communications would be unlawful or would reveal information that is properly privileged or otherwise confidential." Additionally, in a May 20, 2009, signing statement, the President asserted that he would interpret a provision in the Fraud Enforcement and Recovery Act that requires the executive branch to provide the Financial Crisis Inquiry Commission with "any information related to any Commission inquiry" as "not to abrogate any constitutional privilege." Finally, the President asserted two objections to the potential disclosure of protected information in an October 7, 2010, signing statement attached to the Intelligence Authorization Act for Fiscal Year 2010. The two provisions in question require that the President provide to Congress the "legal basis" for conducting covert actions and intelligence activities and mandates that the newly established Inspector General of the Intelligence Community make reports to certain congressional committees with respect to investigations of current or former intelligence officials. The Obama signing statement asserted that the Administration would interpret these provisions so as not to require the "disclosure of any privileged advice or information" or the "disclosure of privileged or otherwise confidential law enforcement information." President Obama has also consistently used signing statements to object to congressionally imposed limitations on the President's discretion concerning the disposition of individuals held at the Guantanamo Bay detention center. In 2011 alone, the President objected to statutory provisions restricting the transfer of Guantanamo detainees, either into the United States or to a foreign country, on four separate occasions. The Obama Administration has asserted that restricting the transfer of detainees into the United States, and therefore restricting the executive branch's ability to prosecute detainees in federal court, violates the separation of powers by infringing on the "critical executive branch authority to determine when and where to prosecute Guantanamo detainees." Likewise, restricting the transfer of detainees to foreign nations would "hinder the executive's ability to carry out its military, national security, and foreign relations activities and … would, under certain circumstances, violate constitutional separation of powers principles." In each signing statement, President Obama asserted that he would interpret the restrictions in a manner that would avoid a "constitutional conflict." One substantive area in which the Obama Administration's use of the signing statement has departed from certain previous administrations, especially the Bush II Administration, has been the absence of any references to the "unitary executive." As noted previously, President George W. Bush "emphatically endorsed the unitariness of the executive branch" and arguably used the signing statement to assert sole presidential authority over his Administration. Whereas the Bush II Administration routinely objected to congressional enactments on the ground that certain provisions infringed on the President's authority to "supervise the unitary executive," no such language has appeared in Obama Administration signing statements. This, however, is not to say that President Obama has not issued signing statements to assert control over the executive branch and executive officials, but only that the Obama Administration has not utilized signing statements to explicitly advance the unitary executive theory of presidential control. For example, in perhaps his most controversial signing statement to date, President Obama expressly objected to a provision of the Department of Defense and Full-Year Continuing Appropriations Act of 2011 that he perceived as infringing on his authority to "supervise and oversee the executive branch." Section 2262 of the act states that no funds made available under the Full-Year Continuing Appropriations "may be used to pay the salaries and expenses" of four specific White House "czars." Upon signing the bill into law, President Obama issued a signing statement objecting to the pay restrictions on the grounds that they would impede his ability to receive advice from White House staff. The statement asserted that "[t]he President has well-established authority to supervise and oversee the executive branch, and to obtain advice in furtherance of this supervisory authority." The Administration concluded that legislative attempts to influence "the President's ability to exercise his supervisory and coordinating authorities … violate[s] the separation of powers by undermining the President's ability to exercise his constitutional responsibilities and take care that the law be faithfully executed." Accordingly, the Administration would interpret the provision so as "not to abrogate these Presidential prerogatives." The Administration repeated these objections with respect to similar provisions of the Consolidated Appropriations Act of 2012, which the President asserted "could prevent me from fulfilling my constitutional responsibilities, by denying me the assistance of senior advisers and by obstructing my supervision of executive branch officials in the execution of their statutory responsibilities." The continued use of signing statements has generated a significant degree of controversy, leading some to call for the enactment of a bar to their issuance, or for the conferral upon Congress of the right to challenge statements in court. However, an analysis of the underlying legal and constitutional issues suggests that such approaches may not have taken full cognizance of the nature of signing statements generally, as well as the nature of the pragmatic and institutional concerns that are posed by the attempts at assertion of executive power underlying the controversy over these instruments. As has been illustrated, there is a long history of presidential issuance of signing statements. These statements provide "one way in which a President may indicate his intent to refuse to enforce a provision of a congressionally enacted law that he believes to be unconstitutional." However, there is little evident support for the notion that objections or concerns raised in a signing statement may be given substantive legal effect. As one commentator has suggested: "Where the President has played a major role in drafting or supporting a particular statutory provision, presidential statements should be granted interpretive significance.... When the President opposed the provision being interpreted, however, his signing statements ... lack persuasive authority." This observation is buttressed by the analysis of the district court in Dacosta v. Nixon , which stated that a bill, when passed by Congress and approved by the President, "establishe[s] 'the policy of the United States' to the exclusion of any different executive or administrative policy, and ha[s] binding force and effect on every officer of the Government, no matter what their private judgments of that policy, and illegalize[s] the pursuit of an inconsistent executive or administration policy. No executive statement denying efficacy to legislation could have either validity or effect." Irrespective of this maxim, presidents have repeatedly declared their intention to disregard laws that they view as unconstitutional. This persistent practice on the part of presidents gives rise to the question of whether a President can refuse to comply with a law he believes to be unconstitutional. The Supreme Court has not directly addressed this issue, but a long line of precedent could be taken to indicate a consistent view on the part of the Court that the Take Care Clause imposes a duty on the President to ensure that officials obey Congress's instructions, and, conversely, that the Clause does not imbue the President with the authority to dispense with congressional enactments. In Kendall v. United States ex rel Stokes , for instance, the Court declared that where Congress has imposed upon an executive officer a valid duty, "the duty and responsibility grow out of and are subject to the control of the law, and not to the direction of the President." Underlying the Court's rejection of the government's argument that the Take Care Clause carried with it the power to control executive officials was the desire to avoid "clothing the President with a power entirely to control the legislation of Congress ... To contend that the obligation imposed on the President to see the laws faithfully executed implies a power to forbid their execution, is a novel construction of the Constitution, and entirely inadmissible." Since Kendall , the Court has consistently rejected the assertion that the Clause is a substantive grant of power to the President. In Myers v. United States , for instance, the Court declared that "[t]he duty of the President to see that the laws be executed is a duty that does not go beyond the laws or require him to achieve more than Congress sees fit to leave within his power." Likewise, in Youngstown Sheet & Tube Co. v. Sawyer , the Court declared that "the President's power to see that the laws are faithfully executed refutes the idea that he is to be a lawmaker. The Constitution limits his functions in the lawmaking process to the recommending of laws he thinks wise and the vetoing of laws he thinks bad." Despite these declarations from the Court, the executive branch has consistently maintained that the President possesses authority to decline to enforce enactments he views as unconstitutional. As enunciated in the Dellinger Memo, the Department of Justice (DOJ) has pointed to the Court's decision in Myers v. United States , for support for this proposition, asserting that since "the Court sustained the President's view that the statute at issue was unconstitutional without any member of the Court suggesting that the President had acted improperly in refusing to abide by the statute," the Court could therefore "be seen to have implicitly vindicated the view that the President may refuse to comply with a statute that limits his constitutional powers if he believes it to be unconstitutional." Additionally, the Dellinger Memo pointed to Justice Jackson's concurrence in Youngstown as recognizing the existence of the "President's authority to act contrary to a statutory command," and has likewise cited Justice Scalia's concurrence in Freytag v. Commissioner , for the proposition that "the President has the 'power to veto encroaching laws ... or even to disregard them when they are unconstitutional.'" It is not at all clear that the reliance of the DOJ on these factors would bear the weight of direct judicial scrutiny. Specifically, as noted above, the Court in Myers v. United States evidenced a clear appreciation of the limits of the President's authority under the Take Care Clause. As such, there would appear to be little support for the DOJ's conclusion that Myers implicitly validated the notion that the President may refuse to enforce laws he deems unconstitutional, particularly in light of the fact that the Court in Myers did not address the President's refusal to enforce the law at issue. As was stated by the Court in Powell v. McCormack , "[t]hat an unconstitutional action has been taken before surely does not render that same action any less unconstitutional at a later date." It is also difficult to see how Justice Jackson's concurrence in Youngstown can be cited as dispositive of the issue. First, while the concurrence contemplates the allocation of power between Congress and the executive in the event that the "President takes measures incompatible with the express or implied will of Congress," it, like the majority opinion in Myers , does not give any substantive consideration whatsoever to the President's authority to decline to enforce the law. Second, the DOJ opinion does not address the holding of the majority in Youngstown that the "Constitution limits [the President's] functions in the lawmaking process to the recommending of laws he thinks wise and the vetoing of laws he thinks bad." Likewise, Justice Scalia's concurrence in Freytag , while probative, does not provide any substantive analysis in support of this proposition, and arose in a case that did not involve executive refusal to comply with the law. While the Court has not had occasion to address the issue directly, the cases discussed above could be taken to indicate a rejection on the part of the Court that the President possesses the power to suspend acts of Congress, instead establishing that the President is bound to give effect to such enactments pursuant to the Take Care Clause. The natural corollary of this proposition, as touched upon by the Court in Youngstown , is that the proper course of action for the President, when faced with a bill he deems unconstitutional, is to exercise his Article I veto authority. However, as is evidenced by the DOJ opinion discussed above, there are competing viewpoints on this issue. As such it is not possible to state conclusively that the President lacks any authority whatsoever to decline to enforce laws he deems unconstitutional absent a definitive consideration of the issue by the Court. While presidential authority to refuse to enforce laws the President considers unconstitutional is a matter of significant constitutional importance, the issue is ultimately of little concern with regard to the legality or effect of signing statements themselves. As the judicial maxims discussed above establish, there is little evident support for the notion that signing statements are instruments with legal force and effect in and of themselves. If an action taken by a President in fact contravenes legal or constitutional provisions, that illegality is not augmented or assuaged merely by the issuance of a signing statement. Commentators argue that this dynamic lends credence to the notion that signing statements have been employed by several administrations not to flatly reject congressional enactments, but, rather, are intended to sensitize other parties to the President's conception of executive authority. Moreover, the use of signing statements as an instrument to expand executive authority generally, as opposed to a mechanism by which the President has claimed summary authority to dispense with the laws enacted by Congress, becomes more apparent when the merits of the objections that typify signing statements are examined. In particular, such analysis indicates that while there are instances in which signing statements are predicated on specific and supportable concerns, the majority of the objections raised, especially with respect to the signing statements issued by the Bush II Administration, were largely non-substantive or were so general as to appear to be hortatory assertions of executive authority. The constitutional and legal principles discussed below are applicable to any signing statement that raises constitutional objections or challenges to congressional enactments based on a general assertion of authority in the specific substantive area identified. As noted above, foreign affairs legislation has been one of the primary areas in which recent Presidents have repeatedly raised constitutional objections or challenges. For example, remarking upon provisions of the Syria Accountability and Lebanese Sovereignty Restoration Act of 2003 that required the imposition of sanctions against Syria absent a presidential determination and certification that certain conditions had been met by Syria or a determination that national security concerns justified a waiver of sanctions, President George W. Bush declared: A law cannot burden or infringe the President's exercise of a core constitutional power by attaching conditions precedent to the use of that power. The executive branch shall construe and implement [this requirement] in a manner consistent with the President's constitutional authority to conduct the Nation's foreign affairs and as Commander in Chief, in particular with respect to the conduct of foreign diplomats in the United States, the conduct of United States diplomats abroad, and the exportation of items and provision of services necessary to the performance of official functions by United States Government personnel abroad. This signing statement is typical of the Bush II Administration's approach, in that it challenges more than one provision of the bill and voices objections across a range of constitutional principles. While the broad and generalized nature of the President's remarks make it difficult to determine specific objections that might arise in the implementation of the act, it may be assumed that President Bush determined that the requirements imposed by Congress under these portions of the act raised separation of powers concerns to the extent that they could be construed as impinging upon core presidential powers or impairing the President's ability to protect national security information or deliberations with his advisers. The Obama Administration's signing statements have also registered objections to perceived congressional encroachments into the President's constitutional authority in foreign affairs. These objections, however, have more narrowly focused on congressional attempts to direct negotiations with foreign states or international organizations. Additionally, the Obama signing statements on foreign affairs, in making more particular objections to specific provisions, have arguably departed from the broad and generalized objections contained within the Bush II signing statements. For example, President Obama specifically objected to various provisions in the Supplemental Appropriations Act of 2009 which directed the Secretary of the Treasury to order U.S. representatives to certain international financial institutions to take specific policy positions. The Obama signing statement asserted that the provision would "interfere with my constitutional authority to conduct foreign relations by directing the Executive to take certain positions in negotiations or discussions with international organizations and foreign governments." The signing statement thus concluded that the President would not "treat these provisions as limiting my ability to engage in foreign diplomacy or negotiations." Regarding the concerns voiced over the executive's foreign affair prerogatives, it should be noted that the Supreme Court has proscribed legislative attempts to extend congressional power into what could be called the "core functions" of the executive branch. However, presidential assertions of this maxim in signing statements could be seen as a hortatory assertion of broad executive authority regarding the conduct of foreign affairs that does not acknowledge the substantial authority that is likewise possessed by Congress in this context. Specifically, while it is generally conceded that there are some powers enjoyed by the President alone regarding foreign affairs, it is likewise evident that Congress possesses wide authority to promulgate policies respecting foreign affairs. Congress has often exercised this authority to determine policy objectives for the United States in international negotiations and to require subsequent legislative approval of international agreements before they may enter into force for the United States. Executive privilege has also formed the constitutional basis for a significant number of presidential signing statements. For example, in remarking upon provisions that required the Secretary of State to submit reports regarding Syria's compliance with the conditions of the act and that nation's dealings with terrorists, President George W. Bush declared: The executive branch shall construe [this requirement] in a manner consistent with the President's constitutional authority to withhold information the disclosure of which could impair foreign relations, national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties. As mentioned previously, President Obama has not specifically referenced executive privilege in any of his signing statements. However, he has registered objections to provisions that require the President to provide information to Congress. As noted, the Obama Administration utilized a signing statement to object to a requirement in the Fraud Enforcement and Recovery Act of 2009 that agencies furnish the Financial Crisis Inquiry Commission with information related to any commission inquiry. Rather than expressly invoking executive privilege, the statement asserted that the executive branch would construe the provision "not to abrogate any constitutional privilege." Both of these signing statements would appear to constitute a generalized declaration of executive power, given that neither statement raised any specific objection to the provision, nor provided any substantive analysis of how its requirements might impinge upon executive authority. To the extent objections based on executive privilege might be taken to indicate a position on the part of the executive that it possesses an absolute right to withhold documents from Congress, it should be noted that judicial and historical precedents run to the contrary. For example, it is well established that Congress may impose reporting requirements upon executive branch officials, and nothing in the act purports to strip the President of his authority to assert a valid claim of privilege, or to withhold documents on the basis of national security. Regarding claims of privilege with regard to presidential communications, the Court held in United States v. Nixon that the notion of privilege is constitutionally rooted, and that when invoked by the President, the materials at issue are deemed "presumptively privileged." However, the Court further held that the privilege is qualified, not absolute, and may be overcome by an adequate showing of need. The Court in Nixon indicated that the President's authority to "protect military, diplomatic or sensitive national security secrets" was significantly greater than his power to protect the confidentiality of executive communications. This statement by the Court was consistent with previous decisions recognizing presidential authority with regard to military and diplomatic matters. In C. & S. Airlines v. Waterman Corp. , for instance, the Court stated that it would be "intolerable that courts, without the relevant information, should review and perhaps nullify actions of the Executive taken on information properly held secret." It is important to note, however, that principles governing judicial deference to the executive in this context do not apply to access by Congress. In United States v. American Telephone and Telegraph Co. , the Court of Appeals for the District of Columbia rejected the argument that "the Constitution confers on the executive absolute discretion in the area of national security." In support of this holding, the court explained: While the Constitution assigns to the President a number of powers relating to national security, including the function of commander in chief and the power to make treaties and appoint Ambassadors, it confers upon Congress other powers equally inseparable from the national security, such as the powers to declare war, raise and support armed forces and, in the case of the Senate, consent to treaties and the appointment of ambassadors. While acknowledging the powers conferred upon both branches in this context, it is important to note that the court in AT&T rejected the notion that disputes over such information were "'political questions' beyond the jurisdiction or proper role of [a] court." Rather, the court left open the possibility that disputes over information pertaining to national security could be resolved by the judiciary in the event that Congress and the executive could not reach a compromise on a given issue. Thus, while the aforementioned cases establish that the President has inherent constitutional authority to protect the confidentiality of executive communications and national security information, it is likewise apparent that these powers are not absolute, with Congress possessing concordant authority to investigate and inquire into such matters. Accordingly, it seems apparent that any all-encompassing or generalized concern regarding executive privilege is not buttressed by any underlying definitive right to withhold information from Congress. Recent Presidents have also employed the signing statement to object to direct reporting requirements that have been imposed by Congress. However, these signing statements are likewise generally unsupported by established legal principles governing Congress's authority to compel and receive information directly from executive branch agencies. Congress has imposed direct reporting requirements on executive branch officials since the first Congress. Legislation establishing the Treasury Department required the Secretary to report to Congress and to "perform all such services relative to the finances, as he shall be directed to perform." Alexander Hamilton, serving as the first Secretary of the Treasury, submitted reports to the House of Representatives pursuant to this command, and began each report with an acknowledgment of the order of the House that had directed him to report. Furthermore, prior to the establishment of the President's authority over the executive branch budget process in the Budget and Accounting Act of 1921, each agency submitted its annual budget request directly to Congress. Finally, the Supreme Court has long recognized the validity of reporting requirements, and in INS v. Chadha , the Court explicitly affirmed Congress's authority to impose "report and wait" provisions, distinguishing them from the unconstitutional legislative veto provisions under review in that case. In light of these factors, it seems apparent that signing statements objecting to direct reporting requirements represent an attempt to sensitize executive personnel to the wishes of the President and to assert a broad conception of presidential power in the face of congressional enactments, rather than a definite and substantive refusal to enforce a congressional enactment. Recent Presidents have also been quite active in issuing signing statements that object to bills passed by Congress that impose a legislative veto over actions taken by the executive branch. Presidential action in this context is particularly interesting, as it provides an example of a context in which the Presidents' declarations are on solid constitutional footing, as well as the opportunity to analyze two conceptually related arguments that have been raised against the issuance of signing statements generally. As noted above, the Supreme Court's holding in INS v. Chadha invalidated the use of a legislative veto by Congress by virtue of the Court's determination that such action violates the Bicameralism and Presentment Clause of the Constitution. Despite this ruling, Congress has continued to pass legislation imposing facially invalid legislative veto provisions. Prior administrations objected to these provisions in signing statements, including President George W. Bush, who issued approximately 47 statements that contain objections to provisions in legislation passed by Congress that it claims violate the separation of powers principles delineated in Chadha . An example of this approach may be found in President Bush's signing statement accompanying the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. There, the President declared that "[t]he executive branch shall construe certain provisions of the act that purport to require congressional committee approval for the execution of a law as calling solely for notification, as any other construction would be inconsistent with the principles enunciated by the Supreme Court of the United States in INS v. Chadha ." President Obama has continued the practice of objecting to legislative vetoes in violation of Chadha . In a March 11, 2009, statement, President Obama objected to various provisions of the Omnibus Appropriations Act of 2009 that "condition the authority of officers to spend or reallocate funds on the approval of congressional committees." Presumably relying on Chadha , the Administration asserted that although it would notify the relevant committee before taking action, "spending decisions shall not be treated as dependant on the approval of congressional committees." While signing statements that raise broad assertions of executive authority and general constitutional objections to bills passed by Congress may indicate an overly broad conception of presidential power, statements that object to legislative vetoes are supported by Supreme Court precedent. Relatedly, it could be argued that the apparent purpose behind the continued congressional practice of imposing such requirements in turn illustrates the dynamic underlying the objections and assertions of authority that characterize signing statements. Despite the apparent facial unconstitutionality of such provisions, relatively little complaint has been voiced concerning Congress's persistence in passing bills that contain legislative veto provisions. The apparent motivation for this practice arises from the fact that while Congress and its committees may not anticipate formal legal compliance with such provisions and often do not expect to be able to enforce them, pragmatic political considerations oftentimes result in substantive acquiescence by the agencies involved. In essence, the passage of legislative veto provisions subsequent to Chadha constitutes an attempt by Congress to leverage informal compliance from executive agencies, the implicit message being that the affected agency may face difficulties in the legislative, oversight or budgetary processes if it does not accede to congressional will in this context. Accordingly, a presidential signing statement objecting to a legislative veto provision serves not only as a response to perceived encroachment on executive branch prerogatives, but also as a declaration that the administration expects, and will be supportive of, the rejection of such congressional assertions of authority by affected agencies. The generalized nature of the constitutional objections and assertions of authority that pervade signing statements, coupled with the fact that such instruments do not have any legal force or effect in and of themselves, lends support to the notion that presidential administrations may employ these instruments as a means by which to make broad claims to extensive and exclusive authority. This approach necessarily raises questions regarding the impact of signing statements on the exercise of executive authority in relation to the traditional roles of Congress and the judiciary. With regard to the judicial branch, the primary consideration is whether the courts have in fact begun to give a degree of determinative weight to signing statements in a manner akin to traditional sources of legislative history. As noted above, one of the factors that appears to have motivated the increase in the issuance of signing statements beginning in the Reagan Administration was to encourage judicial reliance upon the viewpoints contained therein. After persuading West Publishing Company to include signing statements along with legislative histories contained in the United States Code Congressional and Administrative News , Attorney General Edwin Meese stated that this inclusion would facilitate the use of signing statements by courts "for future construction of what the statute actually means." Despite these efforts, it does not appear that courts have incorporated signing statements in the manner hoped for by the Reagan Administration, presumably due to traditional practice as motivated by constitutional precepts. In particular, it could be argued that while there is little support for the notion that the Constitution somehow implicitly forbids the issuance of signing statements, the nature of the President's role in vetoing or approving legislation has nonetheless militated against courts granting interpretive weight to signing statements. Specifically, while the Constitution provides that the President is to note his objections upon the veto of a bill, there is no corresponding requirement that he announce his reasons for its approval. In turn, there is a constitutionally prescribed procedure by which Congress is to consider objections raised by a President in formulating a response to a veto, but not for congressional response to a signing statement. While this dichotomy does not require that courts disregard signing statements (as there is likewise no corresponding constitutional validation of committee reports, floor debates and other legislative history), it arguably lends weight to the notion that presidential signing statements should be discounted when they conflict with congressional explanations that have traditionally enjoyed judicial deference. In particular, a well established rule for resolving conflicts in legislative history establishes that when the two houses have disagreed on the meaning of identical language in a bill that did not go to conference, the explanation that was before both houses prevails in the event that the court turns to the legislative history. The rationale is that congressional intent should depend upon the actions of both houses. Accordingly, given that Congress has no opportunity to act in response to interpretations set forth in signing statements, there is lessened support for the notion that courts should rely upon them to interpret the aim of a congressional enactment. A related issue arising from this constitutional provision centers on the fact that the President may only approve or veto a bill in its entirety. The President does not possess inherent line item veto authority, and it is well established that Congress cannot grant the President such authority by statute. Thus, it could be argued that if the courts were to give determinative weight to signing statements in negating statutory provisions a President would effectively possess power analogous to a line item veto. However, there is no indication that this has occurred, rendering this dynamic of greater interest in relation to the impact of signing statements on executive branch interaction with Congress. Information contained in signing statements may be entitled to more significant judicial consideration if the President or his Administration worked closely with Congress in developing the legislation, and if the approved version incorporated the President's recommendations. This principle can be applied not only to bills introduced at the Administration's behest, but also to bills the final content of which resulted from compromise negotiations between the Administration and Congress. In such circumstances, of course, signing statements are used to explain rather than negate congressional action, and are most valuable as lending support to congressional explanations. Although signing statements are not generally treated as a significant part of legislative history by the courts, they nonetheless affect interpretation by virtue of the effect of directives contained therein on actions taken by administering agencies. Courts grant a high degree of deference to interpretations of agencies charged with implementing statutes, premised on the notion that Congress has authorized the agency to "speak with the force of law" through a rulemaking or other formal process. Congress has not authorized the President to speak with the force of law through signing statements. So, although signing statements may influence or even control agency implementation of statutes, it is the implementation, and not the signing statement itself, that would be measured against the statute's requirements. At most, signing statements might be considered analogous to informal agency actions, entitled to respect only to the extent that they have the power to persuade. Ultimately, it does not appear that the courts have relied on signing statements in any appreciably substantive fashion. As touched upon above, the references made to signing statements in the Supreme Court's decisions in Bowsher v. Synar and INS v. Chadha were perfunctory in nature. Furthermore, in Hamdan v. Rumsfeld , the Supreme Court made no reference whatsoever to the President's signing statement in rejecting the contention that the Detainee Treatment Act did not apply to pending habeas petitions of Guantanamo detainees. Finally, in U.S. v Stevens , the Court noted that a presidential signing statement that pledged to confine prosecutions under an animal cruelty statute to only those cases of "wanton cruelty to animals designed to appeal to a prurient interest in sex" was not sufficient to save the otherwise unconstitutionally overbroad statute. One of the main complaints lodged by the ABA Task Force in opposition to the issuance of presidential signing statements is based on the viewpoint that the objections and challenges raised therein improperly circumvent the veto process delineated in the Constitution. According to this argument, the President, by refusing to veto a bill that contains provisions he does not intend to enforce, expands the presidential role in lawmaking beyond the constitutional parameters of "recommending ... laws he thinks wise and ... vetoing ... laws he thinks bad," and deprives Congress of the opportunity override a presidential veto. While this position has a degree of intuitive appeal in light of the maxims pronounced in cases such as Youngstown , it could misconstrue the nature of signing statements as presidential instruments as well as the actual substantive concerns that underlie their issuance. First, as the signing statements discussed above illustrate, it is exceedingly rare for a President to make a direct announcement that he will categorically refuse to enforce a provision he finds troublesome. Instead, the concerns voiced in the statements are generally vague, with regard both to the nature of the objection and what circumstances might give rise to an actual conflict. The ABA Task Force Report's concern on this point also seems to assume that the interpretation and application of congressional enactments is a black and white issue, when, in reality, inherent ambiguity in the text almost always allows for competing interpretations of what the provision at issue requires. Given this dynamic, it is not surprising that a President's interpretation of a law, as announced in a signing statement, would be informed by a broad conception of executive authority. More fundamentally, a signing statement does not have the effect of a veto. A bill that is vetoed does not become law unless reenacted by a supermajority vote of the Congress. Conversely, a bill that is signed by the President retains its legal effect and character, irrespective of any pronouncements made in a signing statement, and remains available for interpretation and application by the courts (if the provision is justiciable) and monitoring by Congress. A closely related argument, also raised in the ABA Report, is that signing statements that raise objections to provisions of an enactment constitute the exercise of a line-item veto. In Clinton v. New York , the Supreme Court held that the Line Item Act violated the constitutional requirement of bicameralism and presentment by authorizing the President to essentially create a law which had not been voted upon by either House or presented to the President for approval and signature. Accordingly, this argument posits that when the President issues a signing statement objecting to certain provisions of a bill or declaring that he will treat a provision as advisory so as to avoid a constitutional conflict, he is, in practical effect, exercising an unconstitutional line-item veto. The counterpoints to this argument are similar to those adhering to the premise that signing statements constitute an abuse of the veto process. While an actual refusal of a President to enforce a legal provision may be characterized as an "effective" line-item veto, the provision nonetheless retains its full legal character and will remain actionable, either in the judicial or congressional oversight contexts. Ultimately, both of these objections, as with the general focus of concern on signing statements as presidential instruments, may obscure the substantive issue that has apparently motivated the increased use of the constitutional signing statement by President Bush: an expansive conception of presidential authority, coupled with a willingness to utilize fully mechanisms that will aid in furthering and buttressing that philosophy. Given the general and hortatory nature of the language that characterizes these signing statements, it seems apparent that President Bush used this instrument as part of a comprehensive strategy to strengthen and expand executive authority generally, as opposed to a de facto line item veto. Indeed, while the breadth and number of provisions called into question by President Bush drew attention to the institution of the signing statement itself, Professors Curtis A. Bradley and Eric A. Posner have stated that "critics of the Bush Administration's use of signing statements have not identified a single instance where the Bush Administration followed through on the language in the signing statement and refused to enforce the statute as written." This declaration is arguably contradicted by a report from the Government Accountability Office (GAO) that identified six provisions of law that were addressed in various signing statements that it determined were not "executed as written" by the executive branch. Specifically, GAO reviewed 11 signing statements that accompanied appropriations acts for FY2006, and identified 160 specific provisions that were addressed in the signing statements. GAO then examined 19 of these provisions "to determine whether the agencies responsible for their execution carried out the provisions as written." Of the six provisions identified by GAO as not having been executed as written, the first three arose from agency failures or refusals to seek committee approval prior to taking certain actions; the fourth stemmed from the Department of Defense (DOD) failing to include separate budget justifications to Congress on various operations in its 2007 budget submission; the fifth stemmed from GAO's determination that the DOD responded to a congressional inquiry in 38 days instead of the 21-day period specified in law; and the sixth example of noncompliance stemmed from GAO's finding that the Customs and Border Patrol (CBP) did not relocate checkpoints in the Tucson sector every seven days as directed in the relevant appropriations act. In addition to those provisions identified by GAO, there is evidence of other instances in which statutory provisions that were addressed in a signing statement were not enforced. For example, in 2009, President Obama reportedly ignored a provision restricting the use of funds to pay the expenses of sending a U.S. representative to any United Nations body presided over by a country that the Department of State has determined is a sponsor of terrorism by sending U.S. officials to participate in U.N. bodies chaired by Iran. While these examples may be cited in support of the proposition that presidential signing statements constitute the effective exercise of a line item veto, it should be noted that GAO stated in its report that "[a]lthough we found the agencies did not execute the provisions as enacted, we cannot conclude that agency noncompliance was the result of the President's signing statements." This statement is significant, in that while it may of course be argued that these examples of noncompliance constitute prima facie evidence that signing statements are being given substantive legal effect under the current Administration, the fact remains that the GAO report presents no particularized information, beyond their existence, that these departments and agencies were relying on the relevant presidential signing statements as a basis to support such noncompliance. Specifically, the GAO report does not identify any declarations or documents that indicate that presidential signing statements played a role in the actions taken by the aforementioned departments and agencies. Furthermore, it could be argued that the scope and nature of the noncompliance in the provisions identified by GAO militates against a summary conclusion that the pertinent signing statements motivated such noncompliance. While the report stressed that GAO "did not examine the constitutionality of the provisions to which the President objected," the first three examples cited in the GAO report all appear to involve congressional imposition of legislative vetoes of the type expressly rejected by the Supreme Court in INS v. Chadha . Accordingly, both the signing statements and executive noncompliance as to these three provisions appear to be supported by explicit Supreme Court precedent. Regarding the fourth provision, the DOD's justification for noncompliance was based on its determination that the costs of the covered operations were "difficult to predict because of the continuing insurgent activity," and that it was thus "not able to estimate with a great certainty," preventing its inclusion in the budget submission. While the DOD's submission constitutes a failure to comply with the literal terms of the appropriations act, there is no clear evidence that the relevant signing statement played a determinative role in the noncompliance, and the GAO report does not contain any information that serves to rebut the veracity of the DOD's reasons for not including the budgetary information as directed. The fifth example cited by GAO illustrates a literal failure on the part of the DOD to respond to a congressional inquiry within a specified time frame. However, there are numerous examples of agency failures to meet statutory deadlines, irrespective of the presence of a correlating signing statement. Furthermore, given the brief delay period (38 days as opposed to the 21 required by law), it seems unlikely that this incidence of noncompliance may be successfully described as a departmental refusal to enforce the law on the basis of a presidential signing statement. Finally, regarding the sixth example identified by GAO, the CBP justified its noncompliance on its determination that following the congressional directive would be inconsistent with "Border Patrol mission requirements." The CBP additionally noted that only one location had been approved for some checkpoints in the Tucson sector, rendering relocation impossible. The CBP stated that these checkpoints were often shut down for a "short period in an endeavor to satisfy the advisory provision" contained in the pertinent appropriations act. This instance of noncompliance is perhaps the most explicit example of a signing statement being given substantive effect by a department, as the language used by the CBP closely mirrors the President's declaration in his signing statement that "the executive branch shall construe the relocation provision as advisory rather than mandatory." However, the GAO report does not elaborate on this apparent link, and does not contain any information that may be used to evaluate the substance of the CBP's justifications for noncompliance. Thus, while the provisions identified by GAO may be cited as examples of executive refusal to enforce the law subsequent to the issuance of a signing statement, the information contained above could be interpreted as providing reasons for noncompliance that are not directly attributable to the existence of a presidential signing statement. In light of these factors, some might argue that the practice of issuing signing statements is beneficial, in that the statements alert Congress to the universe of provisions that are held in disregard by the executive branch, in turn affording Congress the opportunity not only to engage in systematic monitoring and oversight to ensure that its enactments are complied with, but to assert its prerogatives to counteract the broad claims of authority that undergird the statements. In particular, while the focus on the institution of the presidential signing statement as a source of controversy may be misplaced, congressional interest in the protection of its own institutional prerogatives could ultimately motivate a reaction to an expansive view of presidential authority as expressed not only in signing statements, but also in executive orders, OLC opinions, internal White House Memoranda, and refusals to accede to congressional and legislative branch agency requests for information. All of these tools have been used by recent Presidents to exert control over executive personnel in their administration of statutory obligations and interaction with Congress. Additionally, the broad and persistent nature of the claims of executive authority forwarded, for example, by President Bush appear designed to inure Congress, as well as others, to the belief that the President in fact possesses expansive and exclusive powers upon which the other branches may not intrude. No bills to restrict the use of signing statements have yet been introduced in the 112 th Congress. Three bills, however, were introduced in the 111 th Congress with the aim of restraining the use of signing statements—though it does not appear that any of these proposals would appreciably alter or confine the President's ability to issue signing statements. Section 3(a) of H.R. 258 , the Congressional Lawmaking Authority Protection Act of 2009, provided that "[n]one of the funds made available to the Executive Office of the President, or to any Executive agency ... from any source may be used to produce, publish, or disseminate any statement made by the President contemporaneously with the signing of any bill or joint resolution presented for signing by the President." This section does not give any indication as to when such a statement would cease to be "contemporaneous" with the signing of a bill, but under a practical interpretation of the term, it seems unlikely that this section would impose a substantial impediment to the issuance of signing statements. This section would also not appear to prevent contemporaneous declarations by executive branch agencies. Section 4 of H.R. 258 goes on to state that "[f]or purposes of construing or applying any Act enacted by the Congress, a governmental entity shall not take into consideration any statement made by the President contemporaneously with the President's signing of the bill or joint resolution that becomes such Act." This command indicates that the first section may not necessarily prevent a President from issuing a signing statement. Furthermore, nothing in the bill would prevent a President from simply issuing memoranda or other declarations aimed at guiding agency interpretation and implementation. A bill essentially identical to H.R. 258 was introduced in the 110 th and 109 th Congresses. Additionally, S. 875 , the Presidential Signing Statements Act of 2009, would purport to prohibit any federal or state court from relying on or deferring to a presidential signing statement as a source of authority "[i]n determining the meaning of any Act of Congress." The bill further provides that both the House and the Senate, acting respectively through Office of General Counsel for the House of Representatives and the Office of Senate Legal Counsel, shall be permitted to participate as amicus curiae in any case arising in federal or state court that involves the construction, constitutionality, or both, of "any Act of Congress in which a presidential signing statement was issued." Finally, the bill would establish that in any suit involving a signing statement, Congress may pass a concurrent resolution clarifying congressional intent or findings of fact, and that such a resolution shall be submitted "into the record of the case as a matter of right." The potential effect and utility of a provision forbidding courts from relying on, or deferring to, presidential signing statement is unclear; apart from the potential constitutional issues adhering to congressional attempts to restrict courts from considering such information, there is little indication that signing statements have played any substantive role in influencing judicial rulings. Likewise, the impact of a provision allowing for the submission of a "clarifying" concurrent resolution is open to speculation. Any such clarification by Congress would not have the force and effect of law, and could be viewed by the judiciary as a species of post-enactment legislative history. Similar bills were also introduced in the 110 th Congress. Finally, H.R. 149 , also known as the Presidential Signing Statements Act of 2009, attempted to ensure public awareness and access to presidential signing statements. The bill would require the President to transmit each signing statement that "declares or insinuates the intention of the President to disregard" any provision he believes to be unconstitutional to the House and Senate leadership. Such signing statements would also have to be published in the Federal Register and made available on the Library of Congress's Thomas website. Additionally, the bill would require that the administration send a high level official to testify at the request of either the House or Senate Judiciary Committees "to explain the meaning and justification of every presidential signing statement covered by this Act." Although the bill would prohibit any invocation of executive privilege with respect to this testimony, such a restriction raises constitutional concerns with respect to Congress's authority to abrogate a constitutional privilege of the executive. A similar bill was also introduced in the 110 th Congress. Various other bills were introduced in the 109 th Congress that would have attempted to constrain the issuance, or limit the effect, of signing statements. H.J.Res. 87 and H.J.Res. 89 would have required the President to provide notification to Congress "[i]f at the time of enactment of a law the President makes a determination not to carry out any duly enacted provision of the law," and would have established expedited procedures in the House for consideration of legislation developed in response to such a determination. The scope of this legislation is not entirely clear. As touched upon above, it is quite rare for a signing statement to contain a specific declaration that a law will not be enforced. Furthermore, the generalized nature of the language that is employed in such statements would usually make it difficult to assert that the President had made a concrete determination to not enforce the law (raising the additional possibility that the President would simply ignore this requirement on the grounds that no such determination had been made). Finally, S. 3731 would have attempted to imbue both chambers of Congress with legal standing to challenge a signing statement, providing that any court of the United States would be authorized to rule on the legality of a signing statement "upon the filing of an appropriate pleading by the United States Senate, through the Office of Senate Legal Counsel, and/or the United States House of Representatives, through the Office of General Counsel for the United States House of Representatives." It is not clear that this provision would satisfy either the "case or controversy" or standing requirements of Article III of the Constitution. This bill would likewise have prohibited any state or federal court from relying on, or granting deference to, a presidential signing statement as a source of authority. While continuing assertions of executive authority in numerous signing statements have the potential to impact Congress at a practical and institutional level, both by discouraging federal officials from engaging in open interaction with congressional committees and staff and by arguably discounting the constitutional prerogatives enjoyed by Congress, the aforementioned legislative proposals may be seen as failing to address the purpose and impact of these instruments. By focusing its efforts on attempting to constrain the President from issuing signing statements that call the validity of its enactments into question, Congress could leave unaddressed any risks posed to its institutional power by the broad conception of presidential authority that arguably motivates their issuance. It does not seem likely that a reduction in the number of challenges raised in signing statements, whether caused by procedural limitations or political rebuke, will necessarily result in any change in a President's conception and assertion of executive authority. Accordingly, a more effective congressional response might be to focus on any substantive actions taken by a President that are arguably designed to embed that conception of presidential power in the constitutional framework. Presidential signing statements have a long historical pedigree and there is no discernible constitutional or legal impediment to their issuance. While from the Reagan Administration to the George W. Bush Administration such statements had become increasingly common and were increasingly utilized to raise constitutional or interpretive objections to congressional enactments, the Obama Administration's decreased use of signing statements may signify a break from this trend. Nevertheless, utilizing signing statements to raise constitutional objections to enacted statutes remains a tool of presidential authority. While the broad assertions of executive authority contained in many signing statements carry significant implications, both practical and constitutional, for the traditional relationship between the executive branch and Congress, they do not have legal force or effect, and have not been utilized to effect the formal nullification of laws. Instead, it appears that recent administrations, as made apparent by the voluminous challenges lodged by President George W. Bush, have employed these instruments in an attempt to leverage power and control away from Congress by establishing these broad assertions of authority as a constitutional norm. It can be argued that the appropriate focus of congressional concern should center not on the issuance of signing statements themselves, but on the broad assertions of presidential authority forwarded by Presidents and the substantive actions taken to establish that authority. Accordingly, a robust oversight regime focusing on substantive executive action, as opposed to the vague and generalized assertions of authority typical of signing statements, might allow Congress in turn to more effectively assert its constitutional prerogatives and ensure compliance with its enactments. | Presidential signing statements are official pronouncements issued by the President contemporaneously to the signing of a bill into law that, in addition to commenting on the law generally, have been used to forward the President's interpretation of the statutory language; to assert constitutional objections to the provisions contained therein; and, concordantly, to announce that the provisions of the law will be administered in a manner that comports with the administration's conception of the President's constitutional prerogatives. While the history of presidential issuance of signing statements dates to the early 19th century, the practice has become the source of significant controversy in the modern era as Presidents have increasingly employed the statements to assert constitutional and legal objections to congressional enactments. President Reagan initiated this practice in earnest, transforming the signing statement into a mechanism for the assertion of presidential authority and intent. President Reagan issued 250 signing statements, 86 of which (34%) contained provisions objecting to one or more of the statutory provisions signed into law. President George H. W. Bush continued this practice, issuing 228 signing statements, 107 of which (47%) raised objections. President Clinton's conception of presidential power proved to be largely consonant with that of the preceding two administrations. In turn, President Clinton made aggressive use of the signing statement, issuing 381 statements, 70 of which (18%) raised constitutional or legal objections. President George W. Bush continued this practice, issuing 161 signing statements, 127 of which (79%) contain some type of challenge or objection. The significant rise in the proportion of constitutional objections made by President George W. Bush was compounded by the fact that his statements were typified by multiple objections, resulting in more than 1,000 challenges to distinct provisions of law. Although President Barack Obama has continued to use presidential signing statements, the Obama Administration has used the interpretive tools with less frequency than previous administrations—issuing 20 signing statements, of which 10 (50%) contain constitutional challenges to an enacted statutory provision. The number and scope of such assertions in the George W. Bush Administration gave rise to extensive debate over the issuance of signing statements, with the American Bar Association (ABA) publishing a report declaring that these instruments are "contrary to the rule of law and our constitutional separation of powers" when they "claim the authority or state the intention to disregard or decline to enforce all or part of a law ... or to interpret such a law in a manner inconsistent with the clear intent of Congress." However, in analyzing the constitutional basis for, and legal effect of, presidential signing statements, it becomes apparent that no constitutional or legal deficiencies adhere to the issuance of such statements in and of themselves. Rather, it appears that the appropriate focus of inquiry in this context is on the assertions of presidential authority contained therein, coupled with an examination of substantive executive action taken or forborne with regard to the provisions of law implicated in a presidential signing statement. Applying this analytical rubric, it seems evident that the issues involved center not on the simple issue of signing statements, but rather on the view of presidential authority that governs the substantive actions of the administration in question. This report focuses on the use of signing statements by recent administrations, with particular emphasis on the Administrations of George W. Bush and Barack Obama. |
A stable, democratic, prosperous Pakistan actively combating religious militancy is considered vital to U.S. interests. Pakistan is at the locus of several top-tier policy areas of urgent concern, including regional and global terrorism; efforts to stabilize neighboring Afghanistan; nuclear weapons proliferation; the Kashmir problem and Pakistan-India tensions; democratization and human rights protection; and economic development. Today Pakistan is identified as a haven for numerous Islamist extremist and terrorist groups, and is the world's most rapid proliferator of nuclear weapons, a combination that places it at the top of the international security agenda. Pakistan has been praised by U.S. leaders for its post-2001 cooperation with U.S.-led counterterrorism and counterinsurgency efforts, although long-held doubts about Islamabad's commitment to some core U.S. interests deepened dramatically in 2011 and may be altering the nature of the relationship in 2012. A mixed record on battling Islamist extremism includes ongoing apparent tolerance of Afghan insurgents and anti-India militants operating from its territory. Pakistan's troubled economic conditions and precarious political setting combine with perilous security circumstances and a history of difficult relations with neighbors to present serious challenges to U.S. decision makers. The Pakistani people have paid a heavy price as Islamist radicalism has spread in the country and as its border region near Afghanistan has become a haven for local insurgents, as well as Arab and Uzbek jihadists. Islamabad claims that the "war on extremism" has cost the country more than 37,000 civilian lives, nearly 6,300 security forces, and $78 billion in financial losses. The U.S. National Counterterrorism Center reports there was an average of more than 26 terrorist attacks each week in Pakistan in 2011; only Afghanistan and Iraq suffered a higher number of incidents. Pakistani officials regularly seek to remind the American audience of the country's sacrifices. May 2011 revelations that Al Qaeda founder Osama bin Laden (OBL) had found apparently years-long refuge inside Pakistan marked a new era of intensive U.S. government scrutiny of a now tense and even adversarial relationship. In September that year, the then-top U.S. military officer, Admiral Mike Mullen, issued unprecedentedly strong and public accusations that Pakistan was providing support to Afghan insurgents who attack U.S. interests. Given Mullen's strenuous efforts to develop a close working relationship with his Pakistan counterpart, General Ashfaq Pervez Kayani, the pronouncement was taken as a supreme expression of U.S. frustration. To bookend 2011's bilateral turbulence of historic scale, in late November NATO troops in Afghanistan came under fire from two Pakistani army outposts just across the shared border at Salala. Retaliatory airstrikes left 24 Pakistani soldiers dead. A Pentagon investigation determined poor coordination and miscommunication were to blame, and that NATO troops had responded appropriately. Pakistan's government and people alike have expressed fury at what some suspect was an intentional strike. Following the incident, Pakistani officials moved to scrap and renegotiate all existing bilateral agreements with the United States related to supply lines into Afghanistan and any covert American activities inside (or over) Pakistani territory, primarily those generated early in the 2000s by the governments of President George W. Bush and President-General Pervez Musharraf. Islamabad has continuously demanded a full apology from Washington as requisite for restored cooperation. Yet of the several ways Islamabad's anger was expressed, the most contentious has been its closure of the Pakistani ground lines of communication (GLOCs) that allow NATO supplies to transit into Afghanistan. Despite much anticipation of an imminent deal to reopen them, the GLOCs remain closed to date and the issue was blamed for overshadowing a May 2012 NATO summit in Chicago. Media reports have the Pakistani negotiators seeking as much as $5,000 per truck, or what would be a 20-30-fold increase over last year—and senior U.S. officials refusing to entertain such a fee hike while railing at perceived "extortion" and "price gouging." Only days after the failure to strike a deal on the GLOCs in Chicago, a Pakistani doctor who reportedly had participated in a CIA operation to identify bin Laden family DNA received a 33-year prison sentence for treason, perplexing an American audience and angering many, including senior Members of Congress. The Senate Appropriations Committee responded within hours by attaching a unanimously approved provision to dock $1 million from U.S. aid funding in the FY2013 State and Foreign Operations appropriation for each year of the sentence unless the doctor is freed. The Administration has stated that it saw no reason for the conviction. In many practical respects, the cooperative aspects of bilateral relations have remained frozen in 2012, even before this most mutual exasperation in May. The two governments—and, at a lower level, the diplomatic and security agencies within them—seem at loggerheads after a grueling series of crises. Anti-American sentiments and xenophobic conspiracy theories remain rife among ordinary Pakistanis; opinion surveys find that the United States has of late replaced India as the nation least favored by Pakistanis (a significant development, given the visceral, decades-old Pakistan-India rivalry). Meanwhile, Americans tend to have increasingly poor views of Pakistan. The State Department warns Americans on the high risks of travel in Pakistan, and its own diplomats face travel restrictions there. American civilians have been abducted in Pakistan over the past decade. One, Daniel Pearl, was executed. Islamist extremism and militancy in Pakistan is a central U.S. foreign policy concern. Its arguably growing influence hinders progress toward key U.S. goals, including the defeat of Al Qaeda and other anti-U.S. terrorist groups, Afghan stabilization, and resolution of the historic Pakistan-India rivalry that threatens the entire region's stability and that has a nuclear dimension. Long-standing worries that American citizens have been recruited and employed in Islamist terrorism by Pakistan-based elements have become more acute. Several most-wanted enemies of the United States are widely believed to reside in Pakistan, among them Al Qaeda chief Ayman al-Zawahiri, Taliban chief Mullah Omar, and Haqqani Network leader Sirajuddin Haqqani. Some American intelligence officials reportedly suspect that Zawahiri may be receiving protection from elements of the Pakistani government. Over the past year, increasing numbers in Congress have more forcefully questioned the effectiveness of current U.S. policy and the wisdom of large-scale U.S. aid. Some openly call for the curtailment of all U.S. foreign assistance to Pakistan, and legislation significantly undercutting the Administration's FY2013 aid request, as well as placing new conditionality on both aid and military reimbursements, is moving through Congress in May 2012 (see Appendix ). Congress appropriated about $2 billion in direct aid for Pakistan in FY2012, placing it among the world's leading recipients of U.S. foreign assistance (see Table 1 ). Pakistan's Ambassador to the United States has told U.S. lawmakers that "onerous" restrictions being placed on U.S. aid will be counterproductive to the goal of restoring cooperation and trust. It seems clear that the closure of Pakistani GLOCs to Afghanistan has not been the logistical catastrophe that many pundits in both the United States and Pakistan had expected. In this respect, by keeping the routes closed, Islamabad has "played its trump card" in relations with Washington and not realized the hoped-for gains. Pakistan now risks finding itself increasingly isolated diplomatically, and working positively with the United States and NATO may be the only way to change this course. By bowing to domestic political pressures, the civilian government's negotiating strategy could see the country lose billions of dollars in foreign assistance, as well as its ability to influence post-war Afghanistan. In his June 2011 announcement of a U.S. military drawdown from Afghanistan in 2014, President Obama said the United States "will continue to press Pakistan to expand its participation in securing a more peaceful future for this war-torn region" and "will insist that it keep its commitments" to neutralize terrorist safe havens in its territory. In August, Secretary of Defense Leon Panetta openly acknowledged the complicating factors of Pakistan's ties to anti-Afghan and anti-India terrorist groups, but still insisted that the United States "has no choice but to maintain a relationship with Pakistan." Until the potential bilateral breakdown in 2012, many, if not most, independent observers concurred that continued engagement with Pakistan is the only realistic option for the United States, although some high-visibility analysts counsel taking an increasingly confrontational posture toward Islamabad. As part of the Administration's strategy for stabilizing Afghanistan, its Pakistan policy has included a tripling of nonmilitary aid to improve the lives of the Pakistani people, as well as the conditioning of U.S. military aid to Islamabad on that government's progress in combating militancy and in further fostering democratic institutions. However, in July 2011, the Administration suspended up to $800 million in planned security assistance to Pakistan and appears to be more rigorously evaluating Pakistan's cooperation and progress before releasing further aid. At least $1 billion in approved "coalition support fund" (CSF) reimbursements to Pakistan also remains undisbursed due to bilateral disagreements and acrimony. Developments in 2011 have seemed to validate a preexisting view of many observers that Pakistani behavior is unlikely to change given the long-held geostrategic perspectives of decision makers in Islamabad and Rawalpindi, home of the Pakistan Army's GHQ. If true, this means Pakistan will continue to tolerate safe havens for "friendly" militant groups regardless of U.S. aid levels or overt threats. By many accounts, Pakistan's apparently schizophrenic foreign policy behavior is a direct outcome of the Pakistan military's perceived strategic interests. This leads analysts to encourage full-throated U.S. support for Pakistan's civilian authorities as the only viable means of reducing conflict both inside Pakistan and between Pakistan and its neighbors. The current U.S. Ambassador to Pakistan, Cameron Munter, is among those who has insisted that Pakistan requires a strong civilian government and that common U.S.-Pakistan successes can be achieved only "with a strong partner in Pakistan's democratically elected government." Still, now four years after their seating, there are few signs that Pakistan's civilian leaders are willing and able to seriously address the outcomes of their country's security policies and move them in the direction of moderation. Even in domestic discussions these leaders continue to shirk responsibility for increased rates of extremism there, and to place the bulk of blame on the United States. This perspective—apparently widespread among the Pakistani public, as well—arguably omits enthusiastic official Pakistani participation in supporting Islamist militancy in the region (including the provision of vital support to Afghanistan's Taliban regime throughout most of the 1990s). By nearly all accounts, this support continues, albeit selectively, to date. President Obama has not visited Pakistan while in office, and his decision to travel to India in 2010 without any stops in Pakistan exacerbated anxiety among Pakistani officials who see signs of a "pro-India" tilt in Washington as destabilizing for the region. By refraining from engagement in the Kashmir dispute, moving forward with U.S.-India civil nuclear cooperation without any similar offer to Pakistan, and seeming to sympathize with New Delhi's perspective on the root sources of regional terrorism, the Administration's India policies are viewed suspiciously and even as threatening by Pakistani leaders and citizens, alike. Moreover, Afghanistan's October 2011 choice to establish closer and more overt ties with India, Pakistan's primary rival, and the ensuing May 2012 U.S.-Afghanistan tie-up, is grist for those figures—most especially within Pakistan's security institutions—who argue that Pakistan increasingly is under threat of strategic encirclement by external forces that seek to weaken and perhaps dismember the country. The tumultuous events of 2011, peaking as they did with the Salala incident and resulting Pakistani fury, may combine to mark the end of the "post-9/11 period" of bilateral relations. For 2012 and beyond, many analysts foresee a far more narrow, issue-based engagement—often referred to as "transactional ties"—and a setting aside of the kind of broad strategic partnership envisioned by the late Amb. Richard Holbrooke, President Obama's original Special Representative for Afghanistan and Pakistan. In the January 2012 words of Pakistan's top military spokesman, "From here on in we want a very formal, business-like relationship. The lines will be drawn. There will be no more of the free run of the past, no more interpretation of rules. We want it very formal with agreed-upon limits." Movement of FY2013 congressional legislation suggests such limits will include new restrictions on U.S. foreign assistance to Pakistan. Many analysts appear to foresee a "transactional" relationship as the best realistic alternative to a potential slide into noncooperation on both sides. A more focused, issues-based engagement might better address and serve the interests of both governments, in part by bringing greater transparency and credibility to the alliance. Ambassador Sherry Rehman, Pakistan's latest envoy to the United States, was appointed in late November 2011. In an opinion piece published just before the Chicago summit opened, Amb. Rehman set forth Islamabad's prerequisites for "resetting" the bilateral relationship to include (1) apologizing for the Salala incident; (2) releasing suspended CSF reimbursements; (3) increasing counterterrorism intelligence sharing; (4) halting drone strikes; and (5) shifting to a policy of "trade not aid" by enhancing Pakistan's access to U.S. markets. Two former U.S. diplomats—agreeing that the outlook is poor for any "strategic bond" as sought over the past decade—counsel the forging of a more normal, but constructive relationship by reducing mutual expectations; reducing, but better targeting, U.S. economic aid programs; fostering more substantive business ties between the two countries; and offering more energetic, if discreet, U.S. support for initiatives that could promote regional stability, including those between Pakistan and India, and perhaps even to include dropping U.S. opposition to the Iran-Pakistan gas pipeline project. Another South Asia expert and former advisor to Amb. Holbrooke finds reason for optimism in the more humble domestic status of the Pakistani military (and the corresponding benefits this entails for democratization), and improvements in Pakistan-India relations. He urges the Obama Administration to take account of these factors and not overemphasize a purely security-oriented approach that could risk derailing such positive trends by eliciting even stronger anti-American nationalism among the Pakistani people and thus restoring credibility to the military. In the view of many U.S. analysts, Pakistan's May 2012 intransigence on the issues of GLOCs and insistence on an apology for Salala may prove costly and represent a missed opportunity to work cooperatively with the United States in the region. One commentator who argues this urges the U.S. government to stay firm in pressuring Islamabad on counterterrorism, especially with Pakistan's leverage reduced. Another sees Pakistan's unrelenting stance being "a catastrophic mistake" and "a triumph of short-term thinking over long-term, of scheming over strategy." Even before the post-Salala breakdown of relations, some high-profile analysts were calling for a new U.S. policy to shift to a more adversarial posture toward Pakistan on the assumption that President Obama's (and President George W. Bush's) engagement policies have failed. One senior commentator suggests "focused hostility" toward Pakistan that would hold its military and intelligence services accountable while not harming the Pakistani people more generally. This could entail targeting individuals for sanction, as well as sharply cutting military aid. Another goes further, contending that Pakistan should be considered an enemy of the United States, at least as far as Afghanistan policy is concerned, the logic being that open admission of core disagreement on this issue would benefit both countries. A third argues that only credible threats to end all assistance to Islamabad and "retaliate" if Pakistan fails to comply with U.S. demands will convince Pakistani leaders that genuine cooperation is in their best interests. Another former Holbrooke advisor is among those who reject any such U.S. shift to a more adversarial approach as counterproductive and likely to put the entire U.S.-led project in Afghanistan at risk of failure. A Washington-based Pakistani analyst likewise views a "two Pakistans" approach as unworkable and misguided, contending that U.S. policies aimed at exploiting an internal Pakistani disconnect would likely strengthen that country's conservative Islamist elements and further fuel anti-American sentiments. Instead, this observer asserts that a more "passive" U.S. approach rooted in the provision to Islamabad of security assurances and targeted efforts to bolster Pakistan's civilian governance institutions would be most prudent. It remains to be seen whether the Pakistani military's willingness to abide the current, largely economic rapprochement with India is a tactical choice to ease security and international diplomatic pressure on Pakistan, or if it represents a more strategic shift in Rawalpindi's perspective. Even if Pakistan is well positioned to enjoy the tactical "victory" that (it believes) would come through realization of a pliable, heavily Pashtun-influenced post-NATO government in Kabul, the country's geostrategic status could well suffer from the international isolation that might ensue. Many commentators offer that a rapidly changing South and Central Asian calculus should propel the Pakistani state to favor energy and trade cooperation with its neighbors over its traditional focus on conflict with India, "strategic depth" in Afghanistan, and the status of Kashmir. In this way, Pakistan might transcend the perpetual insecurity that has marked most of its existence. The worldview of Pakistan's security services and, to some extent, domestic public are hindrances to a more robust pursuit of such policies by the country's civilian leaders. On January 4, 2011, Salman Taseer, the governor of Punjab province, was assassinated by a member of his own security team. A senior figure in the national coalition-leading Pakistan People's Party (PPP), Taseer was among the country's most liberal politicians, and he had incurred the wrath of Islamists and other conservatives with vocal criticisms of the country's controversial blasphemy laws. His killer, Malik Mumtaz Qadri, was since lauded as a hero by significant sections of Pakistani society, and even leaders of the country's majority Barelvi Muslim sect, usually considered to hold moderate interpretations of Islam, were vocal supporters of the assassin. Taseer's assassination, strongly condemned by Secretary of State Hillary Clinton, was a major blow to liberal forces in Pakistan. Meanwhile, on March 2, 2011, gunmen ambushed the car of Minorities Minister Shabaz Bhatti—the federal cabinet's only Christian member—and shot him to death. Bhatti had long campaigned for tolerance toward Pakistan's religious minorities and had, like Governor Taseer, openly called for reform of the blasphemy laws. Secretary Clinton expressed being "shocked and outraged" by Bhatti's killing, calling it "an attack on the values of tolerance and respect for people of all faiths and backgrounds championed by Mohammed Ali Jinnah, Pakistan's founding father." Prime Minister Yousef Raza Gilani was the only senior government official to attend Bhatti's funeral. President Zardari addressed the two assassinations with an English-language op-ed in which he contended that, "A small but increasingly belligerent minority is intent on undoing the very principles of tolerance upon which [Pakistan] was founded." Despite such claims, the Taseer and Bhatti assassinations and subsequent events were widely seen as evidence that Islamist radicalism is increasing in Pakistan. On January 27, 2011, Raymond Davis, an American working at the U.S. Consulate in Lahore, shot and killed two men who approached his vehicle in urban traffic. Davis contends he acted in self-defense when the men tried to rob him at gunpoint. However, Pakistani authorities accused Davis of murder and a court barred the government from releasing him despite insistence from top U.S. officials that diplomatic immunity shielded him from prosecution. President Obama described Davis as being "our diplomat." Only more than three weeks after the incident did the U.S. government admit that Davis was in fact a CIA contractor and member of a covert team that was tracking militant groups inside Pakistan. The controversy around Davis's legal status led some in Congress to openly suggest that U.S. assistance to Pakistan might be reduced or curtailed if the case was not resolved in a satisfactory manner. In mid-February, Senate Foreign Relations Committee Chairman Senator Kerry traveled to Islamabad in an effort to reduce escalating tensions, taking the opportunity to express the "deepest sorrow" felt by top U.S. leaders at the loss of life. In late February, the CIA opened direct negotiations with the ISI in an effort to secure Davis's release. On March 16, 2011, after weeks of closed-door negotiations, political pressure by Pakistani officials on the courts, and, finally, a pledge of $2.3 million in diyat , or "blood money," for the victims' families, Davis was freed and flown out of the country. Top U.S. officials denied there had been any quid pro quo arrangement related to Davis's release or that the United States had provided the financial compensation. On May 2, 2011, Al Qaeda founder Osama bin Laden was located and killed in the mid-sized Pakistani city of Abbottabad, a military cantonment in the northwest Khyber Pakhtunkhwa province, in a compound one-half mile from the country's premier military academy and just 35 miles north of the capital of Islamabad (see Figure 1 ). The location and circumstances of OBL's death exacerbated Washington's long-held doubts about Pakistan's commitment to the ostensibly shared goals of defeating religious extremism, and brought calls to curtail U.S. assistance to Pakistan. The news of OBL's whereabouts led to immediate questioning of Pakistan's role and potential complicity in his refuge. President Obama's chief counterterrorism advisor, John Brennan, told reporters it was "inconceivable that Osama bin Laden did not have a support system" in Pakistan. For a wide array of observers, the outcome of the years-long hunt for OBL left only two realistic conclusions: either Pakistani officials were at some level complicit in hiding the fugitive, or the country's military and intelligence services were grossly incompetent in their search for top Al Qaeda leaders. In either case, after many years of claims by senior Pakistani officials—both civilian and military—that most-wanted extremist figures were finding no refuge in their country, Pakistan's credibility suffered a serious blow. Pakistan's military and intelligence services came under rare domestic criticism for being unable to detect and intercept a foreign military raid deep inside Pakistani territory, and for ostensible incompetence in detecting the presence there of the world's most-wanted terrorist. Army Chief Gen. Kayani warned that Pakistan would not tolerate any future incursions. Parliament subsequently issued a strong condemnation of the U.S. raid and again called for a halt to U.S.-launched drone strikes in western Pakistan. It also threatened to close land lines of communication through Pakistan that were considered vital to supplying NATO troops in Afghanistan. Meanwhile, public demonstrations took a bellicose, anti-American cast. The developments fueled bilateral distrust and acrimony unseen in the post-2001 period. Congress pointedly questioned the wisdom of continued engagement with a national government that may at some levels have had knowledge of OBL's whereabouts; figures from both major parties expressed disbelief at Pakistan's allegations of ignorance and called for greater oversight and accountability for future U.S. assistance to Pakistan. Still, senior Members tended to take a more measured view, with the House Speaker voicing the opinion that circumstances called for "more engagement [with Pakistan], not less." Such sentiments tracked well with the view of many independent observers that—despite ample reasons for discouragement and distrust—the United States has had no choice but to continue to engage Pakistan in "a bad marriage." President Obama and other top U.S. officials maintained a generally positive posture toward Pakistan in the weeks following the Abbottabad raid, while also noting that serious questions had arisen over the circumstances of OBL's refuge. The U.S. government reportedly has no conclusive evidence indicating that official Pakistan was aware of bin Laden's whereabouts. Privately, senior Administration officials reportedly became divided over the future of the bilateral relationship, with some at an apparent loss for patience and advocating strong reprisals for perceived Pakistani intransigence. On May 22, 2011, a team of heavily armed militants penetrated security barriers and stormed Pakistan's premier naval base, the Mehran Naval Station near Karachi. Ten security personnel and four militants were killed in the ensuing 16-hour-long gun battle; two other militants are believed to have escaped before Pakistani commandos regained control of the base. The militants were able to destroy two U.S.-supplied P-3C Orion maritime patrol aircraft in their hangar. The attack, which the Pakistani Taliban claimed was revenge for the killing of bin Laden, was the second major embarrassment of the month for the beleaguered Pakistani military, which seemed at a loss to explain how such a damaging breach could occur. The ability of a handful of attackers to wreak such havoc left the security services open to scathing criticism from the generally pro-military Pakistani media, and also brought into question the safety and security of Pakistan's nuclear weapons and materials. Suspicions quickly arose that the base's attackers had inside help, given especially their ability to carefully avoid detection and take effective cover once inside. Within days a former navy commando was arrested in connection with the case. Three navy officers, the base commander among them, are to be court-martialed on charges of negligence in connection with the attack, an unusual disciplinary action for the Pakistani military demonstrating the seriousness of the breach. Inter-Services Intelligence (ISI), Pakistan's main intelligence agency, is accused of ordering the torture and murder of investigative journalist Syed Saleem Shahzad, who disappeared in May 2011 just after penning an article suggesting that the Mehran attack was carried out because the Pakistan Navy was trying to crack down on Al Qaeda cells that had infiltrated the service. Shahzad, whose writing had riled the Pakistani establishment repeatedly in the past, reportedly had received numerous threats from the ISI. In a rare public statement, the ISI denied playing any role in Shahzad's fate. A closed government inquiry into the death began in June; unnamed U.S. officials later said there was sufficient classified intelligence to conclude that senior ISI officials had directed the brutal attack on Shahzad in an effort to silence critics. Soon after, then-Joint Chiefs Chairman Admiral Mike Mullen went on record with the claim that Shahzad's killing "was sanctioned by the [Pakistani] government." In January 2012, an official Commission of Inquiry reported to the Pakistani government that it was unable to identify the culprits behind Shahzad's murder while also recommending that the country's intelligence agencies "be made more law-abiding through a statutory framework carefully outlining their respective mandates and roles" and that they be made "more accountable through effective and suitably tailored mechanisms of internal administrative review, Parliamentary oversight, and judicial redressal of citizens' grievances against them." In July 2011, the Obama Administration made some significant changes in its security-related aid policy toward Pakistan. According to congressional and State Department sources, $440-$500 million worth of scheduled counterinsurgency (COIN) training and equipment for Pakistan was put under suspension due to the recently reduced U.S. military trainer presence there, along with obstacles to fulfilling other agreements between the two countries. In addition, Islamabad's delays in processing U.S. visa requests led to the suspension of $300 million in planned FY2011 Coalition Support Fund reimbursements. Although the Administration presented the move as being necessitated by technical factors, observers saw it as a message and warning to Islamabad that key assistance spigots could close in the absence of improved cooperation. A Pakistani military spokesman dismissed the development as having no effect on his organization's ability to conduct future combat operations, and he repeated the Army Chief's suggestion that more U.S. security assistance be reprogrammed toward development projects in Pakistan. In the view of some observers, the Administration's decision was more likely to elicit greater resentment than greater cooperation from Pakistani leaders, and could be taken as validation by ordinary Pakistanis who see the United States as a fickle and unreliable ally. In October 2011, Pakistani-American businessman Mansoor Ijaz penned a high-visibility op-ed piece that made passing reference to a memorandum allegedly "dictated" to him in May 2011—only days after bin Laden's death—by then-Pakistani Ambassador to the United States, Husain Haqqani. The unsigned memo was meant for the eyes of J.C.S. Chief Adm. Mullen, and it bluntly requested U.S. assistance in averting an allegedly imminent military coup, as well as U.S. support for Islamabad's civilian government to install friendly new leaders for the country's military and intelligence services, leaders who would fully cooperate with U.S. counterterrorism efforts. Once uncovered, the Pakistani Supreme Court, with the military's prodding, launched an investigation to reveal the actual author and purpose of the document, and the resulting "Memogate" scandal cost Haqqani his job and brought immense pressure on President Asif Zardari. Both Zardari and Haqqani deny any involvement in the memo's authorship. Ijaz was shown to be a less-than-credible witness and, while it is still incomplete, the investigation largely fizzled out when testimony did not appear to find evidence of wrongdoing by the civilians. Amb. Haqqani was subsequently allowed to leave Pakistan. Yet the civil-military clash brought substantive concerns that President Zardari might face overthrow by the military. In mid-December, Pakistan's senior-most army and intelligence officers submitted to the Supreme Court statements that the memo was genuine and represented evidence of a conspiracy against the army. Prime Minister Gilani responded with an open warning that "conspiracies are being hatched to pack up the elected government" and said that the military "cannot be a state within a state" and is "answerable to parliament." Rumors of an impending military coup were so ubiquitous in December that the army publically pledged to continue supporting democracy; Gen. Kayani was quoted as saying all such rumors were "speculation." Still, during the final week of 2011, the civilian government remained infuriated that both the army and intelligence chiefs had circumvented them in engaging the court. Prime Minister Gilani again called the move unconstitutional and illegal, a claim denied by the equally infuriated military. Despite widespread alarm about the status of Pakistan's democratic government, the Pakistani public appears increasingly averse to another round of direct military rule and, unlike in the past, opposition politicians are not seeking the military's help. Add to this an assertive judiciary and a vocal watchdog media, and the odds of Pakistan seeing a military coup in the foreseeable future are considered quite low. By January's end, Parliament passed a resolution reaffirming its own supremacy and calling on the army and Supreme Court to remain within their constitutional limits. Gilani subsequently softened his criticisms of the military and the crisis atmosphere faded. In the early, moonless morning hours of November 26, 2011, U.S. ground forces on a mission very near the Afghanistan-Pakistan border reportedly came under heavy machine gun and then mortar fire from hilltop positions just inside Pakistan. According to the Pentagon, U.S. commanders on the ground had no awareness that two small Pakistan army outposts were in the area and thus believed they were being attacked by Afghan insurgents. NATO air assets were called in as a "show of force," but the incoming fire did not cease, so an AC-130 gunship, two F-15 jets, and two AH-64 Apache helicopters were ordered to neutralize the hilltop positions. By this time, Pakistani liaison officers were telling their American counterparts that Pakistani soldiers were coming under fire, but 24 of these soldiers were killed before the air assault ended. Pakistanis both official and otherwise were infuriated; some openly accused NATO forces of intentionally killing Pakistanis. Prime Minister Gilani described the attacks as being "a grave breach of Pakistan's sovereignty" and "a flagrant violation of international law." Pakistani anger, which has not subsided to date, was reflected in the immediate closure of NATO's ground logistics routes through Pakistan, the eviction of U.S. personnel from the Shamsi airfield in Baluchistan, and a boycott of a December Bonn conference on Afghanistan. At the time of this writing, the supply routes have been closed for more that five months, despite Islamabad's stated intention to allow them to reopen (see "U.S./NATO Ground Lines of Communication" section below).The Pakistani government has rejected U.S. expressions of "deep regret" and "sincere condolences," and demands a formal and unconditional apology from Washington. The Pentagon quickly launched an investigation in which the Pakistani side refused to participate. That investigation was completed in late December, when the U.S. general heading it announced that, "U.S. forces, given what information they had available to them at the time, acted in self-defense and with appropriate force after being fired upon" and "there was no intentional effort" to target Pakistanis. It was conceded that serious miscommunication and poor coordination were central factors, but no NATO personnel were found to have acted improperly. Pakistan's military called the "affixing of partial responsibility of the incident on Pakistan ... unjustified and unacceptable." A document detailing the Pakistani perspective was released in January 2012. It conceded that Pakistani forces fired first, but legitimately so in the circumstances. It excoriated the NATO investigators for the "inconceivable" claim that no Pakistani posts were known to be in the area and found the "fundamental cause" of the incident was "the failure of US/ISAF [International Security Assistance Force] to share its near-border operation with Pakistan at any level." It also laid out a timeline suggesting that the incident was "deliberate at some level." Press reporting indicates the Obama Administration came very close to issuing an apology for Salala on several occasions over ensuing months. Advocates, especially within the State Department, have believed an apology would facilitate a reopening of the GLOCs and a mending of relations more generally. Opponents argued that the United States could not give any appearance of weakness given a compulsion to pressure Pakistan on counterinsurgency. Pentagon figures are said to believe an apology would amount to an admission of fault. In late February, Secretary Clinton reportedly was set to apologize to Foreign Minister Khar in London, but that plan was aborted after U.S. military personnel inadvertently burned Korans in Afghanistan. Later, with coordinated insurgent attacks across Afghanistan in April blamed on the Pakistan-based Haqqani Network, those in the Administration arguing for an apology apparently fell silent. U.S.-Pakistan relations were further riled in February 2012 when the House Foreign Affairs Subcommittee on Oversight and Investigations held a hearing on Baluchistan, a Pakistani province that is the site of a long-running violent separatist conflict. At least one witness called for the "partition" of Pakistan into substates, Baluchistan among them. Subcommittee Chairman Representative Dana Rohrabacher subsequently offered H.Con.Res. 104 to express the sense of Congress that the people of Baluchistan had a right to self-determination and to their own sovereign country. Although the resolution has only two co-sponsors and has not emerged from committee to date, congressional attention to the issue infuriated the Islamabad government and sparked a storm of criticism from the Pakistani media. Prime Minister Gilani called it an attack on Pakistani sovereignty and Pakistan's Ambassador in Washington warned it "would seriously impact bilateral relations." The Obama Administration distanced itself from the resolution by declaring that it has no policy to support Baluchistan's independence. The Salala incident spurred the Islamabad government to essentially freeze relations with the United States pending a broad review of the engagement by its Parliament. This review, originally slated to be complete in the opening months of 2012, was not finalized until April. Some observers were encouraged by the review process as representing an unusual foreign policy assertiveness by a Pakistani civilian government typically subservient to the military. More cynical analysts saw the review process as merely a civilian face being put upon what is fundamentally a reflection of army policy making. The unanimously approved, 14-point "Guidelines for Revised Terms of Engagement with the United States" was issued on April 13, 2012. Among the points/demands most relevant for U.S. policy makers were the following: "Immediate cessation of [U.S.-launched] drone attacks inside the territory of Pakistan"; "Cessation of infiltration into Pakistani territory on any pretext, including 'hot pursuit'"; "Pakistani territory including its air space shall not be used for transportation of arms and ammunition to Afghanistan"; "The condemnable and unprovoked NATO/ISAF attack ... represents a breach of international law and constitutes a blatant violation of Pakistan's sovereignty and territorial integrity," and "the government of Pakistan should seek an unconditional apology from the United States"; "Those held responsible for the [Salala incident] should be brought to justice"; "No verbal agreement regarding national security shall be entered into by the government" and "all such agreements or understandings shall cease to have effect forthwith"; "No overt or covert operations inside Pakistan shall be permitted"; "No private security contractors and/or intelligence operatives shall be allowed"; and "Pakistan's territory will not be provided for the establishment of any foreign bases." The review's authors surprisingly added a request that the United States offer a civil nuclear deal to Pakistan similar to the one offered to India in 2005. Throughout the review process and following its completion, the Obama Administration has issued repeated and emphatic expressions of respect for Pakistani democracy and sovereignty, even as drone strikes have continued (albeit at a notably reduced rate). U.S. Special Representative for Afghanistan and Pakistan (SRAP) Marc Grossman was in Islamabad in late April for the 6 th Trilateral Core Group Meeting of the United States, Pakistan, and Afghanistan. His visit marked the first focused, high-level talks since the Salala incident and included substantive discussion of the Parliament's 14 points. Yet hopes that the bilateral relationship would finally be "reset" and in working order were quickly dashed as Grossman departed without any breakthrough. Pakistan's demands for a cessation of drone strikes remain a major point of contention—most analysts believe the CIA will be unwilling to relinquish an ability to strike so-called "high-value targets" whenever and wherever the opportunity arises. A continuation of "signature strikes" targeting suspected low-level militants based on "pattern of life" surveillance is also in question. These types of strikes are considered more likely to result in civilian deaths. Some reports suggest that Pakistani leaders will refuse to open NATO's ground supply lines to Afghanistan via the Karachi port until drone strikes are ended, but no government officials have stated this is the case. However, the greater sticking point may be Pakistan's demands for an unconditional apology for the inadvertent deaths of Pakistani soldiers at Salala. At the time of this writing, none of these major issues are resolved and the U.S. government reportedly is withholding at least $1 billion in military reimbursements and counterterrorism funding pending an agreement on bilateral reengagement. Meanwhile, Pakistan's Foreign Ministry continues to insist that Islamabad "will abide by the recommendations of the Parliament both in letter and spirit." A May 21-22 NATO summit in Chicago—the first ever held in an American city outside of Washington, DC—formally was focused on making decisions about the alliance's future engagement in Afghanistan. Pakistan had boycotted a December 2011 NATO conference in Germany following the Salala incident and it remained unclear for months whether the Islamabad government would be invited to the Chicago meeting, or even participate if invited. Only days before the opening session, President Zardari received a personal call to attend from the NATO Secretary-General. Yet, when the time came, the numerous heads of government in attendance met under the shadow of U.S.-Pakistan tensions and the unresolved GLOCs issue. During the session, President Obama apparently refused to meet in person with President Zardari, a snub that combined with an absence of any apology for Salala to seriously chasten the Pakistanis. Indeed, one unnamed senior U.S. official was quoted as saying there was an intent to make Zardari "feel uncomfortable." Some observers in Pakistan, opposition political figures among them, declared that President Zardari's participation in the summit had been an embarrassment. However, Foreign Minister Khar sounded an upbeat note, arguing that Pakistan was a vital participant and had received an unconditional invitation; Urdu-language editorials were nearly uniform in their (unusual) praise of Zardari for appearing to stand up to international pressure and assert Pakistan's national interests. On May 23, 2012, a tribal court in northwestern Pakistan convicted Shakil Afridi of treason and sentenced him to 33 years in prison. Afridi, a doctor who had worked with the CIA in an apparently unsuccessful attempt to collect DNA samples from Osama bin Laden's Abbottabad compound previous to the May 2011 U.S. commando raid, had been charged under the colonial-era Frontier Crimes Regulations and was tried outside of the Abbottabad jurisdiction. The sentence was met with widespread outrage in the United States; the Obama Administration contends there is no reason for Afridi to be held, and the Chairman and Ranking Member of the Senate Armed Services Committee called the sentence "shocking and outrageous," contending that Afridi "should be praised and rewarded for his actions, not punished and slandered." A statement from the Chairman of the Senate Foreign Relations Committee noted the irony that "the only person being punished is the person who helped the United States achieve justice for the murder of thousands of Americans," and concluded that the development will make efforts to maintain a strategic relationship more difficult. Islamabad insists the process was in accordance with Pakistani law and should be respected. However, even some Pakistani commentators are questioning the conviction, in particular because he was convicted in a court outside the original jurisdiction, without legal representation, and it is unclear if he has a right to appeal. The Administration's biannual March 2011 assessment of Afghanistan and Pakistan policy determined that most indicators and metrics against key U.S. objectives had remained static during the reporting period (the latter half of 2010), notably excepting "significant progress" in combating Al Qaeda in the region. On counterinsurgency (COIN) efforts, it noted improved cooperation both within the Pakistani armed forces and between those forces and NATO, but found that the last quarter of 2010 "saw no progress on effectively executing the COIN cycle in KPk [Khyber Pakhtunkhwa province] and the FATA [Federally Administered Tribal Areas]" (see Figure 2 ): "[W]hat remains vexing is the lack of any indication of 'hold' and 'build' planning or staging efforts to compliment ongoing clearing operations. As such, there remains no clear path toward defeating the insurgency in Pakistan " [emphasis added]. In apparent conflict with such problematic U.S. government reporting on Pakistan's progress was a March 2011 certification by Secretary Clinton required under Section 203 of the Enhanced Partnership With Pakistan Act of 2009 ( P.L. 111-73 ). This certification, which allowed the release of security-related FY2011 aid to Pakistan, included the Secretary's confirmation that Islamabad was demonstrating "a sustained commitment to and is making significant efforts toward combating terrorist groups" and had "made progress" on ceasing support to extremist and terrorist groups, as well as on preventing Al Qaeda and other terrorist groups from operating on Pakistani territory, and in "dismantling terrorist bases" in the country. In the wake of revelations about Osama bin Laden, and persistent complaints from U.S. military commanders that Pakistan was taking action against the Haqqani Network in the FATA, the certification met with considerable skepticism and appeared driven primarily by political considerations rather than by ground realities. When pressed to further explain the certification at an October 2011 House Foreign Affairs Committee hearing, the Secretary offered, "[A]t the time I made the certification, I closely considered the requirements set forth in the statue and I determined that on balance Pakistan met the legal threshold." To date, there has been no similar certification for FY2012. The Administration's September 2011 assessment—covering January-June with preliminary comment on July and August—brought little positive news beyond reporting "significant successes" against Al Qaeda, a key aspect of the first of several objectives related to Pakistan: On enhancing civilian control and stable government in Pakistan , indicators and metrics "remained static" for the entire reporting period. On developing Pakistan's COIN capabilities , indicators and metrics remained static through the first quarter of 2011, then began to decline, with "continued negative trends" into the summer. This was attributed in large degree to the "Pakistan-directed" decrease in bilateral security cooperation. On involving the international community in efforts to assist in stabilizing Pakistan , the indicators and metrics were reported to have remained static, with the International Monetary Fund (IMF) Stand-By Arrangement remaining on hold since August 2010 and only limited progress in funding the World Bank Multi-Donor Trust Fund and the U.N. Pakistan Humanitarian Response Plan. The Pentagon's most recent biannual report to Congress on progress toward security and stability in Afghanistan (for the six-month period ending March 31, 2012) noted some positive trends, but flatly stated that, "The Taliban insurgency and its al Qaeda affiliates still operate with impunity from sanctuaries in Pakistan" which "remain the most critical threat" to the U.S.-led effort in Afghanistan. The report contended that the security situation in eastern Afghanistan "remains volatile" and that the city of Kabul continues to face persistent security threats, many of which are "planned in and controlled from Pakistan": Pakistan's selective counterinsurgency operations, passive acceptance—and in some cases, provision—of insurgent safe havens, and unwillingness to interdict material such as [improvised explosive device] components, continue to undermine security in Afghanistan and threaten ISAF's campaign. Pentagon leaders, and U.S. government leaders in general, believe that Pakistan's desire to see an Afghan government "with primacy for the Pashtuns, and limited Indian influence," motivates its leadership to allow insurgent sanctuaries to persist on its soil. In addition to the several destabilizing developments of 2011 discussed above, U.S.-Pakistan relations have been negatively affected by two other notable issues. One area of contention has been freedom of travel for U.S. diplomats in Pakistan. Incidents in which such diplomats have been prevented from moving between cities reportedly have amounted to "official harassment" from a U.S. perspective, but Pakistani officials insist that requiring "No Objection Certificates" for Americans leaving Islamabad is neither new nor U.S.-specific. Another irritant was the July 2011 revelation that two U.S. citizens of Pakistani origin had for many years been working illicitly on behalf of the ISI in an effort to influence U.S. Kashmir policy. President Obama has not traveled to Pakistan since taking office, and the bilateral Strategic Dialogue has not had a formal session since October 2010. However, high-level interactions, especially among military and intelligence officials, have continued to be frequent, albeit with a notable late 2011/early 2012 lapse. In October 2011, the Obama Administration made a major show of diplomatic force when Secretary Clinton led a large, high-level delegation to Islamabad. Accompanied by CIA Director David Petraeus, new Joint Chiefs Chairman Gen. Martin Dempsey, Deputy National Security Advisor Lt. Gen. Doug Lute, SRAP Grossman, and other senior officials, Clinton sought to impress upon the entire Pakistani civilian and military leadership that the United States will not tolerate the continued existence of militant safe havens in western Pakistan and will take action against them if the Pakistanis do not. At the ministerial level, the U.S.-Pakistan Strategic Dialogue appears to have been postponed indefinitely; formal talks including Secretary Clinton, originally slated for March 2011, have not occurred to date. Yet engagement has continued at other levels: In February 2012, Secretary Clinton met with Foreign Minister Khar in London, where she conveyed U.S. respect for Parliament's right to review bilateral relations and take its time in doing so. Yet the Secretary also conveyed U.S. eagerness to "get back to business," especially on crucial areas such as counterterrorism and Afghanistan. Khar told Clinton that Islamabad needed first to deal with upcoming Senate elections and would soon after deal with Parliament's recommendations. In March, Amb. Grossman met with President Zardari in Dushanbe, Tajikistan, and emphasized that the United States "wants an honest, constructive, and mutually beneficial relationship with Pakistan and remains committed to continued engagement." Days after the Grossman-Zardari meet, President Obama sat down with Prime Minister Gilani on the sidelines of a nuclear security summit in Seoul, South Korea, where the President reasserted the U.S. desire to see the two countries "move forward on important shared interests, including counterterrorism and fostering a stable Afghanistan." Like Secretary Clinton, he welcomed Pakistan's parliamentary review process, and also said the United States would welcome Pakistan's potential participation in the upcoming Chicago NATO summit. Also in March, senior U.S. and Pakistani military commanders held their first formal talks since the Salala incident when Central Command chief Gen. James Mattis and NATO-ISAF commander Gen. John Allen discussed border coordination issues with Gen. Kayani in Rawalpindi. In April, Deputy Secretary of State Thomas Nides met with Foreign Minister Khar in Islamabad in an effort to build upon the March conversations. Nides expressed optimism that the two countries could "achieve a balanced approach that respects Pakistan's sovereignty and interests but also represents our concerns about our national security." Later in April, USAID Administrator Rajiv Shah visited Pakistan to express a strong U.S. commitment to building and improving ties with Pakistan through civilian assistance and development support. In late April, Amb. Grossman was in Islamabad for the 6 th Trilateral Core Group meeting between the United States, Pakistan, and Afghanistan. It was also the first high-level U.S. visit following the release of the parliamentary review. He and interlocutor Foreign Secretary Jalil Abbas Jilani made no breakthroughs on major points of disagreement: Grossman focused on the U.S. desire to see GLOCs quickly reopened, while Jilali reiterated Pakistan's adamant opposition to further drone strikes. By some accounts, it was Washington's refusal to apologize for the Salala incident that ultimately torpedoed the session. The U.S.-Pakistan-Afghanistan Tripartite Commission —established in 2003 to bring together military commanders for regular discussions on Afghan stability and border security—met for the 35 th time in Rawalpindi in mid-May. Missile strikes in Pakistan reportedly launched by armed American Predator and Reaper unmanned aerial vehicles (UAVs) have been a controversial, but arguably effective tactic against Islamist militants in remote regions of western Pakistan. The nominally covert program is overseen by the CIA, but reports indicate that President Obama personally approves the targeting "kill list." By one assessment, 118 drone strikes occurred in 2010 alone, more than during the preceding six years combined. Seventy more strikes were reported in 2011. The missile strikes in western Pakistan reportedly have taken a significant toll on Al Qaeda and other Islamist extremist militants, but are also criticized as an extrajudicial measure that kills civilians and may also contribute to militant recruitment. The Pakistani government regularly issues protests over the strikes—and the perception that they violate Pakistani sovereignty fuels considerable anti-American sentiment among the Pakistani public. As per a May 2012 Foreign Ministry statement: "We strongly condemn these drone attacks. We regard them as a violation of our territorial integrity. They are in contravention of international law. They are illegal, counterproductive, and totally unacceptable." Still, most observers believe official Pakistan has tacitly allowed the strikes and at times provided intelligence for them. Despite Islamabad's persistent and sweeping rejection of drone strikes on Pakistani territory, informed domestic debate exists, with some analysts welcoming the tactic as necessary and the best of several bad options. There is no shortage of accounts suggesting that, as a tactic, the drone campaign has been effective against Al Qaeda and its FATA-based allies. Messaging to Pakistan appears to continue to be part of the program's intent: major strikes closely followed both Raymond Davis's March 2011 release and the Administration's July 2011 announcement on partial suspension of U.S. military aid to Islamabad. Most recently, a series of drone strikes came immediately after the May 2012 NATO summit where President Obama refused to meet with his Pakistani counterpart. Top Administration figures reportedly differ on the wisdom of continuing UAV strikes in Pakistan, with some State Department and Pentagon figures urging the CIA to reduce the pace of its strikes. While there is said to be widespread agreement on the tactical effectiveness of UAV attacks, proponents of their more judicious use reportedly worry that any intense pace aggravates an already troubled relationship with Pakistan and may risk destabilizing that country. A mid-2011 White House review of the program ultimately reaffirmed support for the CIA campaign while also instituting some changes: the State Department would play a greater role in strike decisions, Pakistani officials would get more advanced notice, and strikes would be suspended when Pakistani officials were visiting the United States. the changes appear to have reduced the number of "signature strikes" undertaken against large groups of suspected militants. In June 2011, the President's top counterterrorism advisor, in referring to the armed drone program, claimed "there hasn't been a single collateral death because of the exceptional proficiency, precision of the capabilities we've been able to develop." Three years after taking office, President Obama publically acknowledged and defended the program's existence, saying it "had not caused a huge number of civilian casualties" and is "kept on a very tight leash." These claims are hotly disputed by independent analysts who track the strikes and estimate that 145-535 civilians have indeed been killed, including scores of children. Despite the killing of many hundreds of militants and dozens of their commanders, violence in western Pakistan has hardly subsided as a result of missile strikes. Yet, in present circumstances, and with a coming drawdown of NATO troops in neighboring Afghanistan, many commentators believe the U.S. government may have no better option than to continue employing the tactic. Close U.S. links with Pakistan's Inter-Services Intelligence (ISI) date back to the 1980s, when American and Pakistani intelligence officers oversaw cooperative efforts to train and supply Afghan "freedom fighters" who were battling the Soviet Army. Yet mutual mistrust has been ever-present and, in 2008, long-standing doubts about the activities and aims of the ISI compounded. Along with international concerns about the ISI's assumed decades-long strategy of making use of Islamist militant proxies to forward Pakistan's perceived interests, the service is also implicated in extralegal abductions and manipulation of domestic politics. The agency comes under the direct control of the army and its Director-General, a three-star general, is widely viewed as deputy to the Chief of Army Staff. Lt. Gen. Zaheer-ul-Islam was appointed DG-ISI in March 2012, replacing the retiring Lt. Gen. Pasha. Islam, previously commander of the army's V Corp based in Karachi, received military training in the United States in 2002-2003. Press reports have called him more open and moderate than his predecessors; he may be a candidate for the COAS position after Kayani's scheduled 2012 retirement. U.S. officials repeatedly have fingered the ISI for actively supporting Afghan insurgents with money, supplies, and planning guidance. There is ongoing conviction among U.S. officials that sanctuaries in Pakistan have allowed Afghan militants to sustain their insurgency and that elements of the ISI continue to support them. Some reporting has cited Afghan insurgent commanders claiming that in the latter months of 2011 the ISI increased its direct contacts with the Taliban, vigorously encouraging more violence, and even supplying them with new high-powered explosives manufactured in Pakistan. A classified NATO report detailing information gathered through thousands of interrogations of captured Taliban and Al Qaeda militants was leaked in January 2012 and reportedly indicates that Afghan insurgents continue to receive direct support from the ISI. The report offers that, "Pakistan's manipulation of the Taliban senior leadership continues unabatedly," and "Senior Taliban leaders meet regularly with ISI personnel, who advise on strategy and relay any pertinent concerns of the government of Pakistan." NATO officials played down the report's significance, and Pakistan's foreign minister called its content "old wine in an even older bottle." The ISI is also regularly linked to anti-India terrorist groups, including the Lashkar-e-Taiba, responsible for the November 2008 attack on Mumbai in which some 165 people were killed, 6 Americans among them. During a February 2012 House hearing, Secretary of State Clinton asserted, "[T]here is no doubt in my mind that certain elements of the Pakistani government are more ambivalent about cracking down on terrorism.... [T]here have been relationships between terrorist groups and the military and intelligence services for many decades." Pakistani officials regularly provide assurances that no elements of the ISI are cooperating with militants or extremists. However, to many independent observers, Pakistan's security services increasingly appear to be penetrated by Islamist extremists. Leaked U.S. diplomatic cables reportedly contained claims that Pakistani military officers receive training biased against the United States. Some analysts argue that, just as Pakistan's national identity has continued to be fractured along the lines dividing nationalism from Islamism, Pakistan's security services can be conceived of as comprising two groups: one, led by Gen. Kayani, is fundamentally nationalist and seeks to maintain the status quo; the other, currently leaderless, is driven by a revisionist Islamist ideology, sometimes with a violent cast. Even before the Raymond Davis episode began, reports indicated that CIA-ISI relations were at a nadir, with American officials frustrated at the lack of expanded Pakistani military operations and at signs that elements within the ISI continue to provide backing to certain militant groups. The Davis affair sharpened Pakistani attention to—and acrimony toward—the presence of U.S. security officials and contractors in Pakistan. Revelation of Davis's status as a CIA contractor led the ISI to demand an accounting of all such operatives working in Pakistan, but most intelligence cooperation may have been frozen immediately upon the January shooting. The circumstances of OBL's death brought more focus on purported ISI links with Islamist extremism. Following the May 2011 raid, Pakistan sought to crack down on its own citizens who were found to be working with the CIA. Pressure was increased to allow American investigators access to bin Laden's three widows in Pakistani custody. Such access was subsequently granted. One week after OBL's death, a Pakistani newspaper seen as close to the country's military and intelligence services published the purported name of the CIA's Islamabad station chief. This was the second time in six months that the top covert American operative in Pakistan had been outed, and U.S. officials reportedly believed such disclosures were deliberate as a means for the ISI to demonstrate its leverage and to express anger at U.S. policies. After the OBL raid, the ISI leadership was confronted more frequently—and more publically—with U.S. evidence of collusion between Pakistani officials and Afghan insurgents. Such evidence notably included instances in which the CIA alerted Islamabad about the existence of two bomb-making facilities in Pakistan's Federally Administered Tribal Areas (FATA), only to have Pakistani army units find the sites abandoned by the time they arrived. This led U.S. officials to assume that the targets had been tipped off about upcoming raids, a charge called "totally false and malicious" by the Pakistani military, which declared that some of the intelligence provided "proved to be incorrect." Still, U.S. officials repeated the accusations after militants fled two other bomb-making facilities; these officials reportedly believed that Pakistan's insistence on gaining permission from local tribal elders before entering the area allowed militants to escape. Concurrent with interagency discord, effective joint intelligence work has continued. Just days after the OBL raid, a Yemeni national described as a "senior" or "midlevel" Al Qaeda operative was arrested in Karachi with the help of U.S.-provided intelligence. Mohammed Ali Qasim Yaqub reportedly had been a key courier between Al Qaeda's top leaders, and his capture was seen as a good-faith Pakistani effort to mend relations with Washington. In another apparent effort to rebuild confidence, Pakistan pledged in June to grant more than three dozen visas to CIA officers. Most-wanted terrorist Ilyas Kashmiri was reported killed in a June 2011 drone strike in South Waziristan, and the new Al Qaeda chief's deputy and operational commander, Libyan explosives expert Atiyah Abd al-Rahman, was reported killed in an August strike in North Waziristan (successes in targeting militants in the FATA with unmanned drones likely come with intelligence from Pakistan). In September, Pakistan announced having arrested three allegedly senior Al Qaeda operatives near Quetta with help from technical assistance provided by the CIA. Bilateral intelligence cooperation, especially that targeting Al Qaeda and the "Pakistani Taliban," has quietly continued even as government-to-government relations have worsened. Some reports indicate that the CIA has undertaken a years-long, multibillion dollar effort to establish inside Pakistan a network of "secret friends" of the United States—security officials, intelligence operatives, counterterrorism fighters, and the like, who could offer an alternative to less trustworthy army and ISI officials. Pakistani leaders have long sought access to Central Asia and "strategic depth" with regard to India through friendly relations with neighboring Afghanistan. Such policy contributed to President-General Zia ul-Haq's support for Afghan mujahideen "freedom fighters" who were battling Soviet invaders during the 1980s and to Islamabad's later support for the Afghan Taliban regime from 1996 to 2001. British colonialists had purposely divided the ethnic Pashtun tribes inhabiting the mountainous northwestern reaches of their South Asian empire with the 1893 "Durand Line." This porous, 1,600-mile border is not accepted by Afghan leaders, who have at times fanned Pashtun nationalism to the dismay of Pakistanis. Both Pakistan and Afghanistan play central roles as U.S. allies in global efforts to combat Islamic militancy. Ongoing acrimony between Islamabad and Kabul is thus deleterious to U.S. interests. American and Pakistani goals in Afghanistan are far from fully compatible; there is very little agreement beyond the shared interest in a negotiated settlement that leaves Afghanistan relatively stable and secure. Pakistan—and especially its military and intelligence services—is widely believed to be seeking a post-NATO Afghanistan that is deferential to and perhaps even dependent upon Islamabad, with Kabul setting foreign policies that do not run counter to Pakistani interests. In contrast, the U.S.-led coalition endeavors to leave behind a capable and independent Afghanistan. Such a result would almost certainly see the Kabul government increase its cooperation with India. If within this dynamic Pakistan makes use of the Quetta Shura and Haqqani Network as proxies in its dealings with Kabul (as is widely assumed to have been the case for several years now), the Administration's continued reliance on Islamabad in creating and shaping the reconciliation process is likely to increase Pakistan's leverage. Washington has continued to seek Islamabad's support for Afghan reconciliation talks, ideally by winning ISI pressure on Afghan insurgency leaders to negotiate. Yet tensions between the two governments' respective approaches are evident in the fact that Americans want to "fight, talk, build," while Pakistanis are seen to be taking a "cease-fire, talk, wait for the Americans to leave" tack. Pakistani officials have been confused by a perceived lack of clarity in U.S. goals for Afghanistan and in pressure from Washington to employ force against anti-Kabul militants in North Waziristan even as the U.S. government seeks to talk with other insurgent groups. Some argue that Washington risks rewarding Pakistani intransigence by giving that country's security services a key role in brokering peace with the same insurgent forces they have fostered. Some even contend that the ISI has spent the past decade trying to reinstate the Taliban regime overthrown by the ISAF coalition in 2001. Senior U.S. officials and nearly all independent observers continue to contend that Pakistani cooperation is necessary for reconciliation and long-term stability in Afghanistan. Islamabad's relations with Kabul remain troubled, and it is widely understood that Afghan insurgents continue to find safe havens in the Pakistani cities of Quetta and Karachi, as well as in western Pakistan's tribal agencies. U.S. military commanders identify these havens as central obstacles to successful pacification of southern and eastern Afghanistan. Declassified U.S. government documents indicate that the Taliban's resurgence in the mid-2000s could not have been possible in the absence of FATA sanctuaries. Despite some warming of Pakistan-Afghanistan ties in 2010 and early 2011, Afghan officials continue to openly accuse Pakistan of aiding and abetting terrorism inside Afghanistan. There are signs that Afghan's historic wariness of Pakistani influence in their country is not abating. Many analysts have grown cynical given perceptions of Islamabad's consistent use of "Pashtun jihadi proxies" to forward its perceived interests and the Pakistani military's aim to exert dominance of its Afghan neighbors. Islamabad can be discomfited by signs that the U.S. presence in Afghanistan is not long-term or that the international community may "abandon" the region in ways damaging to Pakistani interests, as was the case during the 1990s. Many analysts saw President Obama's June 2011 announcement of an impending U.S. military drawdown from Afghanistan as yet another signal to stakeholder governments and Taliban elements, alike, that the U.S. focus is on an exit strategy and that the United States may not make a long-term commitment to stabilizing the region. Pakistani leaders insist that Afghan stability is a vital Pakistani interest. In April 2011, Prime Minister Gilani, Army Chief Kayani, and ISI Director Pasha all traveled to Kabul as part of an effort to upgrade the Afghanistan-Pakistan Joint Commission earlier that year and so accelerate the peace process. American observers were disturbed by reports that Gilani had used the meetings as an opportunity to wean Kabul away from its strategic partnership with the United States, and instead move closer to Islamabad and seek greater support from China. According to the reports, Gilani criticized America's "imperial designs" and contended that ending the Afghan war required Kabul and Islamabad to take "ownership" of the peace process. The new Joint Commission met in June 2011, with Gilani and President Karzai expressing their commitment to an "Afghan-led and Afghan-owned" process. The two sides also produced a 23-point "Islamabad Declaration" pledging improved and deepened ties in a wide range of issue-areas. However, in the summer of 2011, increased incidence of "reverse infiltration" caused friction between Islamabad and Kabul, especially after more than two dozen Pakistani soldiers were killed in a June cross-border raid by up to 400 militants from Afghanistan's Kunar province. Later that month Afghan officials accused Pakistan of firing more than 760 rockets into the Kunar, Nangarhar, and Khost provinces over a period of six weeks, killing at least 60 people, including women and children. Pakistan rejected charges that its forces had been involved in any cross-border attacks. Some in Afghanistan see the barrages as part of an orchestrated and official Pakistani effort to "reshape Afghanistan as a Pakistani colony" after International Security Assistance Force (ISAF) troops draw down. Pakistan-Afghanistan relations reached a new nadir in September 2011 when Afghan High Peace Council chairman and former Afghan President Burhanuddin Rabbani was assassinated in his Kabul home by a suicide bomber, dealing a major blow to hopes for reconciliation talks. Afghan officials suspect the ISI played a role in the murder, saying the attacker was Pakistani and the attack had been planned in Quetta. They also criticized Islamabad for its alleged failure to cooperate in the related investigation. Pakistani officials denied playing any part in the assassination, but the Afghan president has continued to accuse Pakistan of "using terrorism" as official policy. In October, Afghan intelligence officials claimed to have halted a plot to assassinate Karzai himself and said the alleged culprits were based in the FATA and affiliated with both Al Qaeda and the Haqqanis. Islamabad strongly endorses current efforts to make peace with the Afghan Taliban and insists that the parameters for such a process should be set by the Kabul government. Pakistan considers itself to be indispensible to successful Afghan peace talks, and Islamabad's leaders are in large part motivated by a desire to deny India significant influence in a post-conflict Afghanistan. Pakistan has sought to exert control over which Taliban figures can negotiate on this account. In early 2010, the Afghan Taliban's top military commander and key aide to Mullah Omar, Mullah Abdul Ghani Baradar, was captured in a joint ISI-CIA operation in Karachi. By some accounts, Pakistani elements "orchestrated" the Baradar arrest to facilitate talks with "willing" Taliban commanders and pave the way for reconciliation negotiations. Cynics contend that the ISI's motives may simply have been to thwart any anticipated negotiations. In mid-2010, Pakistan launched an effort to broker a reconciliation between the Kabul government and the Haqqani Network. This initiative sparked concerns that Islamabad would seek to exploit the political situation—both in the region and in Washington—to mold a settlement giving Pakistan maximal influence in a post-conflict Kabul. Later that year NATO facilitated the secret travel of at least three QST figures and a representative of the Haqqani Network from Pakistan to Kabul for meetings with senior Afghan government officials. It is unclear whether Pakistani officials were included in this process; some reports indicated they were not, others described ISI officials as having participated directly. In another clear indication that Islamabad has substantive influence over top Afghan insurgents, in the fall of 2011 the U.S. Ambassador to Afghanistan suggested that Pakistan is hesitant to allow Taliban leaders to travel to Kabul for reconciliation talks. He asks that Pakistan support the process by allowing those willing to talk to be given the opportunity to do so. Afghan President Karzai has echoed these complaints, saying insurgent leaders inside Pakistan are not sufficiently independent of Pakistani control to enter into negotiations on their own. By early 2012, the Islamabad government appeared to at least be allowing the U.S.-Taliban negotiating initiative to proceed. Then, on an April visit to Islamabad, Afghan President Karzai reportedly asked Pakistani leaders to "use their influence" to prod the Taliban into negotiations, a request that Foreign Minister Khar called "not only unrealistic, but preposterous." Yet, just a week later, Prime Minister Gilani issued an unprecedented open appeal to the Afghan Taliban leadership and other militant commanders to "participate in an intra-Afghan process for national reconciliation and peace." The Obama Administration welcomed the message, even as there remain pervasive concerns that Pakistan's security services are maintaining ties with and possibly supporting certain Afghan insurgent groups as a means of increasing their leverage in the reconciliation process. To many observers in Pakistan and the region more widely, current U.S. transition planning for Afghanistan appears to be cover for a hasty exit strategy. The terrorist network led by Jalaluddin Haqqani and his son Sirajuddin, based in the FATA, is commonly identified as the most dangerous of Afghan insurgent groups battling U.S.-led forces in eastern Afghanistan. In the words of one expert, The Haqqani Network represents a strategic threat to the enduring stability of the Afghan state and U.S. national security interests in the region. The Haqqanis are currently Afghanistan's most capable and potent insurgent group, and they continue to maintain close operational and strategic ties with al-Qaeda and their affiliates. This analyst is among many who contend that the group is not reconcilable and must be dealt with through sustained military offensives by ISAF and Afghan forces beyond 2012. Islamabad officials have consistently deferred on urgent and long-standing U.S. requests that the Pakistani military launch operations against the Haqqanis' North Waziristan haven, saying their forces are already stretched too thin. Most observers believe the underlying cause of Pakistan's inaction is the country's decades-long relationship with Jalaluddin Haqqani and a belief held in the army and ISI that his group represents perhaps the best chance for Islamabad to exert Pashtun-based influence in post-ISAF Afghanistan. Over the past year, the Haqqanis have undertaken numerous high-visibility attacks in Afghanistan that infuriated top U.S. and Afghan officials. First, a June 2011 assault on Kabul's Intercontinental Hotel by Haqqani gunmen and suicide bombers left 18 people dead. Then, in September, a truck bomb attack on a U.S. military base by Haqqani fighters in the Wardak province injured 77 American troops and killed 5 Afghans. But it was a September 13, 2011, attack on the U.S. Embassy compound in Kabul that appears to have substantively changed the nature of U.S.-Pakistan relations, a well-planned and -executed 20-hour-long assault that left 16 Afghans dead, 5 police officers and at least 6 children among them. Although U.S. officials dismissed the attack as a sign of the insurgents' weakness, the ability of militants to undertake a complex raid in the heart of Kabul's most protected area was seen by many as a clear blow to the narrative of Afghanistan becoming more secure. Days after this attack, Admiral Mullen called on General Kayani to again press for Pakistani military action against Haqqani bases. Apparently unsatisfied with his counterpart's response, Mullen returned to Washington, D.C., and began ramping up rhetorical pressure to previously unseen levels, accusing the ISI of using the Haqqanis to conduct a "proxy war" in Afghanistan. Meanwhile, Secretary Panetta issued what was taken by many to be an ultimatum to Pakistan when he told reporters that the United States would "take whatever steps are necessary to protect our forces" in Afghanistan from future attacks by the Haqqanis. Then, during September 22 testimony before the Senate Armed Services Committee, Mullen issued the strongest and most direct U.S. government statement on Pakistani malfeasance of the post-2001 era, saying, The Haqqani network, for one, acts as a veritable arm of Pakistan's Inter-Services Intelligence agency . With ISI support, Haqqani operatives plan and conducted that [September 13] truck bomb attack, as well as the assault on our embassy. We also have credible evidence they were behind the June 28 th attack on the Intercontinental Hotel in Kabul and a host of other smaller but effective operations. [emphasis added] Secretary Panetta, testifying alongside Mullen, took the opportunity to add, "I think the first order of business right now is to, frankly, put as much pressure on Pakistan as we can to deal with this issue from their side." The statements of America's two top military officials were widely seen to signal a new and more strident level of U.S. intolerance for Pakistan's regional "double-game." Publically, the Obama Administration did not fully align itself with Admiral Mullen's charges. President Obama himself later stated, "I think the intelligence is not as clear as we might like in terms of what exactly the [ISI-Haqqani] relationship is," but he still insisted that the Pakistanis "have got to take care of this problem" in any case." Later reporting called the Wardak truck bombing a "turning point" in hardening Secretary Clinton's attitude toward the Haqqanis. In ensuing months, Haqqani fighters have been implicated in numerous further attacks on coalition targets in Afghanistan, including coordinated, country-wide attacks launched in mid-April, 2012. Islamabad rejects claims that Pakistan is responsible for spates of violence in Afghanistan or that it supports or has control over the Haqqanis. The Pakistani military called Mullen's statements "very unfortunate and not based on fact," and categorically denied conducting a proxy war or supporting the Haqqanis. A stern Foreign Minister Khar warned that, with such allegations, the United States could "lose an ally." President Zardari, in an op-ed response, said that "verbal assaults" against Pakistan are damaging the bilateral relationship" As noted above, Pakistani officials have for nearly two years sought to facilitate a rapprochement between the Haqqanis and the Kabul government, but close Haqqani links with Al Qaeda have been a major sticking point (Al Qaeda figures are widely believed to enjoy sanctuary in Haqqani-controlled areas). Pakistan—especially through its military and intelligence agencies—is seen to wield considerable clout with the Haqqanis and may be the only actor able to prod them toward negotiations. Unnamed Pakistani military officials have claimed they can "deliver" the Haqqanis to a negotiating table and that this is the only viable policy option (on the assumption that a military assault on Haqqani bases would only engulf the region in a conflict the Pakistani military would likely be unable to win). However, by bringing the insurgent group into negotiations, Islamabad would be guaranteed a central role in the ensuing process, a development some in Washington and other interested capitals wish to avoid. The Obama Administration has been considering formally designating the Haqqani Network as a Foreign Terrorist Organization (FTO) under U.S. law, especially with pressure to do so coming from some senior Senators, Armed Services Committee Chairman Senator Carl Levin and Intelligence Committee Co-Chair Senator Dianne Feinstein among them. Seven Haqqani leaders have been under U.S. sanctions since 2008 and, in 2011, Secretary Clinton designated operational commander Badruddin Haqqani under Executive Order 13224. However, the potential decision on an FTO designation is complicated by the Administration's apparent willingness to negotiate with the Haqqani leadership, something that has occurred at least once in the recent past (without result), and that Secretary Clinton has indicated may be necessary again in order to establish sustainable peace in Afghanistan. The Haqqani Network Terrorist Designation Act of 2011 ( S. 1959 ) was passed out of the Senate by unanimous consent in December 2011, but has not emerged from House committee to date. U.S. congressional frustration with the Administration's now overdue "formal review" on the question of FTO designation has only increased in 2012. Ammonium nitrate (AN) is widely used fertilizer that also has commercial uses as a chemical explosives precursor. The great majority of improvised explosive devices (IEDs) used by Islamist insurgents fighting in Afghanistan employ AN and, since the Kabul government's January 2010 ban on the substance, nearly all illicit AN in Afghanistan is believed to arrive via transshipments from neighboring Pakistan. According to data from the Pentagon's Joint Improvised Explosive Device Defeat Organization (JIEDDO), the summer of 2011 saw historic peaks in total IED "events" in Afghanistan. However, with improved detection and clearing capabilities—and a major increase in cache finds—the "effective" IED attack rate has declined. Section 503 of the Intelligence Authorization Act of FY2012 (became P.L. 112-87 in January 2012) required the Director of National Intelligence and Secretary of Defense to submit to Congress a report on a coordinated strategy for countering IED-related networks in both Pakistan and Afghanistan. This reporting requirement would be renewed by pending FY2103 legislation. The U.S. government is urging Islamabad to adjust Pakistani national laws to restrict access to AN there or, short of that, to encourage Pakistani law enforcement and border security agencies to be more active and effective in efforts to prevent its movement into Afghanistan. Washington's relevant efforts fall into three main categories: (1) diplomatic initiatives; (2) law enforcement initiatives; and (3) science and technology efforts. JIEDDO, the State Department's SRAP staff, and staff of the Department of Homeland Security's Immigration and Customs Enforcement office are engaged in these efforts. In addition, Operation Global Shield (also known as Project Global Shield) is an unprecedented multilateral law enforcement operation launched in late 2010 to combat the illicit cross-border diversion and trafficking of 11 chemical explosives precursors (including AN) by monitoring their cross-border movements. A U.S.-proposed collaborative effort of the World Customs Organization, the U.N. Office on Drugs and Crime, and Interpol, the program has realized some notable successes to date. Adding urea fertilizer granules to AN can make processing the mixture for explosives more complicated and is recommended by experts. Other options include adding colored dyes to the AN fertilizer to make it easier to spot at checkpoints or adding radio frequency identification tags so as to track AN shipments. Pakarab Fertilizers Ltd., in the central Pakistani city of Multan, is the country's largest fertilizer complex and has been in operation since 1979 (it was privatized in 2005). As reported by the Pakistani Ministry of Industries and Production, the Multan facility has produced well over 300,000 metric tons of AN annually since 2004. There is pending legislation in Islamabad that would adjust relevant Pakistani national laws to further restrict AN and other precursors. However, this "Explosives Ordinance" has remained in draft stage only, meaning that near-term changes are unlikely. The Islamabad government has established a National Counter-IED Forum in which all relevant Pakistani agencies can work together to develop an action plan. In the absence of an outright ban, the United States has had to rely on Pakistani police and border authorities who are vulnerable to corruption. NATO has been dependent upon ground and air lines of communication (GLOCs and ALOCs) through and over Pakistan to supply its forces in landlocked Afghanistan. To date, the logistics routes used by NATO to supply the Afghanistan effort have been closed for six months as a result of Pakistan's anger over the Salala incident and broader pique about the state of its relationship with Washington. The surface routes had regularly come under attack by militants, and were temporarily closed in the past in apparent efforts to convey Islamabad's leverage. In 2008, insurgents began more focused attempts to interdict these supply lines, especially near the historic Khyber Pass connecting Peshawar with Jalalabad, Afghanistan, but also to include the route from Karachi to Kandahar, which runs through Quetta and the Chaman border crossing. Such efforts left thousands of transport and fuel trucks destroyed, and numerous Pakistani drivers dead. To reach the Afghan border from Karachi, truck drivers typically must pay bribes to police and other government officials, and in some instances the trucks destroyed en route have first been emptied of their fuel and other cargo, which can end up for sale at Peshawar markets. In response to interdiction attacks and to reduce reliance on Pakistan, the U.S. military began testing alternative routes, concentrating especially on lines from Central Asia and Russia. By mid-2010, this "Northern Distribution Network" (NDN) was carrying well over half of NATO's total supplies, but only "nonlethal" cargo moves via the NDN. While senior U.S. defense officials prefer Pakistan as a faster and less expensive logistics route, they have continued to expand aerial and NDN routes, even if the former is up to ten times as costly and the latter entails greater U.S. reliance on authoritarian regimes in Central Asia. Loss of the Pakistani GLOCs has proven to be less damaging to Afghan operations than many expected. In early May, the British deputy commander of ISAF forces said they were "managing very well" without the Pakistani GLOCs, but that reopening them would by "extremely helpful" and also provide financial benefits to Pakistanis. Later in the month, Gen. Allen offered that closure of the GLOCs "has not, in fact, negatively affected ... our prosecution of the campaign." However, the Pentagon's April report on Afghanistan and Pakistan called the continued closure of the GLOCs a "strategic concern" that has hampered Afghan security forces by backlogging thousands of tons of equipment for them. It counted more than 4,100 vehicles "stranded" in Pakistan due to the closure while noting that airlift capabilities have limited the closure's effect on the movement of communications equipment and weapons. In withdrawing from Afghanistan, NATO will need to remove at least 100,000 thousand shipping containers and 70,000 vehicles worth at least $30 billion. As the spring "fighting season" in Afghanistan approached in early 2012, U.S. commanders became more insistent about the need to have Pakistani GLOCs reopened. In mid-March, all major Pakistani political and military principles met and agreed "in principle" to reopen the GLOCs and, as noted above, the Pakistani parliamentary review finalized in mid-April called for same. By mid-May, senior Pakistani officials were indicating that reopening was imminent: Foreign Minister Khar offered that, "Pakistan has made a point and now we can move on." Statements from both governments suggested a deal had already been struck well before the Chicago summit, with one report saying Islamabad was seeking a fee of $1,500-1,800 per truck. Yet—only days before the Chicago summit—Pakistani negotiators reportedly proposed a fee of $5,000 per truck, which would represent a 20-fold increase from previous levels. Such a drastic price hike is seen to be especially hard for the Pentagon to accept, given that for many years use of Pakistani GLOCs was considered to be "free" in exchange for billion of dollars in CSF reimbursements paid to Islamabad. The Chairman and Ranking Member of the Senate Armed Services Committee said the $5,000 fee was unacceptable; the latter Member reportedly called it "extortion." To date, negotiations on the issue have not reached a resolution. Islamist extremism and militancy has been a menace to Pakistani society throughout the post-2001 period, becoming especially prevalent since 2007, but the rate of attacks and number of victims may have peaked in 2009. In addition to widespread Islamist violence, Pakistan currently suffers from a serious and worsening separatist insurgency in its southwestern Baluchistan province, as well as rampant politically motivated violence in the megacity and business capital of Karachi. The U.S. National Counterterrorism Center (NCTC) reports significant declines in terrorist incidents and related deaths in Pakistan since 2009. Nevertheless, its figures place the country third in the world on both measures, after Afghanistan and Iraq. Suicide bombing is a relatively new scourge in Pakistan. Only two such bombings were recorded there in 2002; that number rose to 84 in 2009, before dropping to 51 in 2010 and 41 in 2010. Still, Pakistan accounted for nearly half of all suicide bombing deaths worldwide in those years. In recent years, militants have made sometimes spectacular attacks targeting the country's own military and intelligence institutions. A nearly 20% drop in rates of Islamist attacks in 2011 as compared to the previous year generally was attributed to a combination of Pakistani military operations and U.S. drone strikes in the FATA, along with some improvement in law enforcement in major cities such as Islamabad and Lahore. Still, some observers view the Islamabad government as sometimes being cowed by terrorists. The myriad and sometimes disparate Islamist militant groups operating in Pakistan, many of which have displayed mutual animosity in the past, became more intermingled and mutually supportive after 2009 (see text box below). U.S. leaders remain concerned that Al Qaeda terrorists operate with impunity on Pakistani territory, although the group apparently was weakened in recent years through the loss of key leaders and experienced operatives. The Tehrik-i-Taliban Pakistan (TTP) emerged as a coherent grouping in late 2007. This "Pakistani Taliban" is said to have representatives from each of Pakistan's seven tribal agencies, as well as from many of the "settled" districts abutting the FATA. The Quetta Shura Taliban of Mullah Omar is believed in that city, as well as Karachi. The Haqqani Network of Afghan insurgents is based in the North Waziristan and Kurram agencies of the FATA. Pakistan's densely populated Punjab province is home to numerous Islamist militant groups with regional and global jihadist aspirations. Notable among these is the Lashkar-e-Taiba (LeT), a U.S.-designated terrorist group with long-standing ties to the ISI. The U.S. government sees the LeT posing a growing threat to U.S. national security. The Raymond Davis affair may have exposed new and independent U.S. intelligence operations against the LeT in Pakistan. Many analysts now identify the LeT as the most dangerous terrorist group operating in South Asia, one that could grow into a global threat if left unchecked. LeT's ostensible charity wing, Jamaat-ud-Dawa (JuD, also proscribed under U.S. and international law) has an expanding and diversified infrastructure inside Pakistan. Husain Haqqani, Pakistan's Ambassador to the United States from 2008 to 2011, decries his country's apparent fixation on U.S. violations of its sovereignty while paying little or no heed to combating the "jihadist ideology" that has cost tens of thousands of Pakistani lives in recent years. He recently has upbraided the country's Supreme Court for directing its energy toward dislodging the civilian government rather than seeking to bring terrorist leaders to justice. In Haqqani's view, the misguided national mindset was encouraged by military dictators as a means of redirecting public attention: "Anti-Western Sentiment and a sense of collective victimhood were cultivated as a substitute for serious debate on social and economic policy." The Pakistan army has deployed at least 150,000 regular and paramilitary troops in western Pakistan in response to the surge in militancy there, and the army has seen more than 3,000 of its soldiers killed in combat. All seven FATA agencies and adjacent regions have been affected by conflict; 2009 offensives in the Swat Valley and South Waziristan were notable. As noted above, U.S. government assessments paint a discouraging picture of recent efforts. In most areas where Pakistani military offensives have taken place, the "clearing" phase of operations has met with some successes, but the "holding" phase has proven more difficult, and "building" is considered impossible to initiate so long as the civilian administration's capacity is severely limited. Independent analyses reach similar conclusions, saying Pakistani military offensives in Swat and FATA from 2009 to 2011 had mixed results, at best. The army has seen major successes in at least temporarily dislodging militants but, outside of Swat, military gains have not led to sustained counterinsurgency progress, and no notable militant leaders have been killed or captured in ground operations. The Pakistani air force claims to have flown more than 5,500 combat sorties over the FATA, dropping more than 10,000 bombs—80% of them laser-guided—and destroying 4,600 targets. Sometimes bloody fighting has continued in the FATA as government forces press sporadic offensives in the Kurram and Khyber agencies, in particular. Spring 2012 battles in Khyber—home to the TTP-allied Lashkar-i-Islam (LI) led by Mangal Bagh—reportedly have driven more than 500,000 civilians from their homes. After years of trying, the Pakistani army appears to be having meaningful successes in degrading LI's capabilities. Yet a simmering insurgency still affects most FATA agencies. In January, TTP militants overran a Frontier Constabulary fort in South Waziristan and executed 15 soldiers. Moreover, Bajaur suffered its worst militant attack in more than a year when a TTP suicide bomber killed dozens of people in May 2012, the local Bajaur Levies commander and his deputy among them, in apparent retaliation for the killing of an Al Qaeda operative killed by those security forces in 2011. Yet, by many accounts the North Waziristan agency—home to the Al Qaeda- and Taliban-allied Haqqani Network and the TTP forces of Hafiz Gul Bahadar, among others—is currently the most important haven for both Afghan- and Pakistan-oriented militants. Pakistani officials have continued to demur on urgent U.S. requests that their military move into what many consider the "final" militant haven of North Waziristan, saying they need to consolidate the areas newly under their control. Moreover, Pakistan's military forces are new to counterinsurgency and demonstrate only limited capacity to undertake effective nonconventional warfare. Pakistani leaders have complained that the United States has been slow in providing the kind of hardware needed for this effort, but Islamabad's July 2011 ejection of U.S. military trainers has dramatically hindered U.S. efforts to bolster Pakistan's COIN capabilities. Independent analysts assert that Pakistan's military operations and "divide-and-conquer" political approach, combined with drone strikes and internal militant power struggles, effectively splintered the Pakistani Taliban in 2011, leaving scores of smaller and weaker factions, most of which do not take orders from nominal TTP leader Hakimullah Mehsud. This development may explain the major decrease in suicide bomb attacks in Pakistan last year. The apparently volatile Mehsud has longstanding feuds with militant commanders Maulvi Nazir of South Waziristan and Hafiz Gul Bahadar of North Waziristan, both of whom have struck truce deals with the government. More recently, he is said to have been ordered killed by his own former deputy, Wali-ur-Rehman, another senior South Waziristan militant commander who reportedly feels Mehsud has made the TTP too close to Al Qaeda Arabs. Within this setting, Pakistani civilian officials suggested in late 2011 that they were open to new negotiations with TTP militants, especially as the United States began to favor talks with the Afghan Taliban. Deputy TTP chief Maulvi Faqir Muhammad claimed that meetings with government representatives began in November. Rawalpindi remained silent on the alleged initiative, however, and domestic and international concerns arose given the failure of similar efforts in the FATA in 2005, 2006, and 2008 that appeared to leave the militants in a stronger position. Weeks later, a TTP spokesman denied that any negotiations were underway and, in March, Faqir reportedly was removed from his TTP position, likely for engaging in dialogue with the government, a demotion that enraged his lieutenants in the Bajaur agency. Yet negotiations do appear to have taken place and may be continuing. By some accounts, Afghan Taliban leader Mullah Omar has pressured Pakistani militants to make peace with the Pakistani army as a means of reinforcing his own ranks. Al Qaeda and Haqqani group interlocutors are said to have mediated an intra-militant pact to unify four major militant factions under Omar's leadership and based in the two Waziristan agencies. This "Shura-i-Muraqba"—comprised of the Haqqanis and commanders Wali-ur-Rehman, Maulvi Nazir, and Gul Bahadar—is to direct its hostility solely toward Afghanistan, unlike the TTP, which is at war with the Pakistani state. The Haqqanis are widely believed to be seeking to forward their own cause by ending the anti-Pakistan insurgency and so focusing FATA militants' attention on Afghanistan, a shift that no doubt would be welcomed by the Pakistani military. Pakistan's status as a site and source of terrorist international activity continues to be a central concern of the U.S. and other world governments. In April 2012, the U.S. government offered a $10 million reward for information leading to the conviction of Pakistani citizen Hafiz Saeed, leader of the terrorist group that undertook the 2008 Mumbai attack. The news was welcomed by India, but caused further animosity in U.S.-Pakistan relations. Prime Minister Gilani criticized the move as a "negative message" that would "further widen the trust deficit" between the two countries. Opposition lawmakers used even stronger language in their denunciation of the "ridiculous" U.S. announcement. Also in April, scores of well-armed militants assaulted a prison in the northwestern town of Bannu near the FATA and freed nearly 400 prisoners, including one terrorist sentenced to death for a 2003 plot to kill then-President-General Pervez Musharraf. A subsequent government inquiry concluded that local police, paramilitary forces, civil administrators, and the intelligence agencies were "collectively responsible" for the lapse. The raid successfully bolstered Pakistani Taliban force levels and was a major propaganda coup that fueled already acute concerns about the effectiveness of the Pakistani state's security apparatus. During a May 2012 visit to New Delhi, India, Secretary of State Clinton made a point of once again requesting that Pakistan "do more" to clear its territory of terrorist sanctuaries, and she chastised the Islamabad government for taking insufficient action against Hafiz Saeed. U.S. officials remain acutely concerned about the apparent impunity with which Pakistan-based extremist and militant groups are able to act. The senior Afghan Taliban leadership believed to be in Quetta and Karachi, the Haqqani Network based in the North Waziristan and Kurram tribal agencies, and U.S.-designated Foreign Terrorist Organizations such as LeT, Jaish-e-Mohammed, and others in Pakistan's Punjabi heartland appear to remain significant threats to the United States and its allies, including those in Islamabad's civilian government. Long-standing worries that American citizens were being recruited and employed in Islamist terrorism by Pakistan-based elements became more acute in 2010. In May of that year, Faisal Shahzad, a naturalized U.S. citizen of Pakistani origin, attempted to detonate a large, but crudely constructed car bomb in New York City's Times Square. The Pakistani Taliban claimed responsibility for the attempted bombing, and the culprit himself confessed to having received bomb-making training in western Pakistan. Four months later, Shahzad received a mandatory life sentence in prison. Other cases linking U.S. citizens and residents with Islamist extremism in Pakistan and terrorist plots against American targets are abundant. At least one Pakistani-born American was complicit in the 2008 terrorist attack on Mumbai, India. In 2009, federal prosecutors charged David Coleman Headley, a Chicagoan convert to Islam, with traveling to Mumbai five times from 2006 to 2008 as scout for the attack by the Pakistan-based LeT terrorist group; he subsequently pleaded guilty to the charges. His case was perhaps the first in which a former Pakistani military officer was directly linked to terrorism suspects in the United States. Headley and another Pakistan-born Chicagoan, Tahawwur Rana (a Canadian national), are believed to have reported to a retired Pakistani major suspected of being an LeT contact. Headley also interacted with Ilayas Kashmiri, a now-deceased former Pakistani special forces commando with close ties to Al Qaeda. The Indian government energetically petitioned Washington for direct access to Headley as part of its own investigative efforts. Access was granted with an extensive interrogation in 2010; Indian officials later said the information gleaned established an official Pakistani role in the Mumbai attack. In May 2011, a Chicago court heard testimony in Rana's trial (Rana was charged with material support of terrorism related to the Mumbai attack). Three senior LeT members were also indicted in the case—LeT chief Hafez Saeed among them—along with a purported ISI officer identified as "Major Iqbal." Headley, the prosecution's star witness, detailed links between the ISI and terrorism, and so added to already fraught U.S.-Pakistan relations and suspicions about official Pakistani involvement in supporting Islamist militancy. Rana subsequently was acquitted on charges related to the Mumbai attack, but was found guilty of aiding the LeT and of conspiring to attack a Danish newspaper. Three full-scale wars—in 1947-1948, 1965, and 1971—and a constant state of military preparedness on both sides of their mutual border have marked more than six decades of bitter rivalry between Pakistan and India. The acrimonious partition of British India into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been major sources of tension between these two nuclear-armed countries. Both have built large defense establishments at significant cost to economic and social development. A bilateral "Composite Dialogue" was reengaged in 2004 and realized some modest, but still meaningful successes, including a formal cease-fire along the entire shared frontier, and unprecedented trade and people-to-people contacts across the Kashmiri Line of Control (LOC). The dialogue is meant to bring about "peaceful settlement of all bilateral issues, including Jammu and Kashmir, to the satisfaction of both sides." Yet 2008 saw significant deterioration in Pakistan-India relations, especially following the large-scale November terrorist attack on Mumbai, India, that killed some 165 civilians (including 6 Americans) and left the peace process largely moribund. More broadly, militarized territorial disputes over Kashmir, the Siachen Glacier, and the Sir Creek remain unresolved. In 2010, conflict over water resources emerged as another exacerbating factor in the bilateral relationship. Pakistani leaders, like many independent observers, believe that regional peace is inextricably linked to a solution of the Kashmir dispute. Under the Obama Administration, the U.S. government has continued its long-standing policy of keeping distance from that dispute and refraining from any mediation role. By some accounts, Pakistan and India are also fighting a "shadow war" inside Afghanistan with spies and proxies, with all high-visibility attacks comng against Indian targets. Islamabad accuses New Delhi of using Indian consulates in Afghanistan as bases for malevolent interference in Pakistan's western regions, even as there is scant available evidence to support such claims. Following the 2008 Mumbai attack, the New Delhi government focused on holding Islamabad accountable for the existence of anti-India terrorists groups in Pakistan, some of them suspected of receiving direct support from official Pakistani elements, and India essentially refused to reengage the full spectrum of Composite Dialogue issues. Yet, with an early 2011 meeting of foreign secretaries, India agreed to resume peace talks without overt mention of the centrality of the terrorism issue. Days later, the two governments announced that high-level peace talks would be resumed after a hiatus of more than two years. Following the brief "cricket diplomacy" of March 2011—Prime Minister Gilani had accepted his Indian counterpart's invitation to watch a match in India—bilateral talks between home secretaries produced an agreement to establish a "terror hotline" between the respective ministries. Under the resumed dialogue process, the two countries' commerce secretaries met in April 2011 for talks on greater economic and commercial cooperation. A June meeting of foreign secretaries in Islamabad appeared unexpectedly positive to many, with the two officials agreeing to expand confidence-building measures related to both nuclear and conventional weapons, as well as to increase trade and travel across the Kashmiri LOC. A July Joint Statement produced with Foreign Minister Khar's New Delhi visit was widely taken as a successful representation of a peace process back on track after a more than two-year hiatus. The two countries' trade ministers met in New Delhi in September and agreed to take steps to further liberalize their relatively paltry bilateral trade (the necessity of moving exports through Dubai raises transaction costs, slows deliveries, and inflates prices). India also dropped its long-standing opposition to a proposed EU initiative that would waive duties on Pakistani exports from its flood-ravaged areas. The circumstances of OBL's death were relevant to the course of relations between Pakistan and India. Indian Prime Minister Manmohan Singh called the killing "a significant step forward" and expressed hope that it would represent a decisive blow to AQ and other terrorist groups. At the same time, however, New Delhi is concerned that the development is hastening a U.S. withdrawal from Afghanistan in ways that could be harmful to India's foreign policy interests. New Delhi also saw the discovery of OBL in Pakistan as an opportunity to more energetically press its demands that Islamabad extradite the alleged perpetrators of the 2008 Mumbai terrorist attack, Lashkar-e-Taiba figures believed to be in Pakistan, as well as other most-wanted anti-India terrorists such as organized crime figure Dawood Ibrahim. When Afghan President Karzai made a long-planned trip to New Delhi in October 2011 and inked a new "strategic framework" with India—Kabul's first such 21 st century agreement with any country—Pakistan's fears of strategic encirclement became more acute, especially in light of Afghanistan's acceptance of future Indian assistance in training and equipping its security forces. Kabul's floundering efforts to find rapprochement with the Taliban may be behind Karzai's decision to link Afghanistan more closely to India. Although the Afghan President took pains to insist that the pact was not directed at any country, some analysts saw it as a highly provocative development that could make it more difficult to wean Pakistan away from its apparent reliance on militant proxies in Afghanistan. The current tenor of Pakistan's relations with India is better than it has been in many years. The Pakistan-supported separatist rebellion in Indian-held Kashmir is at its lowest ebb since it began in 1989, and the region has been mostly quiet since mid-2010. In late 2011, Pakistan's government vowed to grant normal, Most-Favored Nation (MFN) trade status to India by the end of 2012. A U.S. State Department spokeswoman called the news a "very, very big deal" that could bring new prosperity to the region. Lower tariffs and fewer visa restrictions could boost the value of bilateral trade as much as tenfold from the $2.5 billion seen in 2010, as well as build "peace constituencies" in both countries. Perhaps most importantly, Islamabad's offer to move toward freer bilateral trade—manifest recently by its conversion from a "positive list" of items permitted for import from India to a "negative list" of only those items prohibited—suggests that Pakistan's long-held insistence on progress with the "core issue" of Kashmir as a prerequisite for movement in other areas may be receding. Moreover, there have been no terrorist attacks in India traced to Pakistan in more than three years, a significant gap given the pace of previous attacks. In April 2012, President Zardari made a brief and unofficial visit to India that included a lunch meeting with Prime Minister Singh. It was the first such travel by a Pakistani head of state since 2005. Only days later an avalanche at the remote Siachen Glacier in the Himalayas killed 139 Pakistani soldiers based in the area. For nearly 30 years Pakistani and Indian troops have faced off in this harsh environment that is part of the former princely state of Kashmir. The avalanche tragedy brought renewed attention to the apparent senselessness of conflict over a region with negligible military value, but both governments remain intransigent and deny any plans to redeploy their forces. In May 2012, after nearly two decades of negotiations, Pakistan and India signed pacts with Turkmenistan to build a pipeline through Afghanistan that would carry up to 90 million cubic meters of natural gas each day. The 1,100-mile-long pipeline, projected to cost at least $7.6 billion to build, is enthusiastically supported by Washington as a perfect example of the kind of regional energy integration envisioned in the New Silk Road Initiative, as well as an effective bypassing of Iran, a country the United States seeks to isolate. However, many independent observers are deeply skeptical that security circumstances inside Afghanistan will improve enough in the foreseeable future to win investor confidence. Despite circumstances that provide many analysts with cause for cautious optimism, so long as Islamist militancy emanates from Pakistan and threatens India, New Delhi's willingness to make meaningful concessions will most likely be seriously constrained. India remains unsatisfied with Pakistan's refusal/inability to bring the Mumbai terrorism masterminds to justice, and the continued freedom in Pakistan of LeT chief Hafiz Saeed is a major sticking point. Islamabad continues to bear criticism from New Delhi for not acting on alleged "concrete evidence" sufficient to prosecute Saeed and other suspected Mumbai attack culprits. India also seeks extradition of Ibrahim and several Indian Mujahedeen leaders believed to be residing in Pakistan. Yet movement on the economic front could reinforce already significant motives for both governments to eschew open conflict. As ever, the calculations made by Pakistan's generals are considered key to determining the future course of relations. Pakistan and China have enjoyed a generally close and mutually beneficial relationship over several decades. Pakistan served as a link between Beijing and Washington in 1971, as well as a bridge to the Muslim world for China during the 1980s. China's continuing role as a primary arms supplier for Pakistan began in the 1960s and included helping to build a number of arms factories in Pakistan, as well as supplying complete weapons systems. Chinese companies and workers are now pervasive in the Pakistani economy. Beijing intends to build two new civilian nuclear reactors in Pakistan in what would be an apparent violation of international guidelines. During Chinese Premier Wen Jiabao's late 2010 visit to Islamabad, the governments signed 12 Memoranda of Understanding covering a broad range of cooperative efforts and designated 2011 as the "Year of China-Pakistan Friendship." Pakistani and Chinese businesses also signed contracts worth some $15 billion covering cooperation in oil and gas, mining, space technology, heavy machinery, manufacturing, and other areas. This added to the nearly $20 billion worth of government-to-government agreements reached. Pakistan appeared to react quickly and with purpose in August 2011 when Beijing publically blamed Islamist militants trained in Pakistan for terrorist activities in China's western Xinjiang province. ISI Director Pasha was dispatched to Beijing with the apparent aim of assuaging China. In 2012, Beijing has become more open in expressing concerns that Uighur separatists train and find haven in Pakistan; Chinese allegations that Uighur militants have close links with other Pakistan-based terrorist groups put stresses on bilateral relations. As U.S.-India ties deepen and U.S.-Pakistan ties have deteriorated, many observers see Islamabad becoming ever more reliant on its friendship with Beijing. Pakistani leaders became notably more and perhaps overly effusive in their expressions of closeness with China in 2011. Prime Minister Gilani's May 2011 visit there—coming shortly after the Abbottabad raid—elicited no major new embrace from Beijing, but the Chinese government did insist that the West "must respect" Pakistan's sovereignty, and it agreed to expedite delivery to Pakistan of 50 JF-17 fighter jets equipped with upgraded avionics (Islamabad is also negotiating with Beijing for the purchase of six new submarines for as much as $3 billion in what would be the largest-ever bilateral defense purchase). The United States and China share an interest in seeing Pakistan's counterterrorism capabilities strengthened. While Beijing continues to view its relationship with Pakistan as providing a means of balancing against and perhaps even containing India's regional aspirations, it recognizes that Pakistan-based terrorist groups could trigger the kind of full-blown Pakistan-India crisis that would do great harm to Chinese economic interests in the region. These dynamics provide a basis for greater U.S.-China coordination "to improve the discipline and capacity of Pakistan's military and intelligence services," and perhaps even elicit Chinese pressure on Islamabad to dismantle global jihadist groups such as LeT. Moreover—and despite diverging interests on India's regional role—the United States and China could expand cooperation into other vital areas, including nonproliferation, governance, and economic growth in Pakistan. Chinese military and diplomatic support for Pakistan continues to hinder India's regional ambitions. Indeed, as the United States seeks to deepen its partnership with India, China's geostrategic reliance on Pakistan is likely to grow. Yet China's own aspirations and interests seem to dictate that Beijing not make its Pakistan policies with a narrow focus on balancing India alone. A wider set of interests suggests that the "all-weather friendship" with Pakistan no longer entails the kind of blanket support Islamabad had come to expect in the past. The Chinese government reportedly is unlikely to place itself in the middle of any U.S.-Pakistani rift, nor has it shown any desire to replace Washington as Islamabad's primary foreign benefactor. Pakistan's relations with its Shia Muslim-majority neighbor Iran have long been troubled by differences over Afghanistan (the two countries actively supported opposing sides in the Afghan civil war of the 1990s) and by the presence in Pakistan of anti-Shia terrorist groups. Yet the two countries have cooperated in some areas and both governments aspire to realize the long-anticipated completion of a pipeline that would carry natural gas from Iran to feed Pakistan's unmet energy demands. Tehran claims that construction on its side of the border is complete and it reportedly has offered to provide Pakistan with $500 million to finance construction on its side after a Chinese consortium withdrew its involvement in the project. As the U.S. government seeks to further isolate Iran with sanctions related to its nuclear program, Washington has repeatedly expressed opposition to this pipeline project. In February, Secretary of State Clinton told a House panel that "actually beginning construction of such a pipeline [on the Pakistani side of the border] ... would violate our Iran sanctions law." The Administration has made its concerns "absolutely clear" to Islamabad, which remains insistent that it will complete the project. Tehran's further efforts to skirt international sanctions have included seeking barter deals with Pakistan to trade oil for huge stocks of wheat and rice. The security of Pakistan's nuclear arsenal, materials, and technologies continues to be a top-tier U.S. concern, especially as Islamist militants have expanded their geographic influence there. Pakistan has in the recent past been a source of serious illicit proliferation to aspiring weapons states. The illicit nuclear proliferation network allegedly overseen by Pakistani metallurgist A.Q. Khan was disrupted after its exposure in 2004, but neither Khan himself—a national hero in Pakistan—nor any of his alleged Pakistani co-conspirators have faced criminal charges in the case, and analysts warn that parts of the network may still be intact. While most analysts and U.S. officials believe Pakistan's nuclear security is much improved in recent years, there is ongoing concern that Pakistan's nuclear know-how or technologies remain prone to leakage. Moreover, recent reports indicate that Pakistan is rapidly growing its nuclear weapons arsenal, perhaps in response to recent U.S. moves to engage civil nuclear cooperation with India, which the Obama Administration wants to see join major international nonproliferation regimes. Pakistan's appears to be the world's most rapidly growing nuclear arsenal at a time that China is planning to build two new nuclear reactors there in apparent violation of Nuclear Suppliers Group guidelines. The proposed deal poses a dilemma for the Obama Administration, which has requested that Beijing justify the plan and seeks its approval through international fora. Persistent inflation and unemployment, along with serious food and energy shortages, elicit considerable economic anxiety in Pakistan and weigh heavily on the civilian government. All of these existing problems were hugely exacerbated by devastating flooding in the summer of 2010 (according to the Finance Ministry, Pakistan's economy suffered some $10 billion in losses related to this flooding) and again in September 2011. Corruption is another serious obstacle to Pakistan's economic development, harming both domestic and foreign investment rates, and public confidence, as well as creating skeptical international aid donors. Foreign direct investment plummeted to under $2.2 billion in FY2010/2011, less than half of the $5.4 billion garnered two years earlier. Most analysts identify increasing militancy as the main cause for the decline, although global recession and political instability in Islamabad are also major factors. In the assessment of international financial institutions, Pakistan's economic priorities are addressing inflation, containing the budget deficit, reviving growth, and meeting the challenge posed by higher global oil prices. Figure 3 and Figure 4 show that for many years Pakistan's economic development levels were similar to India's; for much of the post-independence period, Pakistan's GDP per capita was slightly higher than India's. However, in the early 2000s, India's growth shot upward while Pakistan's remained flat, and today India—with roughly seven times the population of Pakistan—enjoys higher national wealth figures even on a per capita basis. A 2008 balance-of-payments crisis led Islamabad to seek multi-billion dollar loans from the International Monetary Fund (IMF). The current IMF-supported program is a 34-month, $11.3 billion Stand-By Arrangement first approved in November 2008, augmented in 2009, and extended by nine months in late 2010. Of the original $11.3 billion IMF SBA, $3.6 billion is yet to be disbursed; the program was placed on hold in August 2010 because Islamabad had failed to implement required revenue and power sector reforms. Any prospective second IMF program is likely to come with more stringent conditions, including restructuring of numerous public sector enterprises. Moreover, in May 2011, security concerns spurred the IMF to put off negotiations with Pakistani officials, further delaying disbursement of remaining support funds. Pakistan reportedly has sought U.S. help to "influence" the IMF to relax its conditions and release the outstanding tranches. One article claimed Pakistani officials had "begged" Secretary Clinton for such consideration during her October 2011 visit to Islamabad, but it is considered unlikely that the United States will intervene. Repayment of IMF loans will place huge constraints on Islamabad's federal budget, which is burdened by perpetually low revenue generation. For most observers, this is caused by what essentially is mass tax evasion by the country's economic elite, and is exacerbated by a federal budget overemphasizing military spending. Secretary Clinton is among the U.S. officials critical of Pakistan's 9% tax-to-GDP ratio, one of the lowest in the world. The government sought to implement a Reformed General Sales Tax initiative in 2011, but to date has been unable to win sufficient parliamentary support for what are considered modest changes. Likewise, the government's early 2011 effort to lower fuel subsidies spurred virulent reaction and led to political turmoil when an important PPP coalition partner withdrew its support. Meanwhile, electricity shortages are behind much of Pakistan's economic deterioration: medium- and small-scale textile businesses, unable to operate their own generators, increasingly are being forced too shut down due to lack of power. Shortfalls in electricity supply have led to unannounced outages of up to 20 hours per day in parts of the country. Public protests over gas shortages have turned violent at times: in May 2012, thousands of angry citizens took to the streets of Lahore and other Punjabi cities, ransacking the offices of politicians and the main power agency, and torching vehicles. Yet public opinion surveys show Pakistanis worrying most about inflation; one poll found a majority of 52% calling inflation the single most important problem facing the country, well ahead of both unemployment and terrorism. Pakistan's economy grew by 2.4% in the fiscal year ending June 2011 despite the devastating floods that opened FY2011. According to IHS Global Insight, "Onerous public debt, persistent double-digit inflation, and severe energy shortages will continue crippling growth in the near term." The State Bank of Pakistan conceded that the flooding "cannot mask the structural deficiencies in Pakistan's economy," especially chronically low tax revenues and acute power shortages. Long-standing plans to implement a reformed general sales tax, broaden the income tax net to include agriculture and services, and phase out government subsidy programs remain delayed, and power outages are estimated to reduce GDP growth by up to 4%, given concentrated impact on manufacturing. The Bank is locate a clear central cause of these "In the final analysis, all the economic problems highlighted above can be traced to poor governance." International financial institutions (IFIs) regularly issue assessments of the Pakistani economy. A November 2011 World Bank "Country Partnership Strategy Report" for FY2010-FY2014 acknowledged that the Islamabad government has faced many daunting challenges and also noted that international donors face new challenges following the 18 th Amendment's devolution of key functions to provincial governments. It finds a deteriorated fiscal situation and an absence of hoped for governance improvements. By this assessment, the outlook is negative as overall macroeconomic risks continue to be significant. The World Bank recommends a focus on accelerating progress in human development sectors such as education and health, and warns that poverty alleviation gains of the early and mid-2000s are at risk in lieu of renewed growth. A February 2012 IMF report bluntly stated that On current policies, Pakistan's near- and middle-term prospects are not good. Growth would remain too low to absorb the large number of new entrants into the labor force, inflation would remain high, and the external position would weaken significantly. ... The current mix of large fiscal deficits and accommodative monetary policy is increasingly unsustainable. The IMF recommends urgent policy action to 1) strengthen public finances through revenue mobilization; 2) reform the energy sector to reduce power shortages; and 3) undertake financial measures that would reduce inflation and safeguard financial sector stability. A key aspiration for Pakistani leaders is to acquire better access to Western markets. With the security situation deterring foreign investors, exports, especially from the key textile sector, may be key to any future Pakistani recovery. Islamabad has continued to press Washington and European capitals for reduced tariffs on textile exports, especially following massive flood damage to Pakistan's cotton crop. By some accounts, the textile sector directly employs 3.5 million Pakistanis and accounts for 40% of urban factory jobs. Pakistani officials and business leaders estimate that abolishing American tariffs, which currently average 17% on cotton apparel, would boost their country's exports by $5 billion annually. Democracy has fared poorly in Pakistan, and is marked by tripartite power struggles among presidents, prime ministers, and army chiefs. The country has endured direct military rule for more than half of its 65 years of existence. A bicameral Parliament is the locus of federal power under the constitution, with a 342-seat National Assembly and a 100-seat Senate. Members are elected to five-year terms by direct election; a President is indirectly elected and also serves a five-year term. President Zardari was elected in September 2008. See Figure 5 for current National Assembly composition. More than four years after Pakistan's relatively credible March 2008 national elections seated a civilian government led by the Pakistan People's Party (PPP) of assassinated former Prime Minister Benazir Bhutto, the country's military establishment still wields decisive influence over Pakistan's foreign policy and national security policies. Meanwhile, the PPP-led coalition has struggled merely to stay in power and has been unable to rein in the security agencies or enact other major social or economic reforms. Moreover, a judiciary empowered by the 2008 "Lawyer's Movement" in support of Chief Justice Iftikhar Chaudhry has continued to do battle with the executive branch and seeks to pursue corruption charges against an array of politicians, including President Zardari himself, a deeply unpopular figure among Pakistanis. Independent analysts have warned that, if it is not halted, Pakistan's perpetual political turmoil could lead to economic chaos, given especially the widening budget and balance of payments deficits. In 2010 and 2011, serious threats to the PPP's majority status and to the very existence of its government arose due to fractious coalition politics. The Jamaat Ulema Islami (JUI)—a small but influential Islamist party—and the Karachi-based Muttahida Quami Movement (MQM) both have withdrawn and then rejoined the coalition in reaction to rising fuel prices, inflation, and perceived government mismanagement. Three times in 2011 the MQM withdrew, then rejoined the ruling coalition. Loss of the MQM's 25 seats removes that coalition's parliamentary majority, which could have led to government collapse. Most observers concluded that each withdrawal was an effort to extract maximum concessions in the form of greater administrative control for the MQM in its Karachi base. In May 2011, the PPP's standing was strengthened through a new alliance with the Pakistan Muslim League-Q (PML-Q) faction, former parliamentary supporters of Pervez Musharraf. This faction recently merged with a smaller PML group and reverted to the original PML name. the party's considerable support in the Punjab province and its agreement to contest the next general elections as PPP allies bolstered the ruling party's status and could represent a threat to that of Nawaz Sharif's PML faction, the PML-Nawaz, or PNL-N. The secular Pashtun nationalist Awami National Party (ANP) is a PPP coalition ally that also runs the government of the Khyber Pakhtunkhwa province. Senate elections in February 2012 were crucial to Zardari's political safety, as PPP gains ensured that party's control of the Senate through 2015. The ruling party increased its significant plurality and is now in a position to block legislation even if it loses in National Assembly polls expected in late 2012 or early 2013. The circumstances of OBL's death were hugely embarrassing for the Pakistani military and led to rare domestic criticism of that institution, traditionally the country's most respected. This in turn created an opening in which Pakistan's civilian leaders might wrest more control over the country's foreign and national security policies. With the embarrassment of the May 2011 Mehran naval base attack compounded by scandals involving apparent abuse of power and human rights, media criticism of the security establishment continued at unprecedented levels throughout the year. Yet, to date, there has been little sign that the civilians would take advantage of these openings; rather, they have rallied behind the security services and made no calls for the resignations of either the Army or ISI Chiefs. Parliament did seat a commission to investigate how bin Laden had found refuge in Pakistan and how American forces were able to penetrate Pakistani territory, but the body's initial lack of focus and cohesion diminished expectations that its work could lead to greater civilian authority. As discussed in the "'Memogate'" section above, civil-military tensions aggravated by the May 2011 bin Laden raid appear to have brought the country close to yet another military coup in late 2011. Still more political upheaval came in early 2012 with Prime Minister Gilani facing contempt charges for his failure to abide by Supreme Court orders that he request that Swiss authorities reopen a longstanding corruption case against President Zardari. Gilani had contended that, as president, Zardari was immune from any prosecution, an argument the court refused to accept. In January the court, led by Chief Justice Iftikhar Chaudhry, issued a contempt notice against the Prime Minister. In April, justices found Gilani guilty of contempt, but made an apparent tactical retreat by sentencing him to only the time it took for the court to adjourn (less than one minute). Gilani has since refused opposition demands that he resign, but many legal scholars predict that he will be disqualified from holding office at some point after the appeal period expires in June, although the Speaker of the National Assembly has determined the Prime Minister is not subject to disqualification. A State Department spokesman had no comment beyond calling the case a domestic political issue for Pakistan. Late 2011 saw the surprising rise of a new political star in Pakistan, former cricket hero Imran Khan and his Pakistan Tehreek-e-Insaf (PTI or Pakistan Movement for Justice) party. Although he has been a national-level political figure since 1996, his PTI was considered a "party of one" with minimal representation in Parliament (his seat only). Yet in late 2011 he was able to attract support from young and middle-class Pakistanis by riding a wave of anti-corruption and anti-American sentiment. Khan's rallies in Lahore in October and Karachi in December each attracted huge and enthusiastic crowds of more than 100,000. The PTI has since won notable converts from both of Pakistan's major national parties. With especially strong support in Punjab, Khan represents a particular threat to the votebank of former Prime Minister Nawaz Sharif's Pakistan Muslim League offshoot (the PML-N). While it is considered unlikely that Khan could win enough seats in parliamentary elections expected in early 2013 to become Prime Minister, he may well become a "kingmaker" in future governance arrangements. Khan has vowed that if he comes to power he would cut off U.S. aid flows and end conflict with the Pakistani Taliban "in 90 days—guaranteed." He has also promised to "end big corruption in 90 days." Such pronouncements seem outlandish to many observers, and Khan has expressed sympathy for Islamist causes and is rumored to have at least tacit backing from the military. Yet there is widespread agreement that Khan's meteoric rise in late 2011 reflected the Pakistani public's hunger for honest politicians not beholden to the country's entrenched, dynastic mainstream parties. A final domestic political development of particular concern to international observers has been the reemergence of Pakistan's conservative Islamist political forces under the rubric of the newly-formed Difa-e-Pakistan (DPC or Defend Pakistan Council). Comprised of more than 40 Islamist and rightwing parties—among them several extremist groups supposedly banned by the Pakistani government—the DPC has held large-scale street rallies and is at the cutting edge of demands that Islamabad end its cooperation with the United States, as well as halt any rapprochement with India. Hafiz Saeed, leader of the Lashkar-e-Taiba (LeT) terrorist group behind the November 2008 Mumbai attack in India, is among those appearing openly at DPC rallies. The DPC strenuously opposes reopening of the GLOCs, considering such a move "akin to helping the allied forces prolong their stay in Afghanistan," and contends that both the United States and India are "involved in Baluchistan's insurgency." Meanwhile, other officially banned terrorist groups appear to thrive with impunity. Anti-American rhetoric has become valuable political currency for any Pakistani politician seeking patriotic credentials, and some analysts see Pakistan's security services benefitting from and possibly supporting the DPC's rise as a tool of leverage against both the United States and Pakistan's own civilian leaders. Pakistan is the setting for serious reported human rights abuses, some of them perpetrated and/or sanctioned by the state itself. According to the U.S. Department of State, although Pakistan's civilian government has taken some positive steps, the overall human rights situation there remains poor, and that lack of government accountability remains a pervasive problem; abuses often go unpunished, fostering a culture of impunity. According to the May 2012 Country Reports on Human Rights for 2011 , The most serious human rights problems were extrajudicial killings, torture, and disappearances committed by security forces, as well as by militant, terrorist, and extremist groups .... Other human rights problems included poor prison conditions, instances of arbitrary detention, lengthy pretrial detention, a weak criminal justice system, insufficient training for prosecutors and criminal investigators, a lack of judicial independence in the lower courts, and infringements on citizens' privacy rights. Harassment of journalists, some censorship, and self-censorship continued. There were some restrictions on freedom of assembly and some limits on freedom of movement. The number of religious freedom violations and discrimination against religious minorities increased, including some violations sanctioned by law. Corruption was widespread within the government and the police forces, and the government made few attempts to combat the problem. Rape, domestic violence, sexual harassment, "honor" crimes, abuse, and discrimination against women remained serious problems. Child abuse and commercial sexual exploitation of children persisted. Widespread human trafficking—including forced and bonded labor—was a serious problem. Societal discrimination against national, ethnic, and racial minorities continued, as did discrimination based on caste, sexual orientation, gender identity, and HIV status. Lack of respect for worker rights continued.... Violence, abuse, and social and religious intolerance by militant organizations, and other nongovernmental actors contributed to a culture of lawlessness in some parts of the country. Among this litany of serious and ongoing human rights abuses, watchdog groups commonly rank Pakistan as the world's most dangerous country for journalists, even as a raucous free press has emerged in the past decade. "Disappearances" and extrajudicial killings by Pakistani security forces elicited acute U.S. concerns in late 2010 when evidence of abuses came to light. The Obama Administration has declared that it will abide by "Leahy amendment" provisions by withholding train and equip funding for several Pakistani army units believed to be complicit in human rights abuses. Laws prohibiting blasphemy in Pakistan are meant to protect Islamic holy persons, beliefs, customs, and objects from insult or defilement. They are widely popular with the public. Yet they are criticized by human rights groups as discriminatory and arbitrary in their use, which often arises in the context of personal vendettas, and can involve little or no persuasive evidence. The laws again came under scrutiny in late 2010 when a Pakistani Christian woman was sentenced to death for what seemed to many a minor offense. International human rights groups issued newly urgent calls for the law's repeal, and President Zardari himself vowed to personally review the case. Yet the PPP-led government backed away from reform proposals after Islamist hardline groups, including some with links to terrorist organizations, were able to rally a host of protestors. As noted above, two of the most vocal government proponents of reforming the laws were assassinated earlier in 2011. The only other high-profile national politician pursuing reform efforts, National Assembly member Sherry Rehman, was forced to withdraw her legislative proposal after her PPP leaders announced that no reforms would be undertaken. In 2001, Congress renewed large U.S. assistance packages to Pakistan. By the end of 2011, Congress had appropriated about $15.3 billion in overt assistance over ten years, including more than $8.3 billion in development and humanitarian aid, and nearly $7 billion for security-related programs (see Table 1 ). In 2009, both chambers of Congress passed their own Pakistan-specific bills authorizing increased nonmilitary aid to Pakistan (to $1.5 billion per year for five years) and placing certain conditions on future security-related aid to that country. The Enhanced Partnership with Pakistan Act (EPPA) of 2009, also known as the "Kerry-Lugar-Berman" (KLB) bill for its main sponsors, became P.L. 111-73 . Earlier that year, Congress also established a new Pakistan Counterinsurgency Capability Fund (PCCF) that is meant to enhance the ability of Pakistani security forces to effectively combat militancy. Moreover, since FY2002 Congress has appropriated billions of dollars to reimburse Pakistan (and other nations) for its operational and logistical support of U.S.-led counterterrorism operations. At nearly $9 billion paid to date, these "coalition support funds" have accounted for more than one-third of all overt U.S. financial transfers to Pakistan since 2001. In recent years, more careful oversight of such disbursements reportedly has led to a major increase in the rate of rejected claims. The Administration's congressionally mandated Pakistan Assistance Strategy Report, issued in December 2009, laid out the principal objectives of nonmilitary U.S. assistance to Pakistan (to help "in building a stable, secure, and prosperous Pakistan"), a general description of the programs and projects designed to achieve these goals, and a plan for monitoring and evaluating the effort. For FY2010-FY2014, it proposed to devote $3.5 billion—nearly half of the $7.5 billion of the aid authorized by the EPPA—to "high-impact, high-visibility" infrastructure programs, especially in the energy and agriculture sectors. Most recently, Washington is considering making grants to help the Pakistani government launch construction of the planned Diamer Basha dam in the country's far northeast. The Asian Development Bank is taking the lead on the roughly $12 billion project which, when completed in eight or more years, could generate 4,500 megawatts of electricity, enough to fill the country's entire current shortfall. The Administration reports having disbursed about $855 million in civilian aid funds during FY2011, excluding emergency humanitarian assistance. Roughly half of such aid is distributed directly through Pakistani government institutions. Still, the majority of appropriated KLB funds have not been spent, in large part because of concerns about corruption and the capacity of Pakistan's government and contractors to effectively oversee aid projects, and confusion over priorities. The delay serves to reinforce Pakistani perceptions that the United States cannot be relied upon to follow through on its promises. Security-related U.S. assistance to Pakistan has included provision of extensive "train and equip" programs, but these were largely suspended in mid-2011. Major U.S. arms transfers to Pakistan since 2001 have included items useful for counterterrorism operations, along with a number of "big ticket" platforms more suited to conventional warfare. Under multiple authorities, Pakistan has received helicopters, infantry arms, and a wide array of other equipment. Pakistani officials have complained that U.S.-supplied defense equipment, especially that most needed for counterinsurgency operations such as attack and utility helicopters, was too slow in coming. Security assistance to Pakistan's civilian sector is aimed at strengthening the country's law enforcement capabilities through basic police training, provision of advanced identification systems, and establishment of a new Counterterrorism Special Investigation Group. As noted above, the circumstances of OBL's death and subsequent developments have had major impact on both Administration and congressional perceptions of the utility of current U.S. aid programs. A substantive reevaluation of aid levels—and of the bilateral relationship more generally—began in 2011. Such rethinking has become evident in significant reductions, as well as new restrictions and conditions, in pending FY2013 legislation (see the Appendix ), and congressional figures have issued some of the strongest criticisms of Pakistan as a U.S. ally seen in decades. There appears to be growing recognition among observers that U.S. military aid has done little to stem Islamist militancy in Pakistan and may even hinder that country's economic and political development. Many of these analysts thus urge U.S. policy targeting effective nonmilitary aid, perhaps especially that which would strengthen Pakistan's civil society. Three major bills authorizing and appropriating U.S. spending in FY2013 contain important Pakistan-related provisions, including new reporting and certification requirements based on more stringent conditions. First, the National Defense Authorization Act for FY2013 ( H.R. 4310 , passed by the full House on May 18, 2012), would prohibit the Secretary of Defense from preferential procurement of goods or services from Pakistan until such time as that country's government reopens the ground lines of communication (GLOCs) to Afghanistan (Sec. 821(d)); limit FY2013 CSF payments to Pakistan to no more than $650 million (Sec. 1211(b)); withhold CSF payments to Pakistan unless the Secretary of Defense reports to Congress on the claims process, any new conditions Pakistan has placed on use of its GLOCs, and estimates any differences in transit costs from FY2011 to FY2013 (Sec. 1211(c)); withhold FY2012 CSF payments to Pakistan unless the Secretary certifies that the Islamabad government is 1) supporting counterterrorism operations against Al Qaeda, its associated movements, the Haqqani Network, and other domestic and foreign terrorist organizations; 2) dismantling IED networks; 3) preventing nuclear-related proliferation; and 4) issuing visas in a timely manner for official U.S. visitors (Sec. 1211(c); and limit the obligation or disbursement of FY2013 PCF funds to 10% of those appropriated or transferred unless the Secretary of Defense, with the concurrence of the Secretary of State, reports to Congress an updated strategy on utilization of the Fund, metrics for determining relevant progress, and a strategy for enhancing Pakistan's efforts to counter IEDs (Sec. 1217). Second, as approved by the Senate Appropriations Committee on May 24, 2012, S. 3241 , a bill to fund the State Department and foreign operations for FY2013, contains provisions that would provide $50 million for the PCCF (about 6% of both the amount requested by the Administration and the amount appropriated for FY2012), but only if the Secretary of State certifies that Pakistan has reopened the GLOCs to Afghanistan and that the funds can be used efficiently and effectively; withhold all funds appropriated for Pakistan under ESF, INCLE, FMF, and PCCF unless the Secretary of State certifies that Pakistan is (1) cooperating with the United States in counterterrorism efforts against the Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations; (2) not supporting terrorist activities against United States or coalition forces in Afghanistan, and Pakistan's military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; (3) dismantling IED networks; (4) preventing nuclear-related proliferation; (5) implementing policies to protect judicial independence and rule of law; (6) issuing visas in a timely manner for official U.S. visitors; and (7) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict (Sec. 7046(c)(1)) (the Secretary may waive these requirements if doing so is important to U.S. national security interests); limit total State Department aid to Pakistan to about $800 million (roughly 36% of the Administration's request), including no more than $375 million for ESF, $100 million for INCLE, and $250 million for FMF (Sec. 7046(c)(2)); further withhold $33 million of appropriated FMF funds unless the Secretary of State certifies that Dr. Shakil Afridi has been released from prison and cleared of all charged relating to the assistance provided to the United States in locating Osama bin Laden (Sec. 7046(c)(2)(G)); and require the Secretary of State to submit to Congress a spend plan for assistance to Pakistan to include achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding furthering development in Pakistan, countering extremism, and establishing conditions conducive to the rule of law and transparent and accountable governance; report biannually on the status of achieving that plan's goals and benchmarks; and recommend that the Secretary suspend all assistance to Pakistan if this report finds Pakistan is failing to make measureable progress toward stated goals and benchmarks (Sec. 7046(c)(3)). The bill provides that $100 million of the ESF funds may be used by the President for Overseas Contingency Operations if so designated by Congress. Third, as approved by the House Appropriations Committee on May 25, 2012, H.R. 5857 , a bill to fund the State Department and foreign operations for FY2013, contains provisions that would provide no funding for PCCF; withhold all funds appropriated for Pakistan under ESF, INCLE, FMF, and PCCF unless the Secretary of State certifies that Pakistan is 1) cooperating with the United States in counterterrorism efforts against the Haqqani Network, the Quetta Shura Taliban, Lashkar-e-Taiba, Jaish-e-Mohammed, Al Qaeda, and other domestic and foreign terrorist organizations; 2) not supporting terrorist activities against United States or coalition forces in Afghanistan, and Pakistan's military and intelligence agencies are not intervening extra-judicially into political and judicial processes in Pakistan; 3) dismantling IED networks; 4) preventing nuclear-related proliferation; 5) issuing visa in a timely manner for official U.S. visitors; and 6) providing humanitarian organizations access to detainees, internally displaced persons, and other Pakistani civilians affected by the conflict (Sec. 7046(c)(1)) (unlike S. 3241 , this provision does not include a national security waiver); require the Secretary of State to submit to Congress a spend plan for assistance to Pakistan to include achievable and sustainable goals, benchmarks for measuring progress, and expected results regarding furthering development in Pakistan, countering extremism, and establishing conditions conducive to the rule of law and transparent and accountable governance; report biannually on the status of achieving that plan's goals and benchmarks; and recommend that the Secretary suspend all assistance to Pakistan if this report finds Pakistan is failing to make measureable progress toward stated goals and benchmarks (Sec. 7046(b)(3)); allow ESF funds, notwithstanding any other provision of law, for cross border stabilization and development programs between Afghanistan and Pakistan or between either country and the central Asian republics (Sec. 7046(c)). allow INCLE and FMF funds to be transferred to PCCF and remain available until September 30, 2014 as long as the Secretary of State notifies Congress 15 days before such action and specifies source of funds and implementation plan. Obligation of such funds are subject to Sec. 7046(b) of this act. | In a security alliance since 2004 and "strategic partners" since 2006, the United States and Pakistan for decades experienced major shifts in the nature and tone of their relations. In the post-9/11 period, assisting in the creation of a more stable, democratic, and prosperous Pakistan actively combating religious militancy has been among the most important U.S. foreign policy efforts. Vital U.S. interests are seen to be at stake in its engagement with Pakistan related to regional and global terrorism; efforts to stabilize neighboring Afghanistan; nuclear weapons proliferation; links between Pakistan and indigenous American terrorism; Pakistan-India tensions and conflict; democratization and human rights protection; and economic development. As a haven for numerous Islamist extremist and terrorist groups, and as the world's most rapid proliferator of nuclear weapons, Pakistan presents a combination that places it at the top of many governments' international security agendas. The May 2011 revelation that Al Qaeda founder Osama bin Laden had enjoyed apparently years-long and relatively comfortable refuge inside Pakistan led to intensive U.S. government scrutiny of the bilateral relationship, and sparked much congressional questioning of the wisdom of providing significant U.S. foreign assistance to a government and nation that may not have the intention and/or capacity to be an effective U.S. partner. Although Obama Administration officials and most senior congressional leaders spent most of 2011 consistently recognizing Pakistan as a crucial ally in U.S.-led counterterrorism and counterinsurgency efforts, long-held doubts about Islamabad's commitment to core U.S. interests deepened over the course of the year. The Pakistani military and intelligence services are seen to be too willing to distinguish among Islamist extremist groups, maintaining links to Afghan insurgent and anti-India militant organizations operating from Pakistani territory as a means of forwarding Pakistani's perceived security interests. U.S.-Pakistan relations are fluid at present, but running a clearly negative course: still based on several national interests shared by both countries, yet marked by levels of mutual distrust and resentment that are likely to catalyze a new set of assumptions for future ties. The tenor of interactions has been increasingly negative in a slide predating a series of crises in 2011. These included a CIA operative shooting dead two Pakistanis in Lahore, bin Laden's killing, suspension of most bilateral security cooperation, a spike in Haqqani Network attacks in Afghanistan, and an incident in which two dozen Pakistani soldiers were inadvertently killed by NATO aircraft. The latter calamity led Pakistan to shut down NATO's road access to Afghanistan and demand an apology that has not been forthcoming in intervening months. Access remains closed to date. Pakistan is among the leading recipients of U.S. aid in the post-9/11 period, having been appropriated about $24 billion in assistance and military reimbursements since 2001. FY2013 legislation in the 112th Congress would cut U.S. assistance funding significantly from both the levels requested by the Administration and from those Congress approved for FY2012. Provisions also would introduce more rigorous restrictions and certification requirements on such aid. With anti-American sentiments and xenophobic conspiracy theories rife among ordinary Pakistanis, persistent economic travails and a precarious political setting combine to present serious challenges to U.S. decision makers. This report will be updated periodically. See also CRS Report R41856, Pakistan: U.S. Foreign Assistance, and CRS Report R42116, Pakistan: U.S. Foreign Aid Conditions, Restrictions, and Reporting Requirements, both by [author name scrubbed] and [author name scrubbed]; and CRS Report RL34248, Pakistan's Nuclear Weapons: Proliferation and Security Issues, by [author name scrubbed] and Mary Beth Nikitin. |
The federal government provides grants for family planning services through the Family Planning Program, Title X of the Public Health Service Act (PHSA; 42 U.S.C. §§300 to 300a-6). Enacted in 1970, Title X is the only domestic federal program devoted solely to family planning and related preventive health services. By law, Title X clients' participation in family planning services is voluntary. The Title X program is not the only federal program that funds family planning services. Other domestic programs that finance family planning, among their other services, include Medicaid, the federal Health Center program, the Maternal and Child Health Services Block Grant, the Social Services Block Grant, and Temporary Assistance for Needy Families. In FY2015, for example, Medicaid accounted for 75% of U.S. public family planning expenditures (including federal, state, and local government spending). In comparison, Title X accounted for 10%. Title X is administered by the Office of Population Affairs (OPA) under the Office of the Assistant Secretary for Health in the U.S. Department of Health and Human Services (HHS). Although the program is administered through OPA, funding for Title X activities is provided through the Health Resources and Services Administration (HRSA) in HHS. Authorization of appropriations for Title X expired at the end of FY1985, but the program has continued to be funded through appropriations bills for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (Labor-HHS-Education). OPA administers three types of project grants under Title X: (1) family planning services; (2) family planning personnel training; and (3) family planning service delivery improvement research. The three types of project grants are discussed below. In FY2017, OPA used approximately 90% of Title X funds for clinical services. Family planning services grants fund family planning and related preventive health services, such as contraceptive services; natural family planning methods; infertility services; adolescent services; breast and cervical cancer screening and prevention; sexually transmitted disease (STD) (including human immunodeficiency virus [HIV]) prevention education, counseling, testing, and referral ; preconception health services; and reproductive life plan counseling. These services must be provided "without coercion and with respect for the privacy, dignity, social, and religious beliefs of the individuals being served." Although females make up the majority of Title X clients, services offered to males include condoms, education and counseling, STD testing and treatment, HIV testing, and, in some cases, vasectomy services. Priority for services is given to persons from low-income families, who may not be charged for care. Clients from families with income between 100% and 250% of the federal poverty guidelines are charged on a sliding scale based on their ability to pay. Clients from families with income higher than 250% of the federal poverty guidelines are charged fees designed to recover the reasonable cost of providing services. If a third party (such as a state Medicaid program or a private health insurance plan) is authorized or legally obligated to pay for a client's services, all reasonable efforts must be made to obtain the third-party payment without discounts. In 2017, Title X-funded clinics served 4.004 million clients, primarily low-income women and adolescents. Of those clients, 12% were male, 67% had incomes at or below the federal poverty guidelines, and 87% had incomes at or below 200% of the federal poverty guidelines. An earlier survey found that for 61% of female clients, Title X clinics were their "usual" or only regular source of health care. In 2017, 42% of Title X clients were uninsured. The number of Title X clients served in 2017 was 0.08% lower than in 2016 (when there were 4.008 million clients). The 2017 client count was 23% lower than in 2010 (when there were 5.225 million clients). Figure 1 shows the number of Title X clients each year from 2010 to 2017. The Family Planning Annual Report and the HRSA FY2017 Budget Justification suggested several reasons for grantees' decreased capacity to serve clients, including clinic closures or clinics no longer participating in Title X; staffing shortages for family planning projects due to difficulties in provider recruitment and retention; and increased unit cost of providing services and upfront costs for infrastructure improvements (such as purchasing new health information technology and entering new contracts with insurers); Grantees also suggested several potential reasons for a decrease in demand, including newly insured clients choosing to seek care from other non-Title X providers; increased use of long-acting reversible contraception (LARC), which could reduce the frequency of client visits in the long run, compared with some other types of contraception (such as oral contraceptives that require refills); and clinical guideline changes, such as Pap tests now being recommended every three years instead of annually. In 2017, there were 89 Title X family planning services grantees. These grantees included 47 state, local, and territorial health departments and 42 nonprofit organizations, such as community health agencies, family planning councils, and Planned Parenthood Federation of America (Planned Parenthood; PPFA) affiliates. Title X grantees can provide family planning services directly or subaward Title X monies to other public or nonprofit entities to provide services. Although there is no fixed matching amount required for grants, regulations specify that no Title X projects may be fully supported by Title X funds. In 2017, Title X provided services through 3,858 clinics located in the 50 states, the District of Columbia, and eight U.S. territories and Freely Associated States. Family planning personnel training grants are used to train staff and improve the use and career development of paraprofessionals. Staff are trained through a Family Planning National Training Center and a National Clinical Training Center. These programs have produced provider education resources, training tools, podcasts, and webinars on topics such as the Zika virus, caring for women with opioid use disorders, mandated child abuse reporting, human trafficking, and clinical efficiency, among other topics. Family planning service delivery improvement research grants are used to conduct research studies with the goal of improving the service delivery of Title X projects. Research funded by these grants includes research on integrating family planning services into STD clinic settings, protecting patient confidentiality, evaluating performance measures for contraceptive services, and evaluating Title X clinics' financial viability and sustainability. Title X is a discretionary program, meaning its funding is provided in and controlled by annual appropriations acts. It has received appropriations every year since the program started in FY1971. Annual appropriations acts have also specified certain program guidelines, such as requiring all Title X pregnancy counseling to be nondirective and prohibiting the use of Title X funds for abortion. This section describes recent funding amounts and proposals. On September 28, 2018, the President signed the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019 ( P.L. 115-245 ). It provides $286.479 million for Title X in FY2019, the same as the FY2018 enacted level. The FY2019 act continues previous years' provisions that Title X funds not be spent on abortions, among other requirements (see the text box below). The appropriations provision states that Title X funds "shall not be expended for abortions" and does not specify any exceptions; for example, it does not specify exceptions for cases of rape, incest, or the endangerment of the woman's life. FY2019 appropriations also are subject to a clause, known as the Weldon amendment, stating that "[n]one of the funds made available in this [a]ct may be made available to a [f]ederal agency or program, or to a [s]tate or local government, if such agency, program, or government subjects any institutional or individual health care entity to discrimination on the basis that the health care entity does not provide, pay for, provide coverage of, or refer for abortions." Some groups have argued that the Weldon amendment conflicts with regulations that require Title X family planning services projects to give pregnant clients the opportunity to receive information, counseling, and referral upon request for several options, including "pregnancy termination." On February 23, 2011, HHS published a final rule in the Federal Register and stated that potential conflicts would be handled on a case-by-case basis. According to HHS, "[t]he approach of a case by case investigation and, if necessary, enforcement will best enable the Department to deal with any perceived conflicts within concrete situations." However, on June 1, 2018, HHS published a proposed rule in the Federal Register that would remove the requirement that Title X projects must offer pregnant clients the opportunity to receive abortion information, counseling, and referral upon request. Under the proposed rule, Title X projects also would be prohibited from referring patients to abortion services. The proposed rule cites the Weldon amendment as a part of its justification for these proposed changes. The sections below summarize the President's FY2019 budget request and FY2019 appropriations legislation considered by Congress. The final FY2019 appropriations level for Title X, $286.479 million, was the same level proposed by the President's budget request, the Senate-reported bill S. 3158 , and the Senate-passed bill H.R. 6157 . House-reported bill H.R. 6470 would have provided no funding for Title X in FY2019. President Trump's FY2019 budget request, submitted February 12, 2018, proposed $286.479 million for Title X, the same as the FY2017 and FY2018 enacted levels. The FY2019 budget proposed to continue previous years' provisions in appropriations laws by prohibiting the use of Title X funds for abortion, among other requirements (see text box above). According to the HRSA Justification of Estimates for Appropriations Committees , the proposed FY2019 funding level would support family planning services for 4 million clients, of which 90% would have family incomes at or below 200% of the federal poverty guidelines. The program's FY2019 goals include preventing 903,000 unintended pregnancies and reducing infertility by screening 1.2 million young women for chlamydia. The FY2019 target for cost per client served is $345.11, with the goal of maintaining the increase in cost per client below the medical care inflation rate. According to the Justification , the Title X program has encouraged clinics to improve financial sustainability by having more contracts with insurance plans and by recovering more costs through reimbursements and billing third-party payers. The Justification emphasizes that family planning projects should "optimally" offer primary health services onsite or "in close proximity." The Justification also states that the Title X program "will likely need to continue addressing the impact of the Zika virus or other conditions which affect non-pregnant individuals of child-bearing age, including but not limited to the population which receives services at Title X family planning service sites." The FY2019 budget stated that it included "provisions prohibiting certain abortion providers from receiving Federal funds from HHS, including those that receive funding under the Title X Family Planning program and Medicaid, among other HHS programs." One such provision would have blocked HHS discretionary funds from being made available to a prohibited entity "either directly, through a State (including through managed care contracts with a State), or through any other means." This prohibition would have applied "[n]otwithstanding any other provision of law." The provision proposed to define a prohibited entity as an entity, including its affiliates, subsidiaries, successors, and clinics, that meets all of the following criteria at the time of enactment: (1) It is a nonprofit organization under Internal Revenue Code Section 501(c)(3); (2) It is an essential community provider primarily engaged in family planning services, reproductive health, and related medical care; (3) It performs, or provides any funds to any other entity that performs, abortions (other than in cases of rape, incest, and certain physician-certified cases in which the woman is in danger of death unless an abortion is performed); (4) Total federal Title X grants to the entity (including affiliates, subsidiaries, or clinics) exceeded $23 million in FY2017. The prohibited entity definition would cease to apply to an entity that certifies that it will no longer perform, nor fund any other entity that performs, an abortion (other than in cases of rape, incest, and when the woman is in danger of death unless an abortion is performed). The HHS Secretary would be required to seek repayment of any federal assistance if the certification's terms are violated. The proposed provision did not mention Planned Parenthood Federation of America (PPFA). However, PPFA may have met the criteria for a prohibited entity. In March 2017, the New York Times reported that, in response to congressional proposals to restrict federal funds to PPFA, the White House informally proposed to preserve federal funding if PPFA stopped providing abortions. PPFA rejected that informal White House proposal. On July 23, 2018, the House Committee on Appropriations reported H.R. 6470 , the Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2019. H.R. 6470 would have provided no funding for Title X in FY2019. Prior to the reporting, on July 11, 2018, during the committee's bill markup, the committee rejected an amendment to H.R. 6470 that would have funded Title X at the FY2018 enacted level and would have prohibited the bill's funds from being used to finalize, implement, administer, or enforce any rule amending Title X regulations. Section 533 of H.R. 6470 would have made funds not available to certain "prohibited entities." This provision was similar to the proposal in the FY2019 budget discussed above. Section 533(a) would have blocked the bill's funds from being made available to a prohibited entity "either directly, through a State (including through managed care contracts with a State), or through any other means." This prohibition would have applied "notwithstanding any other provision of law." Section 533(b) proposed to define a prohibited entity as an entity, including its affiliates, subsidiaries, successors, and clinics, that meets all these criteria at the time of enactment: It is a nonprofit organization under Internal Revenue Code Section 501(c)(3). It is an essential community provider primarily engaged in family planning services, reproductive health, and related medical care. It performs, or provides any funds to any other entity that performs, abortions (other than in cases of rape, incest, and certain physician-certified cases where the woman is in danger of death unless an abortion is performed). Total federal Title X grants to the entity (including affiliates, subsidiaries, or clinics) exceeded $23 million in FY2016. The prohibited entity definition would cease to apply to an entity that certifies that it will no longer perform, or fund any other entity that performs, an abortion (other than in cases of rape, incest, and when the woman is in danger of death unless an abortion is performed). The HHS Secretary would be required to seek repayment of any federal assistance if the certification's terms were violated. Section 533 of H.R. 6470 did not mention PPFA. However, PPFA may have met the criteria for a prohibited entity. The provision possibly could have prohibited the bill's funds, including federal funds from Medicaid and other HHS programs, from going to PPFA and its affiliates and clinics. On June 28, 2018, the Senate Appropriations Committee reported S. 3158 , Departments of Labor, Health and Human Services, and Education, and Related Agencies Appropriations Act, 2019. S. 3158 proposed $286.479 million for Title X, the same as the FY2018 enacted level, and continued previous years' provisions in appropriations laws prohibiting the use of Title X funds for abortion, among other requirements. (See the text box above, "Requirements on the Use of Title X Funds in P.L. 115-245 .") On August 23, 2018, the Senate passed H.R. 6157 , Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019. Similar to S. 3158 , the Senate-passed H.R. 6157 proposed to fund Title X at the FY2018 enacted level and continued previous years' provisions in appropriations laws prohibiting the use of Title X funds for abortion, among other requirements. (See the text box above, "Requirements on the Use of Title X Funds in P.L. 115-245 .") During Senate floor consideration of H.R. 6157 , two amendments ( S.Amdt. 3730 and S.Amdt. 3967 ) were submitted that were similar to the above-mentioned Section 533 of H.R. 6470 . S.Amdt. 3730 was submitted on August 16, 2018, but saw no further action. This amendment was identical to Section 533 of H.R. 6470 . S.Amdt. 3967 was proposed on August 23, 2018, and defeated in a floor vote on the same day. S.Amdt. 3967 was similar to Section 533 of H.R. 6470 . However, it did not have the phrase "notwithstanding any other provision of law," or require repayment of federal assistance if the specified certification's terms were violated. Subsequent to Senate passage of H.R. 6157 , Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, the House and Senate formed a conference committee to finalize the bill. Conference report H.Rept. 115-952 was filed September 13, 2018. The conference report was agreed to in the Senate on September 18, 2018, agreed to in the House on September 26, 2018, and signed by the President on September 28, 2018, becoming P.L. 115-245 . As noted above, P.L. 115-245 funds Title X at $286.479 million, the same as the FY2018 enacted level, and continues previous years' provisions in appropriations laws prohibiting the use of Title X funds for abortion, among other requirements. (See the text box above, "Requirements on the Use of Title X Funds in P.L. 115-245 .") Table 1 shows Title X appropriations amounts since FY1971, when the program was created. Figure 2 shows Title X appropriations amounts since FY1978, in current dollars (not adjusted for inflation) and constant FY2018 dollars (adjusted for medical care inflation). The law prohibits the use of Title X funds in programs in which abortion is a method of family planning. On July 3, 2000, OPA released a final rule on abortion services in family planning projects. The rule updated and revised regulations that had been promulgated in 1988. The major revision revoked the "gag rule," which was said to restrict family planning grantees from providing abortion-related information to Title X clients. The regulation at 42 C.F.R. §59.5 had required, and continues to require, that abortion not be provided as a method of family planning. The July 3, 2000, final rule amended 42 C.F.R. §59.5, adding the requirement that a project must provide pregnant clients with the opportunity to receive information and counseling on prenatal care and delivery; infant care, foster care, or adoption; and pregnancy termination. When a pregnant client requests such information and counseling, the project must give "neutral, factual information and nondirective counseling on each of the options, and referral upon request, except with respect to any option(s) about which the pregnant client indicates she does not wish to receive such information and counseling." According to OPA, family planning projects that receive Title X funds are closely monitored to ensure that federal funds are used appropriately and that funds are not used for prohibited activities, such as abortion. The abortion prohibition does not apply to all Title X grantees' activities, but applies only to Title X projects' activities. The grantee's abortion activities must be "separate and distinct" from the Title X project activities. Safeguards to maintain this separation include (1) careful review of grant applications to ensure that the applicant understands the requirements and has the capacity to comply with all requirements; (2) independent financial audits to examine whether there is a system to account for program-funded activities and nonallowable program activities; (3) yearly comprehensive reviews of the grantees' financial status and budget report; and (4) periodic and comprehensive program reviews and site visits by OPA regional offices. It is unclear precisely how many Title X clinics also provide abortions through their non-Title X activities. In 2015, the Guttmacher Institute surveyed a nationally representative sample of publicly funded family planning clinics. Respondents included 535 clinics that received Title X funds. Based on that survey, an estimated 10% of clinics that received any Title X funding reported offering abortions separately from their Title X project. In 2004, following appropriations conference report directions, HHS surveyed its Title X grantees on whether their clinic sites also provided abortions with nonfederal funds. Grantees were informed that responses were voluntary and "without consequence, or threat of consequence, to non-responsiveness." The survey did not request any identifying information. HHS mailed surveys to 86 grantees and received 46 responses. Of these, 9 indicated that at least one of their clinic sites (17 clinic sites in all) also provided abortions with nonfederal funds, 34 indicated that none of their clinic sites provided abortions with nonfederal funds, and 3 responses had no numerical data or said the information was unknown. Title X supporters argue that family planning reduces unintended pregnancies, thereby reducing abortion. HHS estimates that Title X services helped avert 901,838 unintended pregnancies in FY2016, and the Guttmacher Institute estimates that Title X services helped avert 822,300 unintended pregnancies in calendar year 2015. It is unclear exactly how many unintended pregnancies would have ended in abortion; however, the Guttmacher Institute estimates that in 2015, clinics receiving Title X funds helped avert pregnancies that would have been terminated through 277,800 abortions, including 54,500 abortions among teens. In contrast, Title X critics argue that federal funds should be withheld from any organization, such as PPFA, that performs abortions. They argue that federal funding for nonabortion activities frees up Planned Parenthood's other resources for its abortion activities. Some critics also argue that if a family planning program is operated by an organization that also performs abortions, the implicit assumption and the message to clients is that abortion is a method of family planning. In June 2018, HHS published a proposed rule that would prohibit Title X projects from making abortion referrals and would require physical and financial separation between Title X projects and abortion-related activities, among other changes to Title X regulations. In 2017, of the 4 million Title X clients, 17% were aged 19 or younger. Critics argue that by funding Title X, the federal government is implicitly sanctioning nonmarital sexual activity among teens. These critics argue that a reduced U.S. teen pregnancy rate could be achieved if family planning programs emphasized efforts to convince teens to delay sexual activity, rather than efforts to decrease the percentage of sexually active teens who become pregnant. (See CRS Report R45183, Teen Pregnancy: Federal Prevention Programs .) The program's supporters, in contrast, argue that the Title X program should be expanded to serve more people in order to reduce the rate of unintended pregnancies. The Guttmacher Institute estimates that in 2015, Title X family planning services helped avert an estimated 188,700 unintended teen pregnancies. In addition, the Guttmacher Institute estimates that without Title X clinics' services, the U.S. teen unintended pregnancy rate would have been 44% higher in 2015. Supporters of expanding family planning services argue that the United States has a higher teen pregnancy rate than some countries (such as Sweden) where a similar percentage of teens are sexually active, in part because U.S. teens use contraception less consistently. Some also argue that recent declines in U.S. teen birth rates can be explained in part by changes in teen contraceptive use. By law, Title X providers are required to "encourage" family participation when minors seek family planning services. However, confidentiality is required for personal information about Title X services provided to individuals, including adolescents. OPA instructs grantees on confidentiality for minors: It continues to be the case that Title X projects may not require written consent of parents or guardians for the provision of services to minors. Nor can any Title X project staff notify a parent or guardian before or after a minor has requested and/or received Title X family planning services. The April 2014 Title X guidelines state, Providers of family planning services should offer confidential services to adolescents and observe all relevant state laws and any legal obligations, such as notification or reporting of child abuse, child molestation, sexual abuse, rape, or incest, as well as human trafficking. Confidentiality is critical for adolescents and can greatly influence their willingness to access and use services. As a result, multiple professional medical associations have emphasized the importance of providing confidential services to adolescents. Providers should encourage and promote communication between the adolescent and his or her parent(s) or guardian(s) about sexual and reproductive health. Adolescents who come to the service site alone should be encouraged to talk to their parents or guardians. Educational materials and programs can be provided to parents or guardians that help them talk about sex and share their values with their child. When both parent or guardian and child have agreed, joint discussions can address family values and expectations about dating, relationships, and sexual behavior. Although minors are to receive confidential services, Title X providers are not exempt from state notification and reporting laws on child abuse, child molestation, sexual abuse, rape, or incest. Some minors who use Title X clinics have dependent health insurance coverage through a parent's private health insurance policy. However, for confidentiality reasons, they may not wish to bill family planning or STD services to their parent's health insurance. In a 2016 survey of a nationally representative sample of Title X clients, 75% of insured teen clients planned to use their health insurance at their visit. Of those who did not plan to use their health insurance, 53% cited "someone might find out" as a reason. In another study conducted at 17 Title X sites, 4% of family planning visits were by clients who said they had health insurance but did not want to use it. Of those, 44% cited confidentiality concerns. Of those citing confidentiality concerns, 39% were under the age of 18. According to OPA, Title X clinics "commonly forgo billing" health insurers to maintain confidentiality. As for payment of services provided to minors, Title X regulations indicate that "unemancipated minors who wish to receive services on a confidential basis must be considered on the basis of their own resources." Program requirements instruct that "eligibility for discounts for unemancipated minors who receive confidential services must be based on the income of the minor." Supporters of confidentiality argue that parental notification or parental consent requirements would lead some sexually active adolescents to delay or forgo family planning services, thereby increasing their risk of pregnancy or sexually transmitted diseases. Critics argue that confidentiality requirements can interfere with parents' right to know of and to guide their children's health care. Some critics also disagree with discounts for minors without regard to parents' income, because the Title X program was intended to serve "low-income families." PPFA operates through a national office and has 56 affiliates. The 56 affiliates operate more than 600 local health clinics throughout the United States. PPFA affiliates participating in Title X can receive funds directly from HHS or indirectly from other Title X grantees, such as their state or local health departments. The Guttmacher Institute found that in 2015, Planned Parenthood clinics made up 13% of Title X clinics, but served 41% of female Title X clients. In March 2018, the Government Accountability Office (GAO) released a report with data on the obligations, disbursements, and expenditures of federal funds for several nonprofit organizations, including PPFA and its affiliates. According to the GAO report, HHS reported obligating $23.41 million, and disbursing $21.07 million, to PPFA affiliates through the Title X program in FY2015. These figures reflected funds that HHS provided directly to these organizations. They did not include Title X funds that reached Planned Parenthood or its affiliates indirectly through subgrants or that passed through from state agencies or other organizations. The GAO report also showed PPFA affiliates' expenditures of Title X funds, identified through audit reports that PPFA affiliates submitted to comply with Office of Management and Budget (OMB) audit requirements. Expenditures included federal funds provided directly or indirectly to these organizations. The most recent expenditure data were from FY2015, when Planned Parenthood and its affiliates reported spending $57.28 million from the Title X Family Planning Services program. On September 22, 2015, the Congressional Budget Office (CBO) estimated that PPFA and its affiliates receive approximately $60 million annually through the Title X program. On June 1, 2018, HHS published a proposed rule in the Federal Register , "Compliance with Statutory Program Integrity Requirements," that would make several changes to the Title X program, such as the following: Title X projects would no longer be required to offer pregnant clients the opportunity to receive abortion information, counseling, and referral upon request. Title X projects would be prohibited from referring patients to abortion services. Title X projects would be required to maintain physical and financial separation between their Title X projects and abortion-related activities. Several terms, including family planning and low-income family , would have new definitions. Criteria for awarding Title X Family Planning Services grants would be revised. Title X grant applicants and grantees would be subject to new reporting requirements. This proposed rule has sparked a debate about whether providing an abortion-related service, such as referring a pregnant client to an abortion provider, should be a family planning service under Title X. In addition, there is debate on whether this proposed rule is a "gag rule" that would prevent some Title X clients from receiving adequate information that would permit them to make an informed decision about their health care treatment. For more details on the proposed rule, see CRS Report R45284, Title X Family Planning: Proposed Rule on Statutory Compliance Requirements . The Title X funding opportunity announcement (FOA), which is released by OPA, lays out grant application requirements, program priorities, and other key issues. A significant delay in the FOA for FY2018 Title X Family Planning Services grants raised concern. Some grantees feared services could be interrupted because of a potential lapse in grant funding. A press release accompanied the FOA: "Recognizing the announcement has been delayed, HHS is committed to ensuring that services continue unabated. Current grantees received notification today inviting them to submit a request for grant extension, so there is no gap in services." There were several key differences between the FY2018 FOA and the FY2017 FOA, which was posted under the previous Administration. Key differences were as follows: The FY2018 FOA had a new requirement for clients under the age of consent. A client under the age of consent would be subject to a preliminary screening to rule out victimization after he or she presents with an STD, pregnancy, or any suspicion of abuse. The FY2018 FOA stated that Title X projects should communicate the benefits of avoiding sexual risk, delaying sex, and returning to "sexually risk-free status," especially for adolescents. The FY2017 FOA did not use the phrase "sexually risk-free." The FY2017 FOA required projects to have written clinical protocols in accordance with "Providing Quality Family Planning Services: Recommendations of CDC and the U.S. Office of Population Affairs and Program Requirements for Title X Funded Family Planning Projects" (QFP). The QFP document stated, "Providers should give comprehensive information to adolescent clients about how to prevent pregnancy. This information should clarify that avoiding sex (i.e., abstinence) is an effective way to prevent pregnancy and STDs." Both FOAs required that projects encourage family participation with respect to services to minors. But unlike the FY2017 FOA, the FY2018 FOA additionally stated that this requirement applied to all clients, not just to minors. Under the FY2018 FOA, successful projects would use "counseling techniques that encourage family participation for all clients, including the involvement of parents, spouses or family where practicable." The FY2018 FOA emphasized care coordination by noting that "each Title X project should ensure that family planning is contextualized within a holistic conversation of health, with the project optimally offering primary health services onsite, or having robust referral linkages to primary health providers in close proximity to the Title X site." The FY2017 FOA did not mention onsite or nearby primary care, but it did list among the program's priorities "Addressing the comprehensive health care needs of clients through formal, robust linkages or integration with comprehensive primary care providers." Under the FY2017 FOA, final award selections were made by the applicable Public Health Service Region's regional health administrator (RHA), in consultation with the Deputy Assistant Secretary for Population Affairs (DASPA) and the Assistant Secretary for Health (ASH) or their designees. In contrast, under the FY2018 FOA, final award selections were made by the DASPA or designee. This change was a shift from program practices in place since the 1980s. The Institute of Medicine's (IOM's) 2009 report A Review of the HHS Family Planning Program stated that "Although the original language of the Title X statute provides decision-making authority to the DASPA, the Secretary of HHS transferred this authority from the DASPA to the RHAs in the 1980s. This transfer has helped maintain the integrity of the funding processes associated with the Title X program." The IOM report also stated that "the DASPA's status as a political appointee is one of the most significant issues affecting the Title X program." The FY2018 FOA encouraged applications for "innovative" services and methods that had been "historically underrepresented" in the Title X program. The FY2017 FOA did not use those terms. Finally, among the program's key issues, the FY2017 FOA explicitly mentioned access to "contraceptive options, including long acting reversible contraceptives (LARC), other pharmaceuticals, and laboratory tests, preferably on site" whereas the FY2018 FOA did not. A Questions and Answers document accompanying the FY2018 FOA did clarify that projects must provide contraception. In announcing the FY2018 Grantees for Family Planning Services, OPA stated that "All of these grants will begin on Saturday, September 1, 2018, and will end on Saturday, March 31, 2019." This seven-month grant period is a departure from the program's typical practice. Title X family planning services projects have "project periods," typically up to three years, during which HHS does not require the grantee to recompete for funds. Within these project periods, continuing awards generally are funded in annual increments (one-year budget periods), although program guidance states that "shorter or longer budget periods may be established for compelling administrative or programmatic reasons." Continuing awards are contingent on factors such as appropriations, grantees' compliance with federal requirements, and the best interests of the government. OPA stated in the FY2018 FOA that OPA "will fund grants in annual increments (budget periods) and generally for a project period of up to 3 years, although [OPA] may approve shorter project periods." As mentioned under the " Grantees and Clinics " heading in this report, Title X grantees can provide family planning services directly or can subaward Title X funds to other government or nonprofit entities (subrecipients) to provide services. In December 2016, OPA promulgated the final rule "Compliance With Title X Requirements by Project Recipients in Selecting Subrecipients." The rule became effective January 18, 2017, but P.L. 115-23 nullified the rule on April 13, 2017. The rule would have applied to grantees that make subawards; it would not have affected grantees that provide all their Title X services directly. It would have added language that "No recipient making subawards for the provision of services as part of its Title X project may prohibit an entity from participating for reasons other than its ability to provide Title X services" to Title X Family Planning Services grant program regulations. The President signed P.L. 115-23 , "Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the final rule submitted by Secretary of Health and Human Services relating to compliance with title X requirements by project recipients in selecting subrecipients." P.L. 115-23 nullified the rule under the Congressional Review Act. As a result, the rule "shall be treated as though such rule had never taken effect." That is, the rule is deemed not to have had any effect at any time. Furthermore, HHS is prohibited from reissuing the nullified rule in "substantially the same form" or issuing a "new rule that is substantially the same" as the nullified rule. In the December 2016 preamble accompanying the rule, OPA explained that some states had taken actions to limit Title X participation by certain types of providers. For example, some states enacted laws to prohibit state and local agencies from giving Title X subawards to abortion providers. Some other states had established a priority system for allocating Title X subawards, for example, by giving preference to state health departments, primary care providers, and community health centers over specialized family planning clinics. OPA argued that "these policies, and varying court decisions on their legality, have led to uncertainty among recipients, inconsistency in program administration, and reduced access to services for Title X priority populations." The rule would have limited the criteria a grantee could use to restrict entities from Title X subawards, disallowing "reasons other than [the entity's] ability to provide Title X services." The preamble explained that applicants for new and continuing Title X grants would be required to describe their criteria for choosing subrecipients. The preamble stated that, under this rule, HHS would have reviewed these submissions for rule compliance and would have made "every effort to help entities come into compliance, and will award replacement grants to other providers when necessary to minimize any disruption of services." Supporters of the rule argued that it would have protected funding to specialized family planning providers, such as Planned Parenthood, and that it would have protected vulnerable individuals' access to family planning services. Critics of the rule argued that states should have the discretion to administer Title X funds consistently with state policy, and that the rule would have violated the conscience rights of voters and states that object to public funding of abortion providers. | The federal government provides grants for family planning services through the Family Planning Program, Title X of the Public Health Service Act (PHSA; 42 U.S.C. §§300 to 300a-6). Title X, enacted in 1970, is the only domestic federal program devoted solely to family planning and related preventive health services. In 2017, Title X-funded clinics served 4 million clients. Title X is administered through the Office of Population Affairs (OPA) in the Department of Health and Human Services (HHS). Although the authorization of appropriations for Title X ended in FY1985, funding for the program has continued through appropriations bills for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (Labor-HHS-Education). Title X grantees can provide family planning services directly or subaward Title X monies to other public or nonprofit entities to provide services. In December 2016, OPA released a final rule to limit the criteria Title X grantees could use to restrict subawards by stating that "[n]o recipient making subawards for the provision of services as part of its Title X project may prohibit an entity from participating for reasons other than its ability to provide Title X services." On April 13, 2017, the President signed P.L. 115-23, which nullified the rule under the Congressional Review Act. Federal law (42 U.S.C. §300a-6) prohibits the use of Title X funds in programs in which abortion is a method of family planning. According to OPA, family planning projects that receive Title X funds are closely monitored to ensure that federal funds are used appropriately and that funds are not used for prohibited activities. The abortion prohibition does not apply to all Title X grantees' activities, but applies only to their Title X project activities. Under current guidance, a grantee's abortion activities must be "separate and distinct" from its Title X project activities. On June 1, 2018, HHS published a proposed rule that would prohibit Title X projects from making abortion referrals and would require "physical and financial separation" between Title X projects and abortion-related activities, among other changes to Title X regulations. On September 28, 2018, the President signed the Department of Defense and Labor, Health and Human Services, and Education Appropriations Act, 2019, and Continuing Appropriations Act, 2019 (P.L. 115-245), which provides $286.5 million for Title X, the same as the FY2018 level. The FY2019 act continues previous years' requirements that Title X funds not be spent on abortions, that all pregnancy counseling be nondirective, and that funds not be spent on promoting or opposing any legislative proposal or candidate for public office. Grantees continue to be required to certify that they encourage family participation when minors seek family planning services and to certify that they counsel minors on how to resist attempted coercion into sexual activity. The appropriations law also clarifies that family planning providers are not exempt from state notification and reporting laws on child abuse, child molestation, sexual abuse, rape, or incest. |
The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. As stated in the act, its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." In 2008, Congress enacted the ADA Amendments Act (ADAAA), P.L. 110-325 , to address Supreme Court decisions which interpreted the definition of disability narrowly. On September 23, 2009, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations under the ADA Amendments Act. Comments on the proposed regulations must be submitted on or before November 23, 2009. Prior to a discussion of the proposed regulations, it is helpful to briefly examine the new statutory definition of disability. The ADAAA 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, which states that the definition of disability shall be construed broadly, and which specifically rejects portions of the EEOC's ADA regulations, necessitated regulatory changes. The major changes made to the regulations include specific examples of impairments that will consistently meet the definition of disability, changes in the definition of the term "substantially limits," and expansion of the definition of "major life activity" including changes to the concept of the major life activity of working. The EEOC also amended its interpretative guidance for Title I of the ADA. The ADA definition of disability is a functional definition, not a categorical definition. The EEOC's proposed regulatory definition reiterates the statutory definition and provides guidance on its interpretation. Noting that "disability is determined based on an individualized assessment," the EEOC provides examples of impairments that will consistently meet the definition of disability, and examples of impairments that may be disabling for some individuals but not for others. The EEOC notes that these lists are illustrative, and other types of impairments that are not listed may consistently meet the definition of disability. Examples are also provided of impairments that are usually not disabilities. EEOC states that the following listed impairments will consistently meet the definition of disability: autism, cancer, cerebral palsy, diabetes, epilepsy, HIV or AIDS, multiple sclerosis and muscular dystrophy, major depression, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia. The EEOC examples of impairments that may be disabling for some individuals but not for others include the following: asthma, high blood pressure, learning disabilities, back or leg impairments, carpal tunnel syndrome, and hyperthyroidism. "Temporary, non-chronic impairments of short duration with little or no residual effects (such as the common cold, seasonal or common influenza, a sprained joint, minor and not-chronic gastrointestinal disorders, or a broken bone that is expected to heal completely) usually will not substantially limit a major life activity." EEOC's listing of specific impairments that "will consistently meet the definition of disability" could arguably be seen as contrary to the ADA's statutory definition. One commentator contends that this may mean that an employer would have no argument against coverage of the listed disabilities and, therefore, this approach is contrary to the ADA's individualized assessment approach. However, the EEOC appendix to the proposed regulations notes that, under the ADA, disability is determined based on an individualized assessment, and that the proposed regulation "recognizes, and offers examples to illustrate, that characteristics associated with some types of impairments allow an individualized assessment to be conducted quickly and easily, and will consistently render those impairments disabilities." It is also interesting to note that in its list of conditions that will usually not substantially limit a major life activity, the EEOC included seasonal or common influenza. It did not discuss whether pandemic influenza would be covered. However, in separate guidance, the EEOC found that H1N1, as currently experienced, would not be interpreted as a disability. The ADA Amendments Act states that the purposes of the legislation are to carry out the ADA's objectives of the elimination of discrimination and the provision of "'clear, strong, consistent, enforceable standards addressing discrimination' by reinstating a broad scope of protection available under the ADA." P.L. 110-325 rejects the Supreme Court's holdings that mitigating measures are to be used in making a determination of whether an impairment substantially limits a major life activity as well as holdings defining the "substantially limits" requirements. The substantially limits requirements of Toyot a Motor Manufacturing v. Williams , as well as the existing EEOC regulations defining substantially limits as "significantly restricted," are specifically rejected in the new law. The current EEOC regulations state that three factors should be considered in determining whether an individual is substantially limited in a major life activity: the nature and severity of the impairment, the duration or expected duration of the impairment, and the permanent or long-term impact of the impairment. The proposed regulations do not contain these factors. They state that an impairment is a disability "if it substantially limits the ability of an individual to perform a major life activity as compared to most people in the general population. An impairment need not prevent, or significantly or severely restrict, the individual from performing a major life activity in order to be considered a disability." The Senate Managers' Statement for the ADAAA discussed the meaning of substantially limited and, after quoting from the committee report for the original 1990 ADA, stated, "We particularly believe that this test, which articulated an analysis that considered whether a person's activities are limited in condition, duration and manner, is a useful one." It could be argued that the EEOC's proposed regulations do not conform with congressional intent. The EEOC, in its proposed appendix to the proposed regulations, notes that the Senate Managers' Report does make reference to the "condition, duration and manner" analysis, but argues that congressional intent to override the Supreme Court's Toyota decision is best served by an elimination of this analysis. The House debate contains a colloquy between Representatives Pete Stark and George Miller on the subject of the meaning of "substantially limits" in the context of learning, reading, writing, thinking, or speaking. The colloquy finds that an individual who has performed well academically may still be considered an individual with a disability. Representative Stark stated the following: Specific learning disabilities, such as dyslexia, are neurologically based impairments that substantially limit the way these individuals perform major life activities, like reading or learning, or the time it takes to perform such activities often referred to as the condition, manner, or duration. This legislation will reestablish coverage for these individuals by ensuring that the definition of this disability is broadly construed and the determination does not consider the use of mitigating measures. The EEOC's proposed regulations echo this colloquy, specifically stating the following: An individual with a learning disability who is substantially limited in reading, learning, thinking, or concentrating compared to most people, as indicated by the speed or ease with which he can read, the time and effort required for him to learn, or the difficulty he experiences in concentrating or thinking, is an individual with a disability, even if he has achieved a high level of academic success, such as graduating from college. The determination of whether an individual has a disability does not depend on what an individual is able to do in spite of an impairment. 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. The House Judiciary Committee report indicates that "this clarification was needed to ensure that the impact of an impairment on the operation of major bodily functions is not overlooked or wrongly dismissed as falling outside the definition of 'major life activities' under the ADA." There had been judicial decisions which found that certain bodily functions had not been covered by the definition of disability. For example, in Furnish v. SVI Sys., Inc. the Seventh circuit held that an individual with cirrhosis of the liver due to infection with Hepatitis B was not an individual with a disability because liver function was not "integral to one's daily existence." The proposed EEOC regulations echo the statutory listing of major life activities and add sitting, reaching, and interacting with others, noting that this list is illustrative, not exhaustive. The House Education and Labor Committee report provided examples for major life activities that were not included in the statutory language, and included reaching and interacting with others. The House report also included examples not in the proposed regulations: writing, engaging in sexual activities, drinking, chewing, swallowing, and applying fine motor coordination. The ADA Amendments Act includes working as an example of a major life activity. What it means to be substantially limited in the major life activity of working is also addressed by the EEOC's proposed regulations. The EEOC notes that usually an individual with a disability will be substantially limited in another major life activity so that it would be unnecessary to determine whether the individual was substantially limited regarding working. However, where that is not the case, the EEOC proposes that "[a]n impairment substantially limits the major life activity of working if it substantially limits an individual's ability to perform, or to meet the qualifications for, the type of work at issue." The EEOC also states that this interpretation is to be construed broadly and should "not demand extensive analysis." "Type of work" is described in the EEOC's proposed appendix as including "the job the individual has been performing or for which he is applying, and jobs that have qualifications or job-related requirements which the individuals would be substantially limited in performing as a result of the impairment." Prior to the enactment of the ADAAA, some courts had required a statistical analysis of the availability of certain jobs in order to determine whether an individual was substantially limited in the major life activity of working. The EEOC states that this statistical analysis will no longer be needed. Using the proposed "type of work" standard, the EEOC envisions courts using evidence from the individual regarding his or her educational and vocational background and the limitations of the impairment. Generally, the EEOC would not consider necessary expert testimony concerning the types of jobs in which an individual is substantially limited. As discussed, the terms "class of jobs" and "broad range of jobs in various classes," which are in the existing regulations, are eliminated in the proposed regulation in favor of the term "type of work." The EEOC describes this change as "more straightforward and easier to understand" as well as being consistent with congressional intent for broad coverage. However, this change has been described as "the most problematic issue arising from the EEOC's proposed regulations" since it is not predicated on specific statutory language or legislative history. It could be argued, as EEOC notes, that the change is consistent with congressional intent that the focus of an ADA case should be on whether discrimination has occurred, not on whether the individual has met the definition of disability. Such a change in the regulations could have a significant effect on judicial determinations. | The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. As stated in the act, its purpose is "to provide a clear and comprehensive national mandate for the elimination of discrimination against individuals with disabilities." In 2008, Congress enacted the ADA Amendments Act (ADAAA), P.L. 110-325, to address Supreme Court decisions which interpreted the definition of disability narrowly. On September 23, 2009, the Equal Employment Opportunity Commission (EEOC) issued proposed regulations under the ADA Amendments Act. Comments on the proposed regulations must be submitted on or before November 23, 2009. The ADA Amendments Act, which states that the definition of disability shall be construed broadly and which specifically rejects portions of the EEOC's ADA regulations, necessitated regulatory changes. The major changes made to the regulations include specific examples of impairments that will consistently meet the definition of disability, changes in the definition of the term "substantially limits," and expansion of the definition of "major life activity" including changes to the concept of the major life activity of working. The EEOC also amended its interpretative guidance for Title I of the ADA. |
The purpose of contemporary, structured mentoring programs is to reduce risks by supplementing (but not supplanting) a youth's relationship with his or her parents. These programs are administered by mostly adult volunteers who are recruited by youth-serving organizations, faith-based organizations, schools, and after-school programs. Some of these programs have broad youth development goals, while others focus more narrowly on a particular outcome such as reducing gang activity or substance abuse, or improving grades. Research has shown that mentoring programs have been associated with some positive youth outcomes, but that the long-term ability of mentoring to produce particular outcomes and the ability for mentored youth to sustain gains over time are less certain. Since the mid-1990s, Congress supported mentoring programs for the most vulnerable youth. The Department of Justice's (DOJ's) Juvenile Mentoring Program (JUMP), the first such program, was implemented in 1994 to provide mentoring services for at-risk youth ages 5 to 20. Although there is no single overarching policy today on mentoring, the federal government has supported multiple mentoring efforts for vulnerable youth since JUMP was discontinued in FY2003. Previously, two mentoring programs—the Mentoring Children of Prisoners (MCP) program and Safe and Drug Free Schools (SDFS) Mentoring program—provided a significant source of federal funding for mentoring services. However, the programs were short-lived: the MCP was administered by the Department of Health and Human Services (HHS) from FY2003 through FY2011 and the SDFS program was administered by the Department of Education (ED) from FY2002 through FY2010. The federal government currently funds mentoring efforts through short-term grants and initiatives, primarily carried out by DOJ. DOJ has allocated funding for multiple initiatives through its Mentoring program, including mentoring for certain vulnerable youth and research on mentoring. In addition, the federal government has provided funding to programs with vulnerable youth that have a strong, but not exclusive, mentoring component. Youth ChalleNGe, an educational and leadership program for at-risk youth administered by the Department of Defense (DOD), helps to engage youth in work and school, and leadership opportunities. Adult mentors assist enrolled youth with their transition from the program for at least one year. Finally, federal agencies coordinate on mentoring issues. The Federal Mentoring Council was created in 2006 to address the ways agencies can combine resources and training and technical assistance to federally administered mentoring programs, and to serve as a clearinghouse on mentoring issues for the federal government. The council has been inactive since 2008. This report begins with an overview of the goals of mentoring, including a brief discussion on research of structured mentoring programs. The report then describes the evolution of federal policies on mentoring since the early 1990s. The report provides an overview of the federal mentoring initiatives that are currently funded. While additional federal programs and policies authorize funding for mentoring activities, among multiple other activities and services, such programs are not discussed in this report. The report concludes with an overview of issues that may be of interest to Congress. These issues include the limitations of research on outcomes for mentored youth, the quality of mentoring programs, and the potential need for additional mentors. Mentoring refers to a relationship between two or more individuals in which at least one of those individuals provides guidance to the other. In the context of this report, mentoring refers to the relationship between a youth and an adult who supports, guides, and assists the youth. Youth can receive mentoring through informal and formal relationships with adults. Informal relationships are those that develop from a young person's existing social network of teachers, coaches, and family friends. This report focuses on formal mentoring relationships for vulnerable youth. These relationships are cultivated through structured programs sponsored by youth-serving organizations, faith-based organizations, schools, and after-school programs. Approximately 4.5 million youth are in structured mentoring relationships. Volunteers in structured programs are recruited from communities, religious organizations, and the workplace, and undergo an intensive screening process. Youth eligible for services through structured mentoring programs are often identified as at "high risk" of certain negative outcomes. The goal of modern structured mentoring programs is to reduce risks by supplementing, but not replacing, a youth's relationship with his or her parents. Some programs have broad youth development goals, while others focus more narrowly on a particular outcome such as reducing gang activity or substance abuse, or improving grades. Structured mentoring programs are often community based , meaning that mentored youth and adults engage in community activities (e.g., going to the museum and the park, playing sports, playing a board game, and spending time together outside of work and school). Other programs are characterized as school based because they take place on school grounds or some other set location, like a community center. The co-location of mentoring programs in schools facilitates relationships with teachers, who can meet with mentors and refer youth to the programs. Mentors provide academic assistance and recreational opportunities and expose youth to opportunities that promote their cognitive and emotional development. The origin of today's structured mentoring programs is credited to the efforts of charity groups that formed during the Progressive Movement of the early 1900s. These groups sought adult volunteers for vulnerable youth—defined at the time as youth who were poor or had become involved in the juvenile court system. These early organizations provided practical assistance to youth, including help with finding employment, and created recreational outlets. The most prominent mentoring organization at the time, Big Brothers (now known as Big Brothers Big Sisters of America), continues today as the oldest mentoring organization in the country. The contemporary youth mentoring movement began in the late 1980s with the support of foundations and corporations, including Fannie Mae, Commonwealth Fund, United Way of America, Chrysler, Procter & Gamble, and the National Urban League. In addition, nongovernmental organizations such as One to One in Philadelphia and Project RAISE in Baltimore were established by entrepreneurs seeking to expand mentoring services to vulnerable youth. The federal government has supported structured mentoring programs and initiatives since the beginning of the contemporary mentoring movement. At that time, mentoring was becoming increasingly recognized by the government as a promising strategy to enrich the lives of youth, address the isolation of youth from adult contact, and provide one-to-one support for the most vulnerable youth, particularly those living in poverty. Among the first projects undertaken by the federal government was a youth mentoring initiative in the early 1990s implemented by the newly created Points of Light Foundation, a federally-funded nonprofit organization that promotes volunteering. Then-Secretary of Labor Elizabeth Dole made the case for mentoring as a way to improve the lives of youth and prepare them for the workforce. Other early initiatives included the Juvenile Mentoring Program, or JUMP. The federal government also signaled the importance of mentoring during the 1997 Presidents' Summit, which was convened by the living Presidents (at the time) to pledge their support for policies that assist youth. The Presidents and other national leaders called for adults to volunteer as mentors for over 2 million vulnerable youth. Studies of structured mentoring programs, including those that have received federal funding, indicate that the programs are most successful when they include a strong infrastructure and facilitate caring relationships. Infrastructure refers to a number of activities including identifying the youth population to be served and the activities to be undertaken, screening and training mentors, supporting and supervising mentoring relationships, collecting data on youth outcomes, and creating sustainability strategies. The mentor screening process provides programs with an opportunity to select those adults most likely to be successful as mentors by seeking volunteers who can keep their time commitments and value the importance of trust. Further, these studies assert that orientation and training ensure youth and mentors share a common understanding of the adult's role and help mentors develop realistic expectations of what they can accomplish. Ongoing support and supervision of the matches assist mentored pairs in negotiating challenges. Staff can help the pairs maintain a relationship over the desired period (generally a year or more), and assist them in bringing the match to a close in a way that affirms the contributions to the relationship of both the mentor and youth. According to the research literature, successful programs are known to employ strategies to retain the support of current funders and garner financial backing from new sources. Finally, the studies demonstrate that successful programs attempt to measure any effects of mentoring services on the participating youth. Programs can then disseminate these findings to potential funders and participants. Research on youth mentoring demonstrates that mentoring relationships are likely to promote positive outcomes for youth and avoid harm when they are close, consistent, and enduring. Closeness refers to a bond that forms between the youth and mentor, and has been found to have benefits for the youth. Mentor characteristics—such as prior experience in helping roles or occupations, an ability to appreciate salient socioeconomic and cultural influences, and a sense of efficacy for mentoring youth—appear to facilitate close mentoring relationships. Consistency refers to the amount of time mentors and youth spend together. Regular contact has been linked to positive youth outcomes, and relationships tend to be strong if they last one year or longer. Youth in relationships that lasted less than six months showed declines in functioning relative to their non-mentored peers. A 2011 analysis assessed findings from 73 mentoring evaluations to determine the effectiveness of mentoring generally. The analysis reviewed evaluations, published between 1999 and 2010, of mentoring programs that were intended to promote positive youth outcomes through relationships between children and youth under age 18 and adults (or older youth) serving as mentors. The analysis examined programs that used various formats and strategies—including those that used paid mentors, older mentors, and group formats—and took place for a relatively brief period (e.g., a few months) through a longer period. Each of the evaluations included a comparison group of youth who were not mentored. In some programs, the youth were randomly assigned to participate in the comparison group, while in other programs the comparison group consisted of youth who did not participate in the mentoring program. There is wide consensus that using random assignment allows researchers to best estimate the impact of an intervention such as mentoring. The researchers found that overall, the programs resulted in modest gains for youth. According to the analysis, the programs tended to have positive effects on outcomes across multiple categories, including academics and education, attitudes and motivation, social skills and interpersonal relationships, and psychological and emotional status, among other categories. Seven of the studies included follow-up assessment of youth outcomes after they had completed the program, with an average follow-up period of about two years. The studies showed an enduring positive effect of participating in the programs that were evaluated. Further, the analysis pointed to factors that influence the effectiveness of mentoring programs. These include whether (1) participating youth have preexisting difficulties, such as delinquent behavior, or are exposed to significant environmental risk (not defined, but presumably referring to the home and community in which the youth resides); (2) programs serve greater proportions of males; (3) mentors' educational or occupational backgrounds are well matched to the goals of the program; (4) mentors and youth are paired based on mutual interests, such as career interests; and (5) mentors serve as advocates and teachers to provide guidance to youth and to help ensure their overall welfare. The analysis ultimately found that a broad range of mentoring programs can benefit youth across a number of domains. At the same time, it raised other considerations. For example, few evaluations assessed key outcomes that are of interest to policymakers, such as educational attainment, juvenile offending, and obesity prevention. In addition, few evaluations addressed whether youth sustained the gains they made in the program at later points in their development. The researchers point out that despite the positive effect of the programs overall, the effect is small. Some studies have shown strong gains for youth who are mentored. A study in 1995 of the Big Brothers Big Sisters of America program compared outcomes of eligible youth who were randomly selected to receive mentoring services. The study found that 18 months after the youth were assigned to their groups, the mentored youth skipped half as many days of school. In addition, the mentored youth were 46% less likely than their control group counterparts to use drugs, 27% less likely to initiate alcohol use, and almost one-third less likely to hit someone. A 2002 review of studies of major community-based programs (the 1995 Big Brothers Big Sisters evaluation and evaluations of Across Ages, Project BELONG, and Buddy System, among others) with an experimental design found that certain outcomes for youth with a mentor were better than outcomes for their counterparts without a mentor. These outcomes included the following: Improved educational outcomes: Youth in the year-long Across Ages mentoring program showed a gain of more than a week of class attendance. Evaluations of the program also showed that mentored youth had better attitudes toward school than non-mentored youth. Reduction in some negative behaviors: All studies that examined delinquency showed evidence of reducing some, but not all, of the tracked negative behaviors. Mentored youth in the BELONG program committed fewer misdemeanors and felonies than non-mentored youth. In the Buddy System program, youth with a prior history of criminal behavior were less likely to commit a major offense compared to their non-mentored counterparts with a prior history. Improved social and emotional development: Youth in the Across Ages program had significantly more positive attitudes toward the elderly, the future, and helping behaviors than non-mentored youth. Participants in the Big Brothers Big Sisters program felt that they trusted their parents more and communicated better with them, compared to their non-mentored peers. Similarly, a 2007 study of Big Brothers Big Sisters school-based mentoring programs, with adults serving as mentors, demonstrated some positive results. This study—among the most rigorous scientific evaluations of a school-based mentoring program—found that mentored youth (randomly selected into the treatment group) made improvements in their first year in overall academic performance, feeling more competent about school, and skipping school less, among other areas, compared to their non-mentored counterparts (randomly selected into the control group). Although research has documented some benefits of mentoring, findings from some studies show that mentoring is limited in improving all youth outcomes. The 2002 review of mentoring program evaluations found that programs did not always make a strong improvement in grades and that some negative behaviors—stealing or damaging property within the last year—were unaffected by whether the youth was in a mentoring program. In the 2007 Big Brothers Big Sisters school-based mentoring evaluation, the non-school related outcomes, including substance use and self-worth, did not improve. Research has also indicated that mentored youth make small gains or do not sustain positive gains over time. The 2007 Big Brothers Big Sisters school-based mentoring evaluation found that, in the second year of the program, none of the academic gains were maintained (however, mentored youth were less likely to skip school, and more likely to feel that they would start and finish college). The evaluation also pointed to weaknesses in the program's design, such as high attrition (due likely to the transitioning for some youth to middle school, or high school), limited contact with mentors and youth over the summer, and delays in beginning the program at the start of the school year. A 2008 study of Big Brothers Big Sisters school-based mentoring that used high school students as mentors and drew on data used for the 2007 study, found that while the mentored students experienced gains on some outcomes, the improvements were not sustained for students who ended their involvement in the program after one school year (the minimum time commitment). Similarly, an evaluation of the discontinued federal school-based mentoring program (funded from FY2002 through FY2009) demonstrated that the program did not have an impact on students overall in terms of interpersonal relationships, academic outcomes, and delinquent behaviors. The remainder of this report provides an overview of federal efforts to support mentoring, as well as a discussion of mentoring issues. The federal government does not have an overarching strategy or coordinated approach to mentoring, and the major mentoring program is administered by DOJ. As noted previously, DOJ is the first federal department to have funded a structured mentoring program. The 1992 amendments ( P.L. 102-586 ) to the Juvenile Justice and Delinquency Prevention Act (JJDPA) added Part G to the act, authorizing the Office of Juvenile Justice and Delinquency Prevention (OJJDP) to establish a mentoring program, which came to be known as the Juvenile Mentoring Program (JUMP). The program was created in response to the perception that youth in high-crime areas would benefit from one-on-one adult relationships. The objectives of JUMP were to reduce juvenile delinquent behavior and improve scholastic performance, with an emphasis on reducing school dropout. From FY1994 through FY2003, Congress appropriated a total of $104 million to the program. Annual funding ranged from $4 million to $15.8 million. JUMP was repealed by the 21 st Century Department of Justice Appropriations Authorization Act ( P.L. 107-273 ). This law incorporated the Juvenile Justice and Delinquency Prevention Act of 2001 ( H.R. 1900 ) from the 107 th Congress, which eliminated several juvenile justice programs, including Part G (Mentoring), and replaced it with a block grant program under a new Part C (Juvenile Delinquency Prevention Block Grant Program, to be used for activities designed to prevent juvenile delinquency). The act also created a new Part E (Developing, Testing, and Demonstrating Promising New Initiatives and Programs). According to the accompanying report for H.R. 1900 , the relatively small amount of funding appropriated for JUMP may have been a factor in its elimination. The report states: "In creating this block grant, the [Senate Judiciary] Committee has eliminated separate categorical programs under current law.... Funding for the Part E—State Challenge Activities and Part G—Mentoring Program received minimal funding." The report goes on to say that the committee does not discourage mentoring activities under Part C. After the JUMP program was discontinued with the end of FY2003, the Bush Administration requested funding for mentoring under Part C and Part E of the JJDPA. However, in the years since JUMP's discontinuation, Congress has appropriated mentoring funds under a separate mentoring line item titled "Mentoring Part G," "Mentoring," or "Mentoring Grants"; the line item does not specify under which part of the JJDPA the funding is authorized. The JUMP Program ended in FY2003 and Congress resumed funding for DOJ mentoring in FY2005. Table 1 shows funding from FY2008 through FY2017; Congress has provided $70.0 million to $102.8 million annually in these years. The FY2017 appropriation for the DOJ Mentoring program totaled $80 million. Of this amount, $66.4 million was available for the program, and another $13.6 million was used for other purposes within the Office of Justice Programs (management and administration, peer review, research set-aside, and tribal set-aside). The program funds were used as follows: $61.7 million for grants to provide mentoring services to youth; $778,503 for research activities; and $4.0 million for training and technical assistance, including the Mentoring Resource Center. Table 2 summarizes the purpose, goals, and funding levels for the grants that totaled $61.7 million. The table includes funding for mentoring by organizations with programs that have a national presence (National Mentoring Programs), operate in multiple states (Multi-State Mentoring Initiative), operate locally in collaboration with other mentoring providers (Collaborative Mentoring Programs), or serve specific groups of youth who are at risk (Mentoring for Child Victims of Commercial Sexual Exploitation and Domestic Sex Trafficking Program and Practitioner-Researcher Partnership in Cognitive Behavioral Mentoring Program). The Corporation for National and Community Service (CNS) is an independent federal agency that administers programs to support volunteer services. CNS is authorized by two statutes: the National and Community Service Act (NCSA, P.L. 101-610 ) of 1990, as amended, and the Domestic Volunteer Service Act (DVSA, P.L. 93-113 ) of 1973, as amended. Though CNS does not administer a program explicitly for mentoring, the agency has provided funding for mentoring, among other purposes, through two of its volunteer organizations, AmeriCorps and SeniorCorps. AmeriCorps members serve directly as mentors (through the AmeriCorps State and National program) or focus their efforts on building the capacity of mentoring organizations to increase the number of children they serve (through the AmeriCorps Vista program). SeniorCorps, through its RSVP and Foster Grandparents programs, provides mentoring to children and youth from disadvantaged backgrounds, including children of prisoners. CNS also leads federal efforts to promote National Mentoring Month, which is intended to raise awareness of mentoring, recruit individuals to mentor, and promote the growth of mentoring by recruiting organizations to engage their constituents in mentoring. The Serve America Act ( P.L. 111-13 ), which amended NCSA and DVSA, authorizes funding for programs in which mentoring is a permissible activity, among several other activities. For example, the law provides that AmeriCorps can fund new programs—including the Education Corps, Clean Energy Services Corps, and Veterans Corps—that can be used for mentoring, among other activities. In addition, the law authorizes the program to fund initiatives that seek to expand the number of mentors for disadvantaged youth, as defined under the act. Separately, CNS hosts a website ( http://www.nationalservice.gov/mentor ) to connect potential mentors with mentoring programs. The website is operated by the nonprofit organization MENTOR: The National Mentoring Partnership. The Youth ChalleNGe Program is a quasi-military training program administered by the Army National Guard to improve outcomes for youth who have dropped out of school or have been expelled. Mentoring is a major and required component of the program. Youth ChalleNGe was established as a pilot program under the National Defense Authorization Act for FY1993 ( P.L. 102-484 ), and Congress permanently authorized the program under the National Defense Authorization Act for FY1998 ( P.L. 105-85 ). Congress has since provided an annual appropriation for the program as part of the Department of Defense authorization acts. Currently, 40 sites operate in 29 states, the District of Columbia, and Puerto Rico. See Table 3 for further funding information. Youth are eligible for the ChalleNGe program if they are ages 16 to 18 and enroll prior to their 19 th birthday; have dropped out of school or been expelled; are unemployed; are not currently on parole or probation for anything other than juvenile status offenses and not serving time or awaiting sentencing; and are drug free. In recent years, nearly 9,000 cadets (students) have graduated annually. The program consists of three phases: a two-week pre-program residential phase where applicants are assessed to determine their potential for completing the program; a 20-week residential phase; and a 12-month post-residential phase. During the residential phase, cadets work toward their high school diploma or General Equivalency Diploma (GED) and develop life-coping, job, and leadership skills. They also participate in activities to improve their physical well-being, and they engage in community service. Youth develop a "Post-Residential Action Plan (P-RAP)" that sets forth their goals, as well as the tasks and objectives to meet those goals. The post-residential phase begins when graduates return to their communities, continue in higher education, or enter the military. The goal of this phase is for graduates to build on the gains made during the residential phase and to continue to develop and implement their P-RAP. Within six months of graduation, nearly three-quarters of graduates in 2015 went on to additional education, work, military service, or a combination of these activities. A core component of the post-residential phase is mentoring in which a cadet works with a mentor to meet his or her goals set forth in the P-RAP. Parents and youth are asked to nominate at least one prospective mentor prior to acceptance into the program. They are advised to identify an individual who is respected by the youth and would be a good role model. Cadets tend to know their mentors before enrolling in the program; however, members of an applicant's immediate family or household and ChalleNGe staff members and their spouses are not eligible to become mentors. By week 13 of the residential phase, and prior to the formal matching of a cadet and a mentor, programs are required to use a National Guard-approved curriculum to train the mentors and the cadets for their roles and responsibilities during the formal mentoring relationship. Mentors must be at least 21 years old, of the same gender as the youth (unless otherwise approved by the director of the program), and within reasonable geographic proximity. Mentors must also undergo a background check that includes two reference checks, an interview, and a criminal background investigation. In some programs, the mentors are required to initiate the background investigation and have the results provided to the program prior to their acceptance as a mentor. Mentors and cadets begin weekly contact during the last two months of the residential phase and maintain monthly contacts during the post-residential phase. They are encouraged to participate in community service activities or job placement activities. Although the program prefers that the pair meet in person, contact may be made by telephone calls or letters. Mentors report each month during the post-residential phase about the cadets' placement activities, progress toward achieving their goals, and the activities associated with the mentoring relationship. Some programs also require the cadets to report monthly about their progress. At the end of the post-residential phase, an exit interview is conducted between program staff and the mentor, and the match is formally concluded. Youth ChalleNGe was evaluated by Manpower Development Research Corporation (MDRC), a social policy research organization. The evaluation began in 2005, when 12 state ChalleNGe sites agreed to participate in the evaluation. The evaluation used a random assignment research design, whereby youth were randomly selected to receive the treatment (i.e., to participate in the program) or to a control group that did not participate in the program. The results of the evaluation are based on a survey administered about nine months, 21 months, and three years after the members of the program and control groups entered the study. MDRC issued reports after each survey wave. The reports issued following the first two waves found that youth in the program group had higher education attainment and a stronger work history than the control group. The report issued following the third wave showed that these favorable outcomes persisted at the three-year mark. Those who enrolled in Youth ChalleNGe were significantly more likely to have earned a GED (but not necessarily a high school diploma), to have earned any college credit, to be employed, to have higher earnings, and to be working. Although the earlier reports found positive impacts on criminal justice involvement and health, these impacts faded over time. At the three-year survey, about half of youth in both the program and control groups reported ever having been arrested and about two-thirds of each group reported being in good or excellent health. Further, on some outcomes, there were few statistically significant differences between the treatment and control groups or the outcomes were worse for the treatment group, including that that they were more likely to not use birth control or had tried illegal drugs other than marijuana. The RAND Corporation, a nonprofit policy think tank, is examining the extent to which the ChalleNGe program can develop metrics to measure longer-term outcomes—beyond three years—to determine how the program impacts both individuals and communities. RAND separately conducted a cost-benefit analysis of the program between 2005 and 2008. This analysis looked at 10 ChalleNGe sites in 10 states. This report concluded that the program generates labor market earnings and other benefits of $2.66 for every dollar expended on the program and an estimated return on investment of 166%. Issues that may be relevant to any discussions around the federal role in mentoring include the limitations of research on outcomes for mentored youth and the potential need for additional mentors, particularly for vulnerable populations. A few positive evaluations of mentoring programs may provide justification for federal support of these programs. The study of community-based mentoring programs at select Big Brothers and Big Sisters chapters found that mentored youth were less likely than their non-mentored counterparts to use drugs and alcohol, hit someone, and skip school, among other outcomes. The evaluation of the Big Brothers Big Sisters school-based mentoring program found similar results for mentored youth. Nonetheless, findings from these and other studies show that mentoring did not improve some academic and other tracked outcomes. The long-term influence of mentoring for youth is unknown. The 1995 study tracked youth for 18 months, which is among the longest periods of time mentored youth have been studied. No study appears to address issues around how well youth transition to adulthood, such as whether they attend college or secure employment. Further, studies of mentoring programs have shown that some gains made by mentored youth, compared to their non-mentored counterparts, were short-lived and that mentored youth did not improve in certain areas. Still, these improvements, albeit temporary and limited to certain outcomes, may be a worthwhile public policy goal. A related issue is the design of mentoring evaluations. For example, concerns have been raised about the methodology used in the evaluation of the federal Safe and Drug-Free Schools mentoring program. One concern was that grantees were not randomly selected. As noted, random selection can help researchers determine whether an intervention, such as mentoring, leads to any differences in outcomes between those who receive the intervention and those who do not. Grantees involved in the study "reported being less focused on improving students' academic outcomes and on teaching risk avoidance" than grantees generally, even though these domains were the focus of the evaluation. The grantees selected for the evaluation were more likely to serve females and more Asian, Latino, and Pacific Islander students but fewer white students than grantees overall. The grantees were also more likely to be school districts, compared to nonprofit or community-based organizations. They also tended to have more years of experience running school mentoring and serving more students. These differences may in fact have led to outcomes that were not representative of the entire pool of grantees nationally. Further, some mentored youth in the SDFS mentoring program did not receive certain services that were tied to the outcomes of the study. For example, 43% of the mentored students reported working frequently with their mentors on academics while 21% never worked on academics. Still, it is unclear whether school-based mentoring programs should be tasked with improving both academic outcomes and certain other outcomes, like reducing involvement in gangs and other risky behaviors. Another possible limitation of the SDFS mentoring evaluation was its design. Although the SDFS mentoring evaluation used random assignment, whereby youth were randomly assigned to the treatment (i.e., SDFS mentoring) or the control group (no SDFS mentoring), over one-third of the control group received mentoring, either from the SDFS grantee or from other organizations in the community. This finding raises questions about the extent to which the evaluation could have assessed the true effects of the program, since the outcomes for the control group may have been influenced by the participation of some of the youth in mentoring programs. According to the study, this may have "led to some dilution of the impacts on students compared to expectations." The program delivery for the SDFS mentoring program also did not appear to have adhered to certain established best practices in mentoring, such as matches that lasted one year or more and ongoing training for mentoring. The average length of the mentoring relationship for students surveyed was 5.8 months, and on average, students were not assigned their mentor until about five weeks after they were randomly assigned to the treatment group. Ongoing training did not appear to be widely available. Approximately 41% of mentors reported that ongoing training was available after they begun meeting regularly with their students. This is in contrast to recommendations by researchers in mentoring that mentors receive support and ongoing training after matches have been established. Still, nearly all mentors received pre-match training or orientation and talked with their program supervisor about how things were going with their mentoring relationship. Most mentors (62.3%) reported having access to social workers or staff when they needed support. In a similar vein, one of the researchers of the SDFS mentoring evaluation raised questions about the extent of technical assistance available to grantees about implementing the program: "The legislation ... and the program guidance ... said to focus on the academic and social needs of students. Beyond that, there weren't any prescriptive protocols for how people were going to conduct their mentoring activities, or how they were going to supervise their mentors, or how they were going to train their mentors." Nonetheless, the Department of Education (ED) reported that training and technical assistance was provided by a contractor and ED staff. A 2010 analysis of three major school-based mentoring programs, including the SDFS mentoring program, suggests that the effects of these programs are small but are in a range that "makes their interpretation subject to underlying perspectives and priorities." Similarly, a 2011 analysis assessed findings from 73 mentoring programs and found that despite the positive effect of the programs overall, the effect is small. In other words, some stakeholders may have reason to be skeptical of the findings from the SDFS mentoring program and other mentoring programs, while others may argue that these findings are promising and should lead to further efforts to improve mentoring interventions. The number of mentoring programs appears to have grown in recent years, likely due to a variety of reasons, including federal attention to mentoring as an intervention for at-risk youth and promising associations between mentoring and multiple outcomes. These programs have different formats and serve specific populations of youth. For example, in FY2017, DOJ provided funding to mentoring organizations that serve youth who are victims of commercial sexual exploitation, or are at risk of such victimization. In light of this perceived expansion, researchers and other stakeholders caution that administrators should carefully implement mentoring programs while adhering to core practices of effective mentoring that have been informed by research. The Obama and Trump Administrations have allocated funding for grants to research on mentoring for at-risk youth. MENTOR: A National Mentoring Partnership, a national mentoring organization, estimated that 9.4 million young people who are at-risk youth need a mentor. Recruiting and retaining volunteers appears to be a major challenge for mentoring organizations, including those funded through federal mentoring programs. In its 2004 report of the Safe and Drug Free Schools Mentoring program, the Government Accountability Office (GAO) found that new grantees had more difficulty than established grantees in recruiting and supporting mentors. Similarly, HHS reports that some mentors in organizations that received Mentoring Children of Prisoners' funding (which was funded from FY2003 through FY2010) had dropped out before being matched with a youth because of the time and energy commitment mentoring entails. While research on mentor recruitment and retention is nascent, it reveals that mentoring organizations tend to attract individuals who are middle aged, educated, and have children in their household, and that word of mouth is among the top strategies for recruiting new volunteers. Further, individuals are likely to remain in formal mentoring programs if they feel adequately prepared to serve as mentors. According to the research on mentoring, retention may be high when programs continually monitor mentoring relationships for effectiveness and respond to the needs of mentors. A related issue is that the mentoring gap may be wider for special populations. Mentoring programs primarily serve youth ages 9 through 11 who come to the attention of a parent or teacher, rather than the most at-risk populations, which include, but are not limited to, older youth, runaway and homeless youth, and youth in foster care or the juvenile justice system. Recent efforts to recruit volunteers to mentor vulnerable populations have been under way, as evidenced by DOJ mentoring grants in recent years for selected youth populations. Nonetheless, potential mentors may still be discouraged from working with youth facing serious personal difficulties and challenges in their communities. | Youth mentoring refers to a relationship between youth—particularly those most at risk of experiencing negative outcomes in adolescence and adulthood—and the adults who support and guide them. The origin of the modern youth mentoring concept is credited to the efforts of charity groups that formed during the Progressive era of the early 1900s to provide practical assistance to poor and juvenile justice-involved youth, including help with finding employment. Approximately 4.5 million youth today are involved in formal mentoring relationships through organizations such as Big Brothers Big Sisters (BBBS) of America. Contemporary mentoring programs seek to improve outcomes and reduce risks among vulnerable youth by providing positive role models who regularly meet with the youth in community or school settings. Some programs have broad youth development goals, while others focus more narrowly on a particular outcome. Evaluations of the BBBS program and studies of other mentoring programs demonstrate an association between mentoring and some positive outcomes, but the impact of mentoring and the ability for mentored youth to sustain gains over time are less certain. There is no single overarching federal policy on mentoring or an entity that coordinates mentoring supports across the federal government. The Federal Mentoring Council had served as a resource on mentoring issues for the federal government from 2006 to 2008 and is no longer active. Currently, the federal government provides funding for mentoring primarily through a grant program with annual appropriations for the program of about $78 million to $90 million in recent years. This grant is administered by the Department of Justice's (DOJ) Office of Juvenile Justice and Delinquency Prevention (OJJDP) within the Office of Justice Programs. Program funding has been used for research and direct mentoring services to select populations of youth, such as those involved or at risk of being involved in the juvenile justice system. Other federal agencies provide or are authorized to support mentoring as one aspect of a larger program. For example, select programs carried out by the Corporation for National and Community Service (CNCS) can provide mentoring, among other services. Youth ChalleNGe, an educational and leadership program for at-risk youth administered by the Department of Defense's (DOD's) National Guard, includes mentoring as an aspect of its program. Federal agencies also coordinate on federal mentoring issues. Two other federal programs—the Mentoring Children of Prisoners (MCP) program and Safe and Drug-Free Schools (SDFS) Mentoring program—provided a significant source of federal funding for mentoring services. However, the programs were short-lived: funding for the MCP program was discontinued beginning with FY2011, and funding for the SDFS program was discontinued beginning with FY2010. The MCP program was created in response to the growing number of children under age 18 with at least one parent incarcerated in a federal or state correctional facility. The program was intended, in part, to reduce the chance that mentored youth would use drugs and skip school. Similarly, the SDFS Mentoring program provided school-based mentoring to reduce school dropout and improve relationships for youth at risk of educational failure and with other risk factors. As part of its FY2010 budget justifications, the Obama Administration had proposed eliminating the program because of an evaluation showing that it did not have an impact on students overall in terms of interpersonal relationships, academic outcomes, and delinquent behaviors. Issues relevant to the federal role in mentoring include the limitations of research on outcomes for mentored youth, the quality of mentoring programs, and the potential need for additional mentors. |
On December 17, 2008, Cuban President Raúl 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 Raúl 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. Raúl 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 Martí. 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 Raúl " 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 Raúl 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 José Ramón Machado Venture as the Council's First Vice-President, making him the official successor to Raúl according to the Cuban Constitution. A physician by training, Machado is 77 years old and part of the older generation of so-called históricos, 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 Hernández, and journalists Jose Gabriel Ramón Castillo and Alejandro González 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. 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, Raúl 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 García Pérez, 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 Jiménez Posada to 12 years in jail, and independent journalist Oscar Sánchez Madan to four years. On February 8, 2007, Cuba extradited alleged Colombia drug cartel leader Luis Hernando Gómez Bustamante to Colombia. Gómez 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 René Gómez Manzano was released February 8, while dissidents Julio César López and Raúl 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 "Raúl 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." On February 24, 2008, Cuba's legislature selected Raúl 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, Raúl, 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. Raúl 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 Raúl 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, Raúl 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 Raúl to succeed his brother Fidel as head of government, the selection of José Ramón 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 históricos 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 Raúl, 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 Raúl 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 Raúl as the country's new Minister of the FAR, officially replacing Raúl 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 López Miera, the army's chief of staff, and Gen. Leopoldo Cintra Frías, 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 Raúl Castro has been characterized by a remarkable degree of stability. Although initially there were not any significant economic changes under Raúl, there were signs that changes could be coming. In July 2007 speech, Raúl 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, Raúl 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 Raúl " below.) While additional economic changes under Raúl 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 Raúl 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 José Ramón 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. 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 Raúl 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 Raúl. This was likely for a variety of reasons, but especially because of Raúl's designation by Fidel as successor in the party and his position as leader of the FAR. The FAR has been in control of the government's security apparatus since 1989 and has played an increasing role in Cuba's economy through the ownership of numerous business enterprises. The scenario of a military-led government 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. 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 Hernández, and journalists Jose Gabriel Ramón Castillo and Alejandro González 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 René Gómez Manzano and two others in February, and Jorge Luis García Pérez and six others in April. Incarcerated for 17 years, García Pérez 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 Sánchez, 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. Sánchez 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 Fariñas Hernández received the 2006 Cyber Dissident award from the Paris-based Reporters Without Borders. Fariñas went on a seven-month hunger strike in 2006, demanding broader Internet access for Cubans. 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 Yoaní Sánchez has received considerable international attention for her website, Generación Y, that includes commentary critical of the Cuban government. In May 2008, Sánchez 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. (Sánchez'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 Héctor Maseda Gutiérrez 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 González Alfonso its journalist of the year award. While in prison, Gutiérrez wrote a memoir that he managed to smuggle out of prison one page at a time. Before his imprisonment, González 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 Raúl 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 Raúl Castro's offer, the State Department said that the jailed dissidents in Cuba should be released immediately without any conditions. Named for the 19 th century priest, Felix Varela, who advocated independence from Spain and the abolition of slavery, the Varela Project has collected thousands of signatures supporting a national plebiscite for political reform in accordance with a provision of the Cuban Constitution. The referendum, if granted, would call for respect for human rights, an amnesty for political prisoners, private enterprise, and changes to the country's electoral law that would result in free and fair elections. The initiative is organized by Oswaldo Payá, who heads the Christian Liberation Movement. 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 Payá 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, Payá has been involved in another project known as the National Dialogue with the objective of getting Cubans involved in the process of discussing and preparing for a democratic transition. According to Payá, thousands of 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. Led by three prominent Cuban human rights activists—Marta Beatriz Roque, René Gómez 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." 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. When Raúl 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, Raúl 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 Raúl, while others stressed that only small marginal changes had occurred in Raúl's first year in power. In the aftermath of Raúl'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 Alarcón, 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 Raúl 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, Raúl 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 Raúl 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 Raúl 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, Raúl 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." 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. 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. 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. 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." In response to Fidel Castro's announcement that he was temporarily ceding power to his brother Raúl, President Bush issued a statement on August 3, 2006, that "the United States is absolutely committed to supporting the Cuban people's aspiration for democracy and freedom." The President urged "the Cuban people to work for democratic change" and pledged U.S. support to the Cuban people in their effort to build a transitional government in Cuba. U.S. officials indicated that there are no plans for the United States to "reach out" to the new leader. Secretary of State Condoleezza Rice reiterated U.S. support for the Cuban people in an August 4, 2006, statement broadcast on Radio and TV Marti. According to Secretary Rice, "All Cubans who desire peaceful democratic change can count on the support of the United States." Although there was some U.S. concern that political change in Cuba could prompt a migration crisis, there 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.) Raúl Castro asserted in an August 18, 2006, published interview that Cuba has "always been disposed to normalize relations on an equal plane," but at the same time he expressed strong opposition to current U.S. policy toward Cuba, which he described as "arrogant and interventionist." In response, Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon reiterated a U.S. offer to Cuba, first articulated by President Bush in May 2002, that the Administration was willing to work with Congress to lift U.S. economic sanctions if Cuba were to begin a political opening and a transition to democracy. According to Shannon, the Bush Administration remains prepared to work with Congress for ways to lift the embargo if Cuba is prepared to free political prisoners, respect human rights, permit the creation of independent organizations, and create a mechanism and pathway toward free and fair elections. In a December 2, 2006 speech, Raúl reiterated an offer to negotiate with the United States. He said that "we are willing to resolve at the negotiating table the longstanding dispute between the United States and Cuba, of course, provided they accept, as we have previously said, our condition as a country that will not tolerate any blemishes on its independence, and as long as said resolution is based on the principles of equality, reciprocity, non-interference, and mutual respect." On July 26, 2007, in a speech on Cuba's revolutionary anniversary (commemorating the 1953 attack on the Moncada military barracks), Raúl 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." 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. 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 Raúl 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. 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. 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 Piñar del Río 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 Raúl 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. 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. 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 Santería 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. 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. 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. 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. 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. 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 Piñar 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. 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 Gómez Bustamante to Colombia, an action that drew praise from U.S. Assistant Secretary of State for International Narcotics and Law Enforcement Affairs Anne Patterson. Gómez 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. 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. 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. 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. 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. 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. U.S.-government sponsored radio and television broadcasting to Cuba—Radio and TV Martí—began in 1985 and 1990 respectively. As spelled out in the Broadcasting Board of Governors FY2009 Budget Request , the objectives of Radio and TV Martí 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 Martí 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 Martí 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 Martí 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 Martí 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 Martí broadcasts six days weekly, and by late October 2006 the OCB inaugurated an aircraft-broadcasting platform known as Aero Martí with the capability of transmitting live broadcasts. Aero Martí 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 Martí. It provided a six-month contract with Radio Mambí (710 AM) in Florida, at a cost of $182,500, to broadcast one hour of Radio Martí programming five days a week from midnight to 1:00 am. Radio Mambí 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 Martí 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 Mambí subsequently expired in early 2008, whereas TV Martí continues to be shown on Channel 38. Both Radio and TV Martí 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 Martí, 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 Martí 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 Martí, including investigations by the U.S. Government Accountability Office, by a 1994 congressionally established Advisory Panel on Radio and TV Martí, 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 Mambí 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 Martí broadcasts. It recommended that the BBG's International Broadcasting Bureau should review and assess the leases with Radio Mambí 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 Martí, is the extent to which TV Martí can be viewed in Cuba. The report maintains that there is anecdotal evidence that the Aero Martí 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 Martí within Cuba were significantly higher than previously reported, especially for TV Martí. 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 Martí. 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 Martí can be viewed) in January and February 2007, with 10% of the visitors indicating that they could watch TV Martí via UHF for brief periods. Other observers contend that TV Martí 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 Martí." In interviews with the Associated Press , more than two dozen Cuban immigrants to Florida contended that while Radio Martí can be heard throughout Cuba, TV Martí can rarely be seen. Prior BBG commissioned phone surveys in Cuba from 2003, 2005, and November 2006 estimated past week TV Martí 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 Martí transmissions that began in late October, showed no statistically significant change from the 2003 and 2005 surveys. In the same surveys, Radio Martí had listenership of between 1% to 2% in the past week and 4% to 5% in the past month. 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 Martí. Since FY2005, however, the Broadcasting Board of Governors has not made such a distinction in its annual budget request. The Administration requested $36.279 million for Cuba broadcasting in FY2007, with $2.7 million of this to purchase an aerostat for broadcasting TV Marti. The request was slightly below the $37.129 million appropriated in FY2006 (when Congress funded the Administration's request 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 Martí. 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. 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 Martí 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. 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 Martí. 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. 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. 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. 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. 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. 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 Raúl Castro noted that, in the unlikely event that a prisoner would escape into Cuban territory, Cuba would capture the prisoner and return him to the base. The Cuban government, however, has expressed concerns about the treatment of prisoners at the U.S. base and has said it will keep pressing the international community to investigate the treatment of terrorist suspects. In January 2005, it denounced what it described as "atrocities" committed at the Guantanamo base. Some Members of Congress have called 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. 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. 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. 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]. 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. 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. 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]. 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 |
This report considers the constitutionality of federal tort reform legislation, such as the products liability and medical malpractice reform proposals that have been introduced for the last several Congresses. A tort is a civil (as opposed to a criminal) wrong, other than a breach of contract, that causes injury for which the victim may sue to recover damages. Torts include negligent acts, such as medical malpractice, and acts, such as selling defective products, for which one can be held strictly liable, that is, liable even in the absence of negligence. Although tort law is almost exclusively state law rather than federal law, Congress, as noted in the Appendix to this report, has enacted a number of tort reform statutes. Part I of this report discusses that the enactment of tort reform legislation generally would appear to be within Congress's power to regulate commerce, and would not appear to violate principles of due process or federalism. However, it may be unconstitutional for tort reform legislation to be applied to particular intrastate torts that do not substantially affect interstate commerce. In concluding that Congress has the authority to enact tort reform "generally," this usually refers to reforms that have been widely implemented at the state level, such as caps on damages and limitations on joint and several liability and on the collateral source rule. More specialized types of reforms are not necessarily immune from constitutional challenge. For example, some state courts have struck down statutes that provide that a portion of punitive damages awards must be paid to state funds (although other state courts have upheld such statutes). Part II of this report considers alternative dispute resolution options, some of which could have constitutional problems. This report also includes an Appendix describing selected federal tort reform statutes. This section examines the constitutionality of Congress's authority to enact tort reform, specifically its authority to enact legislation under the Commerce Clause. Other constitutional concerns that the courts have previously addressed with respect to tort reform, such as Due Process and Federalism, are also examined in this section. A federal statute is constitutional if it is enacted pursuant to a power of Congress enumerated in the Constitution and if it does not contravene any provision of the Constitution. The enumerated power pursuant to which federal tort reform could be enacted is Congress's power "To regulate Commerce with foreign Nations, and among the several States" (Art. I, § 8, cl. 3). One might ask, however, whether tort law is "commerce," and, if it is, whether federal tort reform legislation would be constitutional as applied to purely intrastate torts. The Supreme Court has held that Congress's power to regulate interstate commerce includes the power to regulate any activity that "exerts a substantial effect on interstate commerce" ( Wickard v. Filburn , 317 U.S. 111, 125 (1942)), or is within a " class of activities ... within the reach of federal power" ( Perez v. United States , 402 U.S. 146, 154 (1971) (emphasis in original)). Furthermore, "when Congress has determined that an activity affects interstate commerce, the courts need inquire only whether the finding is rational." Hodel v. Virginia Surface Mining & Reclamation Association, Inc. , 452 U.S. 264, 277 (1981). The Supreme Court has held that the business of insurance constitutes interstate commerce for purposes of the Commerce Clause ( United States v. South-Eastern Underwriters Association , 322 U.S. 533 (1944)), and, whether or not tort reform would in fact substantially affect the business of insurance, it would not appear irrational for Congress to conclude that it would. Consequently, there seems little doubt that tort reform legislation, in general, would be within Congress's commerce power. However, it may be unconstitutional for tort reform legislation to be applied to particular intrastate torts that arguably do not substantially affect interstate commerce. An example might be an assault by one individual upon another where the assault has no connection with organized crime or any commercial activity. This is because, in United States v. Lopez , 514 U.S. 549 (1995), the Supreme Court, for the first time since 1936, declared a federal statute unconstitutional for exceeding Congress's Commerce Clause authority. In Lopez , it struck down the Gun-Free School Zones Act of 1990, which made it a federal offense "for any individual knowingly to possess a firearm at a place that the individual knows, or has reasonable cause to believe, is a school zone." The Court in Lopez identified three broad categories of activity that Congress may regulate under its commerce power. First, Congress may regulate the use of the channels of interstate commerce. Second, Congress is empowered to regulate and protect the instrumentalities of interstate commerce, or things in interstate commerce, even though the threat may come only from intrastate activities. Finally, Congress' commerce authority includes the power to regulate those activities having a substantial relation to interstate commerce, i.e. , those activities that substantially affect interstate commerce. Id . at 558-559 (citations omitted). The Court in Lopez then noted that, if the Gun-Free School Zones Act of 1990 was "to be sustained, it must be under the third category as a regulation of an activity that substantially affects interstate commerce." Id . at 559. The act, however, had "nothing to do with 'commerce' or any sort of economic enterprise ... [and] is not an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated." Id . at 561. The same apparently could be said of some torts, such as the assault example suggested above. But it does not appear that it could be said with respect to torts that substantially affect commerce, such as the manufacture of defective products or medical malpractice. Since Lopez , the Supreme Court has decided two major cases on the reach of the Commerce Clause. In United States v. Morrison , 529 U.S. 598 (2000), the Court struck down a section of the Violence Against Women Act of 1994 that created a federal cause of action against any person "who commits a crime of violence motivated by gender," whether interstate or intrastate. In striking down the provision, the Court noted that "a fair reading of Lopez shows that the noneconomic, criminal nature of the conduct at issue was central to our decision in that case" ( id . at 610), and "[g]ender-motivated crimes of violence are not, in any sense of the phrase, economic activity." Id . at 613. In Lopez , the Court noted that "Congress normally is not required to make formal findings as to the substantial burdens that an activity has on interstate commerce." 514 U.S. at 562. It added, however: But to the extent that congressional findings would enable us to evaluate the legislative judgment that the activity in question substantially affected interstate commerce, even though no substantial effect was visible to the naked eye, they are lacking here. Id . at 563. In Morrison , the Court found Congress's findings "substantially weakened" by their reliance on a "but-for causal chain from the initial occurrence of violent crime ... to every attenuated effect upon interstate commerce." 529 U.S. at 615. The second recent major Supreme Court case on the reach of the Commerce Clause was Gonzales v. Raich , 545 U.S. 1 (2005), which upheld the application of the federal statute prohibiting the manufacture and possession of marijuana to the intrastate cultivation and use of marijuana for medicinal purposes. The Court found that there was a rational basis for concluding that the local cultivation and use of marijuana, "taken in the aggregate, substantially affect[s] interstate commerce." Id . at 22. The Court distinguished Lopez and Morrison on the ground that those two cases involved attempts to regulate activities that were not economic, whereas marijuana is a commodity "for which there is an established, and lucrative, interstate market," and "[p]rohibiting the intrastate possession or manufacture of an article of commerce is a rational (and commonly utilized) means of regulating commerce in that product." Id . at 26. Gonzales v. Raich appears to support Congress's power to regulate medical malpractice and products liability litigation, because the practice of medicine and the manufacture of products are activities that constitute interstate commerce, and it would be rational to conclude that litigation concerning these activities substantially affects interstate commerce. At one time, it might plausibly have been suggested that limitations on tort liability might violate the Fifth Amendment's protection against federal deprivations of property without due process of law. However, in 1978, the Supreme Court, upholding the Price-Anderson Act's limitation on liability for accidents resulting from the operation of privately owned nuclear power plants, wrote: Our cases have clearly established that "[a] person has no property, no vested interest, in any rule of common law." The "Constitution does not forbid the creation of new rights, or the abolition of old ones recognized by the common law, to attain a permissible legislative object," despite the fact that "otherwise settled expectations" may be upset thereby. Indeed, statutes limiting liability are relatively commonplace and have consistently been enforced by the courts. Duke Power Co. v. Carolina Environmental Study Group , 438 U.S. 59, 88, n.32 (1978) (citations omitted). In 1985, the Supreme Court, without written opinions, upheld the constitutionality of California statutes that placed caps in medical malpractice cases on, respectively, noneconomic damages and lawyers' contingent fees. In National League of Cities v. Usery , 426 U.S. 833, 855 (1976), the Supreme Court held that the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq ., which prescribes the federal minimum wage, could not constitutionally be applied to employees of state and municipal governments. There was no contention that Congress's commerce power was not broad enough to encompass this sort of regulation. The contention, rather, which the Court accepted, was that the Constitution contained an affirmative limitation on this exercise of the commerce power. The Court did not name any particular provision of the Constitution as imposing the limitation in this case, but did quote an earlier case that said that the Tenth Amendment "expressly declares the constitutional policy that Congress may not exercise power in a fashion that impairs the States' integrity or their ability to function effectively in a federal system." In any event, the Court held that the Commerce Clause did not authorize Congress "to directly displace the States' freedom to structure integral operations in areas of traditional governmental functions." Id . at 852. The only example the Court gave of an integral governmental function was the structuring of "employer-employee relationships in such areas as fire prevention, police protection, sanitation, public health, and parks and recreation." Id . at 851. It added, however, that "[t]hese examples are obviously not an exhaustive catalogue." Id . at 851 n.16. In Garcia v. San Antonio Metropolitan Transit Authority , 469 U.S. 528 (1985), the Court overruled National League of Cities , holding that the Fair Labor Standards Act could be applied to state and municipal employees. It concluded that the National League of Cities test for "integral operations in areas of traditional governmental functions" had proven both "impractical and doctrinally barren," and that the Court in 1976 had "tried to repair what did not need repair." Id . at 557. The Court found that it had "no license to employ freestanding conceptions of state sovereignty when measuring congressional authority under the Commerce Clause." Id . at 550. The Court did, however, "recognize that the States occupy a special and specific position in our constitutional system and that the scope of Congress' authority under the Commerce Clause must reflect that position." Id . at 556. Subsequently, the Court took a step back in the direction of National League of Cities . In New York v. United States , 505 U.S. 144 (1992), the Court invalidated a provision of the Low-Level Radioactive Waste Policy Amendments Act of 1985 because it required states not participating in a regional waste disposal compact to "take title" to waste or accept liability for generators' damages. The Court readily acknowledged that Congress may regulate the interstate market in disposal of low-level radioactive waste, but noted that the Commerce Clause "authorizes Congress to regulate interstate commerce directly; it does not authorize Congress to regulate state governments' regulation of interstate commerce." Id . at 166. The Court discussed two methods by which Congress may urge a State to adopt a legislative program consistent with federal interests.... First, under Congress' spending power, "Congress may attach conditions on the receipt of federal funds." ... Second, where Congress has the authority to regulate private activity under the Commerce Clause, we have recognized Congress' power to offer States the choice of regulating that activity according to federal standards or having state law pre-empted by federal regulation. Id . at 167. But if states decline to participate in a federal scheme, Congress may not force them to do so; to have its way, Congress must preempt state law and regulate directly. The "take title" provision, rather than presenting states with a choice between regulatory participation or accepting federal preemption, required states to choose "between two unconstitutionally coercive regulatory techniques.... Either way, 'the Act commandeers the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program.'" Id . at 176. Under New York v. United States , the only significant federalism restraint on exercise of the commerce power is that state regulatory processes may not be "commandeered" for federal purposes; there is no federalism restraint on federal regulation of businesses and individuals in areas traditionally regulated by states. The fact that Congress has traditionally deferred in large measure to state regulation of the insurance industry, for example, does not mean that Congress must continue to do so; Congress does not invade areas reserved to the states by the Tenth Amendment "simply because it exercises its authority ... in a manner that displaces the States' exercise of their police powers." Hodel v. Virginia Surface Mining & Reclamation Association, Inc. , 452 U.S. 264, 291 (1981) (upholding "steep slope" and other federal regulations of surface mining in spite of traditional state role in regulating land use). In the case of federal tort reform proposals such as reducing awards by amounts recovered from collateral sources, Congress would not be commandeering state regulatory processes. Congress would merely be enacting federal law that preempted substantive state law, and requiring states to enforce the federal law. In New York v. United States , the Court cited four cases that discuss "the well established power of Congress to pass laws enforceable in state courts." Id . at 178. The Court added: These cases involve no more than an application of the Supremacy Clause's provision that federal law "shall be the supreme Law of the Land," enforceable in every State. More to the point, all involve congressional regulation of individuals, not congressional requirements that States regulate. Federal statutes enforceable in state courts do, in a sense, direct state judges to enforce them, but this sort of federal "direction" of state judges is mandated by the text of the Supremacy Clause. Id . at 178-179. One of the four cases the Supreme Court cited, Second Employers ' Liability Cases , 223 U.S. 1 (1912), involved what today would be called tort reform. The case was a challenge to the Employers' Liability Act of 1908, which regulated the liability of common carriers by railroad to their employees; it was essentially a federal workers' compensation statute that preempted state tort law by, among other things, its "abrogation of the fellow-servant rule, the extension of the carrier's liability to cases of death, and the restriction of the defenses of contributory negligence and assumption of risk...." Id . at 49. One question before the Supreme Court was "whether rights arising under the congressional act may be enforced, as of right, in the courts of the States when their jurisdiction, as prescribed by local laws, is adequate to the occasion." Id . at 55. The Court answered the question as follows: When Congress, in the exertion of the power confided to it by the Constitution, adopted that act, it spoke for all the people and all the States, and thereby established policy for all. That policy is as much the policy of Connecticut as it the act had emanated from its own legislature, and should be respected accordingly in the courts of the State. Id . at 57. One tort reform that may be considered by Congress is to require that tort claims—particularly medical malpractice claims—be decided by alternative dispute resolution (ADR) procedures, such as binding arbitration, rather than by traditional jury trials. When Congress creates a federal cause of action, it is generally free to prescribe any procedure for its enforcement, with or without a jury trial. Traditional tort actions, however, such as medical malpractice and products liability, are not federal causes of action; they are governed by state law, even when they are brought in federal court on diversity grounds. State laws generally provide for jury trials in tort cases brought in state courts, and the Seventh Amendment to the United States Constitution generally provides for jury trials of cases arising under state law that are brought in federal court. The question has arisen, therefore, as to the extent to which the Constitution permits Congress to require alternative dispute resolution, in federal or state forums, of tort claims arising under state law. If Congress were to require ADR procedures in lieu of jury trials, then the Seventh Amendment would become a consideration. The Seventh Amendment guarantees the right to trial by jury "In Suits at common law, where the value in controversy shall exceed twenty dollars." Tort actions are suits at common law, so the Seventh Amendment applies to them. However, the Seventh Amendment, unlike most of the Bill of Rights, does not apply in state courts, where most tort actions are brought. It does apply, however, to cases arising under state law that are brought in federal court on diversity grounds. Because the Seventh Amendment applies to the federal courts, Congress may not eliminate the right to a jury trial in common law tort actions brought in federal court. It may, however, eliminate the right to bring common law tort actions in federal court. One way to do this would be to abolish diversity jurisdiction in tort suits; i.e., to prohibit tort suits arising under state law from being brought in federal courts. Another way would be to alter tort suits to the point that they could no longer be considered "Suits at common law" to which the Seventh Amendment would apply. Congress has done the latter with respect to torts inflicted upon federal workers in the workplace. The Federal Employees' Compensation Act, 5 U.S.C. §§ 8101 et seq. , provides for compensation to federal employees for disability or death resulting from work-related injuries, whether the result of a tort or otherwise. Employees can recover without proof of fault on the part of the government or its employees, but are prohibited from bringing a tort action arising under state law against the government or its employees. An injured employee seeking recovery must file a claim with the Secretary of Labor, who determines whether the employee is entitled to an award. There is no right to a jury trial, nor to judicial review. The Supreme Court has held that such an arrangement does not violate the Seventh Amendment because it "abolishes all right of recovery in ordinary cases, and therefore leaves nothing to be tried by jury." It appears, therefore, that Congress may prohibit common law tort suits from being brought in federal court, but may not take the less radical step of allowing them to be brought in federal court but prohibiting them from being heard by juries. If Congress is precluded from permitting common law tort suits to be heard by a federal court without a jury, then it also is precluded from permitting common law tort suits to be decided by a federally established arbitration panel or other federally established non-judicial forum. To do so would violate not only the Seventh Amendment; it would violate Article III of the Constitution. Article III, section 1, provides that the judicial power of the United States shall be vested in one supreme court, and in such inferior courts as Congress may establish, and that the judges of both the supreme and inferior courts shall hold life tenure "during good Behavior," at an irreducible compensation. Federal courts created under this provision are commonly known as "Article III courts." In addition, however, Congress, pursuant to its powers enumerated in Article I, may establish Article I "legislative" courts in "specialized areas having particularized needs and warranting distinctive treatment." Article I judges need not be granted life tenure or irreducible salaries. However, since only Article III courts may exercise the judicial power of the United States, Congress's power to create Article I courts is limited to the above "specialized areas." Except in these areas, Congress may not provide for federal judicial power to be exercised by federally established arbitration panels, or by any federal forum other than an Article III court. In Northern Pipeline Construction Co. v. Marathon Pipeline Co. , the Supreme Court "identified three situations in which Art. III does not bar the creation of legislative courts." These three situations are territorial courts, military courts, and courts created to adjudicate cases involving "public rights." With respect to the third situation, Marathon elaborated: [A] matter of public rights must at a minimum arise "between the government and others." In contrast, "the liability of one individual to another under the law as defined," is a matter of private rights. Our precedents clearly establish that only controversies in the former category may be removed from Art. III courts and delegated to legislative courts or administrative agencies for their determination. Private-rights disputes, on the other hand, lie at the core of the historically recognized judicial power. Subsequently, the Court rejected the notion that public rights must at a minimum arise between the government and others. In Granfinanciera, S.A. v. Nordberg , the Court wrote: The crucial question, in cases not involving the Federal Government, is whether "Congress, acting for a valid legislative purpose pursuant to its constitutional powers under Article I, [has] create[d] a seemingly 'private' right that is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary." If a statutory right is not closely intertwined with a federal regulatory program Congress has power to enact, and if that right neither belongs to nor exists against the Federal Government, then it must be adjudicated by an Article III court. The constitutional problem with placing common law tort actions in an Article I tribunal is equivalent to the constitutional problem with denying jury trials in such cases. In Granfinanciera, S.A. v. Nordberg , the Court noted that Congress cannot conjure away the Seventh Amendment by mandating that traditional legal [ i.e. , common law] claims be ... taken to an administrative tribunal. In certain situations, of course, Congress may fashion causes of action that are closely analogous to common-law claims and place them beyond the ambit of the Seventh Amendment by assigning their resolution to a forum in which jury trials are unavailable. Congress' power to do so is limited, however, just as its power to place adjudicative authority in non-Article III tribunals is circumscribed. That is, the situations in which Congress may deny the right to a jury trial are the same situations in which Congress may place a matter outside of an Article III court. In the Court's words: [I]f a statutory cause of action is legal [ i.e. , common law] in nature, the question whether the Seventh Amendment permits Congress to assign its adjudication to a tribunal that does not employ juries as factfinders requires the same answer as the question whether Article III allows Congress to assign adjudication of that cause of action to a non-Article III tribunal.... [I]f the action must be tried under the auspices of an Article III court, then the Seventh Amendment affords the parties a right to a jury trial whenever the cause of action is legal [ i.e. , common law] in nature. Conversely, if Congress may assign the adjudication of a statutory cause of action to a non-Article III tribunal, then the Seventh Amendment poses no independent bar to the adjudication of that action by a nonjury factfinder. Whether a federal statute requiring tort claims to be decided by an Article I tribunal would violate Article III, and whether it would violate the Seventh Amendment, amount to the same question. But what is the answer? Before examining some Supreme Court decisions that may shed light on it, we should emphasize that the question arises only if Congress were to establish a federal non-Article III forum to hear traditional tort claims. If Congress instead were simply to prohibit states from using jury trials in tort cases, but did not establish an Article I forum for such cases, this would not raise an Article III/ Seventh Amendment issue. This is because state courts were created pursuant to state laws or constitutions and do not exercise federal judicial power, and because the Seventh Amendment does not apply to them. Yet, such an action by Congress raises a different constitutional issue of whether Congress may alter procedures that state courts use to adjudicate state causes of action. This is discussed below in " F. Constitutionality of Prohibiting States from Using Jury Trials, Without Establishment of a Federal Non-Article III Forum ." But to what extent may Congress require that tort claims be decided by an Article I tribunal? In Thomas v. Union Carbide Agricultural Products Co. , the Supreme Court noted that Northern Pipeline had established "that Congress may not vest in a non-Article III court the power to adjudicate, render final judgment, and issue binding orders in a traditional contract action arising under state law, without consent of the litigants, and subject only to ordinary appellate review." The same undoubtedly applies to traditional tort actions arising under state law. However, this quotation suggests that Congress may vest tort claims in a non-Article III forum if it does at least one of two things: (1) alters tort claims so that they are no longer traditional common law actions, or (2) allows de novo review, with the right to a jury trial, of traditional common law tort actions, rather than allow merely traditional appellate review. In other words, Congress apparently may require that traditional common law tort actions initially be heard in a federal non-Article III forum, without a jury, provided it allows a dissatisfied party to then seek a jury trial. However, if Congress wishes to limit judicial review of tort claims, then it apparently must alter tort claims so that they are no longer traditional common law tort actions. To what extent must Congress alter tort claims in order to place them in a non-Article III forum and not provide de novo review? In Granfinanciera , the Court held that "Congress may fashion causes of action that are closely analogous to common-law claims and place them beyond the gambit of the Seventh Amendment" if, in cases not involving the federal government, the private right that Congress creates "is so closely integrated into a public regulatory scheme as to be a matter appropriate for agency resolution with limited involvement by the Article III judiciary." In Thomas , the Court indicated that such limited involvement may consist in judicial review that is something less than de novo review with the right to a jury trial. In Thomas , the Court rejected the notion that a matter of public rights must at a minimum arise between the government and others. Instead, it held "that practical attention to substance rather than doctrinaire reliance on formal categories should inform application of Article III." Thomas involved a provision of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 7 U.S.C. §§ 136 et seq . FIFRA requires manufacturers, as a precondition for registration of a pesticide, to submit research data to the Environmental Protection Agency (EPA) concerning the product's health, safety, and environmental effects. Congress wished to allow the EPA to consider data submitted by one registrant to support the registration of the same or a similar product by another registrant, and therefore "provided statutory authority for the use of previously submitted data as well as a scheme for sharing the costs of data generation." In order to avoid a "logjam of litigation that resulted from controversies over data compensation," Congress provided for "a system of negotiation and binding arbitration to resolve compensation disputes among registrants." "The arbitrator's decision is subject to judicial review only for 'fraud, misrepresentation, or other misconduct.'" The Court considered several factors in determining that an Article III tribunal was not required to resolve these disputes. It found mandatory binding arbitration permissible in part because the right to compensation for shared data "does not depend on or replace a right to ... compensation under state law." The right created by FIFRA is not purely a "private" right, but bears many of the characteristics of a "public" right. Use of a registrant's data to support a follow-on [ i.e. , subsequent] registration serves a public purpose as an integral part of a program safeguarding the public health. Congress has the power, under Article I, to authorize an agency administering a complex regulatory scheme to allocate costs and benefits among voluntary participants in the program without providing an Article III adjudication. Thus, to use the words of the Court in Granfinanciera a few years later, Thomas involved a private right that was "closely integrated into a public regulatory scheme." In addition, the Court in Thomas cited the fact that "no unwilling defendant is subjected to judicial enforcement power as a result of the agency 'adjudication,'" and that FIFRA, while it limits judicial review, it "does not preclude review of the arbitration proceeding by an Article III court." In Commodity Futures Trading Commission v. Schor , the Supreme Court again emphasized that, in determining whether an Article III tribunal is required, it has declined to adopt formalistic and unbending rules. Although such rules might lend a greater degree of coherence to this area of law, they might also unduly restrict Congress' ability to take needed and innovative action pursuant to its Article I powers. Thus, in reviewing Article III challenges, we have weighed a number of factors, none of which has been deemed determinative, with an eye to the practical effect that the congressional action will have on the constitutionally assigned role of the federal judiciary. The opinion in Schor reveals how nonformalistic the Court's approach is in this area: Among the factors upon which we have focused are the extent to which the "essential attributes of judicial power" are reserved to Article III courts, and, conversely, the extent to which the non-Article III forum exercises the range of jurisdiction and powers normally vested only in Article III courts, the origins and importance of the right to be adjudicated, and the concerns that drove Congress to depart from the requirements of Article III. The Court in Schor upheld a congressional grant of adjudicatory powers to a federal agency, the Commodity Futures Trading Commission (CFTC). The Court emphasized that the CFTC's adjudicatory powers depart from the traditional agency model in just one respect: the CFTC's jurisdiction over common law counterclaims.... Aside from its authorization of counterclaim jurisdiction, the [statute] leaves far more of the "essential attributes of judicial power" to Article III courts than did that portion of the Bankruptcy Act found unconstitutional in Northern Pipeline . Specifically, CFTC orders are reviewed under the "weight of the evidence" standard, "rather than the more deferential standard found lacking in Northern Pipeline ." Furthermore, "[t]he legal rulings of the CFTC ... are subject to de novo review." In Northern Pipeline the Court found unconstitutional the delegation to an Article I tribunal—the United States Bankruptcy Court—of the adjudication of the right to recover contract damages. Although discharge in bankruptcy "may well be a 'public right'" and if it is may be delegated to an Article I court, the right to recover contract damages is a state-created private right and as such may not be delegated to an Article I court. In response to the argument that "the bankruptcy court is merely an 'adjunct' to the district court, and that the delegation of certain adjudicative functions to the bankruptcy court is accordingly consistent with the principle that the judicial power of the United States must be vested in Art. III courts," the Supreme Court observed that "the judgments of the bankruptcy courts are apparently subject to review only under the more deferential 'clearly erroneous' standard." Such limited review gave the bankruptcy courts more power than was permissible for an "adjunct." In Granfinanciera , the Court held that the Seventh Amendment requires a jury trial in a suit by a trustee in bankruptcy to recover an allegedly fraudulent monetary transfer. It reached this conclusion because a bankruptcy trustee's right to recover a fraudulent conveyance under 11 U.S.C. § 548(a)(2) seems to us more accurately characterized as a private right rather than a public right as we have used those terms in our Article III decisions. In Northern Pipeline Construction Co .... the plurality noted that ... state-law causes of action for breach of contract or warranty are paradigmatic private rights, even when asserted by an insolvent corporation in the midst of Chapter 11 reorganization proceedings. It was not sufficient that Congress had "reclassified a pre-existing, common-law cause of action.... Congress cannot eliminate a party's Seventh Amendment right to a jury trial merely by relabeling the cause of action to which it attaches and placing exclusive jurisdiction in an administrative agency or a specialized court of equity." "Nor," the Court added, "can Congress' assignment be justified on the ground that jury trials of fraudulent conveyance actions would 'go far to dismantle the statutory scheme,' or that bankruptcy proceedings have been placed in 'an administrative forum with which the jury would be incompatible.'" Furthermore, "[i]t may be that providing jury trials in some fraudulent conveyance actions ... would impede swift resolution of bankruptcy proceedings and increase the expense of Chapter 11 reorganizations. But 'these considerations are insufficient to overcome the clear command of the Seventh Amendment.'" In Thomas , the Court upheld the use of a non-Article III forum because, among other things, the right created was "not purely a 'private' right," and limited judicial review by an Article III court was permitted. In Schor , the Court upheld the use of a non-Article III forum because, among other things, its adjudicatory powers over common law actions were limited, its orders were reviewed by an Article III court under a relatively non-deferential standard, and its legal rulings were subject to de novo review. In Northern Pipeline , the Court struck down the use of an Article I forum because it was allowed to decide state-created private rights, and its decisions were subject only to deferential judicial review. In Granfinanciera , the Court struck down the use of an Article I forum because the right that was adjudicated was a private right. These cases show that, as the Court wrote in Schor , "in reviewing Article III challenges, we have weighed a number of factors, none of which has been deemed determinative, with an eye to the practical effect that the congressional action will have on the constitutionally assigned role of the federal judiciary." However, the major factors appear to be the extent to which the cause of action constitutes a private right, and the degree of review by an Article III tribunal that is provided. If a cause of action is a traditional common law cause of action, not closely integrated into a federal regulatory scheme, then de novo review by an Article III court, with a jury trial, would apparently be required. If the cause of action is altered somewhat, but still resembles a common law action, then something less than de novo review by an Article III court might be adequate, provided the Article III court is not required to be too deferential to the finding of the non-Article III forum. If the cause of action is altered to the point that it no longer resembles a common law tort, and is closely integrated into a federal regulatory scheme, then adjudication by an Article I forum, without judicial review, may be permissible. It does not seem possible to be more specific than this, as "bright-line rules cannot effectively be employed to yield broad principles applicable to all Article III inquiries." As noted above, if Congress were to prohibit the states from using jury trials in tort cases, but did not establish a federal non-Article III forum to hear such cases, then it would raise no Article III / Seventh Amendment issue, but it would raise another constitutional issue. This issue is whether Congress, even where it would otherwise have the power to regulate under the Commerce Clause, may alter the procedures that state courts use to adjudicate state causes of action. In New York v. United States , discussed above, the Court prohibited Congress from using its commerce power to commandeer state regulatory processes. Although, as noted, this restriction would not seem to preclude Congress from preempting substantive state law, it might be argued that eliminating jury trials, constituting as it would an interference with state court procedure, might amount to commandeering state regulatory processes. This distinction between substance and procedure also finds support in the Supreme Court's approach to diversity cases, which are cases arising under state law which, because they are between citizens of different states and the amount in controversy exceeds $50,000, may be heard in federal court. 28 U.S.C. § 1332. In Erie Railroad Co. v. Tompkins , 304 U.S. 64, 78 (1937), the Supreme Court held that, in diversity cases, a federal court is bound by the substantive, as opposed to the procedural, law of the state in which it sits, "whether the law of the State shall be declared by its Legislature in a statute or by its highest court in a decision." In Guaranty Trust Co. v. New York , 326 U.S. 99 (1945), the Supreme Court held that statutes of limitations are substantive for this purpose, and that therefore federal courts must apply state statutes of limitations in diversity cases. By "substantive," the Court meant that the statute could substantially affect the outcome of the litigation. A statute of limitations can substantially affect the outcome of litigation because it can preclude an action from even being brought. By contrast, the right to a jury trial does not have a comparably substantial effect, because in a non-jury trial a judge presumably applies the same law to the same facts as a jury would in a jury trial. In diversity cases, "[i]t is now clear that federal law determines whether there is a right to a jury trial in a case in federal court and that state law is wholly irrelevant." Although the Seventh Amendment, rather than the substantive/procedural distinction, is the main factor here, one could nevertheless argue that, if federal courts may use the federal rule with respect to jury trials of state causes of action, then state courts may not be preempted from using their own rules with respect to jury trials of state causes of action. In addition, "[t]he general rule, bottomed deeply in belief in the importance of state control of state judicial procedure, is that federal law takes the state courts as it finds them. For example, state rules about the ways in which claims for relief, or defenses, or counter-defenses, must be asserted may ordinarily be applied also to federal claims and defenses and counter-defenses, providing only that the rules are not so rigorous as, in effect, to nullify the asserted rights." This general rule seems to have operated in a 1950 case in which the Supreme Court held that a state may "deny access to its courts to persons seeking recovery under the Federal Employers' Liability Act if in similar cases the State for reasons of local policy denies resort to its courts and enforces its policy impartially ... so as not to involve a discrimination against Employers' Liability Act suits...." There is an apparently strong argument, however, in support of Congress's power to eliminate jury trials in state causes of action heard in state courts. The Supreme Court has held that section 2 of the Federal Arbitration Act, 9 U.S.C. § 2, preempts conflicting state law. This statute provides that agreements to arbitrate "shall be valid, irrevocable, and enforceable," and thus effectively eliminates the right to a jury trial in some state cases. In Southland Corp. v. Keating , 465 U.S. 1, 11 (1984), the Supreme Court found that "[t]he Federal Arbitration Act rests on the authority of Congress to enact substantive rules under the Commerce Clause," and that it preempted a state statute that had been interpreted to require judicial consideration of claims brought under a state statute. In Perry v. Thomas , 482 U.S. 483 (1987), and in Doctor ' s Associates, Inc. v. Casarotto , 517 U.S. 681 (1996), the Supreme Court again found the Federal Arbitration Act to preempt conflicting state law. If Congress can eliminate judicial consideration of a case, then arguably it can eliminate jury consideration while retaining judicial consideration. Employers Liability Act of 1908, 35 Stat. 65, c. 149 This statute regulated the liability of common carriers by railroad to their employees; it was essentially a federal workers' compensation statute that preempted state tort law by, among other things, its "abrogation of the fellow-servant rule, the extension of the carrier's liability to cases of death, and the restriction of the defenses of contributory negligence and assumption of risk...." Mondou v. New York, N.H. & H.R. Co. , 223 U.S. 1, 49 (1912). In this case, the Supreme Court upheld the constitutionality of the statute, including the power of Congress to regulate commerce to override state tort law. The Court wrote: When Congress, in the exertion of the power confided to it by the Constitution, adopted that act, it spoke for all the people and all the States, and thereby established policy for all. That policy is as much the policy of Connecticut as it the act had emanated from its own legislature, and should be respected accordingly in the courts of the State. Id . at 57. Price-Anderson Act, 42 U.S.C. § 2210(e) This statute limits the tort liability of Nuclear Regulatory Commission licensees (such as nuclear power plants) and Department of Energy nuclear contractors for a single "nuclear incident." For example, for nuclear power plants, the liability limit is pegged to the amount of financial protection required of the licensee under a two-tiered system of privately available insurance plus industrywide pro-rata contributions. That total, including a 5 percent "surcharge" provided for in the act, is currently $9.09 billion. In Duke Power Co. v. Carolina Environmental Study Group , 438 U.S. 59, 88, n.32 (1978), the Supreme Court upheld the constitutionality of the act, writing: Our cases have clearly established that "[a] person has no property, no vested interest, in any rule of common law." The "Constitution does not forbid the creation of new rights, or the abolition of old ones recognized by the common law, to attain a permissible legislative object," despite the fact that "otherwise settled expectations" may be upset thereby. Indeed, statutes limiting liability are relatively commonplace and have consistently been enforced by the courts [citations omitted]. Atomic Testing Liability Act, 42 U.S.C. § 2212 This 1990 statute, which reenacted the Warner Amendment, § 1631 of P.L. 98-525 (1984), made the Federal Tort Claims Act the exclusive remedy for suits against government contractors who carried out atomic weapons testing programs that caused injury or death due to exposure to radiation. In other words, this law immunized the contractors from liability under state tort law and made the United States liable in their place. Two federal courts of appeals upheld the constitutionality of the Warner Amendment. Other Statutes that Substitute the United States as Defendant The Atomic Testing Liability Act is only one of many statutes that substitute the United States as the defendant in place of a private entity or person in suits arising under state tort law. The Federal Tort Claims Act itself immunizes federal employees from suits under state tort law for acts committed within the scope of employment. 28 U.S.C. § 2679(b)(1). The National Swine Flu Immunization Program of 1976, P.L. 94-380 , made the United States liable for injuries arising out of the administration of the swine flu vaccine to the extent that vaccine manufacturers or distributors would be liable under state law, though it allowed the United States, if it paid any claim, to sue a vaccine manufacturer or distributor whose negligent conduct had caused the injury giving rise to such claim. Congress has also enacted more than 50 statutes that provide that various non-federal individuals or entities shall be treated as federal employees for purposes of liability. These statutes generally apply to volunteers with various federal programs, including federally funded medical clinics and their officers and employees, "free clinic health professionals," members and personnel of the National Gambling Impact Study Commission, Peace Corps volunteers, and volunteers under the Volunteers in the National Forests Act of 1972 and the Volunteers in the Parks Act of 1969. A recent enactment of this type of provision was section 304 of the Homeland Security Act of 2002, P.L. 107-296 , which treats manufacturers and administrators of smallpox vaccine as federal employees for liability purposes. Volunteers and entities covered by these statutes and others may not be sued for torts committed within the scope of their employment, but victims of their negligence may sue the United States under the Federal Tort Claims Act. The United States' liability, however, is limited in various ways. The United States may not, for example, be held liable for discretionary functions (i.e., policy decisions), or for punitive damages. National Childhood Vaccine Injury Compensation Act of 1986 42 U.S.C. §§ 300aa-1 to 300aa-34 This statute prohibits suits under state tort law against manufacturers and administrators of specified vaccines unless the claimant first files a claim for limited (e.g., $250,000 cap on pain and suffering) no-fault compensation with the National Vaccine Injury Compensation Program, which is "administered by a Director selected by the Secretary" of Health and Human Services. Claims are adjudicated by the United States Court of Federal Claims and are paid by the Vaccine Injury Compensation Trust Fund, which is funded by a tax on vaccines. A claimant dissatisfied with recovery under the Program may sue under state tort law, but the statute imposes various limitations on such suits; for example, manufacturers are not liable for failure to provide warnings directly to the injured party, as warnings to the person administering the vaccine are made sufficient. 42 U.S.C. § 300aa-22(c). Comprehensive Environmental Response, Compensation, and Liability Act (Superfund) This statute overrides state tort law in sections 112(e) and 309(a), 42 U.S.C. §§ 9612(e) and 9658(a). Section 112(e) provides that, "[r]egardless of any State statutory or common law to the contrary," no person who asserts a claim against the Fund shall be deemed to have waived any other claim arising from the same transaction. Section 309(a) provides that, "[i]n the case of any action brought under State law for personal injury, or property damages, which are caused or contributed to by exposure to any hazardous substance ... if the applicable limitations period for such action (as specified in the State statute of limitations or under common law) provides a commencement date which is earlier than the federally required commencement date," then the federally required commencement date shall govern. General Aviation Revitalization Act, P.L. 103-298 (1994), 49 U.S.C. § 40101 note P.L. 103-298 bars any products liability suit against a manufacturer involving planes more than 18 years old with fewer than 20 seats that are not used in scheduled service. Cruise Ship Liability, P.L. 104-324 , § 1129 (1996) This section of the Coast Guard Authorization Act of 1996 ( P.L. 104-324 ) added 46 U.S.C. App. § 183(g): In a suit by any person in which the operator or owner of a vessel or employer of a crewmember is claimed to have vicarious liability for medical malpractice with regard to a crewmember occurring at a shoreside facility ... such operator, owner, or employer shall be entitled to rely upon any and all statutory limitations of liability ... in the State of the United States in which the shoreside medical care was provided. Section 1129 also added 46 U.S.C. App. § 183c(b) to allow: contracts, agreements, or ticket conditions of carriage with passengers which relieve a crewmember, manager, agent, master, owner, or operator of a vessel from liability for infliction of emotional distress, mental suffering, or psychological injury.... Such liability, however, may not be limited if the emotional distress, mental suffering, or psychological injury was the result of physical injury to the claimant or the result of the claimant's having been at actual risk of physical injury, if such injury or risk was caused by the negligence or fault of a crewmember or the manager, agent, master, owner, or operator. Such liability also may not be limited if it the emotional distress, mental suffering, or psychological injury was intentionally inflicted, or involved sexual harassment, sexual assault, or rape by a crewmember or the manager, agent, master, owner, or operator. Bill Emerson Good Samaritan Food Donation Act, P.L. 104-210 (1996), 42 U.S.C. § 1791 P.L. 104-210 provides that a person ("an individual, corporation, partnership, organization, association, or governmental entity") or a gleaner ("a person who harvests for free distribution to the needy"), except in cases of gross negligence or intentional misconduct, "shall not be subject to civil or criminal liability arising from the nature, age, packaging, or condition of apparently wholesome food or an apparently fit grocery product that the person or gleaner donates in good faith to a non-profit organization for ultimate distribution to needy individuals." The nonprofit organization that receives the donation shall also not be liable, except in cases of gross negligence or intentional misconduct. The statute defines "gross negligence" as "voluntary and conscious conduct (including a failure to act) by a person who, at the time of the conduct, knew that the conduct was likely to be harmful to the health or well-being of another person." The Federal Food Donation Act of 2008, P.L. 110-247 , 42 U.S.C. § 1792, provides that "all [federal] contracts above $25,000 for the provision, service, or sale of food in the United States, or for the lease or rental of Federal property to a private entity for events at which food is provided in the United States, shall include a clause that" states, "An executive agency (including an executive agency that enters into a contract with a contractor) and any contractor making donations pursuant to this Act [ P.L. 110-247 ] shall be exempt from civil and criminal liability to the extent provided under the Bill Emerson Good Samaritan Food Donation Act (42 U.S.C. 1791)." As federal agencies and contractors are already covered by the Bill Emerson Good Samaritan Food Donation Act, the effect of the 2008 statute is to alert contractors to that fact. Volunteer Protection Act of 1997, P.L. 105-19 (1997), 42 U.S.C. §§ 14501-14505 P.L. 105-19 provides immunity for ordinary negligence to volunteers for nonprofit organizations or governmental entities acting within the scope of their responsibilities, provided that, "if appropriate or required, the volunteer was properly licensed, certified, or authorized by the appropriate authorities...." The immunity does not apply to "willful or criminal conduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the volunteer." This liability limitation does not apply to nonprofit organizations or governmental entities; they may be held vicariously liable for the ordinary negligence of their volunteers, even if volunteers are immune. Nonprofit organizations and governmental entities, however, may continue to benefit from any liability limitations provided by state law. The Volunteer Protection Act of 1997 also eliminates joint and several liability for noneconomic damages with respect to volunteers' work for nonprofit organizations and governmental entities, and allows punitive damages only where the plaintiff establishes "by clear and convincing evidence that the harm was proximately caused by an action of such volunteer which constitutes willful or criminal misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed." The Volunteer Protection Act of 1997 preempts inconsistent state laws except to the extent that such laws provide additional protection from liability to volunteers, nonprofit organizations, or governmental entities. In addition, it allows states to enact statutes "declaring the election of such State that this Act shall not apply to such civil action in the State." If they do so, then the statute would not apply in any action if all parties to the action are citizens of the state. Amtrak Reform and Accountability Act of 1997, P.L. 105-134 , § 161 (1997), 49 U.S.C. § 28103 P.L. 105-134 limits damages in rail accidents. It permits punitive damages to be awarded, to the extent permitted by applicable state law, "only if the plaintiff establishes by clear and convincing evidence that the harm that is the subject of the action was the result of conduct carried out by the defendant with a conscious, flagrant indifference to the rights or safety of others." It also provides: "The aggregate allowable awards to all rail passengers, against all defendants, for all claims, including claims for punitive damages, arising from a single accident or incident, shall not exceed $200,000,000." Aviation Medical Assistance Act of 1998, P.L. 105-170 (1998), 49 U.S.C. § 44701 note P.L. 105-170 , § 5, provides that an air carrier shall not be liable for damages "arising out of the performance of the air carrier in obtaining or attempting to obtain the assistance of a passenger in an in-flight medical emergency, or out of the acts or omissions of the passenger rendering the assistance, if the passenger is not an employee or agent of the carrier and the carrier in good faith believes that the passenger is a medically qualified individual." This statute also immunizes an individual in the above circumstances "unless the individual, while rendering such assistance, is guilty of gross negligence or willful misconduct." Biomaterials Access Assurance Act of 1998, P.L. 105-230 (1998), 21 U.S.C. §§ 1601-1606 P.L. 105-230 limits the products liability under state law of biomaterials suppliers, which it defines as "an entity that directly or indirectly supplies a component part or raw material for use in the manufacture of an implant." A biomaterials supplier may be held liable under state law only if it is the manufacturer of the implant; if it is the seller of the implant in certain limited situations; or, if it is neither the manufacturer nor seller of the implant, then only if it supplied raw materials or component parts for use in the implant that either did not constitute the product described in the contract or failed to meet specifications as provided in the statute. The statute also contains special procedures for the dismissal of civil actions against biomaterials suppliers. Y2K Act, P.L. 106-37 (1999), 15 U.S.C. §§ 6601-6617 P.L. 106-37 limits contractual and tort liability under state law in suits, other than those for personal injury or wrongful death, "in which the plaintiff's alleged harm or injury arises from or is related to an actual or potential Y2K failure...." Limitations on tort liability include (1) a cap on punitive damages, of the lesser of three times the amount awarded for compensatory damages or $250,000, but the cap applies only to defendants who are individuals whose net worth does not exceed $500,000 or organizations with fewer than 50 full-time employees, (2) a "clear and convincing evidence" standard for the recovery of punitive damages, (3) the elimination of joint and several liability except in cases of specific intent to injure or knowing commission of fraud, and except in some cases in which damages against a defendant are uncollectible, and (4) except in the case of an "intentional tort arising independent of a contract," a prohibition on damages for economic loss, including lost profits or sales. Cardiac Arrest Survival Act of 2000, P.L. 106-505 , § 404 (2000), 42 U.S.C. § 238q P.L. 106-505 provides good Samaritan protections regarding automated external defibrillators (AEDs). It provides that, with exceptions, "any person who uses or attempts to use an automated external defibrillator device on a victim of a perceived medical emergency is immune from civil liability; and in addition, any person who acquired the device is immune from such liability," except in specified circumstances. A defendant shall not have immunity under this statute if the defendant (1) commits willful or criminal misconduct or gross negligence, (2) is a licensed or certified health professional acting within the scope of employment or agency, (3) is a hospital or clinic whose employee or agent used the AED while acting within the scope of employment or agency, or (4) is an acquirer of the AED who leased it to a health care entity, and the harm was caused by an employee or agent of the entity. This statute supersedes state law only to the extent that a state has no statute or regulations that provide persons within the class protected by this statute with immunity for civil liability arising from the use of AEDs. Air Transportation Safety and System Stabilization Act, 49 U.S.C. § 44303(b) This statute provides that, "[f]or acts of terrorism committed on or to an air carrier during the period beginning on September 22, 2001, and ending on December 31, 2008, the Secretary [of Transportation] may certify that the air carrier was a victim of an act of terrorism and ... shall not be responsible for losses suffered by third parties (as referred to in section 205.5(b)(1) of title 14, Code of Federal Regulations) that exceed $100,000,000, in the aggregate, for all claims by such parties arising out of such act." If the Secretary so certifies, making the air carrier not liable for an amount that exceeds $100 million, then "the Government shall be responsible for any liability above such amount. No punitive damages may be awarded against an air carrier (or the Government taking responsibility for an air carrier under this subsection) under a cause of action arising out of such act." This statute was enacted by P.L. 107-42 , § 201(b), and sunset on March 21, 2002. It has been extended, however, most recently by P.L. 110-161 , Div. K, § 114(b), 121 Stat. 2381 (2007), through 2008. The section in the Code of Federal Regulations that § 201(b) mentions refers to "persons, including non-employee cargo attendants, other than passengers"; these are apparently the "third parties" to whom § 201(b) refers. September 11 th Victim Compensation Fund of 2001, 49 U.S.C. § 40101 note P.L. 107-42 , Title IV, as amended, created a federal program to compensate victims of the September 11, 2001 terrorist attacks. A victim or the victim's estate may seek no-fault compensation from the program or may bring a tort action against an airline or any other party, but may not do both, except that a victim or the victim's estate may recover under the program and also sue "any person who is a knowing participant in any conspiracy to hijack an aircraft or commit any terrorist act." The number of people who may recover by way of lawsuits may be limited, however, as the statute limits the liability of air carriers (including air transportation security companies and their affiliates), aircraft manufacturers, airport sponsors, or persons with an interest in the World Trade Center on September 11, 2001, to the limits of their liability insurance coverage. The statute gives the United States a right of subrogation with respect to any claim it pays under the compensation program. This means that the United States can recover amounts it pays under the compensation program from any party whom the victim could sue (i.e., a terrorist) or would have been able to sue had she or he not filed a claim under the program. The United States' subrogation rights, however, are limited to the caps mentioned above. On March 7, 2002, the Department of Justice issued its final rule implementing the September 11 th Victim Compensation Fund. The final day to file a claim under the fund was December 22, 2003. Paul D. Coverdell Teacher Protection Act of 2001, P.L. 107-110 , §§ 2361-2368 P.L. 107-110 limits the liability of teachers, which it defines to include instructors, principals, administrators, members of a school board, and other educational professionals or nonprofessionals who work in a school and who are called on to maintain discipline or ensure safety. The liability limitations, however, apply only in states that receive funds under "this Act" (apparently P.L. 107-110 ) and that do not enact a statute declaring that the act shall not apply in the state. The act provides that no teacher shall be liable for ordinary negligence in performing actions that are legal and "in furtherance of efforts to control discipline, expel, or suspend a student or maintain order or control in the classroom or school." A teacher may be liable for "willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the teacher." The act does not limit liability for harm caused by a teacher operating a motor vehicle, vessel, aircraft, or other vehicle for which the state requires an operator or owner to possess an operator's license or to maintain insurance, and it does not apply "to misconduct during background investigations, or during other actions, involved in the hiring of a teacher." In cases in which a teacher may be held liable, punitive damages may not be awarded "unless the claimant establishes by clear and convincing evidence that the harm was proximately caused by ... willful or criminal misconduct, or a conscious flagrant indifference to the rights or safety of the individual harmed." In addition, joint and several liability shall not apply to noneconomic damages. Multiparty, Multiforum Trial Jurisdiction Act of 2002, P.L. 107-273 , § 11020 P.L. 107-273 , at 28 U.S.C. § 1369, provides that, under specified circumstances, federal "district courts shall have original jurisdiction of any civil action involving minimal diversity between adverse parties that arises from a single accident, where at least 75 natural persons have died in the accident at a discrete location." Homeland Security Act of 2002, P.L. 107-296 , §§ 304, 863, 890, 1201, 1402, and 1714-1717 P.L. 107-296 includes six different tort liability provisions (some mentioned as amendments to statutes listed above), which limit the liability of, respectively, smallpox vaccine manufacturers and administrators, sellers of anti-terrorism technology (the SAFETY Act), air transportation security companies and their affiliates, air carriers, Federal flight deck officers, and manufacturers and administrators of components and ingredients of various vaccines. This last liability limitation—an amendment to the National Childhood Vaccine Injury Act of 1986, which appeared in §§ 1714-1717 of the Homeland Security Act of 2002—was repealed by P.L. 108-7 , Division L, § 102. SAFETY Act, P.L. 107-296 , § 863 The Support Anti-terrorism by Fostering Effective Technologies Act of 2002, or the SAFETY Act, ( P.L. 107-296 ), is one of the tort liability provisions in the Homeland Security of 2002. Section 863 created a federal cause of action against sellers of anti-terrorism technologies for claims arising out of "an act of terrorism when qualified anti-terrorism technologies have been deployed in defense against or recovery from such act...." This federal cause of action preempts state tort law and provides for more limited liability than does state tort law; for example, it prohibits punitive damages, joint and several liability for noneconomic damages, and use of the collateral source rule. The federal cause of action applies only to technology approved by the Secretary of Homeland Security. PROTECT Act, P.L. 108-21 , § 305 Section 305 of the Prosecutorial Remedies and Other Tools to end the Exploitation of Children Today Act of 2003, or the PROTECT Act ( P.L. 108-21 ), provides that neither the National Center for Missing and Exploited Children, nor any of its officers, employees, or agents, shall "be liable for damages in any civil action for defamation, libel, slander, or harm to reputation arising out of any action or communication," unless it or he or she "acted with actual malice, or provided information or took action for a purpose unrelated to an activity mandated by Federal law." Class Action Fairness Act of 2005, P.L. 109-2 P.L. 109-2 , which is not applicable only to tort actions, amended 28 U.S.C. § 1332 to provide that the federal district courts shall have exclusive jurisdiction over any class action in which the matter in controversy exceeds $5 million and any member of a class of plaintiffs is a citizen of a state different from any defendant. Among the statute's other provisions is a new 28 U.S.C. § 1453 to govern removal of class actions from state court to federal district court. Protection of Lawful Commerce in Arms Act, P.L. 109-92 (2005) P.L. 109-92 prohibits "a civil action or proceeding or an administrative proceeding," except in six circumstances, against a manufacturer or seller of a firearm or ammunition, or a trade association, for damages "resulting from the criminal or unlawful misuse" of a firearm or ammunition. The exceptions cause the statute not to bar suits if, among other circumstances, the defendant violated a statute or engaged in negligent entrustment or an act of negligence per se. One of the exceptions ensures that the Bureau of Alcohol, Tobacco, Firearms and Explosives may still bring proceedings against gun manufacturers and sellers. Section 5 of P.L. 109-92 is a separate law called the Child Safety Lock Act of 2005. With exceptions, it requires a "secure gun storage or safety device" (as defined in 18 U.S.C. § 921(a)(34)) on handguns, and provides that a person who has lawful possession and control of a handgun, and who uses such a device, is entitled to the same immunity as granted to gun manufacturers, sellers, and trade associations by P.L. 109-92 . Public Readiness and Emergency Preparedness Act, P.L. 109-148 , Division C (2005) P.L. 109-148 limits liability with respect to pandemic flu and other public health countermeasures. Upon a declaration by the Secretary of Health and Human Services of a public health emergency or the credible risk of such emergency, the statute would, with respect to a "covered countermeasure," eliminate liability, with one exception, for the United States, and for manufacturers, distributors, program planners, persons who prescribe, administer or dispense the countermeasure, and employees of any of the above. The exception would be that a defendant who engaged in willful misconduct would be subject to liability under a new federal cause of action, though not under state tort law. However, victims could, in lieu of suing, accept payment under a new "Covered Countermeasure Process Fund," if Congress appropriates money for this fund. The Adam Walsh Child Protection and Safety Act of 2006, P.L. 109-248 The Protection of Children From Sexual Predators Act of 1998, P.L. 105-314 , § 604, added § 227 to the Victims of Child Abuse Act of 1990, 42 U.S.C. §§ 13001 et seq . Section 227(b)(1), 42 U.S.C. § 13032(b)(1), provides that Whoever, while engaged in providing an electronic communication service or a remote computing service to the public, through a facility or means of interstate or foreign commerce, obtains knowledge of facts or circumstances from which a violation of [a specified federal child pornography statute], is apparent, shall, as soon as reasonably possible, make a report of such facts or circumstances to the Cyber Tip Line at the National Center for Missing and Exploited Children, which shall forward that report to a law enforcement agency or agencies designated by the Attorney General. The Adam Walsh Child Protection and Safety Act of 2006, P.L. 109-248 , § 130, added 42 U.S.C. § 13032(g), which grants the National Center for Missing and Exploited Children, as well as its directors, officers, employees, or agents, immunity from civil or criminal liability arising from the performance of Cyber Tip Line responsibilities, except when the Center or any of the above individuals engages in intentional misconduct or reckless disregard to a substantial risk of causing injury without legal justification. Implementing Recommendations of the 9/11 Commission Act of 2007, 6 U.S.C. § 1104(c) P.L. 110-53 , § 1206 (2007), provides immunity from liability to people who, "in good faith and based on objectively reasonable suspicion," report to an authorized official suspicious activity regarding "a passenger transportation system or vehicle or its passengers." The statute also provides, "Any authorized official who observes, or receives a report of, covered activity and takes reasonable action in good faith to respond to such activity shall have qualified immunity from civil liability for such action, consistent with applicable law in the relevant jurisdiction. An authorized official ... not entitled to assert the defense of qualified immunity shall nevertheless be immune from civil liability under Federal, State, and local law if such authorized official takes reasonable action, in good faith, to respond to the reported activity." FISA Amendments Act of 2008 Title I of P.L. 110-261 , the Foreign Intelligence Surveillance Act Amendments Act of 2008, contains two prospective immunity provisions for electronic communication service providers. Title I defines electronic communication service providers as telecommunications carriers, providers of electronic communication services and remote computing services, and "any other communication service provider who has access to wire or electronic communications either as such communications are transmitted or as such communications are stored," as well as the officers, employees, and agents of such entities. First, the statute provides that "[n]o cause of action shall lie in any court against any electronic communication service provider for providing any information, facilities, or assistance in accordance with a directive issued" by the Attorney General and the Director of National Intelligence, after a Foreign Intelligence Surveillance Court (FISC) order or a determination of exigent circumstances, in connection with the targeting of non-United States persons "reasonably believed to be located outside of the United States to acquire foreign intelligence information." Second, the statute further provides that "[n]o cause of action shall lie in any court against any electronic communication service provider for providing any information, facilities, or assistance in accordance with" a FISC order or request for emergency assistance in connection with the targeting of a United States person reasonably believed to be located outside the United States to gather foreign intelligence information. Title II of P.L. 110-261 provides for the dismissal of certain pending civil actions against any "person," which the act defines to include electronic communication service providers as well as "a landlord, custodian, or other person who may be authorized or required to furnish assistance pursuant to" certain orders of the FISC, certifications, or directives. Such actions must be dismissed if the United States district court finds substantial evidence to support the Attorney General's certification that any assistance provided by that person fit within one of five categories listed in § 802(a) of the FISA Act of 1978, as amended by P.L. 110-261 . State court civil actions would be removable to federal court. | This report considers the constitutionality of federal tort reform legislation, such as the products liability and medical malpractice reform proposals that have been introduced for the last several Congresses. Tort law at present is almost exclusively state law rather than federal law, although, as noted in the appendix to this report, Congress has enacted a number of tort reform statutes. Part I of this report concludes that Congress has the authority to enact tort reform legislation generally, under its power to regulate interstate commerce, and to make such legislation applicable to intrastate torts, because tort suits generally affect interstate commerce. However, it may be unconstitutional for tort reform legislation to be applied to particular intrastate torts that do not substantially affect interstate commerce. In concluding that Congress has the authority to enact tort reform "generally," we refer to reforms that have been widely implemented at the state level, such as caps on damages and limitations on joint and several liability and on the collateral source rule. More specialized types of reforms are not necessarily immune from constitutional challenge. For example, some state courts have struck down statutes that provide that a portion of punitive damages awards must be paid to state funds (although other state courts have upheld such statutes). Part I also concludes that there would appear to be no due process or federalism (or any other constitutional) impediments to Congress's limiting a state common law right of recovery. The only exception concerns requiring alternative dispute resolution that limits the right to a jury trial. Part II considers alternative dispute resolution alternatives, some of which could have constitutional problems. The Seventh Amendment would preclude Congress from eliminating the right to a jury trial in common law tort actions brought in federal court. Congress may, however, eliminate the right to bring common law tort actions in federal court, or eliminate common law tort actions themselves. Congress apparently may create Article I tribunals, such as arbitration panels, to hear tort claims, if it alters tort claims so that they are no longer traditional common law actions (but rather are like no-fault workers' compensation claims), or if it allows de novo review by an Article III court, with the right to a jury trial, of traditional common law tort actions (rather than allow merely traditional appellate review). It apparently may also opt for a middle ground by altering the common law cause of action somewhat but not wholly, and by providing for something less than de novo review by an Article III court, provided that the Article III court is not required to be too deferential to the findings of the Article I tribunal. Finally, a strong argument may be made that Congress has the power to eliminate jury trials in tort actions brought in state court, but this is uncertain. |
In the 110 th Congress, there is a renewed push to expand existing federal mental health parity law. Legislation introduced in the House ( H.R. 1424 ) by Representatives Kennedy and Ramstad, and in the Senate ( S. 558 ) by Senators Domenici and Kennedy, have passed in the respective chambers. On March 5, 2008, the House passed H.R. 1424 by a roll call vote. On September 18, 2007, the Senate passed S. 558 with an amendment, by a voice vote. The Congressional Budget Office (CBO) scored S. 558 and H.R. 1424 and estimated that, if enacted, both bills would increase health insurance premiums by 0.4%. On April 29, 2002, in a speech on mental health care during which he announced the formation of the New Freedom Commission on Mental Health, President Bush urged Congress to enact legislation that would provide full parity in the health insurance coverage of mental and physical illnesses. The President identified unfair treatment limitations placed on mental health benefits as a major barrier to mental health care. Historically, private health insurers have provided less coverage of mental illnesses compared to other medical conditions. For example, health plans have imposed lower annual or lifetime dollar limits on mental health coverage, limited treatment of mental health illnesses by covering fewer hospital days and outpatient office visits, and increased cost sharing for mental health care services. Under full parity, a plan must use the same treatment limitations and financial requirements in its mental health coverage as it does in its medical and surgical coverage. The New Freedom Commission endorsed mental health parity in its final report, issued on July 22, 2003. "The commission strongly supports the President's call for federal legislation to provide full parity between insurance coverage for mental health care and physical health care," the report said, in reference to the President's April 2002 address. In 1996, Congress enacted the Mental Health Parity Act (MHPA), which established new federal standards for mental health coverage offered by group health plans. However, the MHPA is limited in scope and does not compel health plans to offer full-parity mental health coverage. It requires group health plans that choose to provide mental health benefits to adopt the same annual and lifetime dollar limits on their coverage of mental and physical illnesses. Plans may still impose more restrictive treatment limitations or cost sharing requirements on their mental health coverage. Lawmakers recently reauthorized the MHPA through December 31, 2008. Senators Domenici and Wellstone introduced full-parity legislation ( S. 543 ) in the 107 th Congress; the measure saw some action but failed to pass. The legislation ( S. 486 ) was reintroduced at the beginning of the 108 th Congress by Senators Domenici and Kennedy. An identical House bill ( H.R. 953 ) was introduced by Representatives Kennedy and Ramstad. No legislative action was taken on either bill. In the 109 th Congress, the MHPA was introduced in the House ( H.R. 1402 ) by Representatives Kennedy and Ramstad. No legislative action was taken on this bill, and no corresponding legislation was introduced in the Senate. For an analysis of the legislative history of federal parity legislation, see CRS Report RL33820, The Mental Health Parity Act: A Legislative History , by [author name scrubbed] and [author name scrubbed]. Patient advocacy groups and health care provider organizations that support mental health parity argue that there is no longer any scientific justification for discrimination in mental health coverage, which they believe only reinforces the stigma that many in society attach to mental illness. Their efforts to combat discrimination received a boost with the release of the 1999 Surgeon General's Report on Mental Health. The report reviewed the extensive scientific literature on mental health and concluded that mental illnesses were largely biologically based disorders like many other medical conditions. It also found that the efficacy of mental health treatments is well documented, and that effective treatments exist for most mental disorders. Proponents of mental health parity highlight the high costs to society of untreated and undertreated mental illness. The Substance Abuse and Mental Health Services Administration estimated that the direct treatment costs of mental illness in 2001 totaled $85 billion. This does not include the economic costs of lost productivity due to illness, lifetime lost productivity, and other indirect costs. Employer and health insurance associations oppose parity legislation because of concerns that it will drive up costs. Parity supporters refute those claims, pointing to recent studies that indicate that full parity can be implemented without substantial cost increases within the context of comprehensively managed behavioral health care. Twenty-eight states have passed laws mandating full-parity mental health coverage. Except Wyoming, all other states have enacted legislation that requires health plans to provide certain specified mental health benefits, but not necessarily full parity. However, employers who have self-insured plans (i.e., the employers pay physicians and hospitals directly) are not bound by state insurance regulations. This report briefly summarizes the economic forces that help explain the persistent limitations on mental health coverage in conventional, fee-for-service (indemnity) health plans. It also discusses issues relating to the feasibility of parity under managed care. In the past decade managed care has transformed the delivery of mental health care services. Employers and health plans now frequently contract out administration of their mental health benefits to specialty managed behavioral health care organizations. The report then reviews state mental health parity legislation and compares the Senate and House versions of the latest full-parity legislation ( S. 558 and H.R. 1424 ) in the 110 th Congress. It concludes with a discussion of some of the key issues in the ongoing congressional debate on mental health parity and discusses why parity may not be enough to provide equivalent financial protection and access to quality care for persons with mental disorders. Appendix A provides a side-by-side comparison of the key provisions in the engrossed versions of S. 558 and H.R. 1424 . Appendix B summarizes state mental health parity laws. Appendix C lists, by committee, the mental health parity hearings since the 106 th Congress. Finally, Appendix D provides websites and annotations of various patient advocacy groups and professional associations that have taken a position on mental health parity. Most mental health care used to be delivered and financed by state-run institutions that provided medical treatment, room and board, and vocational activities for individuals with severe psychiatric disorders. In the 1960s, the role of state governments in mental health began to diminish as alternative forms of outpatient and community-based care gradually replaced institutional care. The mental health system over time started to resemble the general health care system, financed by a combination of private and public insurance. However, private insurance coverage for mental health care no longer included some of the nonmedical services provided by state institutions, such as accommodation and employment. In addition, mental health coverage tended to be more restrictive than the coverage for physical illnesses and surgery and include a higher level of cost sharing. The lack of parity in insurance coverage in part reflected insurers' concerns that the costs of mental health care were high and unpredictable. Insurers argued that mental disorders were difficult to define, and that treatments involving long-term, intensive psychotherapy and extended hospital stays were expensive and often ineffective. Although stigma has played and continues to play an important role in the mental health care debate, differences in insurance coverage of mental illnesses and other medical conditions are also the result of important economic factors. Studies of indemnity insurance have found that the moral hazard problem is more pronounced for mental health care than it is for general medical care. Moral hazard refers to the tendency for patients to demand more services as the price they pay for those services declines. While health insurance, in general, creates incentives for overuse by insulating patients from the total costs of care, research shows that the demand response to reduced cost sharing in mental health care is approximately twice as large as that observed in general medical care. The result has been for insurers to impose higher cost sharing for mental health care. Insurers have also restricted their mental health coverage to protect themselves from adverse selection. Adverse selection refers to the tendency for health plans with generous coverage provisions to attract sick (i.e., high-cost) enrollees. The evidence suggests that adverse selection may be an especially powerful force in mental health care. Studies indicate that individuals with mental illness select health plans that offer more generous mental health coverage. Such behavior can create a strong economic incentive for health plans to reduce their attractiveness to users of mental health care. While competition among plans to avoid enrolling high-risk individuals may represent a good strategy for an individual plan, health economists argue that it is wasteful and inefficient for the health insurance system as a whole. Competition among indemnity insurance plans is seen as an important factor in reducing the level of coverage for mental health care. During the 1970s and 1980s, this argument was used to justify federal and state mandated benefit laws that required insurers to cover minimum levels of mental health care (see below). Some health economists claim that parity can improve the efficiency of insurance markets by reducing wasteful forms of competition that are the result of adverse selection. These commenters note that requiring parity for mental health benefits establishes a uniform "floor" of mental health coverage across all plans. Supporters of parity maintain that studies show that implementing parity through managed mental health care will not lead to a significant increase in costs to the insurers. The movement to establish parity for mental health care has been fueled by changes in the scientific understanding of mental illness and the rapid increase in managed behavioral health care (i.e., mental health and substance abuse treatment). Recently revised estimates suggest that about 15% of the adult U.S. population (approximately 30 million individuals) are affected by a clinically significant mental disorder in any given year. Clinicians are often able to diagnose mental illness with precision, and effective treatments now exist for many psychiatric conditions. Some studies show that the effectiveness of treatments for major mental disorders, which typically involve a combination of medication and psychotherapy, often match or exceed the effectiveness of common treatments for physical illness. As noted earlier, proponents of parity argue that untreated and undertreated mental illness has a major impact on the economy and costs employers tens of billions of dollars annually in lost productivity. Health plans frequently subcontract, or carve out, to managed behavioral health care organizations (MBHOs) the management of the mental health (and substance abuse) component of their benefits package. Over the past few years, behavioral carve-outs have become central to the delivery and payment of mental health care. Nearly three-quarters of Americans with health insurance are covered by managed health benefits. SAMHSA has published a report that explores the current design and administration of mental health coverage. The report lays out the necessary components of an adequate mental health benefit by examining the evidence-base for particular benefits; effect on access, utilization, and costs; the components of a cost-effective mental health benefit package; and the effects of benefits administration on effectiveness. Managed care is changing the way in which mental health services are provided. Whereas conventional fee-for-service insurance controls the demand for services primarily through cost sharing (e.g., deductibles, co-payments) and treatment limitations, MBHOs influence the treatment decisions of mental health care providers through a variety of techniques, including financial incentives, greater emphasis on preventive medicine, development of treatment protocols, and prior authorization of certain services. Cost sharing and coverage limits assume less importance under managed care, which seeks to control moral hazard by internal rationing methods, rather than having to rely on demand-side cost sharing. The introduction of managed mental health care can reduce spending and in some cases increase plan usage. For example, Pacific Bell lowered its mental health expenditures by 13% when it implemented managed behavioral health care in the early 1990s. The cost reduction was not attributable to decreased initial access to care. The number of persons using any mental health care actually increased following the change. Instead, the cost reduction was the result of fewer outpatient sessions per patient, a reduced likelihood of inpatient admission, a reduction in the length of stay for those admitted as inpatients, and significantly lower costs per unit of service delivered. Massachusetts saw a 25% decline in behavioral health care costs for state employees as a result of introducing managed care in 1993. Studies also suggest that MBHOs are able to control the costs associated with mental health parity. In 1996, estimates of the cost of implementing full parity ranged as high as 11% of the total health care premium, which led Congress to limit parity-level benefits in the MHPA. But those estimates did not adequately reflect the impact of managed care and increased use of psychotropic drugs and short-term psychotherapeutics on controlling costs. More recent studies in states that have enacted full-parity laws for mental health coverage provided by managed care plans found that premium increases have been modest. Magellan Health Services, the nation's largest MBHO covering nearly 70 million individuals, reported that it had yet to see a premium cost increase of more than 1% as a result of implementing state mental health parity legislation. At a 2001 Robert Wood Johnson Foundation workshop on the costs of mental health parity, actuaries, economists, and government officials discussed the assumptions and methods used in calculating parity cost estimates. There was broad agreement among the workshop participants that the baseline level of mental health spending has decreased significantly as a result of changes in clinical practice (e.g., use of psychotropic drugs and short-term psychotherapies) and the growth of managed care. Baseline mental health spending is often represented by the share of the total health insurance premium spent on mental health services without parity. Changes in premium costs that result from parity are then expressed as a percentage change in baseline. Workshop participants were also in agreement that managed care has had an important affect on the impact of parity laws. Managed care plans have responded to the expansion of benefits under parity by tightening their internal controls on the use of mental health services so as to dampen any increase in demand and premiums. States began to address inequities in mental health coverage in the 1970s. More than a dozen states enacted laws requiring health plans operating within the state to offer a specific set of mental health benefits. While these mandated-benefit laws increased coverage, they had important limitations. They seldom provided catastrophic coverage against the financial risk of severe mental illness and they did not apply to self-insured employers, which are exempt from state regulation under the Employee Retirement Income Security Act (ERISA). In 1991, Texas and North Carolina became the first states to enact mental health parity legislation. Both state laws were limited in their scope and applied only to insurers that covered state and local government employees. By 1996, when federal parity legislation was enacted (see below), a total of seven states had passed laws that required certain specified state-regulated health plans to provide full-parity mental health coverage. Since then, more than a dozen other states have passed similar legislation, bringing to 28 the total number of states that now mandate mental health coverage with full parity. State laws that mandate full-parity mental health benefits vary in the types of health plans covered and also in the types of mental illnesses they cover. In 15 states, the laws apply both to group health plans and to the individual health insurance market, whereas in another 9 of these states they apply only to group plans. In the remaining four states, the laws apply only to state-employee plans. In 12 of the states with full parity laws, the laws apply to the treatment of all the conditions listed in the Diagnostic and Statistical Manual of Mental Disorders, Fourth Edition (DSM-IV). The other parity laws restrict coverage to specified "serious" or "biologically based" mental illness (e.g., schizophrenia, depression, bipolar disorder). About one-third of the state parity laws exempt small employers, typically those with 50 or fewer employees. In addition to the 28 states that have enacted full parity legislation, 6 states have passed laws mandating a certain minimum level of mental health benefits (but not full parity). Fourteen other states have passed so-called mandated offering laws, under which covered plans that choose to offer mental health coverage must provide a specified minimum level of benefits. The bills currently introduced in the House and Senate are mandated offering laws. See Appendix B for a summary of state parity laws. New Jersey, which in 1999 enacted a full parity law that covers both group plans and the individual market, recently passed legislation that requires individual carriers to offer a policy with minimum mandated mental health benefits. Those benefits include coverage for 90 days of inpatient treatment with a $500 copayment per inpatient stay, and 30 days of outpatient treatment with a 30% coinsurance. The new law does not replace the existing full parity mandate, but is intended to provide individuals with a less expensive alternative to a policy with full-parity coverage. The aim of the law is to allow individuals who might otherwise not be able to afford a policy with full parity to purchase insurance coverage. Texas has also enacted new legislation that allows for the sale of less expensive health insurance policies without state mandates for the treatment of mental illness. An insurer that offers such a policy must also provide at least one policy with state-mandated health benefits. The Mental Health Parity Act (MHPA) amended ERISA and the Public Health Service Act (PHS Act) and established new federal standards for mental health coverage offered by group health plans, most of which are employment based. Identical provisions were later added to the Internal Revenue Code (IRC) by the Taxpayer Relief Act of 1997. The MHPA is not a full-parity law. It requires equivalence in only one area: catastrophic coverage. The MHPA prohibits group plans from imposing annual and lifetime dollar limits on mental health coverage that are more restrictive than those imposed on medical and surgical coverage. Group plans may still impose more restrictive treatment limitations or cost sharing requirements on their mental health coverage compared to their medical and surgical coverage. The MHPA includes several other important limitations. Group plans that choose not to provide mental health benefits are not required to add them, and employers with 50 or fewer employees are exempt from the law. In addition, employers that experience an increase in claims costs of at least 1% as a result of MHPA compliance can apply to the Department of Labor for an exemption. The MHPA standards apply to private-sector, employer-sponsored group health plans, including fully insured and self-insured plans, but not to the individual (nongroup) health insurance market. They also apply to the Federal Employees Health Benefits Program and to some state and local government health plans. Under provisions included in the 1997 Balanced Budget Act ( P.L. 105-33 ), Medicaid managed care plans and State Children's Health Insurance Programs also have to comply with the requirements of the MHPA. The MHPA does not apply to Medicare. In 1999, the General Accounting Office (GAO) reviewed the extent to which employers were complying with the MHPA and how they had revised their health plans. GAO surveyed 863 employers in 26 states without full parity laws. While 86% of the employers reported compliance with the MHPA, a majority of these plans (87%) restricted their mental health coverage in other ways. For example, about two-thirds of MHPA-compliant plans covered fewer outpatient visits and hospital days for mental health treatment than for other medical treatment. Surveys by the Labor Department and the Centers for Medicare & Medicaid Services found similar results. Many plans that had to increase annual and lifetime dollar limits to comply with the MHPA reportedly introduced other more restrictive mental health design features to mitigate the financial impact of the law's more generous dollar limits. Despite concerns about the MHPA's effect on claims costs, only 3% of employers surveyed by GAO reported that their costs had increased, and less than 1% of surveyed employers dropped their mental health coverage altogether following the law's enactment. It is difficult to gauge the impact of the MHPA's increased dollar limits, however, because many plans took steps to counter increases in claims costs by restricting mental health coverage in other ways. Though limited in its scope, the MHPA nevertheless appears to have added momentum to the passage of state parity laws. All states, except Wyoming, have passed some form of parity legislation since the federal law was enacted in 1996. Some states passed parity laws that essentially mirrored the MHPA, and later strengthened the laws to exceed the provisions of the federal law. The MHPA originally sunset on September 30, 2001. In three separate legislative actions, the 107 th Congress extended the MHPA through the end of 2003. Title VII of the FY2002 Labor-HHS-Education appropriations bill ( H.R. 3061 , P.L. 107-116 ) reauthorized the MHPA in all three federal statutes through December 31, 2002. Section 610 of the Job Creation and Worker Assistance Act of 2002 ( H.R. 3090 , P.L. 107-147 ) further amended the MHPA provisions in the IRC—but not in ERISA or the PHS Act—by extending the authorization an additional year through December 31, 2003. Finally, the Mental Health Parity Reauthorization Act of 2002 ( H.R. 5716 , P.L. 107-313 ) reauthorized the MHPA provisions in ERISA and the PHS Act through December 31, 2003. The 108 th Congress extended the MPHA through the end of 2005. First, the Mental Health Parity Reauthorization Act of 2003 ( S. 1929 , P.L. 108-197 ) reauthorized the MHPA through December 31, 2004. The bill amended the MHPA provisions in ERISA and the PHS Act, but not the IRC. Section 302 of the Working Families Tax Relief Act of 2004 ( H.R. 1308 , P.L. 108-311 ) reauthorized the MHPA through December 31, 2005. P.L. 108-311 amended the MHPA provisions in all three statutes. The 109 th Congress extended MPHA through the end of 2007. In the first session of the 109 th Congress, the Employee Retirement Preservation Act ( H.R. 4579 , P.L. 109-151 ) extended the provisions requiring mental health parity in ERISA, the PHS Act, and the IRC through 2006. In the second session, Section 115 of the Tax Relief and Health Care Act of 2006 ( H.R. 6111 , P.L. 109-432 ) extended the MPHA provisions in all three statutes through 2007. The second session of the 110 th Congress extended MHPA through the end of 2008. On June 17, 2008, Sec. 401 of the Heroes Earnings Assistance and Relief Tax Act of 2008 ( P.L. 110-245 , H.R. 6081 ) passed an extension of MHPA through the end of 2008. The law amends ERISA, the PHS Act, and the IRC. By amending all three federal statutes (i.e., ERISA, the PHS Act, and the IRC), the MHPA standards apply to a broad range of group health plans, as well as state-licensed health insurance organizations. The ERISA provisions apply to most group plans sponsored by private-sector employers and unions. The IRC provisions, which cover ERISA plans plus church-sponsored plans, permit the Internal Revenue Service to assess tax penalties on employers that do not comply with the MHPA requirements. The PHS Act provisions apply to insurers and some public-sector group health plans. Self-insured state and local government health plans may elect exemption from the MHPA Although states have taken on primary responsibility for the enforcement of many of the mandates as they apply to health insurers, other enforcement actions are available to the Secretaries of the Department of Labor, Department of Health and Human Services, and the Internal Revenue Service. The enforcement provisions that apply through the MHPA (ERISA, Tax Code, and PHSA) are described more specifically below. Tax penalties for violations of federal health mandates take the form of excise taxes that are imposed on employers or, in the case of multiemployer plans, on the health plans. The excise tax for violations of certain group health plan requirements of the MHPA is specified in section 4980D of the Code. The taxes are payable to the U.S. Treasury. In general, the excise taxes are $100 per day of noncompliance for every qualified beneficiary. When violations are discovered after notice of examination, the minimum tax is $2,500, or $15,000 if violations are more than de minimus. The minimum tax does not apply to church plans. When violations are due to reasonable cause and not willful neglect, the maximum tax during a taxable year cannot exceed the lesser of $500,000 or the employer's group health plan expenses for the prior year. In addition, when violations are due to reasonable cause and not willful neglect, the Secretary of the Treasury may waive part or all of the tax if payment would be excessive relative to the failure involved. No taxes apply if failures were not discovered when exercising reasonable diligence or if failures are corrected within certain periods. Governmental plans are not subject to the excise taxes. In addition, with respect to violations of HIPAA's prohibition against discrimination based on health status, certain small church-sponsored plans are not subject to penalties. Section 502 of ERISA establishes a civil enforcement scheme for violations of the statute. In general, ERISA provides only for the recovery of benefits due to a participant or beneficiary under the terms of a plan, or for declaratory or injunctive relief. Courts have uniformly held that other monetary or damage remedies are not available. Enforcement of group health provisions is described in Section 2722 of the PHSA as established by Section 102 of HIPAA. In cases in which HHS is required, because states have not taken on this responsibility, to enforce group market rules regarding preexisting condition exclusion periods, discrimination, guaranteed availability and renewability, and information disclosure, the Secretary may impose civil money penalties on non-conforming health insurance plans. The penalties available include $100 per day for each day and for each individual when such a failure occurs. In imposing the penalty, the Secretary may consider the previous record of compliance of the entity being assessed. There are limitations on this penalty as well. Penalties cannot be applied for failures that are corrected within 30 days of discovery and under other limited circumstances. In addition, the entity assessed may request an administrative review consisting of an initial hearing and judicial review and appeal. Little information is available on enforcement actions related to MHPA by the three agencies. A 2003 publication available from the Pension and Welfare Benefits Administration (PWBA) of the Department of Labor, however, summarizes some of the enforcement activity as part of a 2001 compliance project. The project was undertaken to give the Agency a baseline for assessing compliance with the health mandates. PWBA conducted 1,267 investigations of group health plans during 2000-2001 for compliance with 42 specific requirements of the health laws. At that time, just over one-third of plans were out of compliance with at least 1 of 36 substantive provisions of the new laws. Compliance rates dropped further when six provisions requiring plan sponsors to provide notice to enrollees for various reasons were calculated into the rates. As a result of this work, the department initiated a program to help employer plans come into compliance with the laws. The program included additional publications and educational materials, a Web page devoted to compliance assistance, and live workshops around the country. The HHS Centers for Medicare and Medicaid Services were unable to provide information on the use of the civil enforcement penalties under the PHSA. A spokesman for the agency pointed out that such information has not been made publically available to date. Similarly, a contact at the Internal Revenue Service informed CRS that tax penalties are not tracked in a manner that would allow the separate identification of amounts assessed or collected only under sections 4980B and 4980D of the tax code. At the White House Conference on Mental Health in June 1999, President Clinton directed the federal Office of Personnel Management (OPM) to implement full parity for both mental health and substance abuse benefits in health plans offered under the Federal Employees Health Benefits Program (FEHBP) beginning in 2001. The FEHBP parity requirement covers medically necessary treatment for all categories of mental illness listed in the DSM-IV. According to the OPM, parity implementation resulted in an average premium increase of 1.64% for fee-for-service plans and 0.3% for HMOs. FEHBP health plans are providing mental health coverage in a variety of ways. Some plans are using the services of managed behavioral health care organizations, while others are managing their own provider networks. Under FEHBP, mental health parity is required only for services provided on an in-network basis. In-network generally refers to a contracted group of providers established by a managed health care organization and/or an insurance carrier. OPM and the Department of Health and Human Services are conducting a three-year evaluation of the FEHBP parity initiative. A recently published study comparing FEHB plans with health plans outside FEHBP that did not mandate parity concluded that implementation of parity in insurance benefits for mental health and substance abuse, when coupled with management of care, resulted in little or no significant adverse impact on access, spending, or quality, while providing users of behavioral health care with improved financial protection in most instances. The researchers analyzed plan benefits data for seven FEHB plans both before (1999 and 2000) and after (2001 and 2002) the introduction of parity. Changes in access, utilization, and cost were compared to changes over the same time period in a matched set of non-FEHB comparison plans (mostly large, self-insured employers). The analysis indicated that the observed increase in the rate of use of mental health and substance abuse services in FEHB plans after implementation of the parity policy was due almost entirely to a general trend in increased use that was observed in the comparison plans. Furthermore, compared to spending trends observed in the non-FEHB plans, the implementation of parity was associated with significant reductions in out-of-pocket spending in five of the seven FEHB plans. On February 12, 2007, Senators Domenici and Kennedy introduced the Mental Health Parity Act of 2007 ( S. 558 ) to amend and expand the MHPA by requiring employer-sponsored group health plans to impose the same treatment limitations and financial requirements on their mental health coverage as they do on their medical and surgical coverage. This bill would amend ERISA and the PHS Act. The bill was referred to the Senate Health, Education, Labor, and Pensions Committee, where it was marked up on February 14, 2007 ( S.Rept. 110-53 ). The Senate passed S. 558 , with an amendment, by voice vote on September 18, 2007. On March 7, 2007, Representatives Kennedy and Ramstad introduced the Paul Wellstone Mental Health and Addiction Equity Act ( H.R. 1424 ), which would amend ERISA, the PHS Act, and the IRC. On July 18, 2007, the House Education and Labor Committee approved H.R. 1424 , with an amendment. The measure, as amended, was approved by the House Ways and Means Committee on September 26, 2007, and by the House Energy and Commerce Committee on October 16, 2007 ( H.Rept. 110-374 ). The House passed H.R. 1424 by a roll call vote of 268-148 on March 5, 2008. H.R. 1424 and S. 558 do not mandate full parity. Like the MHPA, they apply only to group plans that choose to offer mental health coverage. H.R. 1424 , which is modeled on the parity requirements in the FEHBP, covers the treatment of all psychiatric conditions listed in the DSM-IV. On the other hand, S. 558 's parity provisions apply only to conditions that the health plan chooses to cover. Both bills would extend parity to in-network and out-of-network mental health benefits. Both bills also exempt small employers with 50 or fewer employees. In an effort to address some of the concerns of the health insurance industry, H.R. 1424 includes language permitting employers and health plans to manage mental health benefits and cover only those treatment services that are medically necessary. Finally, the bills require GAO, within two years, to evaluate the impact of the new federal parity standards on access to insurance coverage and on insurance costs. There are two key differences between the House and Senate parity bills. The first difference is that the Senate version would allow insurance companies to determine which mental illnesses they cover, whereas the House version would require coverage for all mental illnesses (see discussion below). The second key difference is that the Senate version does not explicitly address preemption of state mental health parity laws, whereas the House version explicitly states that it does not preempt state mental health parity laws. For an analysis of the differences between the House and Senate parity bills, see Appendix A . Unlike previous versions of expanded parity legislation, the House and Senate versions in the 110 th Congress include parity for substance abuse treatment services. Another difference between the Senate bill and the previous parity bills is that S. 558 has the support of insurance companies and employers. Bills that would amend Title XXI of the Social Security Act to provide for equal coverage of mental health services under the State Children's Health Insurance Program passed in the House on August 1, 2007 ( H.R. 3162 ), and in the Senate on August 3, 2007 ( H.R. 976 ). Senators Domenici and Wellstone first introduced the Mental Health Equitable Treatment Act ( S. 543 ) on March 15, 2001. In its June 2000 report to Congress, the National Advisory Mental Health Council (NAMHC) estimated that full parity similar to that provided by S. 543 would raise premium costs by 1.4%, adding that this figure may overestimate the true cost of parity because the forecasting models did not reflect the most recent changes in managed care. Pricewaterhouse Coopers concluded that S. 543 would result in a 1% increase in costs, or $1.32 per enrollee per month. CBO estimated that, on average, S. 543 would increase premiums for group health plans by 0.9%. On August 1, 2001, the Senate Health, Education, Labor, and Pensions (HELP) Committee approved a substitute version of S. 543 ( S.Rept. 107-61 ), which retained most of the major components of the original bill including the full-parity requirement. On October 30, 2001, the Senate added S. 543 as an amendment to the FY2002 Labor-HHS-Education appropriations bill ( H.R. 3061 ). The House version of the Labor-HHS-Education appropriations bill did not include any parity language. During the conference on H.R. 3061 , House conferees rejected the Senate amendment on a party-line vote. Unable to agree on new federal parity standards, the conference voted to reauthorize the MHPA through December 31, 2002. Conferees added language to the conference report ( H.Rept. 107-350 ) "strongly urging the committees of jurisdiction in the House and Senate to convene early hearings and undertake swift consideration of legislation to extend and improve mental health parity protections during the second session of the 107 th Congress." The House Education and the Workforce Subcommittee on Employer-Employee Relations held a hearing on mental health parity on March 13, 2002, followed by a House Energy and Commerce Health Subcommittee hearing on July 23, 2002. On March 20, 2002, Representative Roukema introduced the Senate parity legislation in the House ( H.R. 4066 ), but there was no further legislation action taken before the 107 th Congress adjourned. Representatives Patrick Kennedy and Jim Ramstad, and Senators Domenici and Kennedy introduced full parity legislation on February 27, 2003, which included the same language as S. 543 , as reported by committee, in the 107 th Congress. During the second session, Senator Daschle introduced the Paul Wellstone Mental Health Equitable Treatment Act of 2003 on November 6, 2003. This bill bears the name of the late Senator Paul Wellstone, who was killed in a small plane crash on October 25, 2002. No further legislative action was taken on this bill in the 108 th Congress. The Paul Wellstone Mental Health Equitable Treatment Act of 2005 was again introduced by Representatives Patrick Kennedy and Jim Ramstad on March 17, 2005. No legislative action was taken on this bill during the 109 th Congress, and no corresponding legislation was introduced in the Senate. For a more detailed legislative history of these bills, see CRS Report RL33820, The Mental Health Parity Act: A Legislative History , by [author name scrubbed] and [author name scrubbed]. Federal full-parity legislation has staunch support among patient advocates and mental health provider organizations, who see it as an important step in eliminating what they characterize as inappropriate discrimination in private health insurance coverage of mental illness. But groups representing employers and the health insurance industry strongly oppose the legislation on the grounds that it will add significantly to the dramatically rising costs of health care. They argue that employers cannot afford to spend more money on health insurance coverage for their employees in the current economic climate. They contend that parity costs would likely take the form of increased cost sharing for all covered benefits, reductions in other health care coverage, and/or the elimination of health coverage entirely, which would lead to an increase in the number of uninsured. Proponents of parity legislation counter that full parity does not significantly increase costs under managed care. They argue that parity can in fact reduce costs to employers by improving productivity and reducing absenteeism. Furthermore, they claim that full-parity coverage lowers overall health care expenditures by eliminating the need for medical care and emergency room visits that result if mental illnesses are left untreated. Some large employers have reported that parity in mental health benefits has had a net positive financial impact. As an example, they cite Delta Airlines. Delta increased mental health benefits for its 69,000 employees in 1994, when it switched to managed care. Use of mental health services increased but costs remained flat. Spending in other areas of health care declined and employees missed less work. The Congressional Budget Office (CBO) scored S. 558 and H.R. 1424 and estimated that, if enacted, both bills would increase health insurance premiums by 0.4%. Employers and health insurers are especially concerned about the broad definition of mental illness in H.R. 1424 . They believe that federal parity legislation should cover only serious mental illnesses or illnesses that have been shown to be related to the biological functioning of the brain (e.g., schizophrenia, bipolar disorder), as do many state laws. S. 558 , which covers only mental illnesses that are specifically included by the health plan, has the support of employers and health insurers. Critics of H.R. 1424 claim that extending coverage to all the mental disorders listed in the DSM-IV opens the door to dubious complaints of less serious problems by the "worried well." They object to providing coverage for many of the conditions that are classified as mental disorders in the DSM-IV (e.g., academic skills disorders, sexual desire disorders) because they are not seen as medically significant. Parity supporters view opposition to providing coverage of all DSM-IV disorders as stemming, in part, from stigma and the mistaken belief that mental illness does not have a physiological basis. They claim that restricting mental health coverage to a few specified psychiatric conditions is no different than having medical benefits that cover only serious physical disease such as cancer and heart disease. They argue that covering all the DSM-IV disorders is unlikely to lead to abuse or inflated costs for two reasons. First, H.R. 1424 does not prevent plans from managing mental health benefits through such practices as utilization review, preauthorization, the application of medical necessity and other appropriateness criteria, and through the use of provider networks. Second, the DSM-IV establishes a threshold for diagnosis by requiring evidence of "clinically significant impairment or distress." Any claims for treatment of a patient with a mental health condition that was not serious enough to meet that threshold could be excluded on the basis of medical necessity. Advocates of mental health parity also assert that restricting coverage to a few major mental illnesses is penny-wise and pound-foolish. They point out that milder forms of emotional illness often worsen into more serious psychiatric disorders, if left untreated. National employer survey data indicate that despite the passage of state parity laws and changes in the delivery of mental health services, mental health coverage is still not offered at a level comparable to coverage for other medical conditions. A recent analysis of the 2002 Kaiser Family Foundation/Health Research and Educational Trust (KFF/HRET) Employer Health Benefits Survey found that overall 98% of workers with employer-sponsored health insurance had coverage for mental health care. However, 74% of those covered workers were subject to an annual outpatient visit limit, and 64% were subject to an annual inpatient day limit. The proportion of covered workers subject to annual mental health day and visit limits appears to have increased over the past few years. In contrast, the survey found only 22% of covered workers had higher cost sharing (i.e., copayment or coinsurance) for mental health benefits. This suggests that health plans are relying less on higher cost sharing as a means of limiting the use of mental health services. The 2002 KFF/HRET survey data indicate that about one-third of workers with employer-sponsored health insurance receive their mental health care through carve-outs. Surprisingly, the investigators found relatively little difference in the nominal mental health benefits (i.e., the treatment limitations and cost sharing requirements spelled out in the insurance contract) under carve-outs versus integrated health plans. Carve-outs and integrated plans had similar limitations on the number of inpatient days and outpatient visits. There was also no significant difference in the percentage of covered workers with higher cost sharing for outpatient mental health services in carve-outs compared to integrated plans. Given that MBHOs incorporate supply-side utilization controls rather than relying solely on cost sharing and benefit limits to lower demand, one might expect them to expand mental health benefits while maintaining control over costs. But the KFF/HRET survey data indicate that carve-outs continue to impose special limits and substantial cost sharing on mental health. Some researchers hypothesize that a lack of employer education about the cost advantages of behavioral mental health care management, minimal risk sharing under many carve-out contracts, or a single-minded focus on cost containment could explain why mental health benefit limitations persist. Lingering concerns about adverse selection could also play a role in the persistence of benefit limits. Overall, the 2002 KFF/HRET survey findings suggest that mental health parity may be difficult to establish without broader (i.e., federal) parity laws. State parity laws have a limited impact because they do not cover self-insured plans. ERISA exempts self-insured plans from state regulation. About 52% of covered workers are in a self-insured plan, according to the KFF/HRET survey. Mental health analysts often argue that parity laws are an important step in improving the efficiency and fairness of insurance coverage for mental illness. But many are concerned that parity in nominal benefits for mental health care, by itself, is not sufficient to guarantee equal access to high-quality care and equal levels of financial protection for people with mental disorders. For one thing, many mental health services do not have any counterpart in general medical care and are, therefore, unaffected by parity legislation because they do not have to be included in covered benefits. Private insurance usually does not cover day-hospital care, psychosocial rehabilitation, or residential treatment programs, all of which are seen as effective components of mental health care. Moreover, health plans do not cover supervised housing or employment for patients with chronic mental health conditions. Proponents of parity maintain that taking a broader view of access to quality mental health care means encompassing a variety of social-welfare services. Advocates for the mentally ill worry that behavioral health carve-outs may not provide patients with all the appropriate and medically necessary care. While managed behavioral health care has proved effective at controlling the costs of full parity, patient advocates are concerned about management decisions that may result in across-the-board reductions in treatment without regard to clinical circumstances. MBHOs are under pressure to contain costs. The internal management processes that they use to ration treatment are difficult to regulate. Even under federal and state parity laws, MBHOs still retain wide latitude to manage coverage and control access to mental health care in order to achieve cost-control goals. Managed care contacts, with their complex internal rationing devices, are more remote from regulation than the traditional fee-for-service contracts. MBHOs maintain that by lowering costs and offering parity-level benefits, patients have greater access to treatment at an earlier point in the development of their illness. This, in turn, they hold, results in less suffering and lower costs associated with that treatment. Moreover, they point to studies that have shown that early, effective treatment of mental illness leads to lower medical costs generally, lower disability costs, and less absenteeism in the workplace. But critics of behavioral carve-outs contend that the managed care tools employed by MBHOs are widening the gap between a plan's nominal benefits and the care actually received by patients. In contrast to using a primary care physician as the gatekeeper to more specialized care, which is a model commonly employed in managed care, MBHOs use a larger range of techniques to manage mental health care (e.g., concurrent utilization review by clinical care managers) and use a different mix of providers and services. The American Psychiatric Association and the American Medical Association (AMA) have criticized carve-outs as discriminatory because they separate behavioral health care from "mainstream" health care rather than integrating the two, thus reinforcing the notion that behavioral health is somehow different from other medical conditions. Results of the 1996-1998 Health Care for Communities (HCC) national survey relate to analysts' concerns about the impact of parity on access to quality mental health care. The HCC survey concluded that state parity laws have had no discernible impact on the overall use of mental health services. The survey suggested that utilization of mental health care was no higher in parity states than in states without such laws. HCC researchers said their survey supports the view that the insurance market has responded to parity laws by increasing the management of care in order to control costs. They analyzed the self-reported unmet needs among respondents seeking treatment for mental health and substance abuse problems. When unmet needs was defined as delays in receiving treatment or receiving less treatment than desired, significantly more respondents in managed care reported unmet needs than those enrolled in indemnity insurance. However, when unmet needs was defined as obtaining no care, those in managed care reported unmet needs less often. According to the HCC researchers, results of the survey reinforce concerns about the impact of parity on access to quality health care. A recent study of the implementation of Vermont's 1998 parity law also found that the increased use of managed care, while helping make health care more affordable, may have reduced access and utilization for some services and beneficiaries. The study examined the experiences of the state's two largest health insurers—Kaiser/Community Health Plan (Kaiser/CHP) and Blue Cross Blue Shield of Vermont (BCBSVT)—which together covered nearly 80% of Vermont's privately insured population at the time the parity law was implemented. Vermont's parity law, one of the nation's most comprehensive, covers both mental health and substance abuse treatment services. As a result of the law, both plans made changes to their management of mental health and substance abuse (MH/SA) services. Managed care was an important factor in controlling costs following implementation of parity. Before the parity law took effect, BCBSVT provided MH/SA services mainly through indemnity contracts. After parity, most BCBSVT members received those services through a managed care carve-out and reported a decline both in the likelihood of obtaining mental health treatment and in the average number of outpatient visits. Kaiser/CHP, which had managed care prior to the parity law, increased the use of partial hospitalization treatment and group therapy and reduced the use of inpatient treatment. Overall, MH/SA spending fell by 8-18% after parity was implemented, despite lower consumer out-of-pocket costs and higher limits on the use of MH/SA care. Finally, parity helps only people who have health insurance. It does not address the larger questions concerning the 17.5% of the U.S. population with no health insurance. Appendix A. Comparison of Key Provisions in the Mental Health Parity Act of 2007 (S. 558) and the Paul Wellstone Mental Health and Addiction Equity Act of 2007 (H.R. 1424) Appendix A. Appendix B. State Mental Health Parity Laws Appendix C. Mental Health Parity Hearings Appendix D. Mental Health Parity Websites Patient Advocacy National Alliance for the Mentally Ill http://www.nami.org National Mental Health Association http://www.nmha.org Bazelon Center for Mental Health Law http://www.bazelon.org Suicide Prevention Action Network USA http://www.spanusa.org Professional Associations: Health Care Providers American Psychiatric Association http://www.psych.org American Psychological Association http://www.apa.org American Medical Association http://www.ama-assn.org American Managed Behavioral Healthcare Association http://www.ambha.org Professional Associations: Employers and Health Plans American Health Insurance Plans http://www.ahip.org ERISA Industry Committee http://www.eric.org | In the 110th Congress, the Senate and House have passed different versions of expanded mental health parity legislation (S. 558 and H.R. 1424). These bills have always been strongly supported by advocates for the mentally ill and have had broad, bipartisan support in Congress. Although employers and health insurance groups opposed the legislation in the past because of concern that it would drive up costs, the provisions in S. 558 now have their support. Expanded parity legislation was introduced in the 107th, 108th, and 109th Congresses, but each time it failed to pass. Private health insurers often provide less coverage for mental illnesses than for other medical conditions. Historically, health plans have imposed lower annual or lifetime dollar limits on mental health coverage, limited treatment of mental health illnesses by covering fewer hospital days and outpatient office visits, and increased cost sharing for mental health care by raising deductibles and copayments. The lack of parity (i.e., equivalence) in part reflects insurers' concerns that mental disorders are difficult to diagnose, and that mental health care is expensive and often ineffective. However, the 1999 Surgeon General's report on mental health concluded that mental illnesses are largely biologically based disorders, like many other medical conditions. It found that effective treatments exist for most mental disorders. Differences in insurance coverage of mental illnesses and other medical conditions are also the result of economic factors. Studies indicate that demand response of mental health patients to reduced cost sharing is approximately twice as large as that observed in general medical care. Partly as a consequence, insurers impose higher cost sharing for mental health. Insurers have also restricted mental health coverage to protect themselves against adverse selection (i.e., the tendency for plans with generous mental health coverage to attract patients with mental illnesses that are costly to treat). Health plans frequently subcontract management of the mental health component of their benefits to specialized managed behavioral health care organizations (MBHOs). Recent studies have shown that there is no significant increase in mental health costs to the insurer when parity is implemented in the context of managed care. Despite this finding, introduction of managed behavioral health care, and passage of state parity laws, mental health coverage continues to be subject to more limitations and higher cost sharing than coverage of other illnesses. Some analysts argue that parity alone is not sufficient to guarantee equal access to quality care and equal financial protection for people with mental disorders. Twenty-eight states have laws that mandate full-parity mental health coverage, though these laws do not apply to self-insured group plans. In 1996, Congress enacted the Mental Health Parity Act (MHPA), which is more limited in scope and does not compel insurers to provide full-parity coverage. For group plans that choose to offer mental health benefits, the MHPA requires parity only for annual and lifetime dollar limits on coverage. Group plans may still impose more restrictive treatment limitations and cost sharing requirements on their mental health coverage. On June 17, 2008, the President signed into law (P.L. 110-245) the extension of MHPA through 2008. |
T he State Children's Health Insurance Program (CHIP) is a federal-state program that provides health coverage to certain uninsured, low-income children and pregnant women in families that have annual income above Medicaid eligibility levels. CHIP is jointly financed by the federal government and the states and is administered by the states. Participation in CHIP is voluntary, and all states, the District of Columbia, and the territories participate. The federal government sets basic requirements for CHIP, but states have the flexibility to design their own version of CHIP within the federal government's basic framework. As a result, there is significant variation across CHIP programs. FY2017 was the last year federal CHIP funding was appropriated in statute, and FY2018 began on October 1, 2017, without CHIP funding being extended. As a result, states do not currently have full-year FY2018 CHIP allotments, and states are funding their CHIP programs with unspent federal CHIP funds from prior years. On October 4, 2017, both the Senate Finance Committee and the House Energy and Commerce Committee had markups on different bills that would extend CHIP federal funding through FY2022, among other things. The Senate Finance Committee reported the Keeping Kids' Insurance Dependable and Secure Act of 2017 (KIDS Act, S. 1827 ), which would extend federal CHIP funding through FY2022 and extend the increased enhanced federal medical assistance percentage (E-FMAP) rates for one year (i.e., through FY2020) but with an 11.5 percentage point increase instead of a 23 percentage point increase under current law. The bill also includes extensions of other CHIP provisions (e.g., the Express Lane eligibility option and the maintenance of effort [MOE] for children in families with incomes below 300% of the federal poverty level [FPL]) and other programs and demonstrations (e.g., the Child Obesity Demonstration Project and the Pediatric Quality Measures Program). According to the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT) cost estimate, the KIDS Act is estimated to increase federal spending by $14.9 billion and revenues by $6.7 billion for a net cost of $8.2 billion over the period of FY2018 through FY2027. On January 5, 2018, CBO and JCT updated the cost estimate for the KIDS Act to account for the repeal of penalties for the individual health insurance mandate that was included in P.L. 115-97 , enacted on December 22, 2017. According to the cost estimate released on January 5, 2018, the KIDS Act is estimated to increase federal spending by $7.3 billion and revenues by $6.6 billion for a net cost of $0.8 billion over the period of FY2018 through FY2027. The House Energy and Commerce Committee reported the Helping Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable Act of 2017 (HEALTHY KIDS Act, H.R. 3921 ), which includes almost identical language to the KIDS Act that would extend CHIP federal funding through FY2022 and extend the increased E-FMAP for one year at 11.5 percentage points. The HEALTHY KIDS Act also includes almost identical language that would extend the same CHIP provisions and other programs and demonstrations as the KIDS Act. The HEALTHY KIDS Act also includes some provisions that are not in the KIDS Act, such as adding a new CHIP state option for qualified CHIP look-alike plans; modifying the Medicaid disproportionate share hospital (DSH) allotment reductions; and providing additional Medicaid funding to Puerto Rico and the U.S. Virgin Islands. The HEALTHY KIDS Act includes the following provisions as offsets: modifications to Medicaid third party liability, treatment of lottery winnings for Medicaid eligibility, and Medicare Part B and D premium subsidies for higher-income individuals. On October 30, 2017, the House Rules Committee posted an amendment in the nature of a substitute for the Community Health And Medical Professionals Improve Our Nation Act of 2017 (CHAMPION Act, H.R. 3922 , H.Res. 601 ), meaning that it is intended to be considered by the House as an amendment to H.R. 3922 and the language of the CHAMPION Act would be stricken and the text of the amendment in the nature of the substitute would be inserted in its place. This amendment in the nature of a substitute is entitled the Continuing Community Health And Medical Professional Programs to Improve Our Nation, Increase National Gains, and Help Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable Act of 2017 (CHAMPIONING HEALTHY KIDS Act), and it includes revised language for the CHAMPION Act (which would extend funding for community health centers and other programs, among other things) under Division A and revised language for the HEALTHY KIDS Act under Division B. (See the textbox for an overview of the provisions in Division A of the CHAMPIONING HEALTHY KIDS Act.) The HEALTHY KIDS Act, under Division B of the CHAMPIONING HEALTHY KIDS Act, includes some changes to the provisions from the HEALTHY KIDS Act as reported by the House Energy and Commerce Committee. The CHAMPIONING HEALTHY KIDS Act amended the provision extending the outreach and enrollment program, the Medicaid DSH provision, and the Medicaid third party liability provision. In addition, the CHAMPIONING HEALTHY KIDS Act released on October 30, 2017, deleted the Medicare Parts B and D premium subsidies for higher-income individuals provision, but this provision was added back into the CHAMPIONING HEALTHY KIDS Act through an amendment adopted by the House Rules Committee on November 1, 2017. According to the CBO and JCT cost estimate for the CHAMPIONING HEALTHY KIDS Act language posted on the House Rules Committee website on October 30, 2017, the HEALTHY KIDS Act under Division B is estimated to increase federal spending by $11.4 billion and revenues by $6.7 billion for a net cost of $4.7 billion over the period of FY2018 through FY2027. The House passed the CHAMPIONING HEALTHY KIDS Act on November 3, 2017, by a vote of 242 to 174. This report contains a table that provides an overview of the provisions in the KIDS Act and Division B of the CHAMPIONING HEALTHY KIDS Act as baselined against current law. The section following the table provides more detailed summaries of the provisions in the KIDS Act and Division B of the CHAMPIONING HEALTHY KIDS Act. Table 1 provides a high-level comparison of the provisions in the KIDS Act and Division B of the CHAMPIONING HEALTHY KIDS Act. For each provision, there is a summary of current law, an explanation of the provision in the KIDS Act, and an explanation of how the provision in Division B of the CHAMPIONING HEALTHY KIDS Act compares to the provision in the KIDS Act. This section provides more detailed summaries of each provision in the KIDS Act and Division B of the CHAMPIONING HEALTHY KIDS Act. For each provision, there is a current law summary followed by an explanation of the provision in the KIDS Act. Then, there is an explanation of how the provision in Division B of the CHAMPIONING HEALTHY KIDS Act compares to the provision in the KIDS Act. CHIP is funded through FY2017 with appropriated amounts specified in statute. Since CHIP was first established in 1997, it has been funded through subsequent legislation. For instance, the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA; P.L. 111-3 ) provided federal CHIP funding for FY2009 through FY2013, the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended) provided federal CHIP funding for FY2014 and FY2015, and the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA, P.L. 114-10 ) provided funding for FY2016 and FY2017. For FY2016 and FY2017, the annual appropriation amounts were $19.3 billion and $20.4 billion, respectively. The FY2017 appropriation was the combination of semiannual appropriations of $2.85 billion from Section 2104(a) of the Social Security Act (SSA) plus a one-time appropriation of $14.7 billion from MACRA Section 301(b)(3), which was provided for the first six months of the fiscal year and remains available until expended. Section 2(a) of the KIDS Act would extend federal CHIP funding for five years by adding federal appropriations for FY2018 through FY2022 under SSA Section 2104(a). The funding amounts are as follows: $21.5 billion for FY2018, $22.6 billion for FY2019, $23.7 billion for FY2020, $24.8 billion for FY2021, and $25.9 billion for FY2022. The funding for FY2022 would be structured as it was for FY2017, with semiannual appropriations of $2.85 billion plus a one-time appropriation (see " One-Time Appropriation for FY2022 ") in the amount of $20.2 billion to be provided for the first six months of the fiscal year and remain available until expended. Section 301(a) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . The federal government reimburses states for a portion of every dollar they spend on CHIP, up to state-specific annual limits called allotments. Allotments are the federal funds allocated to each state for the federal share of its CHIP expenditures. State CHIP allotment funds are provided annually, and the funds are available to states for two years. Under current law, FY2017 is the last year CHIP allotments are authorized. There are two formulas for determining state allotments: an even-year formula and an odd-year formula. In even years, such as FY2016, state CHIP allotments are based on each state's federal allotment for the prior year plus any Child Enrollment Contingency Fund payments (see " Extension of the Child Enrollment Contingency Fund ") from the previous year, adjusted for growth in per capita National Health Expenditures and child population in the state (i.e., the allotment growth factor). In odd years, state CHIP allotments are based on each state's spending for the prior year (including federal CHIP payments from the state CHIP allotment, Child Enrollment Contingency Fund payments, and redistribution funds). This figure is adjusted using the same growth factor as the even-year formula (i.e., growth in per capita National Health Expenditures and child population in the state). Because the odd-year formula is based on states' actual use of CHIP funds, it is called the rebasing year , and a state's CHIP allotment can either increase or decrease depending on that state's CHIP expenditures in the previous year. State CHIP allotments can be increased to reflect CHIP eligibility or benefit expansions in either even or odd years. For a state's allotments to increase due to an expansion, the state needs to submit the required information to the Secretary of the Department of Health and Human Services (HHS) no later than August 31 st preceding the beginning of the fiscal year. Sections 2(b)(1)(A)-(D) of the KIDS Act would authorize CHIP allotments for FY2018 through FY2022 under SSA Section 2104(m), maintaining the allotment formulas for odd- and even-year allotments. Sections 301(b)(1)(A)-(D) of the CHAMPIONING HEALTHY KIDS Act would authorize CHIP allotments for FY2018 through FY2022 in the same way as the provision in S. 1827 . However, for FY2018, the HEALTHY KIDS Act would allow states to submit the required information regarding program expansions no later than 60 days after the enactment. Prior to MACRA, FY2015 was the last year federal CHIP funding was available, and under current law, FY2017 is the last year federal CHIP funding is available. For both FY2015 and FY2017, semiannual appropriations were provided under SSA Section 2104(a) in addition to a one-time appropriation. CHIP allotments for the first half of the year were available from the semiannual appropriation amount provided in SSA Section 2104(a) provided for the first half of the year in addition to a one-time appropriation. For the second half of the year, allotments were made available from the funding provided in the first half of the year in addition to the semiannual appropriation amount provided in SSA Section 2104(a) for the second half of the year. In FY2015 and FY2017, the full-year amount for state allotments was determined according to the odd-year formula for CHIP allotments, which means the allotments were equal to federal spending from the prior year multiplied by the allotment growth factor. Section 2(b)(1)(E) of the KIDS Act would structure the federal CHIP funding for FY2022 under SSA Section 2104(m)(10) the same as it was structured for FY2015 and FY2017. For FY2022, funding for the first half of the year would be available from SSA Section 2104(a)(25)(A) and from the FY2022 one-time appropriation provided for in Section 2(b)(3) of this draft bill. Funding for the second half of the year would be provided in SSA Section 2104(a)(25)(B). The full-year amount for state allotments would be determined according to the even-year formula for CHIP allotments, which means each state's allotment would equal the allotment for the prior year plus any Child Enrollment Contingency Fund payments from the previous year, multiplied by the allotment increase factor. Section 301(b)(1)(E) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . When FY2015 and FY2017 were the last years federal CHIP funding was available, one-time appropriations in the amount of $15.4 billion and $14.7 billion (respectively) were provided for allotments for the first six months of each year in addition to the semiannual appropriations provided in SSA Section 2104(a). The funds from the one-time appropriation were to remain available until expended. The one-time appropriation for FY2015 was provided in CHIPRA Section 108, and the one-time appropriation for FY2017 was provided in MACRA Section 301(b)(3). Section 2(b)(3) of the KIDS Act would provide a one-time appropriation in the amount of $20.2 billion for FY2022. This funding would accompany the allotments for the first half of FY2022, and the funding would remain available until expended. Section 301(b)(3) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . CHIPRA established the Child Enrollment Contingency Fund to provide shortfall funding to certain states. It was funded with an initial deposit equal to 20% of the appropriated amount for FY2009 (i.e., $2.1 billion). In addition, for FY2010 through FY2017, such sums as were necessary for making Child Enrollment Contingency Fund payments to eligible states were to be deposited into this fund, but these transfers could not exceed 20% of the appropriated amount for the fiscal year or period. For FY2009 through FY2017, states with a funding shortfall and CHIP enrollment for children exceeding a state-specific target level received a payment from the Child Enrollment Contingency Fund. This payment was equal to the amount by which the enrollment exceeds the target, multiplied by the product of projected per capita expenditures and the E-FMAP. Section 2(c) of the KIDS Act would extend the funding mechanism for the Child Enrollment Contingency Fund under SSA Section 2104(n) and payments from the fund for FY2018 through FY2022. Section 301(c) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . In a few situations, federal CHIP funding is used to finance Medicaid expenditures. For instance, certain states had significantly expanded Medicaid eligibility for children prior to the enactment of CHIP in 1997, and these states are allowed to use their CHIP allotment funds to finance the difference between the Medicaid and CHIP matching rates (i.e., federal medical assistance percentage [FMAP] and E-FMAP rates, respectively) for the cost of children in Medicaid in families with income above 133% of FPL. The following 11 states meet the definition: Connecticut, Hawaii, Maryland, Minnesota, New Hampshire, New Mexico, Rhode Island, Tennessee, Vermont, Washington, and Wisconsin. This provision is referred to as the qualifying state s option . Under current law, FY2017 was the last year in which the qualifying states option was authorized. Section 2(d) of the KIDS Act would extend the qualifying states option under SSA Section 2105(g)(4) for FY2018 through FY2022. Section 301(d) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . CHIPRA created a state plan option for Express Lane eligibility through September 30, 2013. Under this option, states are permitted to rely on a finding from specified Express Lane agencies (e.g., those that administer programs such as Temporary Assistance for Needy Families, Medicaid, CHIP, and the Supplemental Nutrition Assistance Program) for determinations of whether a child has met one or more of the eligibility requirements necessary to determine his or her initial eligibility for Medicaid or CHIP, eligibility redeterminations for Medicaid or CHIP, or renewal of eligibility coverage under Medicaid or CHIP. This provision was extended through subsequent legislation. Authority for Express Lane eligibility determinations expired September 30, 2017. Section 2(e) of the KIDS Act would amend SSA Section 1902(e)(13)(I) to extend authority for Express Lane eligibility determinations from FY2018 through FY2022. Section 301(e) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . Eligibility for Medicaid and CHIP is determined by both federal and state law, whereby states set individual eligibility criteria within federal standards. Statewide upper income eligibility thresholds for CHIP-funded child coverage vary substantially across states, ranging from a low of 170% of FPL to a high of 400% of FPL, as of July 1, 2016. The Centers for Medicare & Medicaid Services (CMS) administrative data show that CHIP enrollment is concentrated among families with annual income at lower levels. FY2013 state-reported administrative data show that approximately 99.4% of CHIP child enrollees were in families with annual income at or below 300% of FPL. Under the ACA MOE provisions, states are required to maintain their Medicaid programs with the same eligibility standards, methodologies, and procedures in place on the date of enactment of the ACA until January 1, 2014, for adults and through September 30, 2019, for children up to the age of 19 (SSA Section 1902(gg)(2)). The ACA also requires states to maintain income eligibility levels for CHIP children through September 30, 2019, as a condition for receiving payments under Medicaid (SSA Section 2105(d)(3)). The penalty to states for not complying with either the Medicaid or the CHIP MOE requirements would be the loss of all federal Medicaid funds. Under the CHIP statute, FY2017 was the last year federal CHIP funding is provided, even though the ACA child MOE requirement is in place through FY2019. The MOE requirement impacts CHIP Medicaid expansion programs and separate CHIP programs differently. For CHIP Medicaid expansion programs , when federal CHIP funding is exhausted, the CHIP-eligible children in these programs will continue to be enrolled in Medicaid but financing will switch from CHIP to Medicaid. For separate CHIP programs , states are provided a couple of exceptions to the MOE requirement: (1) states may impose waiting lists or enrollment caps to limit CHIP expenditures, and (2) after September 1, 2015, states may enroll CHIP-eligible children in qualified health plans in the health insurance exchanges. In addition, in the event that a state's CHIP allotment is insufficient to fund CHIP coverage for all eligible children, a state must establish procedures to screen children for Medicaid eligibility and enroll those who are Medicaid eligible. For children not eligible for Medicaid, the state must establish procedures to enroll CHIP children in qualified health plans in the health insurance exchanges that have been certified by the HHS Secretary to be "at least comparable" to CHIP in terms of benefits and cost sharing. Section 2(f) of the KIDS Act would extend the Medicaid (SSA Section 1902(gg)(2)) and CHIP (SSA Section 2105(d)(3)) MOE requirements for children for three years from FY2020 through FY2022. However, for this period, the Medicaid and CHIP MOE requirements would only apply to children in families with annual income less than 300% of FPL. During this specified period, states would be permitted to roll back Medicaid and/or CHIP eligibility for children in families with annual income that exceeds 300% of FPL without the loss of all federal Medicaid matching funds. Section 301(f) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . Under federal law, states are permitted to establish CHIP buy-in programs that allow children in families with annual income above the state's CHIP income eligibility thresholds to purchase health coverage through the CHIP program at full cost (including administrative fees). Historically, buy-in programs have not relied on federal CHIP funds and operate outside of CHIP program rules. As a result, states have flexibility in how they design a buy-in program, including requirements related to eligibility and enrollment processes, benefit coverage, cost-sharing, state-financed subsidies, etc. Under the ACA's individual mandate, most individuals have to maintain minimum essential coverage or pay a penalty for noncompliance. The types of coverage that are considered minimum essential coverage are listed in Section 5000A of the Internal Revenue Code (IRC) and its implementing regulations. Most types of comprehensive coverage are considered minimum essential coverage, including public coverage, such as coverage under programs sponsored by the federal government (e.g., Medicaid and CHIP), as well as private insurance (e.g., employer-sponsored insurance and non-group, or individual, insurance). CHIP buy-in programs are not listed among the types of coverage that qualify as minimum essential coverage. No provision. Section 301(g) of the CHAMPIONING HEALTHY KIDS Act would add a new state option at SSA Section 2107 to allow states to consider all enrollees in CHIP and in qualified CHIP look-alike programs to be members of a single risk pool when developing rates and premiums for program participation. A qualified CHIP look-alike program would be defined as a state-only program (i.e., financed with nonfederal funds, including premiums) that is available for purchase for children through the age of 18 who are not eligible for Medicaid or CHIP and that provides benefits that are at least identical to CHIP state plan benefits (or a waiver of such plan). Section 301(g) would also amend IRC Section 5000A(f)(1) to add a qualified CHIP look-alike program to the types of coverage that qualify as minimum essential coverage. This provision would be effective with respect to taxable years after December 31, 2017. SSA Section 1139A(e), as added by CHIPRA Section 401(a), requires the HHS Secretary, in consultation with the CMS Administrator, to conduct a demonstration project to develop a model for reducing childhood obesity by awarding grants to eligible entities (e.g., community-based organizations, federally-qualified health centers, and universities and colleges) to carry out the project. The law specifies how awarded funds shall be used (e.g., to carry out community-based activities related to reducing childhood obesity), and requires the Secretary to prioritize grants to certain eligible entities (e.g., those that can demonstrate having previously received funds to carry out activities that promote individual and community health, and those located in medically underserved communities or areas in which the average poverty rate is at least 150% of the average poverty rate in the state involved). CHIPRA required the Secretary to design the demonstration project within one year of enactment and to submit to Congress a report describing the demonstration project and evaluating its effectiveness not later than three years after project implementation. CHIPRA authorized the appropriation of $25 million for the period of FY2009 through FY2013 to fund the demonstration project. ACA Section 4306 replaced the authorization of appropriations with a total appropriation of $25 million for the period of FY2010 through FY2014. In 2011, the Centers for Disease Control and Prevention (CDC) awarded funding to four grantees to conduct a four-year Childhood Obesity Research Demonstration (CORD) Project. Funding was not appropriated for FY2015. MACRA Section 304(a) appropriated $10 million to fund the demonstration project for FY2016 and FY2017. The CDC launched an expansion to the first demonstration project titled CORD 2.0, which provided funding to two grantees for 2016 through 2018, focusing on clinical and weight management program interventions. Section 3(a) of the KIDS Act would amend SSA Section 1139A(e)(8) to appropriate $25 million for the period of FY2018 through FY2022 to carry out the childhood obesity demonstration project. Section 302(a) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . SSA Section 1139A authorizes a variety of activities related to pediatric quality measurement and care. Under SSA Section 1139A(a), the HHS Secretary was required to identify and publish an initial core set of pediatric quality measures by no later than January 1, 2010. SSA Section 1139A(b) required the Secretary to establish a Pediatric Quality Measures Program (PQMP) by January 1, 2011. This program is required to identify pediatric quality measure gaps and development priorities, award grants and contracts to develop measures, and revise and strengthen the core measure set, among other things. Section 1139A(c) requires states to submit reports to the Secretary annually to include information about state-specific child health quality measures applied by the state, among other things. Under Section 1139A(d), the Secretary also was required, between FY2009 and FY2013, to award no more than 10 grants to states and child health providers for demonstration projects to evaluate ideas to improve the quality of children's health care. In addition, the Secretary, not later than January 1, 2010, was required by Section 1139A(f) to establish a program to encourage the development and dissemination of a model electronic health record for children. The Institute of Medicine (IOM) was required under Section 1139A(g) to develop a report on the measurement of child health status and quality by no later than July 1, 2010. Funding for these activities was appropriated in the amount of $45 million for each of FY2009 through FY2013. Section 210 of the Protecting Access to Medicare Act of 2014 (PAMA, P.L. 113-93 ) extended funding for only the PQMP for FY2014 by requiring that not less than $15 million of the $60 million appropriated for adult health quality measures under SSA Section 1139B(e) for FY2014 be used to carry out Section 1139A(b). The appropriation in Section 1139A(i) for funding to carry out Section 1139A (except for 1139A(e), the childhood obesity demonstration project) expired in FY2013; the funding designated to carry out Section 1139A(b) expired in FY2014. MACRA Section 304(b) appropriated $20 million for the period FY2016 through FY2017 for the purposes of carrying out SSA Section 1139A. This funding was specifically excluded from being used to carry out the activities under Section 1139A(e), the childhood obesity demonstration project; Section 1139A(f), the development of a model electronic health record for children; and Section 1139A(g), the IOM study of pediatric health quality. Section 3(b) of the KIDS Act would amend SSA Section 1139A(i) to appropriate funding in the amount of $75 million for the period of FY2018 through FY2022 to be used to carry out the activities of Section 1139A (except for subsections (e), (f), and (g)), and the funding would remain available until expended. Section 302(b) of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . CHIPRA Section 201 appropriated (out of funds in the Treasury that were not otherwise appropriated) $100 million in outreach and enrollment grants for FY2009 through FY2013 to be used by eligible entities (e.g., states, local governments, community-based organizations, elementary or secondary schools) to conduct outreach and enrollment efforts that increase the participation of Medicaid and CHIP-eligible children. Of the total appropriation, 10% is directed to a national campaign to improve the enrollment of underserved child populations, and 10% is targeted to outreach for Native American children. The remaining 80% is distributed among eligible entities for the purpose of conducting outreach campaigns, focusing on rural areas and underserved populations. Grant funds also are targeted at proposals that address cultural and linguistic barriers to enrollment. The ACA appropriated $140 million for FY2009 through FY2015 for outreach and enrollment grants. MACRA Section 303 appropriated $40 million for FY2016 and FY2017 for outreach and enrollment grants. Under current law, appropriated funds for CHIP outreach and enrollment grants have not been enacted for FY2018 or subsequent fiscal years. Section 4 of the KIDS Act would amend SSA Section 2113(a)(1) and (g) to appropriate $100 million for CHIP outreach and enrollment grants for the period of FY2018 through FY2022. Like the provision in S. 1827 , Section 303(a) of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 2113(a)(1) and (g) to appropriate $100 million for CHIP outreach and enrollment grants for the period of FY2018 through FY2022. In addition, Section 303(b) of the CHAMPIONING HEALTHY KIDS Act would add organizations that use parent mentors to the list of entities that are eligible to receive outreach and enrollment grants under SSA Section 2113(f). A p a rent mentor would be defined as a parent or guardian of a child who is eligible for Medicaid or CHIP and who is trained to assist families with uninsured children to improve social determinants of health. Such assistance may include educating families about how to obtain health insurance coverage, assisting families with completing (and submitting) health insurance coverage applications, serving as a liaison between families and representatives of Medicaid and CHIP, providing guidance to families on identifying medical and dental homes and community pharmacies for children, and providing assistance and referrals to families to address social determinants of children's health (e.g., poverty, food insufficiency, and housing). Section 303(c) would amend SSA Section 1902(e)(14) to specify that compensation received by parent mentors for allowable activities would be disregarded when determining Medicaid eligibility for individuals for whom the modified adjusted gross income (MAGI) income counting rules apply. The federal government's share of CHIP expenditures (including both services and administration) is determined by the E-FMAP rate. The E-FMAP rate is derived each year by the HHS Secretary using a set formula, and it varies by state. By statute, the E-FMAP (or federal matching rate) can range from 65% to 85%. The ACA included a provision to increase the E-FMAP rate by 23 percentage points (not to exceed 100%) for most CHIP expenditures from FY2016 through FY2019. This increases the statutory range of the E-FMAP rate to 88% through 100%. With this 23 percentage point increase, the federal share of CHIP expenditures is higher, which means states are spending through their limited federal CHIP funding (i.e., state CHIP allotments) faster. In FY2017, the E-FMAP rates ranged from 88% (13 states) to 100% (12 states). Section 5 of the KIDS Act would extend the increase to the E-FMAP rate under SSA Section 2105(b) for one year through FY2020. However, for FY2020 the increase to the E-FMAP would be 11.5 percentage points instead of 23 percentage points. Section 304 of the CHAMPIONING HEALTHY KIDS Act is identical to the provision in S. 1827 . SSA Section 1923 requires states to make Medicaid 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 (CPI-U) 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 total $43 billion and 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. No provision. Section 305 of the CHAMPIONING HEALTHY KIDS Act would further amend the Medicaid DSH reductions under SSA Section 1923(f)(7) by eliminating the reductions for FY2018 and FY2019 and increasing the annual reduction amounts for FY2021 through FY2023. The aggregate reduction amounts would increase from $43.0 billion to $44.0 billion. Specifically, under this provision, the annual aggregate reductions to the Medicaid DSH allotments would be $4.0 billion in FY2020 and $8.0 billion for each year from FY2021 through FY2025. In FY2026, states' DSH allotments would be calculated as though the reductions never occurred, with the annual inflation adjustments for FY2020 through FY2025. Medicaid financing for the territories (i.e., America Samoa, Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, and the U.S. Virgin Islands) is different than the financing for the 50 states and the District of Columbia. The five territories all have the same FMAP rate (i.e., federal matching rate) of 55%, whereas the FMAP for the 50 states and the District of Columbia varies by state according to each state's per capita income and can range from 50% to 83%. The territories are eligible for some (but not all) of the FMAP exceptions available to states and the District of Columbia for certain states, situations, populations, providers, and services. For instance, expenditures for compensation or training of skilled medical personnel of the state agency or public agency are matched at 75%, and expenditures for the establishment and operation of a State Medicaid fraud control unit are matched at 90% for the first twelve-quarter period after the unit is established and 75% after that period. Federal Medicaid funding to the states and the District of Columbia is open-ended, but the Medicaid programs in the territories are subject to annual federal spending caps (i.e., allotments). These Medicaid caps increase annually according to the change in CPI-U. Once the cap is reached, the territories assume the full cost of Medicaid services or, in some instances, may suspend services or cease payments to providers until the next fiscal year. Prior to the ACA, all five territories typically exhausted their federal Medicaid funding prior to the end of the fiscal year. For this reason, the territories received an additional $7.3 billion in funding through the ACA from two provisions of the law. One provision provided $6.3 billion in additional Medicaid federal funding to the territories to be distributed proportionally, and this funding is available between July 1, 2011, and September 30, 2019. In addition, another ACA provision provided $1.0 billion in increased Medicaid funding to the territories because none of the territories established exchanges. In May 2017, Puerto Rico received an additional $296 million in Medicaid funding through the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The Puerto Rico Oversight, Management, and Economic Stability Act ( P.L. 114-187 ) set up a Financial Management and Oversight Board with broad fiscal powers to approve, for territory governments or instrumentalities of those governments (such as public corporations or municipal governments): fiscal plans; budgets; voluntary agreements with bondholders; debt restructuring plans; and critical projects eligible for expedited permitting processes. No provision. Section 306(a) of the CHAMPIONING HEALTHY KIDS Act would increase the annual growth in Puerto Rico's and the U.S. Virgin Islands' annual Medicaid allotments under SSA Section 1108(g)(2) from CPI-U to CPI-U plus one percentage point for FY2018 and FY2019. Section 306(a) of the CHAMPIONING HEALTHY KIDS Act would also increase Medicaid funding for Puerto Rico provided under SSA Section 1108(g)(5) by $880 million that is available through September 30, 2019. An additional $120 million would be available to Puerto Rico through September 30, 2019, if the Financial Management and Oversight Board certifies that Puerto Rico has taken reasonable and appropriate steps during the period of October 1, 2017, through December 31, 2019, to (1) reduce Medicaid fraud, waste, and abuse; (2) implement strategies to reduce unnecessary, inefficient, or excessive Medicaid spending; (3) improve the use and availability of Medicaid data for program oversight and operation; and (4) improve quality of care and patient experience for Medicaid enrollees. Section 306(a) of the CHAMPIONING HEALTHY KIDS Act would increase the Medicaid funding for the U.S. Virgin Islands provided under SSA Section 1108(g)(5) by an amount equal to the per capita equivalent of the increased Medicaid funding provided to Puerto Rico under Section 306. The per capita equivalent is defined as the ratio of the population of the U.S. Virgin Islands to the population of Puerto Rico using the most recent estimates from the Bureau of the Census released before September 4, 2017. Section 306(b) of the CHAMPIONING HEALTHY KIDS Act would add a new SSA Section 1903(a)(8), which would increase Puerto Rico and U.S. Virgin Islands' Medicaid matching rates during the period of January 1, 2018, through December 31, 2019, for expenditures for (1) compensation or training of skilled medical personnel of the state agency or public agency from 75% to 90% and (2) the establishment and operation of a State Medicaid fraud control unit from 75% to 90% after the first twelve-quarter period after the unit is established. The payments for these increases to the matching rate would not be taken into account for Puerto Rico's and U.S. Virgin Islands' annual Medicaid allotment funding. Under SSA Section 1902(a)(25), Medicaid generally serves as the payer of last resort. This means that Medicaid will pay for services only to the extent that third parties are not liable. This principle is referred to as third-party liability ("TPL"). Under the statute, states must meet numerous TPL requirements with respect to both third parties in general, and health insurers that may be liable for care furnished to Medicaid enrollees. For example, states must collect TPL-related information at the time of Medicaid eligibility determinations and redeterminations and must submit to the HHS Secretary a plan for pursuing third parties, to be monitored as part of the HHS Secretary's review of the state's mechanized claims processing system. States must require health insurers to disclose to the state Medicaid agency information concerning the insurer's coverage of Medicaid-eligible individuals, must respond to the state's TPL inquiries, and must process third-party claims filed by the state. Under the federal Medicaid regulations, states must require providers to bill liable third parties before billing Medicaid. (This requirement is referred to as cost avoidance. ) SSA Section 1902(a)(25)(E) and (F) provides for exceptions to the cost avoidance rule. Specifically, for preventive pediatric services, prenatal services, and certain services rendered to individuals on whose behalf child support enforcement is being carried out, states are required to pay providers' claims under standard claims payment rules and then seek reimbursement from liable third parties, rather than withholding payment until the third party's liability has been determined. In general, where an enrollee is entitled to payment by a third party for an item or service but Medicaid has already paid, the enrollee is considered to have assigned his or her claim to payment to the state. In addition, when a state makes a payment to a provider for a service and the state is later reimbursed by a third party for that service, the state's service expenditure is treated as an overpayment to the extent of the third party's payment to the state. The state is required to return to CMS the federal share of the overpayment. Section 202 of the Bipartisan Budget Act of 2013 (BBA 13; P.L. 113-67 , Division A), made two amendments to Medicaid TPL rules under SSA Section 1902(a)(25). First, it limited the exceptions to the Medicaid TPL requirement of cost avoidance described above. Specifically, states may choose to defer payment to providers of preventive pediatric, prenatal services and services to children on whose behalf child support enforcement is being carried out, such that the state pays the provider only if a liable third party has not made payment within 90 days after the date the provider submitted a claim to the third party relating to the services. BBA 13 also amended the SSA to enable states to recover all portions of judgments received by Medicaid enrollees and clarified that states may impose liens against Medicaid enrollees' assets obtained as part of a liability settlement. The BBA 13 provisions, as amended by PAMA and MACRA, took effect on October 1, 2017. No provision. Section 401(a)(1) of the CHAMPIONING HEALTHY KIDS Act would postpone the effective date of the TPL amendments made by BBA 13 by two years, to October 1, 2019. The provision postponing the effective date would take effect on September 30, 2017, and apply with respect to any open claims, including claims generated or filed, after that date. Section 401(a)(2) of the CHAMPIONING HEALTHY KIDS Act would substitute the current terms third party and health insurer in current SSA Section 1902(a)(25) with one term, responsible third party . It would add a new SSA Section 1902(nn) defining responsible third party. This represents a change from current law because at present, the terms third party and health insurer are not explicitly defined in the statute. Section 401(a)(3) of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 1902(a)(25)(E) and repeal Section 1902(a)(25)(F) in order to eliminate the cost avoidance exceptions that currently apply to pediatric preventive services, prenatal services, and services furnished to children on whose behalf child support enforcement is being carried out. A cost avoidance exception would apply only to pediatric vaccines furnished under the Vaccines for Children program. Section 401(a)(4) of the CHAMPIONING HEALTHY KIDS Act would add a new SSA Section 1902(a)(25)(F) clarifying both the role of Medicaid managed care entities (and other health insurers) in furnishing Medicaid benefits under contract with the state, as well as the role of health insurers as responsible third parties . For example, the provision would require that where states provide Medicaid services through a contract with a health insurer, the contract must specify any responsibility of the health insurer with respect to recovery of payment from responsible third parties pursuant to the delegation or transfer by the state to the insurer of enrollees' right to payment by third parties. It would require that where a state elects to delegate or transfer its TPL rights to a health insurer, the state must ensure the state law confers on the insurer the same authority that the state would otherwise have with respect to the state's dealings with other health insurers on TPL matters. The provision would require that reimbursements made by responsible third parties to a health insurer under contract with the state be treated as overpayments, just as such TPL reimbursements would be treated if paid directly to the state. Section 401(a)(5) of the CHAMPIONING HEALTHY KIDS Act would clarify the scope of the obligations that states must impose on health insurers as responsible third parties under SSA Section 1902(a)(25)(I). For example, currently, states must require health insurers to respond to the state's inquiries regarding TPL claims; the new provision would specify that the insurer must respond within 60 days. Similarly, under current law, states must require health insurers to agree not to deny TPL claims submitted by the state solely on the basis of the date of submission of the claim, or the type or format of the claim. The new provision would add that such claims may not be denied solely on the basis of a lack of prior authorization. Section 401(a)(6) of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 1903(d)(2)(B) to provide that, with respect to expenditures for Medicaid services provided to individuals who are eligible for Medicaid by virtue of the ACA eligibility expansion ( ACA Medicaid expansion enrollees ), the HHS Secretary, in determining the amount of the federal overpayment to the state relating to a TPL recovery (i.e., the federal share of the state's overpayment to the provider), would apply the state's standard FMAP rate, rather than the newly eligible matching rate. This would mean that the states would retain a larger percentage of the third-party overpayment recoveries for services furnished to ACA Medicaid expansion enrollees . The federal government's share for most Medicaid expenditures is called the FMAP rate. States' FMAP rates are subject to various exceptions for specific types of situations, enrollee populations, services, or providers. The FMAP exceptions currently in effect are increases to, rather than reductions to, a state's standard FMAP. Current law does not impose any specific penalties on states for failure to comply with the TPL requirements in SSA Section 1902(a)(25). In general, CMS has the authority to disallow federal participation in states' Medicaid expenditures in specific instances where CMS determines that the expenditure does not comply with the state plan or federal Medicaid requirements. No provision. Section 401(b) of the CHAMPIONING HEALTHY KIDS Act would add a new Section 1905(ee) to the SSA providing that, beginning in 2020, if a state fails to comply with the TPL requirements in SSA Section 1902(a)(25) with respect to each calendar quarter of a year, the HHS Secretary may reduce the FMAP by 0.1 percentage point (one-tenth of one percentage point) for calendar quarters of each subsequent year in which the state also fails to comply. SSA Section 2107(e), which lists specific provisions of Title XIX (Medicaid) of the SSA that apply to CHIP, does not list the TPL requirements in SSA Section 1902(a)(25). Under SSA Section 1902(a)(25)(I)(i), states must, through state law, require health insurers to provide to the state, upon state request, information concerning Medicaid enrollees or Medicaid-eligible individuals to determine during what period the individual was covered by the health insurer. At state option, the same requirements can be imposed on health insurers with respect to enrollees or eligible individuals under CHIP. No provision. Section 401(c)(1) of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 2107(e)(1) to include the TPL requirements at SSA Section 1902(a)(25) as a Medicaid provision binding on the CHIP program. Section 401(c)(2) of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 1902(a)(25)(I)(i) to make its application to CHIP mandatory rather than optional for the state. SSA Section 1936 requires the HHS Secretary to establish a Medicaid Integrity Program, under which the HHS Secretary contracts with eligible entities to conduct various review, audit, education, and training activities. SSA Section 1936(b)(4) requires the HHS Secretary to provide for education and training of state or local personnel responsible for the administration of the Medicaid program, as well as providers, managed care entities, and enrollees, concerning "payment integrity and quality of care." No provision. Section 401(d) of the CHAMPIONING HEALTHY KIDS Act would add a new SSA Section 1936(f) requiring that the education and training included in the Medicaid Integrity Program include training on the liability of responsible third parties . It would require that, as part of this education and training, the HHS Secretary (1) publish information on its website concerning TPL best practices, (2) monitor states' efforts to assess TPL and analyze the challenges posed by such assessment, (3) distribute to state Medicaid agencies information relating to these efforts and challenges, and (4) provide guidance to state Medicaid agencies concerning state oversight of TPL efforts by Medicaid managed care plans under SSA Section 1903(m) or 1932. CMS makes quarterly Medicaid grant awards to states to cover the federal share of Medicaid expenditures. The amount of the grant is determined on the basis of information submitted by the state to CMS in quarterly estimate and quarterly expenditure reports. States are required to submit Form CMS-64, the Quarterly Medicaid Statement of Expenditures, within 30 days after the end of each quarter. The Form CMS-64 contains a schedule relating to aggregate TPL collections. No provision. Section 401(e) of the CHAMPIONING HEALTHY KIDS Act would require the HHS Secretary, in consultation with the states, to develop and make available to states not later than January 1, 2019, a model uniform set of reporting fields and accompanying guidance that states may use for purposes of (1) reporting to CMS through the Transformed Medicaid Statistical Information System (T-MSIS) and (2) collecting information identifying responsible third parties and other relevant information for ascertaining their responsibility to pay for Medicaid and CHIP services. The ACA created IRC Section 36B to provide premium assistance tax credits for individuals to purchase coverage through the health insurance exchanges, among other purposes. Section 36B includes a definition of household income, based on MAGI. Section 36B's definition of MAGI is used to determine eligibility for various federal health programs, including Medicaid. As of January 1, 2014, MAGI rules are used in determining eligibility for most of Medicaid's nonelderly populations, including the ACA Medicaid expansion. Medicaid's MAGI income-counting rule is set forth in law and regulation. Under the Medicaid MAGI counting rules, the state looks at each individual's MAGI, deducts 5%, which the law provides as a standard disregard for individuals at the highest income limit for coverage, and compares that income to the income standards set by the state in coordination with CMS. For Medicaid, MAGI is defined as the IRC's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased by certain types of income (e.g., tax-exempt interest income received or accrued during the taxable year and the nontaxable portion of Social Security benefits). In addition, under Medicaid regulations, certain types of income are subtracted (e.g., certain scholarships and fellowships) to arrive at MAGI. Also under Medicaid regulations, irregular income received as a lump sum (e.g., state income tax refunds, lottery or gambling winnings, one-time gifts or inheritances) is counted as income only in the month received. In addition to specifying the types of household income that must be considered during eligibility determinations, the regulations also define "household." The income of any person defined as a part of an individual's "household" must be counted when determining that individual's income level for purposes of a Medicaid eligibility determination. Medicaid program regulations make a distinction with regard to the budget period when determining income eligibility for applicants and new enrollees as compared to eligibility redeterminations for current enrollees. Specifically, income eligibility for applicants and new enrollees is based on current monthly household income. When redetermining eligibility for current Medicaid enrollees, states are permitted to use current monthly income and family size, or projected annual income and family size for the remaining months of the calendar year. For states that choose the latter measure when redetermining eligibility, Medicaid requires the applicant to predict income and household size for the remaining months of the calendar year. No provision. Section 402 of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 1902(e)(14) to require states to consider qualified lottery winnings and/or qualified lump sum income received by an individual on or after January 1, 2018, when determining eligibility for Medicaid based on MAGI for each such individual. Such income would not be counted as household income when determining Medicaid eligibility for other members (other than the individual's spouse) of the individual's household. Winnings and/or income in an amount less than $80,000 would be considered in the month that such winnings and/or income are received. Amounts greater than or equal to $80,000 but less than $90,000 would be prorated over a period of 2 months. Amounts greater than or equal to $90,000 but less than $100,000 would be prorated over a period of 3 months. For purpose of prorating winnings and/or income in amounts greater than or equal to $100,000, one additional month would be added for each increment of $10,000 received, not to exceed 120 months (or 10 years) for winnings and/or income of $1,260,000 or more. Winnings and/or income greater than or equal to $80,000 would be required to be counted in equal monthly installments over the applicable time period. The provision would establish a state option for a hardship exemption for individuals for whom the denial of Medicaid eligibility based on such income would cause an undue medical or financial hardship as determined by criteria established by the HHS Secretary. States would be required to inform individuals in advance of their loss of Medicaid eligibility and of their option to enroll in a qualified health plan offered through the health insurance exchange during a special enrollment period (due to the loss of Medicaid or CHIP coverage) and to provide technical assistance to assist such individuals in enrolling in such coverage. The state would also be required to inform each individual of the date that such individual would be permitted to reapply for Medicaid. The provision would define "qualified lottery winnings" as winnings (including amounts awarded as a lump sum payment) from a state-conducted sweepstakes or lottery, or a lottery operated by a multistate or multijurisdictional lottery association. The bill would define "qualified lump sum" income as income received as a lump sum: (1) from monetary winnings from gambling (as defined by the HHS Secretary and including monetary winnings from gambling activities described in section 1955(b)(4) of title 18 of the United States Code), (2) damages received by suit or agreement in lump sums or as periodic payments (other than monthly payments) on account of causes of action (other than causes of action arising from personal physical injuries or physical sickness), or (3) as liquid assets from the estate of a deceased individual (as defined in SSA Section 1917(b)(4)). The bill would specify that states may recover lottery winnings awarded to the individual to pay for Medicaid medical assistance furnished to the individual. For the first 41 years of the Medicare program, all Part B enrollees paid the same Part B premium amounts, regardless of their income. However, the Medicare Modernization Act of 2003 ( P.L. 108-173 ) required that, beginning in 2007, higher-income Part B enrollees pay higher premiums. Similarly, when the Part D program began in 2006, all enrollees in the same Part D plan paid the same premiums. The ACA subsequently imposed high-income premiums on Part D prescription drug benefit enrollees, beginning in 2011. The Social Security Administration notes that fewer than 5% of Medicare beneficiaries pay these higher premiums. For Part B, standard premiums (i.e., premiums paid by enrollees who are not considered high income) are set at 25% of average annual per capita Part B program expenditures, and the remaining 75% of costs are subsidized by the federal government. Similarly, under Part D, base premiums are set at 25.5% of average annual per capita costs for standard Part D coverage, and the remaining 74.5% is subsidized by the federal government. Adjustments are made to the Parts B and D premiums for higher-income beneficiaries, with the percentage of per capita expenditures paid by these beneficiaries increasing with income. (In other words, the federal subsidy declines as income levels increase.) This percentage currently ranges from 35% to 80% of average per capita expenditures for both Parts B and D. The income thresholds for couples who file joint tax returns are 200% of the individual income threshold at each level. In 2017, individuals whose annual income exceeds $85,000 ($170,000 for a couple) are subject to higher premium amounts. (See Table 2 .) As required by the ACA, and modified by MACRA, income thresholds used in determining high-income premiums for 2011 through 2017 are frozen at the 2010 levels. Prior to 2010, annual adjustments to these thresholds were based on annual changes in the CPI-U, rounded to the nearest $1,000. This has meant that over time, as income—including Social Security benefits—has increased with inflation, a greater proportion of Medicare enrollees have paid the high-income premiums. Beginning in 2018, MACRA Section 402 lowers the income thresholds for the top two income groups as shown in Table 3 (current law heading). Individuals with incomes between $133,500 and $160,000 per year will be in the 65% applicable percentage group (instead of those with incomes between $160,000 and $214,000), and the income threshold for the highest group (80%) will be $160,000 (instead of $214,000). For years 2020 and thereafter, the thresholds will be adjusted annually for inflation based on the CPI-U. The adjustments will be based on the new (2018 and 2019) threshold levels. No provision. Section 403 of the CHAMPIONING HEALTHY KIDS Act would amend SSA Section 1839 to add an additional income tier for individuals with annual earnings of $500,000 or more or couples filing jointly with earnings of $875,000 or more. (See Table 3 (proposed modification heading).) Enrollees exceeding these thresholds would pay premiums that cover 100% of the average per capita cost of the Parts B and D benefits. The threshold for couples filing jointly in this new income tier would be calculated as 175% of the individual income level rather than 200% as in the other income tiers. This top threshold would be frozen through 2026, and would be adjusted annually for inflation starting in 2027 based on the CPI-U. | The State Children's Health Insurance Program (CHIP) is a means-tested program that provides health coverage to targeted low-income children and pregnant women in families that have annual income above Medicaid eligibility levels but have no health insurance. CHIP is jointly financed by the federal government and the states, and the states are responsible for administering CHIP. In statute, FY2017 was the last year a federal CHIP appropriation was provided. Federal CHIP funding was not extended before the beginning of FY2018. As a result, states do not currently have full-year FY2018 CHIP allotments and states are funding their CHIP programs with unspent federal CHIP funds from prior years. The continuing resolutions enacted on December 8, 2017, and December 22, 2017, both include provisions that provide short-term funding for CHIP. The continuing resolution enacted on December 8, 2017, includes a special rule for redistribution funds, and the continuing resolution enacted on December 22, 2017, includes short-term appropriations and an extension of the special rule for redistribution funds. This short-term funding is not sufficient to fund CHIP through the end of FY2018.There are a couple of bills that would extend federal funding for CHIP for five years. On October 4, 2017, both the Senate Finance Committee and the House Energy and Commerce Committee had markups on different bills that would extend CHIP federal funding through FY2022, among other provisions. The Senate Finance Committee reported the Keeping Kids' Insurance Dependable and Secure Act of 2017 (KIDS Act, S. 1827), which would extend federal CHIP funding through FY2022 and extend the increased enhanced federal medical assistance percentage (E-FMAP) rates for one year (i.e., through FY2020) but with an 11.5 percentage point increase instead of the 23 percentage point increase under current law. The bill also includes extensions of other CHIP provisions (e.g., the Express Lane eligibility option and the maintenance of effort for children with incomes below 300% of the federal poverty level) and other programs and demonstrations (e.g., the Child Obesity Demonstration Project and the Pediatric Quality Measures Program). The House Energy and Commerce Committee reported the Helping Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable Act of 2017 (HEALTHY KIDS Act, H.R. 3921, H.Rept. 115-358), which includes almost identical language to the KIDS Act that would extend CHIP federal funding through FY2022 and extend the increased E-FMAP for one year at 11.5 percentage points. The HEALTHY KIDS Act also includes almost identical language that would extend the same CHIP provisions and other programs and demonstrations as the KIDS Act. The HEALTHY KIDS Act also includes some provisions that are not in the KIDS Act, such as adding a new CHIP state option for qualified CHIP look-alike plans, modifying the Medicaid disproportionate share hospital (DSH) allotment reductions, and providing additional Medicaid funding to Puerto Rico and the U.S. Virgin Islands. The HEALTHY KIDS Act includes the following provisions as offsets: modifications to Medicaid third party liability, treatment of lottery winnings for Medicaid eligibility, and Medicare Part B and D premium subsidies for higher-income individuals. On October 30, 2017, the House Rules Committee posted an amendment in the nature of a substitute for the Community Health And Medical Professionals Improve Our Nation Act of 2017 (CHAMPION Act, H.R. 3922), meaning that it is intended to be considered by the House as an amendment to H.R. 3922 and the language of the CHAMPION Act would be stricken and the text of the amendment in the nature of the substitute would be inserted in its place. This amendment in the nature of a substitute is entitled the Continuing Community Health And Medical Professional Programs to Improve Our Nation, Increase National Gains, and Help Ensure Access for Little Ones, Toddlers, and Hopeful Youth by Keeping Insurance Delivery Stable Act of 2017 (CHAMPIONING HEALTHY KIDS Act), and it includes revised language for the CHAMPION Act (which would extend funding for community health centers and other programs among other things) under Division A and revised language for the HEALTHY KIDS Act under Division B. The House passed the CHAMPIONING HEALTHY KIDS Act on November 3, 2017, by a vote of 242 to 174. This report compares and summarizes the provisions in the KIDS Act and in Division B of the CHAMPIONING HEALTHY KIDS Act. |
The Berne Union represents a diverse group of public and private entities that are directly involved in international trade and foreign investment by providing financing and insurance to exporters and investors. The activities of Berne Union members are diversified across products, geographies, governance modes, and regulatory systems. In 2011, Berne Union members provided over $1.8 trillion in insurance coverage, representing more than 10% of total global trade. The Berne Union was formed in 1934 when private and state export credit insurers from France, Italy, Spain, and the United Kingdom met in Berne, Switzerland. As a result, the organization was named after the location of the first meeting, thus the name the Berne Union, although the organization has never been based in Berne. The Union was headquartered in Paris until the 1970s, when it was moved to London. Associated with the Berne Union is the Prague Club, which was established in 1993 by the Berne Union and the European Bank for Reconstruction and Development (EBRD) to support new and maturing export credit agencies that are setting up and developing export credit and investment insurance programs. Also named after the location where the first meeting was held, the Prague Club established an information exchange network for new agencies in Central and Eastern Europe that have not yet meet the entrance requirements for Berne Union members. When the Prague Club members have grown to the point where they can meet certain specified criteria, they can apply for full Berne Union membership. Membership in the Berne Union is open to new applicants but there are requirements that must be met to ensure that discussions among the members remain relevant and topical for as many members as possible. Membership requirements include Institutions applying for membership in the Berne Union should be underwriters actively conducting business in the areas of export credit financing and foreign investment as their core activity. Institutions must have been in operation in the field of export credit insurance or the insurance of outward investment for a period of at least three years. Institutions should meet certain thresholds for premium income or for the value of business covered. If the applicant is engaged in export credit insurance, its operations must include insurance of both commercial and political risks and it must underwrite political risks in a global and general sense. If the applicant is engaged in the insurance of outward investment, it must be providing direct insurance against the normal political risks, including expropriation and war, and issues associated with the transfer of funds. Applicants to the Berne Union are assigned observer status for two years, after which the membership of the Berne Union decides collectively if the applicant can become a full member. In the past five years, more than 10 new members have joined the Berne Union and 3 applicants are presently listed in the observer status. In 2007, the Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC) became the newest member of the Berne Union. The United States is represented within the Berne Union by two federal government agencies—the U.S. Export-Import Bank and the Overseas Private Investment Company —and five private sector corporations. The private-sector members are the American International Group insurance underwriters (AIG); the Chubb Corporation of Warren, New Jersey; the Foreign Credit Insurance Association Management Company, Inc. (FCIA); the Multilateral Investment Guarantee Agency (MIGA); and the Zurich Emerging Markets Solution. The Berne Union is led by a President, a Vice President, and a Management Committee. The President is elected each year and can be re-elected for one further year. The Vice President is elected each year and cannot be re-elected. The Management Committee consists of the President, the Vice President, Committee Chairs, and 12 representatives of member organizations. The standing committees represent three areas of specialization within the credit industry: short-term credit insurance represented by the Short Term (ST) Committee, medium- and long-term credit insurance and lending represented by the Medium Long Term (MLT) Committee, and investment insurance represented by the Investment (INV) Committee. Six of the members for the Management Committee represent the two largest organizations in each of the three committees. The remaining six members are elected on a rotating basis for a two-year term. To support the Berne Union leadership, the Berne Union has a staff of five people, known as the Secretariat, located in London. These five staff members are responsible for coordinating all Berne Union and Prague Club activities and for providing ways for the members to participate. In particular, the Secretariat is responsible for maintaining external relations and for promoting the Berne Union and its members within the export credit and insurance industry as a whole by supporting opportunities for members to meet and discuss professional matters and to exchange views and experiences. This interchange of information is achieved through three methods, annual general meetings and Committee meetings, annual seminars and workshops, and an intranet among the Berne Union members. Annual general meetings are hosted by a Berne Union member on a rotating basis and take place over four or five days. Discussions at these meetings reflect broad aspects of international trade, international finance, and developments in specific industry sectors. In particular, member discussions focus on developing and promoting the best available practices in the fields of international trade finance and foreign investment insurance. Recently, the members focused their attention on such issues as the impact of the global credit crunch and the effect it is having on global trade; the dynamic expansion of the Indian economy and the growing demand for credit insurance; and trends in social and corporate responsibility, green initiatives in project finance, and the expanding capacity for local currency finance. The Berne Union has developed long-standing relationships with the leading international and regional financial institutions in the credit and investment insurance industry. For instance, the Union has developed strong ties with such groups as the Organization for Economic Cooperation and Development (OECD), the International Monetary Fund (IMF), and the World Bank group, and has worked closely with these organizations to promote international financial stability and broad-based economic growth. The Berne Union is also in regular contact with such regional development banks as the European Bank of Reconstruction and Development (EBRD) and the Asian Development Bank, as agencies from both regions are active members of the Prague Club. The Berne Union has close relationships with the other major credit insurance associations including the International Credit Insurance and Surety Association (ICISA) and the Pan-American Surety Association (PASA). According to Berne Union President Johan Schrijver, the financial crisis has presented suppliers of exports and export insurance with severe challenges as liquidity has been tight and the volume of global trade fell sharply. In addition, risk concerns have shifted from focusing primarily on developing countries to developed economies and the sovereign debt crisis in Europe and the political instability in the Middle East. Berne Union members expect the rate of economic growth to slow down in 2012, which could place pressure on official export credit agencies to provide additional support. According to Johan Schrijver, Berne Union members "continue to express serious concerns about the ability of banks to fund trade and investment given the proposed regulatory changes and the on-going funding challenges that banks are facing. Any further deterioration in bank capacity for trade and export finance could have serious consequences for global trade and economic recovery." Berne Union members have participated in conferences and other forums where they have encouraged the continued availability of export credits and trade and investment insurance to support the positive effects of global trade and investment. At the same time, Berne Union members continue to support practices that emphasize ethical practices in international trade. Berne Union members have adopted operational guidelines in the three major business areas to support best practices among all of the members. Denmark's Eksport Kredit Fonden (EKF) adopted a set of principles known as the Equator Principles that comprise a voluntary set of guidelines associated with project finance that are based on the environmental and social procedures developed by the World Bank's International Finance Corporation and that have been adopted by various international banks. Berne Union members have also met with business leader throughout Asia to overcome concerns about doing business in Asia, particularly in China. Some members argue that there is a lack of available information concerning the nature and performance capability of many of the firms in China that are involved in trade or investment transactions with Berne Union members. The rapid growth of joint ventures with Chinese firms has created confusion at times for some of the public-sector Berne Union members, because many of them are charged by their respective governments with participating in transactions that support economic activity in their home countries. As a result of this confusion, membership in the Berne Union is growing fastest among firms from the private sector where those firms are not charged with promoting national content. Another key issue for Berne Union members is insurance against terrorist risks and how such risks should be defined and whether they should be included as a part of investment insurance. In November 2006, the Berne Union members adopted a set of 10 Guiding Principles, which represents a set of best practices commitments for Berne Union members to operate "in a professional manner that is financially responsible, respectful of the environment and which demonstrates high ethical values." In brief terms, the 10 Principles are commitments to: 1. Conduct business in a manner that contributes to the stability and expansion of global trade and investment in accordance with applicable laws and relevant international agreements. 2. Carefully review and manage the risks that are undertaken. 3. Promote export credit and investment insurance terms that reflect sound business practices. 4. Generate adequate revenues to sustain long-term operations that are reflective of the risks that are undertaken. 5. Manage claims and recoveries in a professional manner, while recognizing the rights of insurers and obligors. 6. Be sensitive about environmental issues and take such issues into account in the conduct of business. 7. Support international efforts to combat corruption and money laundering. 8. Promote best practices through exchange of information, policies, and procedures, and through the development of relevant agreements and standards, where these are deemed necessary. 9. Commit to furthering transparency amongst members and in the reporting of business practices. 10. Encourage cooperation and partnering with commercial, bilateral, multilateral, and other organization involved in export trade and investment business. Congress plays no direct role in the Berne Union, but its presence is felt indirectly through two U.S. government agencies that are members of the Union and over which it has oversight responsibility—the U.S. Export-Import Bank and the Overseas Private Investment Corporation. These agencies also provide information back to Congress and to the Administration about developments in the areas of export credit finance and foreign investment. U.S. private sector firms that are members of the Berne Union also often look to Congress for support and leadership in the areas of export credit finance and insurance, especially with the increased risks many firms now believe exist as a result of terrorist activities. As a result of its vast international economic and security interests, the United States is directly affected by, and therefore plays a leading role in, developments in the areas of international trade, international finance, and foreign investment. The vast U.S. international presence also means that U.S. national interests are tied to the successful operation and stability of the international trade and finance markets, which means that Congress is often involved in resolving issues that affect important U.S. interests that rely on stability in the international financial system and the successful operation of global trade and investment markets. | The Berne Union, or the International Union of Credit and Investment Insurers, is an international organization comprised of more than 70 public and private sector members that represent both public and private segments of the export credit and investment insurance industry. Members range from highly developed economies to emerging markets, from diverse geographical locations, and from a spectrum of viewpoints about approaches to export credit financing and investment insurance. Within the Berne Union, the United States is represented by the U.S. Export-Import Bank (Eximbank) and the Overseas Private Investment Corporation (OPIC) and four private-sector firms and by one observer. The main role of the Berne Union and its affiliated group, the Prague Club, is to work to facilitate cross-border trade by helping exporters mitigate risks through promoting internationally acceptable principles of export credit financing, strengthen the global financial structure, and facilitate foreign investments. Over the past decade, the growth and increased importance of global trade and financing have altered the agenda of the Berne Union from focusing primarily on concerns over country-specific political risk to concerns about global trade, international finance, global and regional security, and questions of business organization, civil society, transparency, and corporate responsibility. The 2008-2009 financial crisis and the economic recession that followed has altered export financing by making credit conditions tighter and by raising concerns over risks in the advanced economies. As a result, demands on official export credits have grown sharply. Congress, through its oversight of Eximbank and OPIC, as well as international trade and finance, has interests in the functioning of the Berne Union. |
The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. Under title III of the ADA, discrimination against individuals with disabilities in public accommodations, including hospitals and doctor's offices, is prohibited. The Department of Justice (DOJ) promulgated regulations under title III requiring places of public accommodation to provide "auxiliary aids and services" to individuals with disabilities unless they are able to prove such services would be unduly burdensome. Auxiliary aids may include qualified interpreters as well as note takers, video remote interpreting (VRI) services, or real-time computer-aided transcription services. The new regulations issued under title III on July 26, 2010, address several issues including the application of rights to effective communication by companions who are individuals with disabilities, the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter. The auxiliary aid requirement articulated by the DOJ interprets the broad nondiscrimination language of the ADA and requires effective communication, but neither the statute nor the regulations explicitly state when doctors or hospitals must provide hearing impaired patients with interpreters. As a result, the answer as to whether doctors or hospitals must provide interpreters for hearing impaired individuals is dependent on the particular circumstances surrounding the patient's case. Judicial decisions give some guidance on when an interpreter must be provided in particular factual situations. Title III of the ADA provides that "[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation." Discrimination is further described as including "a failure to make reasonable modifications in policies, practices, or procedures when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities." Public accommodations are exempted from providing these special provisions when they "can demonstrate that making such modification would fundamentally alter the nature of such goods, services, facilities, privileges, advantages, or accommodations." The definition of public accommodation specifically includes the "professional office of a health care professional" and hospitals. On July 26, 2010, the 20 th anniversary of the passage of the ADA, the Department of Justice (DOJ) issued final rules amending the existing regulations under ADA title II (prohibiting discrimination against individuals with disabilities by state and local governments) and ADA title III (prohibiting discrimination against individuals with disabilities by places of public accommodations). These new regulations contain detailed sections on communications. Like the previous regulations, the new regulations require that public entities and public accommodations furnish appropriate aids and services when necessary to ensure effective communication with an exception regarding fundamental alterations or undue burdens. More specifically, the title III regulations state that public accommodations do not have to provide auxiliary aids if such measures would "fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations being offered or would result in an undue burden, i.e., significant difficulty or expense." In determining whether an action poses an undue burden, the regulations require the consideration of several factors, including the nature and cost of the action, the overall financial resources of the site, the geographic separateness and the administrative or fiscal relationship of the site or sites in question to a parent corporation, the overall financial resources of the parent corporation, and the type of operation or operations of any parent corporation or entity. When a particular auxiliary aid would cause an undue burden, the public accommodation must provide alternative assistance so that the individual can take full advantage of the services and goods offered. Unlike the previous regulations, the new regulations specifically extend the requirement for effective communication to companions who are individuals with disabilities. DOJ noted in its comments on the new regulations that this was a particularly important issue. Effective communication with companions is particularly critical in health care settings where miscommunication may lead to misdiagnosis and improper or delayed medical treatment. The Department has encountered confusion and reluctance by medical care providers regarding the scope of their obligation with respect to such companions. Effective communication with a companion is necessary in a variety of circumstances. For example, a companion may be authorized to make health care decision on behalf of the patient or may need to help the patient with information or instructions given by hospital personnel. A companion may be the patient's next-of-kin or health care surrogate with whom the hospital must communicate about the patient's medical condition. The new regulations also indicate that the type of auxiliary aid or service necessary for effective communication varies depending on the circumstance. The new title III regulations specifically state that "[a] public accommodation should consult with individuals with disabilities whenever possible to determine what type of auxiliary aid is needed to ensure effective communication, but the ultimate decision as to what measure to take rests with the public accommodation, provided that the method chosen results in effective communication." The term "auxiliary aid" is defined to include "qualified interpreters on site or through video remote interpreting (VRI) services, notetakers, real-time computer-aided transcription services, written materials; exchange of written notes ... or other effective methods of making aurally delivered materials available to individuals who are deaf or hard of hearing." The new regulations added video remote services (VRI) as an example of an auxiliary aid that may provide effective communication. The new regulations specifically state that when VRI is used it must provide real-time, full-motion video and audio over a dedicated high-speed, wide-bandwidth video or wireless connection that does not produce lags, choppy, blurry or grainy images or irregular pauses in communications; a sharply delineated image that is large enough to display the interpreter's face, arms, hands, and fingers and the participating individual's face, arms, hands, and fingers; and a clear, audible transmission of voices. In addition, a public accommodation that uses VRI must provide adequate training to users of the technology and other involved individuals. The new regulations also discuss when a family member or a friend may be used as an interpreter. Generally, a public accommodation is not to rely on an adult who accompanies an individual with a disability to interpret for the individual. However, there are some exceptions including an emergency involving an imminent threat to safety or welfare, and where the individual with a disability specifically requests that the accompanying adult interpret and the accompanying adult agrees. A minor child may not be used to interpret except in an emergency situation. As the regulations indicate, there is no absolute requirement that an interpreter be provided in a particular situation. However, in order to comply with the ADA, auxiliary aids must provide effective doctor-patient communication. In Mayberry v. Van Valtier, the court held that a deaf Medicare patient was entitled to a trial on her claim that her doctor violated the ADA. In this case, the doctor had communicated with the patient for several years mostly by exchanging notes or using the patient's children as sign interpreters and on one occasion had noted in the patient's file that her back pain was higher than she had originally thought and that this misunderstanding was "probably due to poor communication." The patient, Mrs. Mayberry, requested that the doctor provide an interpreter for a physical examination. The doctor complied but following the examination wrote a letter to the interpreter, with a copy to the patient, stating that she would not be able to use the interpreter's services again and that "I really can't afford to take care of Mrs. Mayberry at all." The doctor characterized the letter as a protest against what was perceived as an unfair law. The court found that the allegations made by the patient were sufficient to reject a motion for summary judgment and ordered the case to proceed to trial. Subsequently, a judgment was rendered in favor of the doctor but there is no record of a written opinion. In Aikins v. St. Helena Hospital , another district court examined arguments concerning effective communication and denied summary judgment to the hospital and doctor. Elaine Aikins, a hearing impaired individual, and the California Association of the Deaf (CAD) alleged that St. Helena Hospital and Dr. James Lies failed to communicate effectively with Mrs. Aikins during her now deceased husband's medical treatment. Instead of an interpreter, the hospital provided Mrs. Aikins with an ineffective finger speller. Allegedly Mrs. Aikins was unable to effectively communicate with Dr. Lies or other hospital staff until her daughter became available to interpret, an argument that was supported by the doctor's mistaken impression concerning how long the patient had been without CPR. Mrs. Aikins and the CAD alleged that Dr. Lies and St. Helena Hospital violated both the ADA and the Rehabilitation Act. Dr. Lies maintained that the Rehabilitation Act was inapplicable and St. Helena asserted that it complied with both the ADA and Rehabilitation Act. Although the ADA claims were dismissed due to lack of standing, the court noted that adequate medical treatment is not a defense to a claim that a defendant failed to provide effective communication under the Rehabilitation Act of 1973. "Mrs. Aikins's claims relate to her exclusion from meaningful participation in the decisions affecting her husband's treatment, not to the appropriateness of the treatment itself." Citing Aikins , the court in Naiman v. New York University found that a physician's effectiveness in providing medical treatment to a hearing impaired patient does not negate an ineffective communication claim under the ADA. Mr. Alec Naiman, who is hearing impaired, was admitted on several occasions to New York University Medical Center, one of many medical facilities operated by New York University. On each occasion Mr. Naiman requested an interpreter in order to "effectively participate in his treatment" and communicate with hospital staff. With the exception of one visit, the center failed to provide one in a timely manner or did not provide an interpreter at all. New York University argued that Mr. Naiman failed to state a claim under the ADA because he received adequate medical care from the medical center. The court disagreed and ruled in favor of the plaintiff. The court noted that an effective communication claim under the ADA relates to the patient's exclusion from participation in his treatment rather than the treatment itself. Therefore, the effectiveness of the treatment is an insufficient defense to the general purpose and scope of the ADA. As DOJ discussed in its appendix to the ADA Title III regulations, although physicians and hospitals are strongly encouraged to confer with patients with disabilities about the type of auxiliary aid they prefer when communicating, deference to the patient's preferred method is not necessarily required. In Majocha v. Turner , the district court denied a motion for summary judgment in a case involving the lack of an interpreter for the father of a 15-month-old patient. The defendant doctors argued that they had offered to use note taking to communicate. The district court observed that an individual with a disability cannot insist on a particular auxiliary aid if the aid offered ensures effective communication. However, the court, relying on lay and expert testimony concerning the lack of effectiveness of note taking in this case, found that there was a genuine dispute regarding whether the note taking was an acceptable auxiliary aid and denied the doctors' motion for summary judgment. The law provides that an interpreter, or any suggested auxiliary aid, is not required if the doctor can demonstrate that doing so would "fundamentally alter the nature of the good, services, facility, privilege, advantage, or accommodation being offered or would result in an undue burden." This issue was discussed in Bravin v. Mount Sinai Medical Center, where the plaintiff sued a hospital for failure to provide a sign language interpreter during a Lamaze class. The court there found that while the hospital alluded to undue hardship, it did not address the issue explicitly. Therefore, because there was no issue of fact as to whether the hospital violated the ADA, the court awarded summary judgment to the plaintiff. The Senate report on the ADA noted that "technological advances can be expected to further enhance options for making meaningful and effective opportunities available to individuals with disabilities. Such advances may enable covered entities to provide auxiliary aids and services which today might be considered to impose undue burdens on such entities." Recently, videoconferencing technology, combined with high-speed internet connections, has been used to provide around-the-clock interpreting services for businesses. Additionally, the use of CART technology has been employed as a means to efficiently communicate with hearing impaired individuals. This may render successful undue burden arguments increasingly difficult. However, the use of technology must result in effective communication. Several cases have held that to establish a claim for damages, a plaintiff must show that a defendant is guilty of intentional discrimination or deliberate indifference. In Loeffler v. Staten Island University Hospital, a case brought under Section 504 of the Rehabilitation Act, the Second Circuit Court of Appeals held the factual situation could support a finding of deliberate indifference. Robert Loeffler and his wife were deaf but their two children, ages 13 and 17, had normal hearing. The Loefflers stated that prior to Mr. Loeffler's heart surgery, they requested an interpreter but one was never furnished and their children served as translators, even in the surgery recovery room and the critical care unit. Several plaintiffs have argued that defendant hospitals have shown deliberate indifference when a sign language interpreter was requested but not provided. In Freydel v. New York Hospital , the court of appeals found that the hospital had a policy to provide interpreter services and had attempted to secure an interpreter for a 78-year-old deaf woman who communicated in Russian sign language. The second circuit held that proving that staff members failed to respond to repeated requests for a Russian sign language interpreter "cannot by itself suffice to maintain a claim of deliberate indifference." Similarly, in Constance v. State University of New York Health Science Center, the court denied the plaintiffs' motion for damages finding that the hospital responded quickly to a request for an interpreter. Although the failure to follow up on the request may have been negligent, the court found it did not amount to deliberate indifference. In Alvarez v. New York City Health & Hospitals Corporation , the district court reached a similar conclusion, finding that the plaintiff did not make the required showing of deliberate indifference since the hospital has a policy of providing interpreters and provided an interpreter within a day of the request. One of the threshold issues a plaintiff must overcome before the merits of a case can be examined is whether the plaintiff has standing to bring an ADA claim. Several decisions have found that a plaintiff who alleges discrimination under the ADA due to lack of a sign language interpreter does not have standing because there is not a real and immediate threat of harm. However, other decisions have found standing. For example, in Gillespie v. Dimensions Health Corporation , the district court found standing for plaintiffs alleging "the existing and on-going policy and practice [of not providing interpreters] itself violates their rights under the ADA." In addition, because the plaintiffs had sought, and would likely continue to seek, medical care from the hospital, there was a sufficient threat of future ADA violations to grant the plaintiffs standing under the ADA. The ADA purposely adopted a flexible standard regarding nondiscrimination requirements. This flexibility was seen as a means to balance the rights of the patients with disabilities the interests of treating physicians and hospitals. Because of this flexibility, precise requirements are not readily enunciated. Therefore, whether or not a doctor or hospital must provide an interpreter for a hearing impaired individual depends on the particular circumstances surrounding the patient's care. Exactly when a sign language interpreter may be required has been discussed in several judicial decisions. However, the majority of the claims regarding the failure of a doctor to provide a hearing impaired patient with an interpreter appear to have been resolved through either an informal or formal settlement process. The DOJ has obtained a number of settlement agreements with hospitals in recent years. In addition, the new regulations promulgated under title III address several issues including the application of rights to effective communication by companions who are individuals with disabilities, a specific discussion of the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter. | The Americans with Disabilities Act (ADA) is a broad civil rights act prohibiting discrimination against individuals with disabilities. Title III of the Americans with Disabilities Act (ADA) prohibits places of public accommodation, including hospitals and doctors' offices, from discriminating against individuals with disabilities. The Department of Justice (DOJ) promulgated regulations under title III requiring the use of auxiliary aids, unless they would fundamentally alter the nature of the service or result in an undue burden. Auxiliary aids may include qualified interpreters as well as note takers, video remote interpreting (VRI) services, or real-time computer-aided transcription services. The new regulations issued under title III on July 26, 2010, address several issues including the application of rights to effective communication by companions who are individuals with disabilities, the use of video remote interpreting (VRI) services, and when an accompanying adult or child may be used as an interpreter. Attempting to address the myriad of disabilities and public accommodations, the ADA purposely adopted a flexible standard concerning when its nondiscrimination requirements are met. The law and DOJ regulations, then, do not explicitly state when hospitals or doctors are required to provide interpreter services to patients with disabilities and, as is illustrated by the judicial decisions in the area, this issue is largely fact dependent. |
In the wake of the tragedy of September 11, 2001, the U.S. Congress decided that enhancing the security of the United States' borders was a vitally important component of preventing future terrorist attacks. Before September 11, 2001, border security fell piecemeal under the mandate of many diverse federal departments, including but not limited to the Department of Justice (the Immigration and Naturalization Service); the Department of the Treasury (the Customs Service); the Department of Agriculture (the Animal and Plant Health Inspection Service); and the Department of Transportation (the Coast Guard). The Homeland Security Act of 2002 ( P.L. 107-296 ) consolidated most federal agencies operating along the U.S. borders within the newly formed DHS. Most of these agencies were located in the Directorate of Border and Transportation Security (BTS), which was charged with securing the borders; territorial waters; terminals; waterways; and air, land, and sea transportation systems of the United States; and managing the nation's ports of entry. The lone exception is the U.S. Coast Guard, which remained a standalone division within DHS. The BTS was composed of three main agencies: (1) the CBP, which is charged with overseeing commercial operations, inspections, and land border patrol functions, (2) ICE, which oversees investigations, alien detentions and removals, air/marine drug interdiction operations, and federal protective services, and (3) the TSA, which is charged with protecting the nation's air, land, and rail transportation systems against all forms of attack to ensure freedom of movement for people and commerce. On July 13, 2005, the Secretary of DHS, Michael Chertoff, announced the results of the months-long Second Stage Review (2SR) that he undertook upon being confirmed as DHS Secretary. One of Secretary Chertoff's main recommendations, which was agreed to by the DHS Appropriations Conferees, was the elimination of the BTS Directorate. The Secretary announced the creation of a new Office of Policy, which, among other things, assumed the policy coordination responsibilities of the BTS Directorate. The operational agencies that comprised BTS (CBP, ICE, TSA) now report directly to the Secretary and Deputy Secretary of DHS. The goal of this reorganization was to streamline the policy creation process and ensure that DHS policies and regulations are consistent across the department. Additionally, the Federal Air Marshals program was moved out of ICE and back into TSA to increase operational coordination between all aviation security entities in the department. Conceptually speaking, CBP provides the front line responders to immigrations and customs violations and serves as the law enforcement arm of DHS, while ICE serves as the investigative branch. TSA is charged with securing the nation's transportation systems, whereas the U.S. Coast Guard also serves an important border security function by patrolling the nation's territorial and adjacent international waters against foreign threats. Combined FY2010 appropriations for the border security agencies of DHS equaled $30.96 billion, and the combined full time equivalent (FTE) manpower totaled approximately 180,142 employees. CBP combined portions of the previous border law enforcement agencies under one administrative umbrella. This involved absorbing employees from the Immigration and Naturalization Service (INS), the Border Patrol, the Customs Service, and the Department of Agriculture. CBP's mission is to prevent terrorists and terrorist weapons from entering the country, provide security at U.S. borders and ports of entry, apprehend illegal immigrants, stem the flow of illegal drugs, and protect American agricultural and economic interests from harmful pests and diseases. As it performs its official missions, CBP maintains two overarching and sometimes conflicting goals: increasing security while facilitating legitimate trade and travel. In FY2010, CBP's appropriated net budget authority totaled $10.13 billion and manpower totaled approximately 58,105 FTE. Between official ports of entry, the U.S. Border Patrol (USBP)—a component of CBP—enforces U.S. immigration law and other federal laws along the border. As currently comprised, the USBP is the uniformed law enforcement arm of the Department of Homeland Security. Its primary mission is to detect and prevent the entry of terrorists, weapons of mass destruction, and unauthorized aliens into the country, and to interdict drug smugglers and other criminals. In the course of discharging its duties the USBP patrols over 8,000 miles of our international borders with Mexico and Canada and the coastal waters around Florida and Puerto Rico. At official ports of entry, CBP officers are responsible for conducting immigrations, customs, and agricultural inspections on entering aliens. As a result of the "one face at the border" initiative, CBP inspectors are being cross-trained to perform all three types of inspections in order to streamline the border crossing process. This initiative unifies the prior inspections processes, providing entering aliens with one primary inspector who is trained to determine whether a more detailed secondary inspection is required. CBP inspectors enforce immigration law by examining and verifying the travel documents of incoming international travelers to ensure they have a legal right to enter the country. On the customs side, CBP inspectors ensure that all imports and exports comply with U.S. laws and regulations, collect and protect U.S. revenues, and guard against the smuggling of contraband. Additionally, CBP is responsible for conducting agricultural inspections at ports of entry in order to enforce a wide array of animal and plant protection laws. In order to carry out these varied functions, CBP inspectors have a broad range of powers to inspect all persons, vehicles, conveyances, merchandise, and baggage entering the United States from a foreign country. ICE merged the investigative functions of the former INS and the Customs Service, the INS detention and removal functions, most INS intelligence operations, and the Federal Protective Service (FPS). This makes ICE the principal investigative arm for DHS. ICE's mission is to detect and prevent terrorist and criminal acts by targeting the people, money, and materials that support terrorist and criminal networks. As such they are an important component of our nation's border security network even though their main focus is on interior enforcement. In FY2010, ICE appropriations totaled $5.44 billion, and the agency had approximately 20,134 FTE employees. Unlike CBP, whose jurisdiction is confined to law enforcement activities along the border, ICE special agents investigate immigrations and customs violations in the interior of the United States. ICE's mandate includes uncovering national security threats such as weapons of mass destruction or potential terrorists, identifying criminal aliens for removal, probing immigration-related document and benefit fraud, investigating work-site immigration violations, exposing alien and contraband smuggling operations, interdicting narcotics shipments, and detaining illegal immigrants and ensuring their departure (or removal) from the United States. ICE is also responsible for the collection, analysis and dissemination of strategic and tactical intelligence data pertaining to homeland security, infrastructure protection, and the illegal movement of people, money, and cargo within the United States. The Coast Guard was incorporated into DHS as a standalone agency by P.L. 107-296 . The Coast Guard's overall mission is to protect the public, the environment, and U.S. economic interests in maritime regions—at the nation's ports and waterways, along the coast, and in international waters. The Coast Guard is thus the nation's principal maritime law enforcement authority and the lead federal agency for the maritime component of homeland security, including port security. Among other things, the Coast Guard is responsible for evaluating, boarding, and inspecting commercial ships as they approach U.S. waters; countering terrorist threats in U.S. ports; and for helping to protect U.S. Navy ships in U.S. ports. A high-ranking Coast Guard officer in each port area serves as the Captain of the Port and is the lead federal official responsible for the security and safety of the vessels and waterways in their geographic zone. In FY2010, Coast Guard appropriated budget authority totaled $10.14 billion, and the agency had approximately 49,954 FTE military and civilian employees. As part of Operation Noble Eagle (military operations in homeland defense and civil support to U.S. federal, state and local agencies), the Coast Guard is at a heightened state of alert protecting more than 361 ports and 95,000 miles of coastline. The Coast Guard's homeland security role includes protecting ports, the flow of commerce, and the marine transportation system from terrorism; maintaining maritime border security against illegal drugs, illegal aliens, firearms, and weapons of mass destruction; ensuring that the U.S. can rapidly deploy and resupply military assets by maintaining the Coast Guard at a high state of readiness as well as by keeping marine transportation open for the other military services; protecting against illegal fishing and indiscriminate destruction of living marine resources; preventing and responding to oil and hazardous material spills; and coordinating efforts and intelligence with federal, state, and local agencies. The TSA was created as a direct result of the events of September 11 and is charged with protecting the United States' air, land, and rail transportation systems to ensure freedom of movement for people and commerce. The Aviation and Transportation Security Act (ATSA, P.L. 107-71 ) created the TSA and included provisions that established a federal baggage screener workforce, required checked baggage to be screened by explosive detection systems, and significantly expanded FAMS. In 2002, TSA was transferred to the newly formed DHS from the Department of Transportation; as previously noted, in 2003 the Federal Air Marshal program was taken out of TSA and transferred to ICE. In FY2006, the program was transferred back to TSA. In FY2010, TSA appropriations totaled $5.26 billion, and the agency had approximately 51,949 FTE employees. To achieve its mission of securing the nation's aviation, TSA assumed responsibility for screening air passengers and baggage—a function that had previously resided with the air carriers. TSA is also charged with ensuring the security of air cargo and overseeing security measures at airports to limit access to restricted areas, secure airport perimeters, and conduct background checks for airport personnel with access to secure areas, among other things. However, an opt out provision in ATSA will permit every airport with federal screeners to request a switch to private screeners commencing in November 2004. Additionally, as a result of the 2SR, the Federal Air Marshals program has been transferred back to TSA. FAMS is responsible for detecting, deterring and defeating hostile acts targeting U.S. air carriers, airports, passengers and crews by placing undercover armed agents in airports and on flights. This report has briefly outlined the roles and responsibilities of the four main agencies within the DHS charged with securing our nation's borders: the CBP, ICE, the U.S. Coast Guard, and the TSA. It should be noted, however, that although the Homeland Security Act of 2002 consolidated all the agencies with primary border security roles in DHS, many other federal agencies are involved in the difficult task of securing our nation's borders. Although border security may not be in their central mission, they nevertheless provide important border security functions. These agencies include, but are not limited to the U.S. Citizenship and Immigrations Services within DHS, which processes permanent residency and citizenship applications, as well as asylum and refugee processing; the Department of State, which is responsible for visa issuances overseas; the Department of Agriculture, which establishes the agricultural policies that CBP Inspectors execute; the Department of Justice, whose law enforcement branches (the Federal Bureau of Investigation and Drug Enforcement Agency) coordinate with CBP and ICE agents when their investigations involve border or customs violations; the Department of Health and Human Services, through the Food and Drug Administration and the Center for Disease Control; the Department of Transportation, whose Federal Aviation Administration monitors all airplanes entering American air space from abroad; the Treasury Department, whose Bureau of Alcohol, Tobacco, and Firearms investigates the smuggling of guns into the country; and lastly the Central Intelligence Agency, which is an important player in the efforts to keep terrorists and other foreign agents from entering the country. Additionally, due to their location, state and local responders from jurisdictions along the Canadian and Mexican borders also play a significant role in the efforts to secure our nation's borders. | After the massive reorganization of federal agencies precipitated by the creation of the Department of Homeland Security (DHS), there are now four main federal agencies charged with securing the United States' borders: the U.S. Customs and Border Protection (CBP), which patrols the border and conducts immigrations, customs, and agricultural inspections at ports of entry; the U.S. Immigrations and Customs Enforcement (ICE), which investigates immigrations and customs violations in the interior of the country; the United States Coast Guard, which provides maritime and port security; and the Transportation Security Administration (TSA), which is responsible for securing the nation's land, rail, and air transportation networks. This report is meant to serve as a primer on the key federal agencies charged with border security; as such it will briefly describe each agency's role in securing our nation's borders. This report will be updated as needed. |
The Individuals with Disabilities Education Act (IDEA) is a grants and civil rights statute which provides federal funding to the states to help provide education for children with disabilities. If a state receives funds under IDEA, it must make available a free, appropriate public education (FAPE) for all children with disabilities in the state. Another key requirement of IDEA is "child find" which requires that all children with disabilities be located, identified, and evaluated. Education for children with disabilities in private schools is included in IDEA, but the requirements of the statute for children in private schools are not always the same as the requirements for children with disabilities in public schools. For example, there are specific requirements delineated regarding private schools. Issues concerning what services are required for children with disabilities placed in private schools, and who is to pay for these services, have been a continuing source of controversy under IDEA. Under the law prior to the enactment of P.L. 105-17 in 1997, states were required to set forth policies and procedures to ensure that provision was made for the participation of children with disabilities who are enrolled in private schools by their parents consistent with the number and location of these children. These requirements were further detailed in regulations which required that local education agencies (LEAs) provide private school students an opportunity for equitable participation in program benefits and that these benefits had to be "comparable in quality, scope, and opportunity for participation to the program benefits" provided to students in the public schools. The vagueness of the statute and the "equitable participation" standard led to differences among the states and localities and to differences among the courts. Prior to P.L. 105-17 , the courts of appeals that had considered these issues had sharply divergent views. Some courts gave local authorities broad discretion to decide whether to provide services for children with disabilities in private schools, which generally resulted in fewer services to such children, while others attempted to equalize the costs for public and private school children. The Supreme Court had granted certiorari in several of these cases, but when Congress rewrote the law in 1997, the Court vacated and remanded these cases. The IDEA Amendments of 1997 rejected the "equitable participation" standard and provided that to the extent consistent with the number and location of children with disabilities in the state who were enrolled in private schools by their parents, provision was made for the participation of these children in programs assisted by Part B by providing them with special education and related services. The amounts expended for these services by an LEA were to be equal to a proportionate amount of federal funds made available to the local educational agency under Part B of IDEA. These services could be provided to children with disabilities on the premises of private schools, including parochial, elementary, and secondary schools. There was also a requirement that the statutory provisions relating to "child find," identifying children with disabilities, are applicable to children enrolled in private schools, including parochial schools. Much of the 1997 language regarding private schools was kept in the 2004 reauthorization, but changes to these provisions were made, and these are discussed in more detail in the subsequent discussion of current law. Generally, the Senate report observed that "the intent of these changes is to clarify the responsibilities of LEAs to ensure that services to these children are provided in a fair and equitable manner." In addition, the Senate report stated that "many of the changes reflect current policy enumerated either in existing IDEA regulations or the No Child Left Behind Act." The House report noted that "the bill makes a number of changes to clarify the responsibilities of local educational agencies to children with disabilities who are placed by their parents in private schools. The Committee feels that these are important changes that will resolve a number of issues that have been the subject of an increasing amount of contention in the last few years." Under current law, there are several ways a child with a disability may be placed in a private school, and the LEA's responsibilities under IDEA vary depending on the type of placement. A child with a disability may be placed in a private school by the LEA or state educational agency (SEA) as a means of fulfilling the FAPE requirement for the child. In this situation, the full cost is paid for by the LEA or the SEA. A child with a disability may also be unilaterally placed in a private school by his or her parents. In this situation, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. IDEA states in part, (ii) REIMBURSEMENT FOR PRIVATE SCHOOL PLACEMENT.—If the parents of a child with a disability, who previously received special education and related services under the authority of a public agency, enroll the child in a private elementary school or secondary school without the consent of or referral by the public agency, a court or a hearing officer may require the agency to reimburse the parents for the cost of the enrollment if the court or hearing officer finds that the agency had not made a free appropriate public education available to the child in a timely manner prior to that enrollment. However, IDEA does require some services for children in private schools, even if they are unilaterally placed there by their parents, and there is no finding that FAPE was not made available to the child. In this situation, IDEA requires that a proportionate amount of the federal funds shall be made available. As noted previously, sometimes parents place their child in a private school when they disagree with the LEA concerning whether the LEA can provide FAPE. In School Committee of the Town of Burlington v. Department of Education of Massachusetts , the Supreme Court held that the statutory provision granting courts the right to grant such relief as the court deems appropriate includes the power to order school authorities to reimburse parents for private school expenditures. However, this reimbursement is permitted only if a court ultimately determines that the private school placement, rather than a proposed individualized education program (IEP), is proper under the act. The reimbursement may be reduced or denied if the child's parents did not give certain notice, if the parents did not make the child available for an evaluation by the LEA, or if a court finds the parents' actions unreasonable. The cost of reimbursement is not to be reduced or denied for the failure to provide notice if the school prevented the parent from providing such notice, the parents had not received notice of the notice requirement, or compliance would likely result in physical harm to the child. In addition, at the discretion of a court or hearing officer , the reimbursement may not be reduced or denied if the parent is illiterate or cannot write in English or compliance with the notice requirement would likely result in serious emotional harm to the child (§612(a)(10)(C)(iv)). The issue of whether FAPE has been or will be provided is a complex one that has been at the crux of many judicial decisions, including those concerning reimbursement for parental private school placement. The first IDEA case to reach the Supreme Court, Board of Education of the Hendrick Hudson Central School District v. Rowley, remains a seminal decision on the requirements of FAPE. The Court held in Rowley that the requirement of FAPE is met when a child is provided with personalized instruction with sufficient support services to benefit educationally from that instruction. This instruction must be provided at public expense, meet the state's educational standards. approximate the grade levels used in the state's regular education, and comport with the child's IEP. Rowley's application to particular fact patterns remains a much-litigated issue. The Supreme Court has also addressed the issue of whether parents can receive reimbursement from an LEA for unilaterally placing their child in a private school even if the child has never received IDEA services. In the Supreme Court's most recent IDEA decision, Forest Grove School District v. T.A., the Court held that IDEA authorized reimbursement for private special education services when a public school fails to provide FAPE and the private school placement is appropriate, regardless of whether the child previously received special education services through the public school. The Court emphasized that "[i]t would be particularly strange for the Act to provide a remedy ... when a school district offers a child inadequate ... [special education] services but to leave parents without relief in the more egregious situation in which the school district unreasonably denies a child access to such services altogether." Recent lower court decisions have held that if the child is making some educational progress and the public school has provided an IEP calculated to provide for continued progress, the requirements of FAPE are met and the child is not entitled to a private school placement. For example, in M.H. and J.H. v. Monroe-Woodbury Central School District , the court found that the child's IEP was adequate and, therefore, the parents were not entitled to tuition reimbursement for a private school placement. These same standards have been applied when parents seek to place their child in a private school different from the private school where the school district has placed the child. In addition, if a private school does not adequately address the child's educational needs, the court may not require private school tuition reimbursement. Courts have held that reimbursement for private school tuition is barred if parents arrange for private school educational services without notifying the LEA of their problems with their child's IDEA services. Reimbursement is also barred if the parents act unreasonably in their relations with the school or if the allegation concerns procedural violations that do not rise to a level of substantive harm. Children with disabilities may be unilaterally placed in a private school by their parents in situations where the parents do not argue for tuition reimbursement. Generally, children with disabilities enrolled by their parents in private schools are to be provided special education and related services to the extent consistent with the number and location of such children in the school district served by a LEA pursuant to several requirements. This general provision was changed in 2004 from previous law by the addition of the requirement that the children be located in the school district served by the LEA. In other words, the LEA responsible for implementing IDEA is the LEA in the area where the private school is located. The Senate report described this change as protecting "LEAs from having to work with private schools located in multiple jurisdictions when students attend private schools across district lines." Although the intent was to protect LEAs from working with private schools in multiple jurisdictions, this provision has generated considerable controversy. A detailed discussion of this issue is beyond the scope of this report; however, several of the issues raised include the disproportional effect on LEAs with large concentrations of private schools, the lack of change in the funding formula to reflect the change, and potential conflicts with state laws. In addition to the general LEA responsibility discussed above, there are also five specific requirements regarding parentally placed children: Funds expended by the LEA, including direct services to parentally placed private school children, shall be equal to a proportionate amount of federal funds made available under part B of IDEA. The LEA, after timely and meaningful consultation with representatives of private schools, shall conduct a thorough and complete child find process to determine the number of children with disabilities who are parentally placed in private schools. Services may be provided to children on the premises of private, including religious, schools, to the extent consistent with law. State and local funds may supplement, but not supplant, the proportionate amount of federal funds required to be expended. Each LEA must maintain records and provide to the SEA the number of children evaluated, the number of children determined to have disabilities, and the number of children served under the private school provisions. However, although IDEA does require services to parentally placed children, it should be emphasized that no parentally placed child has an individual right to receive the services that child would receive if enrolled in the public school. IDEA contains requirements concerning LEA consultation with private school officials and representatives of the parents of parentally placed private school children with disabilities. This consultation is to include the child find process and how parentally placed private school children with disabilities can participate equitably; the determination of the proportionate amount of federal funds available to serve parentally placed private school children with disabilities, including how that amount was calculated; the consultation process among the LEA, private school officials, and representatives of parents of parentally placed private school children with disabilities, including how the process will operate; how, where, and by whom special education and related services will be provided for parentally placed private school children with disabilities, including a discussion of the types of services (including direct services and alternate service delivery mechanisms), how the services will be apportioned if there are insufficient funds to serve all children, and how and when these decisions will be made; and how the LEA shall provide a written explanation to private school officials of the reasons why the LEA chose not to provide services if the LEA and private school officials disagree. A written affirmation of the consultation signed by the representatives of the participating private schools is required by the law. If the private school representatives do not sign within a reasonable period of time, the LEA shall forward the documentation to the SEA. A private school official has the right to submit a complaint to the SEA alleging that the LEA did not engage in meaningful and timely consultation or did not give due consideration to the views of the private school official. If a private school official submits a complaint, he or she must provide the basis of the noncompliance to the SEA, and the LEA must forward the appropriate documentation. If the private school official is dissatisfied with the SEA's determination, he or she may submit a complaint to the Secretary of Education, and the SEA shall forward the appropriate documentation to the Secretary. The general IDEA due process procedures are not applicable for children parentally placed in private schools where FAPE is not an issue except where the complaint concerns child find. | The Individuals with Disabilities Education Act (IDEA) is a grants and civil rights statute which provides federal funding to the states to help provide education for children with disabilities. If a state receives funds under IDEA, it must make available a free, appropriate public education (FAPE) for all children with disabilities in the state. Education for children with disabilities in private schools is included in IDEA, but the requirements of the statute for children in private schools are not always the same as the requirements for children with disabilities in public schools. Under current law, there are several ways a child with a disability may be placed in a private school, and the LEA's responsibilities under IDEA vary depending on the type of placement. A child with a disability may be placed in a private school by the local education agency (LEA) or state educational agency (SEA) as a means of fulfilling the FAPE requirement for the child. In this situation, the full cost is paid for by the LEA or the SEA. A child with a disability may also be unilaterally placed in a private school by his or her parents. In this situation, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. However, IDEA does require some services for children in private schools, even if they are unilaterally placed there by their parents, and there is no finding that FAPE was not made available to the child. In this situation, IDEA requires that a proportionate amount of the federal funds shall be made available. |
In January 2002, the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund) was established as an independent foundation in Switzerland to support country efforts to curb the number of illnesses and deaths caused by HIV/AIDS, tuberculosis (TB), and malaria. Each year, the three diseases kill some 6 million people, mostly in Africa. The Fund's Board meets at least twice annually to discuss governance issues, such as grant approval. Nineteen Board seats are rotated among seven donor countries, seven developing countries, and one representative from each of a developed country non-governmental organization (NGO), a developing country NGO, the private sector, a foundation, and affected communities. The United States holds a permanent Board seat. In its first five years, the Fund aimed to support: treatment for 1.8 million HIV-positive people, 5 million people infected with TB, and 145 million malaria patients; the prevention of HIV transmission to 52 million people through voluntary HIV counseling and testing services (VCT); the purchase and distribution of 109 million insecticide-treated bed nets to prevent the spread of the malaria; and care for 1 million orphans. As of July 11, 2008, the Global Fund has approved proposals for 519 grants in 136 countries totaling $10.8 billion ( Table 1 ). About half of those funds have been disbursed. As of December 2007, the Fund-supported grants have been used to treat an estimated 1.4 million HIV-positive people and 3.3 million people infected with TB, and to distribute 46 million insecticide-treated bed nets to prevent malaria transmission. An estimated 58% of Global Fund grants support HIV/AIDS interventions, about 17% fund anti-TB programs; some 24% sustain anti-malaria projects, and 1% strengthen health systems. According to the Global Fund, in 2005, its support represented more than 20% of all global HIV/AIDS spending, some 67% of global TB funds and about 64% of all international support for malaria interventions. In 2005, the Fund approved Round 5 grants in two tranches, because there were no sufficient donor pledges to support all recommended proposals at the time of grant approval. Its Comprehensive Funding Policy (CFP) specifies that the Fund can only sign grant agreements if there are sufficient resources to support the first two years of grant activities. The policy is designed to avoid disruptions in funding that might interrupt project activities. Financial delays can cause people to miss treatments, potentially leading to drug-resistance, susceptibility to secondary diseases, or death. The Fund distributes grants through a performance-based funding system. Under this system, the Fund commits to financially support the first two years (Phase I) of approved grants, though it disburses the funds quarterly if grants meet their targets. As the end of Phase I approaches, the Fund reviews the progress of the grant to determine if it should support the third through fifth years (Phase II). In November 2006, the Board established the Rolling Continuation Channel (RCC). This funding channel, which began in March 2007, permits Country Coordinating Mechanisms (CCMs) to request additional funding for grants that are performing well but set to expire. The application process for the RCC is not as rigorous as the Round process. RCC-approved grants can receive support for up to an additional six years, with the funds being awarded in three-year intervals. The channel is intended only for those grants that have demonstrated a significant contribution "to a national effort that has had, or has the potential to have in the near future, a measurable impact on the burden of the relevant disease." The Fund uses a performance-based funding system that permits it to temporarily suspend support for grants if it finds significant problems with project performance, such as accounting inconsistencies. In some instances, the Fund restored support to grants once key concerns were resolved. For example, in November 2006, the Fund suspended support for grants in Chad. After undertaking audits of the grants, the Fund reportedly discovered evidence of "misuse of funds at several levels and the lack of satisfactory capacity by the Principal Recipient and sub-recipients to manage the Global Fund's resources." In August 2007, the Fund announced that it had lifted the suspension, "after a series of investigation and negotiations between the Global Fund and national authorities ... and after efforts and strong commitment of all relevant stakeholders which guaranteed that the issues have been addressed and better systems with clarified responsibilities will be put in place. As part of the [Global Fund's] mitigation—besides other measures—a fiduciary agent will guarantee for an interim period of 12 months adequate financial monitoring and accounting for our grants." The Fund might discontinue support for grants in Phase II if it finds that they did not sufficiently meet their targets. Countries whose grants have been discontinued can apply and have secured funding in subsequent Rounds (see Nigeria below). In extreme cases, the Fund will immediately cancel financial support. If funds are immediately revoked, the Fund might invoke its continuity of services policy, which ensures that life-extending treatment is continued for suspended or cancelled grants or for those whose terms have expired until other financial support is identified. To date, the Fund has only terminated grants in Burma. When the Fund decided to terminate support for grants in Burma, policy analysts debated how best to serve humanitarian needs in politically unstable countries. On January 30, 2004, the Global Fund announced that it had temporarily withdrawn its grant in Ukraine. Citing the slow progress of Fund-backed HIV/AIDS programs, the Fund stated that it would ask "a reliable organization to take over implementation of the programs for several months, to give Ukraine the opportunity to address concerns of slow implementation, management, and governance issues." Nearly a month later, on February 24, 2004, the Fund announced that the suspension had ended, and that a temporary principal recipient had been identified. The Fund hoped that if a new Principal Recipient (PR) were used, project performance would improve and related problems would be resolved. In July 2005, the Fund announced that the new PR was successfully implementing the grant and that it had approved additional funds for the grant's Phase II activities. In May 2006, at its 13 th board meeting, the Fund decided to discontinue support for Nigeria's HIV/AIDS programs awarded in Round 1. In previous board meetings, the Secretariat recommended that the Fund not award Nigeria additional support for Phase II. The Board disagreed. At the 12 th Board meeting, the Board and Secretariat agreed to create an Independent Review Panel to review the grants and report back to the Board. Following its investigation, the Panel presented similar findings and agreed with the Secretariat that the grants were performing poorly. The Board agreed not to fund Phase II of the grants, but committed to support procurement of HIV treatments for up to two years. Although those grants were discontinued, the Fund awarded Nigeria different HIV/AIDS grants in Round 5. Staff at the Global Fund report that the Fund discontinued support for Pakistan's malaria projects in Round 2 because of weak project implementation, slow procurement of health products, poor data quality, and slow spending of project funds. Specifically, the Secretariat found that 8 of the grant's 10 targets had not been reached and only 15% of the insecticide-treated nets (ITNs) had been distributed. On March 1, 2005, the Global Fund announced that it would not approve funding for the second phase of Senegal's malaria project, which was originally funded in Round 1. A Fund press release indicated that the project "was found to have systemic issues that resulted in poor performance." The release did not specify what issues it had with the project, though it indicated that "review of the Senegal grant raised serious concerns" about the effective use of Global Fund resources. Although the program was discontinued, Fund officials encouraged Senegal to address the issues that were raised and to apply for new funds in the future. Ultimately, the Fund approved a grant proposal that Senegal submitted for malaria projects in Round 4. In December 2005, the Global Fund Board voted to discontinue funding an HIV prevention grant in South Africa. The Board decided that the grant, implemented by an NGO named loveLife, had failed to sufficiently address weaknesses in its implementation. Press accounts quote a Global Fund representative explaining that it had become difficult to measure how the loveLife prevention campaign was contributing to the reduction of HIV/AIDS among young people in South Africa. Additionally, the representative reportedly stated that the Board had repeatedly requested that loveLife revise its proposals and address concerns regarding performance, financial and accounting procedures, and the need for an effective governance structure. A Global Fund spokesman was quoted as saying that "loveLife is extremely costly, there are programs that have been very effective, which cost a fraction of what loveLife costs. It would be irresponsible of the Global Fund to spend almost $40 million without seeing results." LoveLife officials were reportedly surprised that the Global Fund ultimately decided to discontinue funding the grant, particularly since there were some reported differences of opinion regarding the matter between the Fund's Technical Review Panel (TRP), Secretariat, and the Board. Additionally, loveLife officials reportedly argued that the decision was politically motivated and influenced by U.S. emphasis on abstinence in HIV prevention efforts. One press account quoted a loveLife official as saying, "Obviously the strength of conservative ideologies is spilling over into the field of HIV and HIV prevention and it has direct impact on programs like loveLife." According to a loveLife press release, the decision to discontinue support for the program will substantially curtail South Africa's efforts to prevent HIV infections among young people, because the Global Fund's grant supported one third of the program's budget. However, the South African government has reportedly provided additional funds to the program to close the funding gap, and other donors, such as the U.S.-based Kaiser Family Foundation, have continued funding loveLife HIV-prevention efforts. On August 24, 2005, the Global Fund announced that it had temporarily suspended all five of its grants in Uganda. Additionally, the Fund declared that the Ugandan Ministry of Finance would have to establish a new structure that would ensure effective management of the grants before it considered resuming support. In a press release, the Fund explained that a review undertaken by PricewaterhouseCoopers revealed serious mismanagement by the Project Management Unit (PMU) in the Ministry of Health, which was responsible for overseeing the implementation of Global Fund programs in Uganda. Examples of "serious mismanagement" included evidence of inappropriate, unexplained or improperly documented expenses. Up to that point the Fund had disbursed some $45.4 million of the $200 million approved. Three months later on November 10, 2005, the Fund announced that it had lifted the suspension on all five grants. The PR and the Ministry of Finance committed to restructure management of the grants and strengthen oversight and governance of Global Fund grants to Uganda. In spite of these actions, the Fund did not approve support for Phase II activities. After extensive consultation with the U.N. Development Program (UNDP), the Fund decided to terminate its grant agreements with Burma effective August 18, 2005. The Fund stated that while it was concerned about the extensive humanitarian needs in Burma, travel restrictions imposed by the country's government prevented the Fund from effectively implementing grants. According to the Fund, travel clearance procedures that the Burmese government instituted in July 2005 prevented the PR, implementing partners, and Global Fund staff from accessing grant implementation areas. The Fund indicated that the travel restrictions coupled with new procedures that the government established to review procurement of medical and other supplies "prevented implementation of performance-based and time-bound programs in the country, breached the government's commitment to provide unencumbered access, and frustrated the ability of the PR to carry out its obligations." The Global Fund's decision to discontinue those grants in Burma sparked a larger debate about providing humanitarian assistance in countries that are politically unstable or governed by dictatorial regimes. Some were disappointed that the Fund terminated its assistance, citing the significant humanitarian needs in the country. A Burmese official stated that, "the restrictions on aid workers were only temporary, and 'do not justify irreversible termination of grants.'" A U.N. official accused the United States of pressuring the Global Fund to withdraw its support in Burma. One U.N. official warned of impending death as a result of the situation, stating that, "without exaggeration, people are going to die because of this decision." Some, however, blamed the Burmese government for the Fund's decision to terminate the grants. One Washington-based observer stated that, "it needs to be recognized who causes suffering in that country. It's not the Global Fund...It's the regime." A Global Fund spokesperson stressed that the interrupted aid was not a political decision, rather one based on effective project implementation. Burma has garnered support from other countries and international organizations to continue programs terminated by the Fund. Australia is reportedly increasing its aid to Burma by 25%. Additionally, the European Union (EU) announced that it had pledged about $18 million to fight HIV/AIDS in the country. In January 2006, Australia, Britain, Sweden, the Netherlands, Norway, and the European Commission announced that they planned to establish a $100 million, five-year joint donor program that would replace some of the financial support the country lost after the Fund had withdrawn. The program, the Three Diseases Fund (3D Fund), was officially launched in October 2006. The donors contend that the funding system maintains the safeguards established by the Global Fund that ensures the money does not directly support the military regime. In September 2000, at the United Nations (U.N.) Millennium Summit, member states adopted the U.N. Millennium Declaration, which among other things, established a set of time-bound, measurable goals and targets for combating poverty, hunger, disease, illiteracy, environmental degradation and discrimination against women. This resolution contains what have become commonly known as the Millennium Development Goals (MDGs). World leaders who agreed to the MDGs pledged to provide sufficient financial and technical support to meet the goals. Of the eight goals, the one aimed at HIV/AIDS and malaria commits world leaders to reverse the spread of the two diseases by 2015. The World Health Organization (WHO) and the Joint United Nations Program on HIV/AIDS (UNAIDS) estimate that in order to meet the MDG goal related to HIV/AIDS and malaria, in each year from 2008 to 2010, donors would need to provide between $28 billion and $31 billion. The Global Fund estimates that during that time period, its annual share of this amount would range from $4 billion to $6 billion. The Fund estimates that it will need between $11.5 billion and $17.9 billion from 2008 to 2010. The range represents the rate at which grant approval could escalate in three different scenarios ( Table 2 ). In Scenario A, the Global Fund would continue to award new grants at the current rate of about $1 billion per year and would not experience significant growth. In Scenario B, the Fund would moderately increase new grant awards, with annual grant awards averaging $5 billion from 2008 to 2010. In Scenario C, the Fund projects that it would meet the MDGs and would need an average of $6 billion for each year from 2008 to 2010. The Global Fund does not advocate any scenario, because it bases its financial needs on the grant proposals that it receives. However, at a board meeting in April 2007, the Board estimated that it would need from $6 billion to $8 billion by 2010—reflecting Scenarios B and C. At the launching of PEPFAR, the Administration proposed that over the Plan's five-year term, $1 billion be contributed to the Global Fund. The Administration has requested $1.3 billion for the Fund from FY2004 through FY2008: $200 million in each of FY2004 and FY2005, and $300 million in each of FY2006 through 2008. Congress has consistently provided more to the Fund than the Administration has requested through PEPFAR, appropriating some $3 billion from FY2004 through FY2008 ( Table 3 ). In FY2008, Congress appropriated $840.3 million for a U.S. contribution to the Fund, the single largest U.S. contribution to date. Of those funds, $545.5 million would be funded through the State Department, and $294.8 million through the Department of Health and Human Services (HHS). The President requested $500 million for FY2009. Some critics of the Fund have expressed concern about particular aspects of the Fund's financial policies. Observers contend that the Fund's oversight mechanisms are not strong enough to protect against wasteful spending, particularly in countries that have a well documented history of corruption and poor financial management. Fund supporters counter that the organization's website provides an abundance of information related to its funding process, grant project proposals and budgets, grant spending trends, and results of board meetings, which include decisions regarding the suspension of grants. Fund advocates also argue that the Fund's decisions to suspend temporarily, and in some cases, discontinue poor performing grants demonstrate the effectiveness of the Fund's oversight and funding mechanisms. In June 2005, the U.S. Government Accountability Office (GAO) reported that the Fund had a limited capability to monitor and evaluate grants, raising questions about the accuracy of its reported results. GAO also indicated that the Fund's documents had not consistently explained why it provided additional funds for grants or why it denied disbursement requests. In October 2006, the Center for Global Development (CGD) Global Fund Working Group reported similar findings and made a number of recommendations, including strengthening the performance based funding system. In an effort to strengthen oversight of the Fund's grants, Congress included a provision in Section 525 of P.L. 109-102 , FY2006 Foreign Operations Appropriations, that required 20% of the U.S. contribution to the Global Fund be withheld until the Secretary of State certified to the Appropriations Committees that the Fund had undertaken a number of steps to strengthen oversight and spending practices. The act allows the Secretary to waive the requirement, however, if she determines that a waiver is important to the national interest. At a March 2007 hearing on TB held by the Subcommittee on Africa and Global Health, Representative Adam Smith expressed his reservations about the Fund's oversight capacity, stating that The information and accountability that Congress has come to take for granted through bilateral programs are not available through the Global Fund, and that many of the primary recipients of the Global Fund grants are governments with a history of corruption and fraud and/or limited capacity to properly manage large sums of money in their health sectors. One could argue that the absence in the Global Fund of a robust reporting and monitoring mechanism, at both the primary and sub- recipient levels, is an open invitation for waste in these countries and a tragic loss of opportunity to save lives. The implementation of a system that provides accountability and transparency would seem vital, absolutely necessary, in my view, to continue the expanded donor support of the Global Fund in the future. GAO re-evaluated the Fund and released a report in May 2007, which acknowledged that the Fund had improved its documentation of funding decisions, but also determined that the process needed improvement. The report indicated that while each grant that GAO reviewed included an explanation of associated funding decisions, the explanations did not detail what criteria the Fund used to determine whether to disburse funds or renew support, as it had found in 2005. GAO recommended that the Fund strengthen oversight of Local Fund Agents (LFAs) and standardize performance benchmarks to improve the quality of grant monitoring and reporting. In FY2008, Congress placed additional monitoring and oversight provisions to Global Fund appropriations. The FY2008 Consolidated Appropriations required that 20% of U.S. contributions to the Fund be withheld until the Secretary of State certifies to the Committees on Appropriations that the Global Fund releases incremental disbursements only if grantees demonstrate progress against clearly defined performance indicators; provides support and oversight to country-level entities; has a full-time, independent Office of Inspector General who is fully operational; requires LFAs to assess whether a principal recipient has the capacity to oversee the activities of sub-recipients; is making progress toward implementing a reporting system that breaks down grantee budget allocations by programmatic activity; makes the reports of the Inspector General publicly available; and tracks and encourages the involvement of civil society, including faith-based organizations, in country coordinating mechanisms and program implementation. The FY2008 Consolidated Appropriations also required the Secretary of State to submit a report within 120 days of enactment to the Appropriations Committees that details the involvement of faith-based organizations in Global Fund programs. Some in Congress have long advocated for stronger oversight of Global Fund spending. Supporters of this idea have welcomed the provisions. Some Global Fund supporters contend, however, that such action is unnecessary in light of the strides that the Fund continues to make in improving its reporting and monitoring practices. As Congress considers whether to continue supporting the Global Fund, Members might debate whether the Fund is sufficiently adhering to congressional mandates or if additional provisions are necessary. P.L. 108-25 , U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act, prohibits U.S. government contributions to the Fund from exceeding 33% of contributions from all donors. Congress instituted the contribution limit to encourage greater global support for the Fund. There is some debate about whether the 33% provision should be interpreted as the amount the United States should provide to the Fund or as the maximum amount the United States can contribute. Supporters of the Fund contend that Congress instituted the 33% mandate in recognition of the moral responsibility that the United States holds as one of the wealthiest countries in the world. Opponents of this idea assert that if U.S. contributions to the Fund were to reflect its share of the global economy, then U.S. contributions would and should range from 20% to 25% of all contributions. Some Global Fund advocates who disparage the 33% restriction argue that the differing fiscal cycles of the Fund and the United States complicate efforts to leverage support. Opponents to the 33% restriction contend that the requirement is harmful to the Fund, because the U.S. fiscal year concludes some three months before the Fund's. Critics most often point to FY2004 to substantiate their position. In that fiscal year, nearly $88 million of the U.S. contribution was withheld from the Fund to prevent the funds from exceeding 33%. Advocates of the restriction assert that the 33% cap was intended to suspend portions of U.S. contributions, where necessary. Proponents of the cap note that the Fund was not significantly affected, as the withheld portion was released at the end of the calendar year, when the Fund secured sufficient funds to match the U.S. contribution. Supporters of the provision contend that the Fund benefits from the policy, because it encourages other donors to increase their contributions, as happened in FY2004 ( Table 4 ). Debate on the 33% contribution cap has also focused on the limited amount of support that the private sector and others have provided to the Fund ( Table 5 ). Since its inception, the Fund has struggled to secure support from non-government donors. The Bill & Melinda Gates Foundation remains the largest single contributor among non-government donors. As of July 17, 2008, the foundation accounts for about 86% ($650.0 million) of all non-governmental pledges ($755.1 million) and more than 75% ($450.0 million) of all payments made to the Fund by non-governmental donors ($579.6 million). Some Fund supporters had hoped that the Product Red campaign, launched in January 2006 by co-founder Bono, would lead to significant increases in contributions made by the private sector. As of July 17, 2008, Product Red™ has contributed $69.8 million to the Fund, comprising 12% of non-government contributions, double what it paid in April 2007. The Administration has argued that any amount that Congress provides to the Global Fund in excess of its request skews the appropriate balance of aid that the United States should provide to the Fund and other bilateral HIV/AIDS efforts. At a FY2005 Senate Appropriations Committee hearing in May 2004, then-Global AIDS Coordinator Ambassador Randall Tobias argued that the "incremental difference between what the Administration requested and what was appropriated to the Fund is money that might have been available" for U.S. bilateral programs. Although appropriations to the Fund have been increasing, the percentage of U.S. global HIV/AIDS, TB, and malaria appropriations provided for U.S. contributions have remained mostly level ( Table 6 , Figure 1 , and Figure 2 ). Fund supporters counter that appropriations made to the Fund in excess of requested levels better reflect what the United States should provide and complement U.S. bilateral HIV/AID programs, particularly since the Administration and the Fund have strengthened their coordination. U.S. officials acknowledge that though the Fund is a critical part of PEPFAR, when making appropriations, Congress should consider the pace at which the Fund can distribute funds. The Office of the Global AIDS Coordinator (OGAC) has cited an instance when PEFPAR used some of its funds to purchase anti-retroviral medication (ARVs) for a Global Fund project that faced financial delays. In FY2009, the Administration requested $500 million for U.S. contributions to the Global Fund through Foreign Operations and Labor/HHS Appropriations. This amount accounts for almost 8% of all HIV/AIDS, TB, and malaria proposed spending—about 5% less than FY2008 enacted levels. | The Global Fund to Fight AIDS, Tuberculosis, and Malaria, headquartered in Geneva, Switzerland, is an independent foundation that seeks to attract and rapidly disburse new resources in developing countries aimed at countering the three diseases. The Fund is a financing vehicle, not an implementing agency. The origins of the Fund as an independent entity to fight the three diseases lie partly in a French proposal made in 1998, in ideas developed in the 106th Congress, and in recommendations made by United Nations Secretary-General Kofi Annan in April 2001. Though the Global Fund was established in January 2002, President Bush pledged $200 million to such a fund in May 2001. As of July 17, 2008, donors have pledged more than $20.2 billion to the Fund, of which more than $10.2 billion has been paid. The fund has approved support for more than 500 grants totaling some $10 billion for projects in 136 countries. Each year, the Fund awards grants through Proposal Rounds. The Fund launched its eighth Round on March 3, 2008. In 2005, the Fund approved Round 5 grants in two tranches, because initially there were insufficient donor pledges to approve all the recommended proposals. The Fund approved the first group of Round 5 proposals in September 2005 and the second in December 2005, after donors pledged to make additional contributions. The Global Fund only approves proposals if it has sufficient resources on hand to support the first two years of a proposed project. This policy is designed to avoid disruptions to projects due to funding shortages. Funding lapses can cause interruptions in treatment regiments, which could lead to treatment-resistant strains of the diseases or death. The United States is the largest single contributor to the Global Fund. From FY2001 through FY2008, Congress has made available an estimated $3.6 billion to the Fund, including $840.3 million in FY2008, the single largest U.S. contribution to date. Of those funds, $545.5 million would come from the State Department, and $294.8 million from the Department of Health and Human Services (HHS). The President requested $500 million for a FY2009 contribution to the Global Fund. There has been some debate about the level of U.S. contributions to the Fund. Some critics argue that the United States should temper its support to the Fund, because the Fund has not demonstrated strong reporting and monitoring practices; because contributions made to the Fund in excess of the President's request are provided at the expense of U.S. bilateral HIV/AIDS, TB, and malaria programs; and because they maintain that the Fund needs to secure support from other sources, particularly the private sector. Supporters of current funding levels counter that the Fund has improved its reporting and monitoring practices, greater U.S. contributions to the Fund parallel increases in U.S. bilateral HIV/AIDS, TB, and malaria programs, and the Fund has attempted to raise participation of the private sector through the launching of Product Red™. This report, which will be periodically updated, discusses the Fund's progress to date, describes U.S. contributions to the organization, and presents some issues Congress might consider. |
Drinking water and wastewater treatment systems treat and safeguard the nation's water resources. Drinking water utilities supply safe potable water to customers in both the proper quantity and quality. Wastewater utilities operate facilities that clean the flow of used water from a community. The federal government has had significant involvement with these systems for many years, both through setting standards to protect public health and the environment and through funding to assist them in meeting standards. While funding of water infrastructure programs has been addressed annually through the congressional appropriations process, authorizing legislation affecting policy and program issues was last enacted in 1996 (for drinking water infrastructure) and 1987 (for wastewater infrastructure). More recently, water infrastructure issues have been receiving increased attention by policymakers and legislators. The renewed attention is due to a combination of several factors. Meeting Regulatory Requirements. Financial impacts of meeting regulatory requirements—some new, some long-standing—are a continuing issue for many communities. In the case of drinking water systems, the most pressing rules are the result of standard-setting by the Environmental Protection Agency (EPA) to implement the Safe Drinking Water Act Amendments of 1996 and to update older standards. These rules impose new or stricter drinking water limits on numerous contaminants, including arsenic, radioactive contaminants, microbials, and disinfection byproducts, among others. Additional rules for previously unregulated contaminants, such as perchlorate and radon, are pending. For wastewater systems, principal regulatory requirements mandated by the Clean Water Act have not changed since 1972, and the majority of communities have achieved or are in the process of achieving compliance. The newer issue for wastewater systems is the cost of controls and practices to manage what are termed wet weather pollution problems, such as urban stormwater runoff and overflows from municipal sewers. These requirements are old in the sense that most wastewater utilities have not addressed long-standing wet weather problems, but they also are new because in many communities, specific measures and how to pay for them are only now being identified. Financing Repair or Replacement. A more recent focus by stakeholders is on the need to repair and replace infrastructure that has been in place for decades and will soon fail, many believe. According to the American Water Works Association (AWWA), "We stand at the dawn of the replacement era ... replacement needs are large and on the way. There will be a growing conflict between the need to replace worn-out infrastructure and the need to invest in compliance with new regulatory standards." Over the long term, these stakeholders say, a higher level of investment than is occurring today is required. For both wastewater and drinking water systems, a key concern is that EPA's funding programs, the largest sources of federal assistance, do not, in the main, support repair and replacement; their focus is upgrades and new construction needed to achieve wastewater and drinking water standards. Security. Beyond the traditional infrastructure needs related to regulatory compliance and system repair and expansion, the terrorist attacks of September 11, 2001, generated new investment needs for drinking water and wastewater systems. The national costs of addressing water and wastewater security needs have not been well quantified. In 2002, the AWWA estimated that municipal water systems would have to spend more than $1.6 billion just to ensure control of access to critical water system assets. This estimate did not include the capital costs of upgrades to address vulnerabilities that water system managers have identified in vulnerability assessments, or the costs facing wastewater systems and smaller drinking water systems. EPA's 2009 report on public water system infrastructure needs included $422.0 million for projects to address security needs. EPA concluded that security-related needs were underestimated, as many water systems incorporate these costs into the costs of broader construction projects rather than report them separately. Although EPA has identified a range of security measures that are eligible for funding through traditional infrastructure assistance programs, competition already is severe for these funds, which are primarily used for projects needed to meet regulatory requirements. Problems That Do Not Fit Existing Solutions. Some interest groups argue that traditional federal programs and financing approaches do not fit well with some current types of needs. Points at issue vary, but the common thread is that certain needs are not being well met by programmatic solutions that now exist. In some cases (metropolitan drinking water systems, for example), there is a perception that EPA's programs are more geared to aiding small systems than large ones. In other cases, the concern is how to fund projects with mixed elements (e.g., developing new community water supplies and treating that water, especially in rural areas) that do not meet traditional program definitions, or are seemingly spread across jurisdictions of multiple federal agencies. Still others believe that expanding program eligibility to include water conservation or "green infrastructure" projects could reduce overall needs for capital investment. Another concern arises in small, dispersed communities where on-site treatment systems may be preferable to centralized facilities; however, on-site treatment generally is not eligible for federal aid. At issue for Congress is whether to modify existing programs to address such problems, or to address them in legislation individually and case-by-case. Other Legislative Models and Activity. Legislative approaches for other types of infrastructure—especially surface transportation and aviation—have suggested possible new models for water infrastructure financing. The federal highway and mass transit and aviation programs generally are supported by trust funds derived from fees and taxes paid by users of those systems and facilities. Some proponents of water infrastructure spending, concerned about a gap between needs and available funds, believe that a federal water trust fund could supplement existing federal resources. However, unlike surface transportation and aviation, there is no comparable dedicated trust fund for water infrastructure, or easily identifiable revenue source for such a fund. Other possible new sources of assistance also have recently been discussed, including a national infrastructure bank or a program of federal assistance similar to the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. Who Should Pay. Every level of government is facing tremendous budgetary pressures to reduce spending while still funding priorities. Historically, federal programs provided much of the support for local water infrastructure projects, but that role has changed, particularly as a result of shifting of federal programs from grants to loans, but also due to declining federal resources. At issue is what role can the federal government play in local project financing, and what should the federal role be in setting and supporting local priorities. This report identifies a number of issues receiving attention in connection with water infrastructure. It begins with a brief review of federal involvement, describes the debate about funding needs, and then examines key issues, including what is the nature of the problems to be solved; who will pay, and what is the federal role; and questions about mechanisms for delivering federal support, including state-by-state allotment. Recent congressional and Administration activity on these issues also is briefly reviewed. The federal government has a lengthy history of involvement with wastewater and drinking water systems. The history of financial assistance is longer for wastewater than for drinking water, however. EPA has the most significant role, both in terms of regulation and funding. The Water Pollution Control Act of 1948 (P.L. 80-845) was the first comprehensive statement of federal interest in clean water programs. While it contained no federally required goals, limits, or even guidelines, it started the trickle of federal aid to municipal wastewater treatment authorities that grew in subsequent years. It established a grant program to assist localities with planning and design work, and authorized loans for treatment plant construction, capped at $250,000 or one-third of construction costs, whichever was less. With each successive statute in the 1950s and 1960s, federal assistance to municipal treatment agencies increased. A construction grant program replaced the loan program; the amount of authorized funding went up; the percentage of total costs covered by federal funds was raised; and the types of project costs deemed grant-eligible were expanded. In the Federal Water Pollution Control Act Amendments of 1972 (P.L. 92-500, popularly known as the Clean Water Act, 33 U.S.C. 1251 et seq .), Congress totally revised the existing federal clean water law, including with regard to wastewater systems. At the time, there was widespread recognition of water quality problems nationwide and frustration over the slow pace of industrial and municipal cleanup efforts under existing programs. In the 1972 law, Congress strengthened the federal role in clean water and established national standards for treatment, mandating that all publicly owned treatment works achieve a minimum of secondary treatment (defined in EPA regulations as removing 85% of incoming wastes), or more stringent treatment where necessary to meet local water quality standards, and set a July 1, 1977, deadline for meeting secondary treatment. A number of new conditions were attached to projects constructed with grants. In exchange, federal funds increased dramatically. The federal share was raised from 55% to 75%, and annual authorizations were $5 billion in FY1973, $6 billion in FY1974, and $7 billion in FY1975. In 1977, the grant program was reauthorized through FY1982; annual authorizations were $5 billion for each of the last four years covered by that act ( P.L. 95-217 ). Some restrictions were imposed, including requirements that states set aside a portion of funds for innovative and alternative technology projects and for projects in rural areas. In addition, the types of eligible projects were limited in order to focus use of federal funds on projects with environmental benefits in preference to projects aiding community growth. When the program was again reauthorized in 1981 ( P.L. 97-117 ), Congress and the Administration agreed to significant restrictions, out of concern that the program's wide scope was not properly focused on key goals. Budgetary pressures and a desire to reduce federal spending also were concerns. Annual authorizations under this act were $2.4 billion, the federal share was reduced to 55%, and project eligibilities were limited further. The 1972 law required a "needs survey" every two years to adjust the statutory allotment formula by which grant funds were divided among the states. In this survey, EPA compiles state data to estimate capital costs for water quality projects and other activities eligible for support under the Clean Water Act. From an initial estimate of $63 billion in 1973, the survey figure went to a high of $342 billion in 1974, dropped to $96 billion in 1976, and has risen with each subsequent needs survey conducted. The most recent survey (discussed below, see " Wastewater Needs ") estimates that $345 billion is needed for all water quality and public health-related water quality problems over the next 20 years, including $192 billion for wastewater treatment plants and related pipes. Inconsistencies and variations from one survey to another have been ascribed to several factors, including the lack of precision with which needs for some project categories could be assessed (especially in the early years) and the desire of state estimators to use the needs survey as a way of keeping their share of the federal allotment as high as possible. However, EPA believes that recent surveys produce credible data, because of the requirement that needs must be justified by project-specific documentation. By the mid-1980s there was considerable policy debate between Congress and the Administration over the future of the construction grants program and, in particular, the appropriate federal role. Through FY1984, Congress had appropriated nearly $41 billion under this program, representing the largest nonmilitary public works programs since the Interstate Highway System. The grants program was a target of the Reagan Administration's budget cutters, who sought to redirect budget priorities and establish what they viewed as the appropriate governmental roles in a number of domestic policy areas, including water pollution control. Thus, for budgetary reasons and the belief that the backlog of wastewater projects identified in 1972 had largely been completed, the Reagan Administration sought a phase-out of the act's construction grants program by 1990. Many states and localities, which continued to support the act's water quality goals and programs, did support the idea of phasing out the grants program, since many were critical of what they viewed as burdensome rules and regulations that accompanied the receipt of federal grant money. However, they sought a longer transition and ample flexibility to set up long-term financing to promote state and local self-sufficiency. Congress's response to this debate was contained in 1987 amendments to the act ( P.L. 100-4 ). It authorized $18 billion over a nine-year period for sewage treatment plant construction, through a combination of the traditional grant program and a new State Water Pollution Control Revolving Funds (SRF) program. Under the new program, federal capitalization grants would be provided as seed money for state-administered loans to build sewage treatment plants and, eventually, other water quality projects. Cities, in turn, would repay loans to the state, enabling a phaseout of federal involvement while the state built up a source of capital for future investments. Allotment of the SRF capitalization grants among states continues to be governed by a statutory formula, which Congress revised in 1987 (see discussion below, "Allotment of Funds"). Under the amendments, the SRF program was phased in beginning in FY1989 and entirely replaced the previous grant program in FY1991. The intention was that states would have greater flexibility to set priorities and administer funding, while federal aid would end after FY1994. Municipalities have made substantial progress towards meeting the goals and requirements of the act, yet state water quality reports continue to indicate that discharges from wastewater treatment plants are a significant source of water quality impairments nationwide. In the 2000 National Water Quality Inventory report, states reported that municipal wastewater treatment plants contribute to water quality impairments of rivers, streams and lakes and are the most widespread source of pollution affecting estuarine waters. The authorizations provided in the 1987 amendments expired in FY1994, but pressure to extend federal funding has continued, in part because estimated needs remain so high. Thus, Congress has continued to appropriate funds, and the anticipated shift to full state responsibility has not yet occurred. Cumulatively through FY2012, Congress has appropriated nearly $85 billion in Clean Water Act assistance, including $36 billion in SRF capitalization grants since 1987. Public water systems are regulated under the Safe Drinking Water Act (SDWA) of 1974 ( P.L. 93-523 ), as amended (42 U.S.C. 300f-300j). Congress enacted the SDWA after nationwide studies of community water systems revealed widespread water quality problems and health risks resulting from poor operating procedures, inadequate facilities, and uneven management of public water supplies in communities of all sizes. The 1974 law gave EPA substantial discretionary authority to regulate contaminants that occur in public drinking water supplies, and authorized EPA to delegate to the states primary implementation and enforcement authority for the Public Water System Supervision program. SDWA drinking water regulations apply to roughly 153,500 public water systems (both privately and publicly owned systems) that provide piped water for human consumption to at least 15 service connections or that regularly serve at least 25 people. Of these systems, 51,650 are community water systems (CWSs) that serve residential populations year-round. (Roughly 15% of community systems are investor-owned.) All federal regulations apply to these systems. Another 18,400 water systems are non-transient, non-community water systems (NTNCWSs), such as schools or factories, that have their own water supply and serve the same people for more than six months but not year-round. Most drinking water requirements apply to these systems. In contrast to the 40-plus years of federal support for financing municipal wastewater treatment facilities, Congress established a program under SDWA to help public water systems finance projects needed to comply with federal drinking water regulations in 1996. Funding support for drinking water only occurred more recently for several reasons. Until the 1980s, the number of drinking water regulations was fairly small, and public water systems often did not need to make large investments in treatment technologies to meet those regulations. Moreover, good quality drinking water traditionally had been available to many communities at relatively low cost. By comparison, essentially all communities have had to construct or upgrade sewage treatment facilities to meet the requirements of the 1972 Clean Water Act. In addition, when the SDWA was first enacted, few expected that the number of small, less economical water systems would continue to increase. Over time, drinking water circumstances have changed as communities have grown, and commercial, industrial, agricultural, and residential land-uses have become more concentrated, thus resulting in more contaminants reaching drinking water sources. Moreover, as the number of federal drinking water standards and related monitoring requirements have increased, many communities have found that their water may not have been as good as once thought and that additional treatment was needed to meet the new standards and protect public health. From 1986 to 1996, for example, the number of regulated drinking water contaminants grew from 23 to 83. The states and EPA began expressing greater concern that many of the nation's community water systems were likely to lack the financial capacity to meet the rising costs of complying with SDWA requirements, especially because 83% of all CWSs were small. Congress responded to these concerns with the 1996 SDWA Amendments ( P.L. 104-182 ), which directed EPA to establish a drinking water state revolving loan fund (DWSRF) program to help public water systems finance projects needed to comply with SDWA regulations and to further the public health protection objectives of the act. This program, patterned after the Clean Water Act SRF, authorizes EPA to make grants to states to capitalize DWSRFs, which states then use to make loans to water systems. States are required to match 20% of their federal capitalization grant, and must make available 15% of their grant for loan assistance to small systems. Communities repay loans into the fund, thus making resources available for projects in other communities. Eligible projects include installation and replacement of treatment facilities, distribution systems, and certain storage facilities. Projects to replace aging infrastructure are eligible if they are needed to maintain compliance or to further public health protection goals. Public water systems eligible to receive DWSRF assistance include community water systems (whether publicly or privately owned) and not-for-profit noncommunity water systems. The law generally prohibits states from providing DWSRF assistance to systems that lack the capacity to comply with the act or that are in significant noncompliance with SDWA requirements, unless these systems meet certain conditions to return to compliance. (Although the law authorizes assistance to privately owned community water systems, some states have laws or policies that preclude privately owned utilities from receiving DWSRF assistance.) Appropriations for the program were authorized at $599 million for FY1994, and $1 billion annually for FY1995 through FY2003. Although the funding authority for the DWSRF program has expired, Congress continues to appropriate funds. Through FY2012, Congress has provided $16.4 billion for this program, including $2.0 billion as part of the American Recovery and Reinvestment Act ( P.L. 111-5 ). In creating the DWSRF, Congress added several new features to the program to reflect experience gained under the Clean Water Act program and differences between the drinking water and wastewater industries. A key difference in the DWSRF is that privately owned as well as publicly owned systems are eligible for funding. Another distinction is that states may use up to 30% of their DWSRF grant to provide additional assistance, such as forgiveness of loan principal or negative interest rate loans, to help economically disadvantaged communities. Paralleling the Clean Water Act, the SDWA requires EPA to assess the capital improvement needs of eligible public water systems. Needs surveys must be prepared every four years. In contrast to the CWA, which includes a statutory allotment formula for SRF capitalization grants, EPA must distribute DWSRF funds among the states based on the results of the latest survey. Eligible systems include roughly 51,600 public and privately owned community water systems and more than 18,400 not-for-profit noncommunity water systems. (See Table 1 for a comparison of key features of the clean water and drinking water SRF programs.) While EPA administers the largest federal water infrastructure assistance programs, the U.S. Department of Agriculture (USDA) also provides funding. It administers grant and loan programs available to communities with populations of 10,000 or less, thus benefitting small communities, many of which have had problems obtaining assistance through the CWA and SDWA loan programs. Many small towns have limited financial, technical and legal resources, and have encountered difficulties in qualifying for and repaying loans. They often lack opportunities for economies of scale or an industrial tax base, and thus face the prospect of high per capita user fees to repay a loan for the full cost of a sewage treatment or drinking water project. USDA's grant and loan programs are authorized by the Rural Development Act of 1972, as amended (7 U.S.C. §1926). The purpose of these USDA programs is to provide basic amenities, alleviate health hazards, and promote the orderly growth of the nation's rural areas by meeting the need for new and improved rural water and waste disposal facilities. Loans and grants are made for projects needed to meet health or sanitary standards, including clean water standards and Safe Drinking Water Act requirements. For FY2012, Congress appropriated $499.8 million in appropriations for USDA's water and waste disposal grant and loan programs. For years, USDA and EPA officials have made efforts to improve coordination in administering their programs, both to reduce redundancies and inconsistencies and to better meet the health and environmental goals of the programs. In 1997, the two agencies signed a Memorandum of Agreement encouraging cooperation and coordination on jointly financed water and wastewater infrastructure projects to minimize overlap and duplication—specifically regarding project planning and funding, policy and regulatory barriers, and common federal requirements (such as environmental reviews). In October 2012, the Government Accountability Office reported that funding for rural water and wastewater infrastructure remained fragmented and that EPA and USDA efforts had not led to better coordination at the state level (e.g., the agencies have not met the 1997 goal to develop uniform guidelines for the environmental analyses required of communities, thus requiring these communities to make separate and substantively different applications for funding for the same project). The GAO noted, however, that efforts continue and that the agencies are working to develop uniform guidelines for preliminary engineering reports for communities seeking funding. Some of the factors that have led to increased attention to water infrastructure reflect long-standing concerns (for example, how cities will meet federal regulatory requirements), while others are more recent (such as analyses of broader funding needs, including maintenance and repair of older systems). A number of interest groups—many with long-standing involvement, as well as new groups and coalitions—have assisted in bringing attention to these issues. One such group is the Water Infrastructure Network (WIN), a coalition of state, municipal, environmental, professional, and labor groups organized in 1999. Two WIN reports on funding needs and policy have received considerable attention. In 2000, WIN issued a report estimating a $24.7 billion average annual investment gap for the next 20 years for municipal wastewater and drinking water systems to address new problems and system deterioration. Over the 20-year period, according to WIN's analysis, $940 billion is required for wastewater and drinking water investments, and more than $1 trillion in O&M spending is required. A second WIN report, issued in 2001, recommended a multibillion dollar investment program in water infrastructure. WIN's initiatives are now more than a decade old, and their reports have not been updated, but the group's members continue to advocate for expanded infrastructure investments. An alternative view on infrastructure investments is reflected by companies in the private water industry, including the National Association of Water Companies, and the National Council for Public-Private Partnerships. These groups support continued funding for the drinking water and clean water SRF programs, but they also advocate policies to encourage greater private sector participation in water infrastructure projects, such as making clean water SRF funding available to private entities (as is the case with drinking water SRF funding) and eliminating restrictions in federal tax law (see " Federal Funds for Private Infrastructure Systems "). Traditionally, setting priorities for infrastructure spending is based on a combination of factors. Estimates of funding needs are one factor that is commonly used as a measure of the dimension of a problem and to support spending on some activities relative to others, as in: funding needs for X are much greater than for Y, therefore, society should spend more heavily on X. In the infrastructure context, funding needs estimates try to identify the level of investment that is required to meet a defined level of quality or service. Essentially, this depiction of need is an engineering concept. It differs from economists' conception that the appropriate level of new infrastructure investment, or the optimal stock of public capital (infrastructure) for society, is determined by calculating the amount of infrastructure for which social marginal benefits just equal marginal costs. One of the major difficulties in any needs assessment is defining what constitutes a "need," a relative concept that is likely to generate a good deal of disagreement. For this reason, some needs assessments are anchored to a benchmark, such as current provision in terms of physical condition and/or performance. This current level of provision may be judged to be too high by some and too low by others, but nonetheless it provides a basis for comparison, as future spending needs can be estimated in terms of maintaining or improving the current condition and performance of the infrastructure system. In some cases, estimates are intended to identify needs for categories of projects that are eligible for assistance under various federal programs. By being defined in that manner, assessments based solely on funding eligibility may not take into consideration needs for non-eligible categories, such as replacement of aging infrastructure or projects to enhance security. Some federal agencies estimate the funding necessary to bring the current infrastructure system to a state of good repair. The resulting funding estimate is sometimes referred to as the infrastructure "backlog." Again, among other problems, such as inventorying the current condition of infrastructure and calculating repair costs, the needs estimate is affected by judgments about what constitutes a state of good repair. EPA's contribution to the debate over needs is primarily its wastewater and drinking water needs surveys. The Safe Drinking Water Act requires EPA to assess the capital improvement needs of eligible public water systems every four years thereafter. Concurrently, and in consultation with the Indian Health Service (IHS) and Indian tribes, EPA must assess needs for drinking water treatment facilities to serve Indian tribes. For purposes of the SDWA assessment, EPA defines "need" as the capital costs associated with ensuring the continued protection of public health through rehabilitating or building facilities needed for continued provision of safe drinking water. Similarly, the Clean Water Act requires EPA, in cooperation with states, to report biennially to Congress on the cost of construction of all needed publicly owned wastewater treatment works in the United States (in reality, the clean water needs survey is done every four years because of resource limitations). In its most recent clean water survey, EPA defines a "need" as the unfunded capital costs of projects that address a water quality or water quality-related public health problem existing as of January 1, 2008, or expected to occur within the next 20 years. EPA conducted initial surveys of capital improvement needs for public water systems in 1995 and 1999. It conducted the third assessment in 2003. Based on this survey, EPA estimated that systems needed to invest $276.8 billion in drinking water infrastructure improvements over 20 years to comply with drinking water regulations and to ensure the provision of safe water. This amount exceeded the 2001 needs survey estimate of $150.9 billion ($165.5 billion in 2003 dollars) by more than 60%. EPA attributed this increase to several factors, such as the inclusion in the 2003 survey of $1 billion in security-related needs, as well as funds needed for compliance with several new and pending regulations. Also, water systems had improved their assessment of needs for infrastructure rehabilitation and replacement in 2003, which EPA determined had been under-reported in previous surveys. The most recent drinking water needs survey, conducted in 2007 and issued in March 2009, covers the period from 2007 through 2026. As noted previously, the survey indicates that systems need to invest $334.8 billion in drinking water infrastructure improvements over 20 years to comply with drinking water regulations and to ensure the provision of safe water. This amount is similar to the 2003 needs estimate of $276.8 billion ($331.4 billion when adjusted to 2007 dollars). The agency notes that the latest survey reflects the use of more consistent methodologies for needs estimation among the states and continued improvements in reporting of needs related to infrastructure rehabilitation and replacement. Although all of the infrastructure projects in the needs assessment would promote the health objectives of the act, EPA reports that just 16% ($52.0 billion) is attributable to federal drinking water regulations, while $282.8 billion (84%) represents nonregulatory costs. Most needs typically involve installing, upgrading, or replacing transmission and distribution infrastructure to allow a system to continue to deliver safe drinking water; systems with such needs usually are not in violation of a drinking water standard. Projects attributable to SDWA regulations (including pending regulations) typically involve the upgrade, replacement, or installation of treatment technologies. Small community water systems (serving populations of 3,300 or fewer) accounted for 19% of the total 20-year need. In addition to the needs reported for the states, American Indian and Alaska Native Village water systems had combined estimated 20-year needs of $2.9 billion. The estimated needs reported by American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands totaled nearly $900 million. With the number of regulated drinking water contaminants now exceeding 90, and with more rules pending, these water infrastructure needs are expected to grow. Consequently, stakeholders continue to press Congress to reauthorize and increase appropriations for the DWSRF program. The most recent wastewater survey, conducted in 2008 and issued in 2010, estimates that $322 billion is needed for projects and activities to address water quality or water quality-related public health problems in the United States over the next 20 years. This estimate includes $192.2 billion for wastewater treatment plants, pipe repairs, and buying and installing new pipes; $63.6 billion for combined sewer overflow correction; $42.3 billion for stormwater management; and $23.9 million for eligible nonpoint pollution management activities. Compared with the previous survey, four years earlier, the largest increases in reported needs were for wastewater treatment (29% higher) and stormwater management (67% higher). The increases are due to several factors, according to EPA: needs for rehabilitation of aging infrastructure, facility improvements necessary for meeting more protective water quality standards and address population growth and, in some cases, providing additional treatment capacity for handling wet-weather flows. Needs for small communities (under 10,000 population) represented about 8% of the total. The clean water needs survey does not separately identify needs for Alaskan Native villages, and only a few states report needs for Indian tribes. More comprehensive estimates are made by the Indian Health Service (IHS) of the U.S. Department of Health and Human Services, which operates a Sanitation Facilities Construction program pursuant to the Indian Sanitation Facilities Act (P.L. 86-121). IHS estimated that in 2007 tribal wastewater needs totaled $719.2 million. EPA acknowledges that needs estimates generally have been conservatively biased. First, all reported needs in both surveys must be documented with project-specific information. Second, needs that are ineligible for SRF funding are not reflected; thus, in the drinking water survey, needs for fire flow, dams, and untreated reservoirs are omitted. Neither EPA survey explicitly accounts for infrastructure needs due to population increases, since growth-related projects are not eligible for EPA funding. The wastewater needs survey does not include information about privately owned facilities or facilities that serve privately owned industrial facilities, military installations, national parks, or other federal facilities, as they are not eligible for funding under the clean water SRF program. Finally, neither survey accounts for financing costs associated with utility borrowing to pay for capital investment. Despite various challenges and limitations, needs estimates have improved with experience. In the most recent drinking water needs survey, for example, EPA reported that state and water system efforts to correct past problems with significant under-reporting of needs appear to have been successful. In addition to the needs surveys, in 2002 EPA issued a study, called the Gap Analysis, assessing the difference between current spending and total funding needs for drinking water and wastewater infrastructure. Using data from the needs surveys and updated information, the Gap Analysis estimated total needs for drinking water and clean water (capital investment plus financing costs, and operation and maintenance (O&M)) from 2000 to 2019, as well as the projected gap between current spending and needs. This report examined a range of estimates, based on two scenarios: a low-end estimate assuming a 3% annual real growth in revenues (an increase in user rates and equivalent increase in customer growth) and a high-end estimate assuming no growth in water utility systems' revenues. Using these two scenarios, the Gap Analysis estimated a 20-year investment gap between current spending levels and capital investment needs for wastewater and drinking water combined between $66 billion and $224 billion (in 2001 dollars). In addition, it estimated a 20-year gap in spending for O&M between $10 billion and $309 billion. Under EPA's analysis, the estimated average annual gap between current spending and investment needs is between $1.6 billion and $23.1 billion, and the average annual O&M gap is between $0.3 billion and $36.3 billion, depending on the scenario. Compared with estimates of baseline expenditures, EPA's projections imply an average annual increase in costs over the 20-year period that ranges from 2.8% to 85.8% for capital investment and O&M combined. A 2002 report by the Congressional Budget Office (CBO) also contributes to the discussion about water infrastructure investment needs. In that report, CBO presented two scenarios of future needs for capital investment and O&M costs, a low-cost case and a high-cost case. The two scenarios present a range of estimates for each, reflecting the limited information available about existing water infrastructure. A shortage of data compounds the general analytic problem of making 20-year estimates of what would happen under current and currently anticipated trends. CBO estimated that for the years 2000 to 2019, annual costs for investment would range between $11.6 billion and $20.1 billion for drinking water systems, and between $13.0 billion and $20.9 billion for wastewater systems, or between $24.6 billion and $41.0 billion for water and wastewater combined (in 2001 dollars). Additionally, CBO estimated that annual costs over the period for O&M, which are not eligible for federal aid, would range between $25.7 billion and $31.8 billion for drinking water and $20.3 billion to $25.2 billion for wastewater systems, or between $46.0 billion and $57.0 billion for water and wastewater combined. CBO believes that the low-cost scenario is reasonable, given uncertainty about the condition of existing infrastructure, prospects for improved efficiency, and assumptions about borrowing. CBO estimated that the difference between actual capital spending (approximately $22 billion by all levels of government in 1999) and future costs—what some call an investment funding gap—would be $3.0 billion annually in the low-cost scenario and $19.4 billion in the high-cost case. Together, the future costs under the low-cost scenario represent growth of 14% from 1999 levels, while under the high-cost case, the estimated increases represent growth of about 90%. CBO also examined estimates in WIN's 2000 report, because of the public attention that it has received. Overall, CBO was critical of a number of analytic aspects. In particular, while WIN included financing costs in its analysis, WIN's estimates of total capital investment needs did not reflect "costs as financed." Costs as financed conveys the full costs of investments made out of funds on hand during the period analyzed and the debt service (principal and interest) paid in those years on new and prior investments that were financed through borrowing. Costs as financed are a kind of moving average that smooths out year-to-year changes in investment volume, CBO said. In contrast, WIN's 2000 report included total debt service on new investments from 2000 to 2019, regardless of when those payments occur, rather than the debt service actually paid during the period (on both pre-2000 and new investments). The difference is important, according to CBO, because utilities' past investments financed from 1980 to 1999 and still being paid off from 2000 to 2019 are smaller than the investments projected to be financed during the latter period. WIN's approach to estimating investment needs (capital plus financing) results in approximately a 20% over-estimate, according to CBO. A 2003 CBO report examined estimates in the 2002 CBO report and in EPA's Gap Analysis. The differences between EPA's and CBO's projections of total investment costs are not especially significant, but both have significant implications: both EPA's and CBO's high-end estimates ($46.5 billion and $41 billion, respectively) reflect a near doubling of baseline investment costs through 2019. Many doubt that such an increase in spending is feasible or sustainable. While estimates of funding needs have become one focal point for discussion, some argue that trying to focus on precise needs estimates is not as important as recognizing the general need. For example, CBO's reports and EPA's Gap Analysis caution that projections of future costs associated with water infrastructure are highly uncertain and could lie outside of the ranges that they present. Different assumptions could increase or decrease the results. CBO explained this point in 2003: Because available data are limited, the agencies must use many assumptions to develop their projections, and the 20-year projection window provides ample opportunity for unforeseen developments to influence costs. Data limitations make it impossible for the agencies to know even baseline investment costs with certainty. As is evident from their analyses of various investment scenarios, CBO and EPA believe that funding gaps are not inevitable, if other steps are taken. Both emphasize that funding gaps occur only if capital and O&M spending remain unchanged from present levels. Future spending and other measures that systems could adopt to reduce both types of costs, such as asset management processes, could significantly alter estimates of future needs. How a gap would be filled raises a number of other issues. Whether water infrastructure needs over the next 20 years are $200 billion or $1 trillion, they are potentially very large, and the federal government is unlikely to provide 100% of the amount. Questions at issue include what is the precise problem to be solved; who will pay, and what is the federal role in that process; and how to deliver federal support. Defining the scope of the water infrastructure problem is a key issue. As described previously, traditionally the CWA and SDWA have assisted projects needed to upgrade and improve wastewater and drinking water systems for compliance with federal standards. There still are significant needs for those core projects: for example, the 2008 clean water needs survey reports that more than one-half of the $192 billion in needs for treatment plants and pipes are for projects to correct overflows from existing municipal sewers and to manage stormwater. Regarding drinking water needs, the EPA estimates that, of the $334.8 billion in needs, $52 billion (16%) is required for water systems to comply with regulations. However, these needs are expected to increase as the number of SDWA regulations increases. Another $282.8 billion (84%) of total needs is for projects that water utilities consider a high priority for ensuring the continued delivery of safe drinking water; these projects typically involve the upgrade, replacement, or installation of transmission and distribution infrastructure. While not disregarding needs for compliance-related projects, stakeholders also have focused on the problem of projects that have not traditionally been eligible under federal aid programs—major repair and replacement of existing systems. Currently, federal funds may be used for projects that involve minor system repairs (such as correcting leaky pipes that allow infiltration or inflow of groundwater into sewer lines) but may not be used for major rehabilitation, or extensive repair of existing sewers that are collapsing or are structurally unsound. In many cities, systems that currently meet standards and provide adequate service are, according to advocacy groups, reaching the end of their service-life and will require substantial investment in the near future. The EPA needs surveys do not explicitly identify or quantify needs for aging water infrastructure systems or facilities. The American Water Works Association's 2001 report focused solely on the need to reinvest in aging drinking water infrastructure. It estimated that nationally by 2030, $250 billion may be required to replace worn out facilities and systems. The replacement problem is occurring not because of neglect or failure to do routine maintenance, AWWA and others say, but because water infrastructure facilities and pipes installed decades ago are now wearing out. Most pipes were installed and paid for by past generations in response to population growth and economic development booms of the 1890s, World War I, 1920s, and post-World War II. The oldest cast iron pipes, dating from the late 1800s, have an average useful life of about 120 years, while pipes installed after World War II have an average life of 75 years. The useful life of pipe varies considerably, based on such factors as soil conditions, materials used, and character of the water flowing through it. Also, pipe deteriorates more rapidly later in the life cycle than initially. AWWA says, "Replacement of pipes installed from the late 1800s to the 1950s is now hard upon us, and replacement of pipes installed in the latter half of the 20 th Century will dominate the remainder of the 21 st century." Treatment plant assets are more short-lived than pipes, with typical service lives of 15 to 50 years. Thus, many that were built in response to environmental standards in the 1970s and 1980s also will begin to be due for replacement in a few years. AWWA says that the replacement problem being debated today is not that utilities are faced with making up for a historical gap in the level of replacement funding. Rather, it is that utilities must ramp up budgets to prevent a replacement gap from developing in the near future; that is, to avoid getting behind. With the exception of the latest EPA drinking water needs survey, none of the investment needs reports discussed previously (WIN report, or those by CBO and EPA) accounts for increased security-related needs that utilities have begun to identify. In its 2002 report, CBO said: Because water systems are still developing estimates of the costs for increasing security in the wake of the September 11 attacks, the estimates do not include those expenses—but preliminary reports suggest that security costs will be relatively small compared with the other costs for investment in infrastructure. One partial estimate for wastewater systems reported that, among large wastewater utilities, operators identified $135 million in security-related needs for the period 2002-2006, with approximately one-quarter of those reporting saying that their needs exceed $1 million. Although poorly quantified and potentially small relative to overall infrastructure needs, the costs of addressing security concerns for drinking water systems are expected to be significant. The Bioterrorism Preparedness Act of 2002 ( P.L. 107-188 ) required all community water systems serving more than 3,300 persons to assess their vulnerabilities to terrorist attack or other intentional acts to disrupt the provision of safe and reliable drinking water supplies. Having done so, many of these systems now are taking, or planning to take, steps to improve the security of their facilities and to protect sources of drinking water. The AWWA estimated that the roughly 8,400 community water systems covered by the Bioterrorism Act would have to spend more than $1.6 billion just to implement the most basic steps needed to improve security (such as better controlling access to facilities with fences, locks, perimeter lights, and alarms at critical locations). This estimate did not include the capital costs of upgrades to address vulnerabilities identified in vulnerability assessments, such as hardening pumping stations, chemical storage buildings, transmission mains, adding redundant infrastructure, or relocating pipelines of facilities. Efforts to estimate costs have been hampered by the fact that the security measures needed for utilities are very site-specific. However, the AWWA estimated that, nationwide, community water systems will need to invest billions of dollars to address identified vulnerabilities. The total security need estimated from the 2003 drinking water needs survey was $1 billion, but EPA noted that the survey provided only a partial estimate of security needs, as it was done while water systems were expanding their security evaluation and planning efforts. Many water systems had completed vulnerability assessments and corrective action plans, but frequently lacked cost estimates for making security improvements. In the 2007 survey (published in 2009), water systems identified a total of $422 million in needed security projects; however, EPA noted that total cost that systems incur to protect infrastructure and water quality is likely to be much greater as many of these costs are folded into construction costs for infrastructure projects and not identified separately. To cover the costs of making security improvements, some water utilities have imposed rate increases or reallocated existing resources. However, many others have been increasing rates to pay for projects needed to comply with new regulations, but had not contemplated the need for additional resources to address security concerns. Asserting that homeland security is primarily a federal responsibility, and that the needs are large, some individual communities and water associations have approached Congress in search of assistance. In the Bioterrorism Preparedness Act, Congress authorized funding for FY2002 through FY2005 for EPA to provide financial assistance to drinking water systems for several purposes, including making basic security enhancements, but no funding was provided. EPA has identified numerous security improvements that are eligible for funding through the drinking water and clean water state revolving fund programs, and infrastructure bills since the 108 th Congress specified that projects to improve security would be eligible for assistance under the clean water and drinking water state revolving funds. However, these funds are used primarily to comply with Safe Drinking Water Act and Clean Water Act requirements, and it is uncertain how readily these funds might become available for security measures. Wastewater SRF funding is used for construction of publicly owned municipal wastewater treatment plants, implementing state nonpoint pollution management programs, and developing and implementing management plans under the National Estuary Program (CWA Section 320). Drinking water SRFs may provide assistance for expenditures that will facilitate compliance with national drinking water regulations or that will "significantly further the health protection objectives" of the Safe Drinking Water Act. There are many proposals for expanding the scope of activities eligible for SRF funding, in addition to meeting major replacement and security-related needs, raising numerous tradeoff questions for policymakers. Recent legislative proposals have proposed adding a number of new types of projects to those already eligible for SRF assistance: water conservation; water reuse, reclamation, or recycling; measures to increase facility security; and implementation of source water protection plans, for example. More recently, there has been growing interest, as well, in "green" infrastructure, such as projects that treat or minimize sewage or urban stormwater discharges using nonstructural approaches, stream buffers, wetland restoration, or low-impact development technologies. The rationale for using federal assistance is that investments in some of these approaches could reduce overall needs for capital investment. Green infrastructure investments are now an EPA priority, and congressional interest is reflected in the 2009 American Recovery and Reinvestment Act ( P.L. 111-5 ), which required states to use at least 20% of SRF funding that they received under that act to address green infrastructure, water or energy efficiency improvements, or other environmentally innovative activities. Congress has included language in subsequent appropriations acts concerning use of a portion of SRF funds for green projects. All of these non-traditional types of projects could benefit water quality protection and improvement, as do traditional infrastructure investments, and supporting them through the SRF would help ensure comparatively secure funding. But expanding the scope of eligibility also arguably dilutes the historic focus of these programs, at a time when traditional needs remain high. This tension already exists with the wide range of set-asides authorized under the drinking water SRF, where, in addition to funding infrastructure projects, states may reserve up to 31% of their federal capitalization grant for a range of other purposes. For example, states may use up to 10% of their grant to implement wellhead protection programs and another 10% to fund local source water protection initiatives. (See discussion below of set-asides, under " Delivering Federal Support .") Many argue that greater investment in managing nonpoint sources of water pollution would especially benefit public health and water quality. According to state data compiled by EPA, polluted runoff is the major source of water quality problems in the United States. Water quality survey data indicate that 40% of surveyed U.S. waterbodies are impaired by pollution (meaning that waters fail to meet applicable standards) and that surface runoff from diffuse areas such as farm and ranch land, construction sites, and mining and timber operations is the chief cause of impairments, while municipal point sources contribute a much smaller percentage of water quality impairments to most waters. The possible cost of practices and measures to address the nonpoint pollution problem has not been comprehensively documented. Nevertheless, it is conceivable that investments in nonpoint pollution abatement (e.g., grants for nonpoint pollution management projects under the Clean Water Act, technical and financial assistance to farmers through USDA, Safe Drinking Water Act grants to protect sources of drinking water) could have equal or greater environmental benefit than investments in water infrastructure. For example, New York City is funding an extensive watershed protection program, including areas far from the metropolitan area, in an effort to avoid the need to build a filtration plant that would cost the city several billion dollars. Growing populations in many areas of the country are placing increasing demands on water supplies and wastewater treatment facilities. Yet, even without new growth, many people in existing small and rural communities do not have access to public sewers or water supply and, thus, are using alternative systems to help them comply with environmental laws and to solve public health problems. Local officials face a challenge of striking a balance between ensuring that water and wastewater services are affordable, but also providing sufficient revenue for system needs. To deliver these services, they often face challenges arising from economic, geographic, and technological impediments. Outside of EPA's and USDA's traditional programs, it appears that Congress is increasingly being asked to authorize direct financial and technical assistance for developing or treating water, including rural water supply projects to be built and largely funded by the Bureau of Reclamation of the Department of the Interior, water recycling projects built and partially funded by the Bureau, and pilot programs for water supply and wastewater treatment projects funded by the U.S. Army Corps of Engineers. To yet another group of stakeholders, these, too, reflect priority problems in need of legislative attention and federal solutions. Indeed, the 109 th Congress passed legislation ( P.L. 109-451 ) authorizing the Bureau of Reclamation to establish a program for design and construction of rural water supply projects in 13 Reclamation states in the West. Policymakers face decisions about priorities and tradeoffs, since spending decisions often are essentially a zero-sum game: that is, what priority should be given to traditional infrastructure projects needed to comply with standards, versus the emerging problem of infrastructure replacement, versus nonpoint pollution management or other competing activities also having environmental benefits? Since not all can be supported, do some have greater priority than others? What should the federal government support? Should eligibility for SRF funding be expanded to include less traditional activities? Is there clearly a federal role for some or all activities, or is a larger federal role justified for some than for others? Many stakeholders have sought substantially increased federal spending on water infrastructure for reasons described in this report. Among groups involved in water infrastructure (states, cities, equipment manufacturers, the construction industry), a long-standing issue is the gap between funding needs and available resources from federal, state, and local sources. In its 2001 report, WIN recommended initially doubling federal support for water infrastructure, and increasing it by 500% after five years. Others doubt that increased federal support of that magnitude is necessary or appropriate. Even if policymakers agree that there is a federal role, significant questions remain about defining that role and agreeing on priorities. Data compiled by EPA demonstrate that federal capitalization grants are the largest, but not the only, source of monies in the SRFs. For example, cumulatively from 1996 through mid-2010, drinking water SRFs made available $21.2 billion in funds for assistance. Of the total, $12.4 billion was provided by capitalization grants, while the remainder—nearly $8.8 billion—came from state match contributions, leveraged bonds, principal repayments, and interest earnings, as well as some transfers from the clean water SRF. Likewise, cumulatively from 1988 through mid-2010, clean water SRFs have had $71 billion in funds available. Half ($31 billion) came from federal capitalization grants, while the remainder similarly derived from state matching funds, leveraged bonds, principal repayments, and interest earnings. In addition, state assistance outside of the SRF programs is an important source of total funds available for water infrastructure. For example, from FY1991 through FY2000, states made about $13.5 billion available for drinking water and wastewater projects under state-sponsored grant and loan programs and by selling general obligation and revenue bonds. Local government officials estimate that, on average, ratepayers currently pay about 90% of the total cost to build their drinking water and wastewater systems (through direct local financing or loan repayments to SRFs); federal funds provide the remainder. (Small rural systems depend more on government aid than do large systems.) According to the National League of Cities, these capital costs, plus operations and maintenance for which localities also are responsible, total about $60 billion annually for drinking water and wastewater systems. The U.S. Conference of Mayors reports that local governments have spent nearly $1.7 trillion on clean water and drinking water systems since 1972. Cities also say that they have been raising water and sewer rates to accommodate increases in operating and maintenance costs, which have risen 6% above inflation annually. In 2010, CBO reported that, from 2003 through 2007, state and local investment in drinking water and wastewater utilities rose by 3% annually while federal expenditures declined by 13%. Municipal officials contend that increased local fees and taxes alone cannot solve all funding problems. This is true, they say, both with respect to costs of meeting future needs (e.g., new treatment requirements) and costs of reinvesting in aging infrastructure. Water and wastewater officials acknowledge that they will continue to cover the majority of water infrastructure needs, but believe that doing so presents a significant challenge in keeping water affordable. In small cities, rural areas, and cities with shrinking populations and/or local economies, a possible doubling or tripling of water and sewer rates could be required to meet all needs. If some cities are unable to finance replacement or improvement of their water infrastructure, officials say that declining service levels, violations of water quality requirements, and threats to public health and the environment could occur. Assertions about financial impacts and affordability are at the heart of many stakeholders' efforts to seek greater federal support. The Water Infrastructure Network, for example, says that local sources alone cannot be expected to meet the challenge of large water and sewer needs, and that the benefits of federal help accrue to the nation as a whole, since water moves across political boundaries. WIN estimated that, even with that additional investment, average household water and sewer rates would increase over the next 20 years, but in WIN's projections, average rate increases would be 100%, compared with 123% without such a boost in federal support. Affordability also is central to discussions between EPA and municipalities to provide local governments with flexibility to direct funds as necessary to local water infrastructure projects. Responding to concerns of municipalities that are hard-pressed to build or upgrade systems to manage stormwater and wastewater overflows, in June 2012 EPA released an Integrated Planning Framework that will allow cities to modify CWA discharge permits and adapt plans or enforcement orders for managing sewer overflows, while still meeting water quality standards. EPA's expectation is that integrated planning will enable municipalities to identify efficiencies in implementing requirements that arise from wastewater and stormwater programs, which represent 35% of funding needs for core clean water projects, including how best to make capital investments. Some analysts dispute the view that federal funding solutions are fundamental to meeting future investment needs. According to this view, funding problems are in many cases due to the failure of local communities to assign a high priority to water and wastewater services and result in failure to set local water rates and other user charges at levels that cover capital and operating expenditures. This is especially true in the case of municipally or publicly owned utility systems which, unlike investor-owned systems, often do not support the full cost of service through rates. Publicly owned systems predominate in the wastewater industry (constituting more than 95%). In the drinking water industry, approximately 33% of public water systems are privately owned; however, most of these systems are small, serving roughly 15% of the U.S. population. "Rate shocks" which result from large rate increases can be managed to a degree, analysts say, by financing, ratemaking, and conservation strategies. Some argue that if water services continue to be subsidized by federal funds, subsidies should not reward utilities' inefficiency, but should be used strategically and equitably. Some advocate using needs-based subsidies to help low-income households by providing direct payment assistance or funding a lifeline rate. CBO has repeatedly argued that federal spending programs to support water infrastructure (direct project grants and SRF capitalization grants, as well as credit subsidies in the form of loans, loan guarantees, and tax preferences) can have a number of unintended consequences. In a 2011 report (one of a periodic series) on the budgetary implications of policy choices, one of the options that CBO presents is a phaseout of federal capitalization grants for SRFs. CBO cites several economic rationales for doing so. For example, grants may encourage inefficient decisions about water infrastructure by allowing states to lend money at below-market interest rates, in turn reducing incentives for local governments to find less costly ways to control water pollution and provide safe drinking water. Also, federal contributions may not result in increased total investment if they are merely replacing funding that state and local sources would otherwise have provided. In a 2010 analysis of public spending on transportation and water infrastructure, CBO asserted that infrastructure demand could be better aligned with supply if services were priced to reflect the full cost of providing and using the infrastructure. To avoid economic inefficiencies, CBO suggested that the federal government could fund certain infrastructure projects where the funding benefits the nation as a whole, and could choose to fund projects for particular states and localities only if the funding was expected to generate benefits for taxpayers nationwide. Overall, the budget office concluded that spending for public infrastructure projects can generate long-term economic growth, but realizing such gains "depends crucially on identifying economically justifiable projects—those with benefits to society that are expected to outweigh costs." The budget office cautioned, however, that identifying such projects is very difficult. In practice, economic efficiency frequently is not the primary policy driver for federal infrastructure spending. A range of public policy goals often take priority, such as reducing the costs of federal environmental mandates, and helping ensure some level of access to facilities for all citizens. The question of how federal financial support is delivered to water infrastructure projects involves several issues, including composition of aid (loans and grants), and assistance for private as well as public entities. Related issues are impacts of other federal requirements, use of set-asides, and how funds are allotted to states. One issue that divides the stakeholder groups is whether the preferred source of assistance should be grants or loans, with cities (both large and small) and the WIN group favoring a significant place for grants, while most states and groups such as the National Association of Water Companies favor loans in preference to grants. Both SRF programs authorize states to make loans at or below market interest rates, including zero interest loans. However, for several years, both small and large cities have urged Congress to explicitly authorize water infrastructure grants, in addition to loans, to provide flexible assistance best suited for particular community and state needs. Thus, the drinking water SRF, enacted nine years after the clean water SRF program, allows up to 30% of capitalization grants to be used to provide additional loan subsidies to disadvantaged communities (such as partial loan forgiveness, negative interest rates, or grants). Grants that do not require repayment obviously are preferred by communities. For example, some small communities that lack an industrial tax base or means to benefit from economies of scale find it difficult to repay a loan for 100% of the cost of water infrastructure projects. Some larger cities also seek grants, on the basis that water infrastructure is just one of numerous costly capital needs that they must meet, and a partial subsidy in the form of a grant would help make those costs more affordable for ratepayers. Small and disadvantaged communities' financing problems also have been addressed by permitting a longer loan repayment period. By spreading out repayment, communities can reduce the amounts due on an annual basis, thus lessening the amount of rate increases needed to finance the repayment (although total financing costs over the life of the loan may be higher). Under both SRF programs, annual principal and interest repayments begin one year after project completion and are to be fully amortized 20 years after project completion. Under the drinking water SRF, however, states may allow economically disadvantaged communities up to 30 years to repay loans. The Clean Water Act does not currently permit 30-year repayments, but through appropriations legislation, Congress has encouraged EPA to allow states to issue bonds allowing for clean water SRFs with repayment terms of greater than 20 years. Consequently, EPA has allowed a few states that requested the authority (e.g., Massachusetts, West Virginia, Maryland) to issue 30-year clean water SRF loans. Many state officials are reluctant to use a portion of the SRF to award grants, chiefly because, to the extent that part of the SRF is used for making grants, the corpus of the loan fund and its ability to be a self-sustained long-term source of funding are diminished. States acknowledge that a loan "buy down," in the form of granting forgiveness of a portion of the SRF loan principal, can be a useful option for dealing with disadvantaged communities. However, many states prefer to limit the use of grants as much as possible and oppose a mandate to make grants. State water quality officials who previously administered the Clean Water Act's construction grant program and others (including CBO) believe that grants can undermine efficient investments by leading to substitution of federal funds for state and local funds, rather than augmenting state and local investment, and distort decisions about preventive maintenance, treatment technology, and excess capacity. According to EPA, states are being conservative in using the principal forgiveness authority under the drinking water SRF: since 1996, fewer than 20 states have done so, and assistance provided with principal forgiveness has totaled less than 3% of all drinking water SRF assistance since that time. In the 2009 economic stimulus legislation (ARRA, P.L. 111-5 ), Congress provided $6 billion in supplemental appropriations for the two SRF programs and required states to provide at least 50% of the funds as subsidization in the form of principal forgiveness, negative interest loans, grants, or a combination. Subsequent appropriations acts have continued to encourage states to provide subsidization, but with some modification and flexibility. EPA's FY2012 appropriation ( P.L. 112-74 ) provides that not less than 20% but not more than 30% of each state's clean water and drinking water SRF capitalization grants are to be used for additional subsidy. Some groups, such as private water companies, favor limited and targeted federal assistance, so that utilities are encouraged to attain and maintain business-like operations. If federal assistance is provided, they, like many state officials, favor that it should be primarily in the form of low-interest or zero-interest loans. Some in these groups support assistance for low-income families to supplement their water and sewer bills, where necessary, either paid to the families or directly to the utility. Some loan forgiveness (as under the drinking water SRF) or grants (with at least 50% local cost share) are options that some support in rare cases, and only so long as assistance produces long-term solutions and ensures that federal monies are used cost-effectively. Except in cases where virtually all of a utility's customers are impoverished, assistance for low-income households should be favored over grants, they say. Grants or loans with substantial forgiveness subsidize all customers' rates, even those that are able to afford the full cost of service, and therefore are not an efficient use of scarce federal assistance. Currently under the drinking water SRF program, eligible loan recipients can include community water systems, both publicly and privately owned, and not-for-profit noncommunity water systems (e.g., schools with their own water supply). Eligible loan recipients for wastewater SRFs are any municipality, intermunicipal, interstate or state agency, but not privately owned utilities. A number of stakeholders advocate that SRF funds be made available to privately owned wastewater systems, as well. This would "level the playing field" between the two programs, it is argued, and also would encourage public-private partnerships and privatization—and thus increase infrastructure investment levels overall. Another issue involving the private sector arises from the Internal Revenue Code. Under federal tax law, certain activities financed by the issuance of state and local bonds have a special status because the interest earned is exempt from federal income taxation. Tax-exempt financing enables state and local governments to borrow at a lower interest rate than either private business or the federal government must pay on taxable debt. In general, tax-exempt status applies to activities broadly defined as having public purpose. Some specific activities considered to have both public and private purposes are eligible for tax-exempt financing. However, these public/private activities are subject to a cap that limits the volume of private activity bonds (PABs) state and local governments may issue annually. PABs for water infrastructure are subject to the volume cap, and tax-exempt financing can be done if the project is able to secure an allocation from the volume cap. Because private water bonds compete under this cap with other private bond uses such as housing, industrial development, and student loans, some groups favor legislation that would exempt all PABs for water and sewage facilities from the volume cap. President Bush proposed to exempt PABs used to finance drinking water and wastewater infrastructure from the PAB unified state volume cap, in order to provide states and communities greater access to PABs to help finance water infrastructure needs. Legislation intended to provide such an exemption has been introduced in each Congress since the 109 th . Current law provides such an exemption for government-owned and operated solid waste disposal facilities. Opponents argue that restrictions on tax-exempt financing should be maintained, because of the costs to the federal government, in terms of income tax revenues foregone. Similarly, some opponents say that the bonds represent an inefficient allocation of capital, favoring some projects over others, and increase the cost of financing traditional governmental activities. Legislation to permit interest on federally guaranteed USDA water, wastewater, and essential community facilities loans to be tax exempt also has been introduced. A second issue related to the Internal Revenue Code concerns arbitrage. If proceeds of tax-exempt bonds issued by state and local governments in connection with SRF programs are invested in securities that pay a higher yield than the yield on the bonds, the earnings are termed arbitrage profits. Unchecked, state and local governments could substitute arbitrage earnings for a substantial portion of their own citizens' tax effort. Thus, Congress has decided that such arbitrage should be limited, and that tax-exempt bond proceeds must be used quickly to pay contractors for the construction of the capital facilities for which the bonds were issued. Federal tax law requires that bond proceeds be spent out during a specified period; if not, the arbitrage earnings must be rebated to the U.S. Treasury. The Internal Revenue Service (IRS) places arbitrage restrictions on SRF reserves. In the case of the SRFs, this issue can arise when governments use SRF monies to borrow funds at tax-exempt rates in order to issue municipal bonds and then invest the funds received from the issues in higher earning taxable securities. The process of using federal capitalization grants and state matching funds as collateral to borrow in the public bond market so as to increase the pool of available funds for project lending is termed leveraging . It is used by more than one-half of states, according to EPA. EPA's Environmental Finance Advisory Board has expressed concern that the interpretation of the IRS arbitrage limitations reduces the amount of funds potentially available for infrastructure projects because it requires the yield on invested reserves to be no greater than the bond maturity rate, and it has urged EPA to support amending the Internal Revenue Code to provide that monies contributed to SRFs be freed from arbitrage earnings restrictions. Many state officials believe that amounts used as reserves to secure bonds for SRF projects should be exempted from the arbitrage rebate rules so that any interest earnings could be used for additional investment in water infrastructure projects. The Council of Infrastructure Financing Authorities (CIFA), which represents most of the SRF organizations, argues that applying the arbitrage rules in the case of SRFs does not make sense since by law these funds can only be used for the purpose of financing water and wastewater facilities. CIFA has estimated that if arbitrage restrictions were lifted, SRFs could earn an additional $100 million to $200 million annually on their funds. If these earnings were used as reserves to secure additional bonds, they could provide an additional $200 million to $400 million annual investment in infrastructure projects. However, others respond that without the existing arbitrage rule, state and local governments could issue tax-exempt bonds solely for the purpose of gaining arbitrage profits, at the expense of greater revenue losses to the federal government and ultimately higher interest rates on bonds whose proceeds actually are used for the acquisition or construction of capital facilities. Legislation in the 110 th Congress ( S. 1910 ) would have lifted arbitrage restrictions on federal capitalization grants and state matching funds for clean water and drinking water SRFs, but this proposal has not been reintroduced. Under both SRF programs, a number of federal authorities, executive orders, and government-wide policies apply to projects and activities receiving federal financial assistance, independent of program-specific statutory requirements. These include environmental laws (e.g., Clean Air Act, Endangered Species Act), social legislation (e.g., Age Discrimination Act, Civil Rights Act), and economic and miscellaneous laws (Davis-Bacon Act, Uniform Relocation and Real Property Acquisition Policy Act of 1970, and procurement prohibitions under environmental laws and Executive Order 11738). Until recently, these federal cross-cutting requirements apply only to projects funded directly by the federal capitalization grants, but not to SRF activity made from loan repayments, interest earned, or other state monies contained in the SRF. In addition, the clean water SRF attaches 16 specific statutory requirements to activities funded directly by federal capitalization grants that are carryover ("equivalency") requirements from the CWA's previous construction grant program (e.g., specific project evaluation requirements). Many stakeholders believe that these statutory and cross-cutting requirements are burdensome and costly and, in many cases, provide only ancillary benefits to water infrastructure projects. One particularly contentious issue is compliance with the Davis-Bacon Act which 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 (with respect to small and minority-owned businesses). Supporters say that the law helps stabilize the local construction industry by preventing competition from firms that could undercut local wages, and perhaps working conditions, and thus compete unfairly with local contractors. Congress has added Davis-Bacon prevailing wage provisions to more than 50 separate program statutes, including the Clean Water Act (and specifically to the law's infrastructure funding program) and to the Safe Drinking Water Act generally. However, the applicability of Davis-Bacon to the clean water SRF expired in FY1994, when the authorizations in P.L. 100-4 expired. Further, the Davis-Bacon provision in the SDWA predates the drinking water SRF program, and the SRF provisions make no reference to prevailing wages; thus, EPA had interpreted the SDWA to not require applicability of the Davis-Bacon Act to all construction projects supported by SRFs. Inclusion (and proposed expansion) of its requirements in the CWA and SDWA SRF programs has been controversial, and that controversy was a prominent reason that no water infrastructure financing legislation has been enacted recently. Congress did impose Davis-Bacon requirements on funds provided for the clean water and drinking water SRFs under the 2009 American Recovery and Reinvestment Act (ARRA, P.L. 111-5 ) and in EPA's subsequent appropriations. As now implemented, these requirements apply to construction projects carried out "in whole or in part" with SRF assistance—a broader mandate than in the past, which has created additional controversy. The utility of set-asides that allow for or require using a portion of SRF capitalization grants for program purposes other than directly constructing infrastructure has been debated for some time. Under the clean water SRF, a state must reserve the greater of 1% of its capitalization grant or $100,000 each year to carry out specified planning requirements under the CWA. Under the drinking water SRF, a state may use up to 31% of its capitalization grant for specified SDWA programs including supervision of public water systems, operator certification, compliance capacity development, and state and local source water protection initiatives (some uses require a 50% state match). Reserving a large amount of funds, even for related implementation activities, necessarily limits the funds available to the state for assisting infrastructure projects. Also, several of the set-aside activities have their own funding authority; thus, a concern for states is that Congress may rely on the SRF to fund other SDWA requirements instead of providing the authorized appropriations, and the overall funding for drinking water activities may be diminished. Drinking water program officials acknowledge this problem, but many believe that set-asides are a useful means of ensuring that monies will be available for activities that might otherwise not have a secure source of funds. Because states have some flexibility, few are using the full amount that could be reserved under the set-asides. According to EPA, only a few states have used the full 31% that the law allows, and the average amount reserved by all states since 1996 is 16%. Many state clean water program officials have a different view of mandatory set-asides, based on experience administering the previous construction grant program which for a time required states to reserve a portion of federal funds for specified types of projects. Because of problems in spending those set-aside funds (e.g., finding beneficial projects on which to spend all the required reserved funds) and extensive oversight by EPA, many of them now oppose the reservation of core funds (especially mandatory set-asides), except for covering states' SRF administrative costs. Nevertheless, a number of stakeholder groups have urged Congress to include several different types of reserves in the CWA SRF program, such as requiring states to set aside a fixed percentage of funds for projects in rural communities, or for "green" infrastructure projects involving water or energy efficiency, water reuse, or nonstructural approaches to managing wastewater. A separate issue relates to set-asides for administration. Under both the CWA and SDWA programs, states may reserve up to 4% of their federal capitalization grants annually for the reasonable costs of administering the SRF. As the SRFs have developed and loan portfolios have grown, many states argue that an amount equal to 4% of the allotment is insufficient for administering the program. This problem is exacerbated by the fact that for more than a decade, congressional appropriations of capitalization grants remained steady or declined (prior to increases in FY2009 and 2010). Many states impose fees on borrowers, which has the effect of increasing costs for the borrower. Thus, an issue of concern to many is increasing the amount that states are allowed to reserve for administrative purposes. For more than a decade, Congress has provided appropriations act language that allows states to include the cost of administering SRF loans as principal in funds provided to eligible borrowers, but many states favor a more permanent statutory solution. Another issue of interest is how federal funds are allocated among the states. Capitalization grants for clean water SRFs are allotted according to a state-by-state formula in the Clean Water Act. It is a complex formulation consisting basically of two elements, state population and capital needs for wastewater projects. Because the allocation formula has not been revised since 1987, yet needs and population have changed, the issue of state-by-state distribution of federal funds has been an important topic when legislation is considered. In contrast, capitalization grants for drinking water SRFs are allotted by EPA based on the proportional share of each state's needs identified in the most recent national drinking water needs survey, not according to a statutory formula. Among the questions likely to be discussed are, should a single formula apply to both programs? Should allocation follow from a statutory or administrative formula? Do EPA's needs surveys provide an accurate basis for state-by-state distribution? If programs are expanded to include eligibility for new activities, such as pollution prevention and watershed protection, how should they be reflected in state-by-state allocations? Crafting an allotment formula has been one of the most controversial issues debated during past reauthorizations of the Clean Water Act. The dollars involved are significant, and considerations of "winner" and "loser" states bear heavily on discussions of alternative formulations. A related issue is whether a portion of federal water infrastructure funds will be allocated in the form of congressionally directed appropriations for specified communities' projects, which are often referred to as earmarks. Until recently, congressional appropriators had dedicated a significant portion of annual water infrastructure assistance as grants for specific communities, both small and large, with a federal cost-share of 55%. For example, for FY2010 ( P.L. 111-88 ), Congress appropriated $2.1 billion for clean water SRF capitalization grants, $1.4 billion for drinking water SRF grants, and $186.8 million in earmarked grants for 319 listed projects. Appropriations directed by Congress for identified projects enable legislators to assist communities otherwise unable to fully qualify for state-administered programs, or those seeking a grant rather than a loan which must be repaid. State officials that administer the SRF programs generally oppose these types of grants because such congressional actions deny states the ability to determine priority for project funding. Congress imposed a moratorium on earmarking in FY2011, but could choose to restore it in the future. The basic technologies used by communities to meet wastewater and drinking water needs have changed little for several decades, in part because utility officials often favor using conventional, familiar systems and technologies. This is particularly the case in the wastewater sector where regulatory requirements have been relatively static for years. Although this has long been true in the drinking water sector as well, the situation is changing as new regulations are requiring many public water systems to apply new technologies. EPA's revised drinking water standard for arsenic drew particular attention to the need for research on treatment technologies that are affordable and suitable for small water systems. In the conference report for the Consolidated Appropriations Act for FY2005 ( P.L. 108-447 ), Congress expressed concern that many small communities, especially rural communities in the West, will not be able to afford to comply with the arsenic rule and that it could pose a large financial hardship on these communities. Congress has provided funding specifically for research on cost-effective arsenic removal technologies for small systems. Overall federal support for research and development (R&D) of new drinking water and wastewater technologies has been limited. While much of EPA's drinking water research is focused on health effects studies, the identification of feasible treatment technologies is a central component of EPA's drinking water standard setting process, and technology research has received support. However, EPA's water research budget often has fallen short of its regulatory needs, and consequently, competition for available funding has been considerable. According to the Water Infrastructure Network, technology R&D is supported at the federal level mainly by programs of EPA's Office of Research and Development and EPA's Environmental Technology Verification (ETV) Program. Also, Congress has directed that EPA provide appropriated funds to nonprofit research foundations including the Water Environment Research Foundation ($2 million in FY2009 and FY2010) and the American Water Works Association Research Foundation ($1.7 million in FY2009 and FY2010). The ETV Program began in 1995 to verify the performance of innovative technology developed by the private sector and to accelerate the entrance of new technologies in all media. In the water and drinking water areas, technologies have been verified for a number of packaged drinking water systems especially needed for small community water supplies. Pilots also are underway to evaluate source water protection technologies and urban wet weather flow control technologies. In its 2001 report, WIN recommended that Congress authorize $250 million annually for a new Institute of Technology and Management Excellence to support the development and use of innovative technologies that would reduce the cost of meeting drinking water and clean water requirements and replacing water infrastructure. The CBO also has noted that one option to increase federal support for water infrastructure would be increased federal spending on R&D that could reduce water systems' costs and improve efficiency, such as technical R&D into new pipe materials, construction and maintenance methods, and treatment technologies. Economic principles suggest that federal involvement may be appropriate to increase cost-effectiveness when other entities, such as private firms and state governments that may fund R&D for water systems, do not have adequate incentive to consider the spillover benefits that would accrue from a national perspective as a result of research investments. Increased federal support of technical R&D could take the form of additional research projects managed by EPA, larger federal grants to private organizations, or both. In the past, Congress has attempted to advance new and innovative technologies in other ways, in addition to R&D activities. Beginning with the 1977 amendments to the Clean Water Act, Congress authorized specific incentives for such technologies, in particular by increasing the federal share under the previous construction grant program for innovative and alternative technology projects that reuse or recycle wastewater and sludge, reduce costs, or save energy consumption. That act also provided for 100% modification or replacement of innovative or alternative systems in the event of technological failure or significantly increased operating costs, as a safety measure to reduce the potential uncertainty of using risky or unproven wastewater treatment technologies. The federal funding bonus and the potential for full replacement if a wastewater system failed were seen by states and cities as significant incentives for using technologies other than conventional treatment systems. However, these incentives were funded as set-asides from construction grants. As described above, these set-asides were not universally popular among state officials at the time, and they were not extended when the clean water SRF program was created. In 1989, EPA estimated that, compared with conventional treatment processes, for every dollar invested in designing and constructing an innovative project, 40 cents was saved over the life of the facility. Many now believe, however, that under the clean water SRF program, without the incentive of bonus funds or 100% replacement grants, few communities are constructing projects that utilize unproven or unfamiliar technology. The Safe Drinking Water Act has no such incentives, but regulatory pressures and population growth are forcing both water and wastewater utilities to assess the potential of alternative treatment technologies. In this regard, issues for congressional consideration could include possible financial incentives or regulatory incentives (such as allowing some additional compliance flexibility) for use of innovative technology, as well as increased federal support for technology R&D. In 2010, EPA issued a new Drinking Water Strategy which includes a goal to promote development of new drinking water technologies to address health risks posed by a broad array of contaminants. In January 2011, the Agency promoted the formation of a Regional Water Technology Innovation Cluster to bring together public and private partners to focus on finding new ways to simultaneously treat multiple contaminants in drinking water. Such technologies have the potential to significantly reduce treatment costs and needed infrastructure investments. Momentum in Congress to consider the issues discussed in this report has grown since the 107 th Congress, partly in response to urgings of stakeholder groups, but no legislation other than appropriations has been enacted. During this period, the Administration has promoted a number of steps to ensure that investment needs are met in an efficient, timely, and equitable manner. House and Senate committees held oversight hearings on water infrastructure financing issues during the first session of the 107 th Congress, and in the second session, the House Transportation and Infrastructure Committee approved H.R. 3930 , a bill authorizing $20 billion in clean water SRF assistance for five years. No committee report was filed. The Senate Environment and Public Works Committee reported legislation authorizing $35 billion in total funding over five years for the clean water and drinking water SRF programs ( S. 1961 , S.Rept. 107-228 ). No further action occurred on either bill, in large part due to controversies over provisions in both bills to apply requirements of the Davis-Bacon Act to SRF-funded water infrastructure projects (discussed above) and also over CWA grant allocation formulas in the two measures. Attention to these issues resumed in the 108 th Congress. First, in July 2003, 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 2002. H.R. 1560 would have authorized $20 billion for the clean water SRF program for FY2004-FY2008. 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, including principal forgiveness and negative interest loans, for communities that meet a state's affordability criteria. It also 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. The Water Resources and Environment Subcommittee continued to examine infrastructure issues and, in April 2004, held a hearing on aging water supply infrastructure. In October 2004, the Senate Environment and Public Works Committee reported S. 2550 ( S.Rept. 108-386 ), authorizing $41.25 billion over five years, including $20 billion for the clean water SRF program and $15 billion for the drinking water SRF program. The bill included a new formula for state-by-state allocation of clean water SRF grants, and expansion of the types of projects and activities eligible for clean water SRF grants. It would have directed states to reserve a portion of their annual clean water and drinking water SRF capitalization grants for making grants to eligible communities, and further would have required EPA to establish a grant program to help small water systems comply with drinking water regulations. (For discussion, see CRS Report RL32503, Water Infrastructure Financing Legislation: Comparison of S. 2550 and H.R. 1560 , by [author name scrubbed] and [author name scrubbed] (pdf).) No further action occurred on either bill. Once again, the issue of the applicability of the prevailing wage requirements of the Davis-Bacon Act to SRF-funded projects affected consideration of the legislation, but criticism also included objection by some states to funding allocation formulas in the bills and opposition by the Administration to funding levels. During the 109 th Congress, the Senate Environment and Public Works Committee reported a water infrastructure financing bill, S. 1400 ( S.Rept. 109-186 ). Similar to S. 2550 in the 108 th Congress, this bill would have extended both SRF programs (authorizing $20 billion over five years for the clean water SRF program and $15 billion drinking water SRF). It would have revised and updated the CWA formula for state-by-state allocation of SRF monies and would have specified that the prevailing wage requirements of the Davis-Bacon Act would apply to all projects financed from an SRF. It also would have directed the EPA to establish grant programs for small or economically disadvantaged communities for critical drinking water and water quality projects; authorized loans to small systems for preconstruction, short-term, and small-project costs; and directed the EPA to establish a demonstration program to promote new technologies and approaches to water quality and water supply management. No further action occurred on this bill. Water infrastructure financing also received consideration in the 110 th Congress, but, again, no legislation was enacted. In March 2007, the House passed H.R. 720 , the Water Quality Financing Act of 2007. It 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 , described above). 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. H.R. 720 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. In September 2008, the Senate Environment and Public Works Committee approved S. 3617 ( S.Rept. 110-509 ), the Water Infrastructure Financing Act, similar to the measure that the committee approved in the 109 th Congress ( S. 1400 ). S. 3617 would have authorized $20 billion for grants to capitalize the Clean Water Act SRF program and $15 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. S. 3617 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. It also included several provisions to benefit small or economically disadvantaged communities, such as through new technical assistance and more generous loan terms. These issues also received attention in the 111 th Congress, but no legislation was enacted. In March 2009, the House passed H.R. 1262 , the Water Quality Investment Act, a bill similar to House-passed H.R. 720 from the 110 th Congress. In July 2010, the House passed H.R. 5320 , the Assistance, Quality, and Affordability Act of 2010, which would have authorized appropriations for the drinking water SRF for three years and would have made certain changes to the program. Further, the Senate Environment and Public Works Committee reported a broad drinking water and wastewater infrastructure financing bill, S. 1005 , the Water Infrastructure Financing Act, but the Senate did not take up the bill. Taking a different approach, the Water Protection and Reinvestment Act ( H.R. 3202 ) was introduced to establish a dedicated water infrastructure trust fund. The trust fund would be supported by excise taxes on water-based beverages and on various products that become part of the wastewater streams (such as pharmaceuticals and shampoo), and a tax on some corporate profits. Water infrastructure trust fund legislation was again introduced in the 112 th Congress ( H.R. 6249 ). Legislation to reauthorize the clean water SRF program also was introduced ( H.R. 3145 ). Neither bill was taken up by congressional committees. For information, see CRS Report R41594, Water Quality Issues in the 112 th Congress: Oversight and Implementation , by [author name scrubbed], and CRS Report RS22037, Drinking Water State Revolving Fund (DWSRF): Program Overview and Issues , by [author name scrubbed]. The George W. Bush Administration addressed water infrastructure in a number of general ways, but did not offer legislative proposals of its own. The Administration opposed the SRF authorization levels proposed in bills in Congress, saying that those levels would exceed the Administration's targets for federal investment in water infrastructure and did not support the President's priorities of defense and homeland security. The Bush Administration argued that funding needs are not solely the responsibility of the federal government, and that actions on the part of local governments also are required to help close the gap. Stakeholder groups concurred, at least to the extent of agreeing that the problem is not solely the responsibility of any single level of government or entity, and that all must act to find solutions. But many stakeholders argued that levels of federal investment endorsed by the Bush Administration were insufficient to maintain investment levels needed to achieve the nation's goals for safe and healthy water. While saying that federal and state funding can help water utilities meet future needs, EPA's principal water infrastructure initiative during the Bush Administration was to support strategies termed the Four Pillars of Sustainable Infrastructure. The Four Pillars were better management, full-cost-pricing, efficient water use, and watershed approaches to protection. EPA pursued a Sustainable Infrastructure Leadership Initiative in partnership with water utilities to promote the Four Pillars. The purpose of the initiative was to identify new and better ways of doing business in the water and wastewater industries and promote them widely, and thus ensure sustainability of water systems. For example, EPA worked to encourage utility rate structures that lead to full cost pricing and will support water metering and other conservation measures. EPA also encourages consumers to use water-efficient products (e.g., residential bathroom products), with the intent of reducing national water and wastewater infrastructure needs 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, including support for a Four Pillars approach. Building on these concepts 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 is also working 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 approaches such as natural or "green" systems. Further, EPA works 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. The Obama Administration shifted the debate from its predecessor in regard to federal budgetary resources for water infrastructure investments. First, the Administration supported inclusion of $6.0 billion for the clean water and drinking water SRF programs in economic recovery legislation enacted in February 2009, the American Recovery and Reinvestment Act ( P.L. 111-5 ). Second, in subsequent budget requests, the Administration has sought increased funding for the two programs. For FY2012, the Administration requested $3.3 billion for the clean water and drinking water SRF programs; Congress appropriated $2.4 billion ( P.L. 112-74 ). The preceding discussion identifies a number of issues that Congress, the Administration, and stakeholders have been debating regarding water infrastructure needs and concerns, many of which are the subject of advocates' recommendations and policy positions. In addition, recently some have begun to address the long term challenge of actually paying for the larger financial commitment that many of them seek and, in particular, of identifying alternatives to finance a larger, sustained federal role. While some may wish to fund a larger amount of federal spending for water infrastructure entirely out of general revenues in the U.S. Treasury, such proposals have faced numerous hurdles and competition with many other government priorities. Thus, several questions arise: if a substantial financing gap exists that cannot be met by improved efficiencies or local revenue enhancement, and if a larger federal financial role is determined to be appropriate, where would that money come from? Are there alternative revenue sources that could be identified to support increased federal involvement? Some analytic work has been done on these questions in the past, including research by academics and interest groups. EPA has contributed analysis in various ways, including a study requested by Congress in the mid-1990s that examined financial mechanisms to enhance the capability of governments to fund mandated environmental goals. In addition, the EPA's Environmental Finance Advisory Board has developed various publications, including A Guidebook of Financial Tools , which provides a comprehensive review of financing mechanisms, and related tools that may help communities pay for environmental projects and lower compliance costs. Still, with funding needs believed to be so high and federal funding limited, some interest groups have been exploring other options. Consensus exists among many stakeholders—state and local governments; equipment manufacturers, construction companies, and engineers; and environmental advocates—on the need for more investment in water infrastructure. Many in these varied groups support one or more options for doing so, ranging from water-related fees that could be dedicated to water infrastructure, or some sort of new federal credit assistance program such as a national infrastructure bank. Increased public/private partnerships are advocated by some, and other options also may merit exploration. There is no consensus supporting a preferred option or policy, and many advocate a combination that will expand the financing "toolbox" for projects. Most agree that there is no single method or "silver bullet" that will address needs fully or close the financing gap completely. At least for the near term, communities will continue to rely on the SRF programs, tax-exempt governmental bonds, and available tax-exempt private activity bonds to finance their water infrastructure needs. The 112 th Congress focused extensively on cutting federal spending, and this emphasis is expected to continue in the 113 th Congress. Unclear for now is whether such actions will be applied to infrastructure programs equally with others, or whether infrastructure investments will be perceived as supporting economic activity by increasing the capital stock and raising productivity and thus be protected from major reductions, or even be provided with greater federal resources. | Policymakers are giving increased attention to issues associated with financing and investing in the nation's drinking water and wastewater treatment systems, which take in water, treat it, and distribute it to households and other customers, and later collect, treat, and discharge water after use. The renewed attention is due to a combination of factors. These include financial impacts on communities of meeting existing and anticipated regulatory requirements, the need to repair and replace existing infrastructure, concerns about paying for security-related projects, and proposals to stimulate U.S. economic activity by building and rebuilding the nation's infrastructure. The federal government has a long history of involvement with wastewater and drinking water systems, with the Environmental Protection Agency (EPA) having the most significant role, both in terms of regulation and funding. The U.S. Department of Agriculture also plays an important role in rural communities through its water and wastewater loan and grant programs. These programs have been popular; however, states, local communities, and others have asserted that program gaps and limitations may diminish their potential effectiveness. They also point to the emergence of new infrastructure needs and issues, while federal resources for these programs have declined. Reports on infrastructure funding needs and related policy issues have been issued by interest groups, EPA, and the Congressional Budget Office (CBO). They present a range of estimates and scenarios of future investment costs and gaps between current spending and future costs. EPA and CBO, in particular, caution that projections of future costs are highly uncertain, and that funding gaps are not inevitable. Increased investment, sought by many stakeholders, is one way to shrink the spending gaps, but so, too, are other strategies such as asset management, more efficient pricing, and better technology. Congressional interest in these issues has grown for some time. In each Congress since the 107th, House and Senate committees acted on legislation to reauthorize and modify infrastructure financing programs in the Clean Water Act and Safe Drinking Water Act, but no bills other than appropriations were enacted. EPA's recent initiatives support strategies intended to ensure that infrastructure investment needs are met in an efficient, timely, and equitable manner. The Obama Administration has focused attention on providing increased federal budgetary resources for water infrastructure investments and on encouraging sustainable water infrastructure policies. This report identifies issues that continue to receive attention in connection with water infrastructure investment. It begins with a review of federal involvement; describes the debate about needs; and then examines key issues, including what is the nature of the problems to be solved, who will pay, what is the federal role, and questions about mechanisms for delivering federal support. Congressional and Administration activity on these issues since the 107th Congress also is briefly reviewed. |
Since becoming independent in 1991, Armenia has made unsteady progress toward democratization, according to many international observers. These observersâincluding 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 Statesâhad 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 membersâthe Republican Party of Armenia and the Armenian Revolutionary Federationâin 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. 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. 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. 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 leadersâwho are comrades-in-arms of the conflict over Azerbaijan's breakaway region of Nagorno Karabakhâwill 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." 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. 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 Knollenbergâco-chairs of the Congressional Armenia Caucusâsent 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]. |
Haiti has had a long, difficult history highlighted by prolonged poverty, political instability, and underdevelopment resulting in a politically fragile state with the lowest standard of living in the Western Hemisphere. With the assistance of the United Nations Stabilization Mission in Haiti (MINUSTAH) and large amounts of international aid, Haiti has been attempting to establish a foundation for longer-term economic development. Security issues have presented the primary risk to stability, while restoring economic growth, investment, employment, and access to basic social services have been the major and equally formidable challenges to sustainable development. Since assuming his second non-consecutive term of office in May 2006, President René Préval has emphasized the importance of rebuilding democratic institutions and establishing conditions for private investment to create jobs. The success of his government will depend largely on its ability to improve security and socioeconomic conditions in Haiti, a country in which 76% of the population lives on less than $2 a day. During his first two years in office, security conditions have improved, but Haitians have seen their already substandard living conditions deteriorate further with the rise in global food prices and recent devastation by a series of hurricanes. In a country where more than half of the working age population is unemployed, even many of those who have jobs do not earn enough to provide their families with more than one meal a day. Steeply rising food prices and resulting riots in Haiti were a catalyst for action by Congress and the Bush Administration. The 110 th Congress responded directly to Haiti's immediate food needs, but has also taken the opportunity to advance legislation on other fronts it deems critical for Haiti's longer term development. In April 2008, the House unanimously passed an amendment to the Jubilee Act ( H.Amdt. 993 to H.R. 2634 ) that recommends immediate cancellation of Haiti's outstanding multilateral debts. In June 2008, the House and Senate passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 ), the Farm Bill. Title XV includes the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2008, which gives trade preferences to U.S. imports of Haitian apparel. In late June 2008, Congress amended the Mérida Initiative, an aid package for Mexico and Central America that was part of the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ), to include counternarcotics funds for Haiti. Some Members of Congress have also urged the Administration to grant temporary protected status (TPS) for Haitian immigrants living in the United States ( H.R. 522 ). Collectively, these efforts form the basis for a multifaceted congressional response to Haiti's stability and development challenges. Rising food prices are having economic and political effects around the world, but especially among poor people in low-income developing countries like Haiti. Prices for basic food commodities in Haiti, the vast majority of which are imported, have risen by an average of 30-40% over the last year. In early April 2008, weeks of protests against rising food prices turned violent, with at least six people killed, including one U.N. peacekeeper. Haitians were reportedly frustrated by the Préval government's lack of action and protests continued until the President announced a plan to partially subsidize the cost of rice. On April 12, Haiti's Prime Minister resigned after the Haitian Parliament accused him of mishandling the government's response to the food crisis. Since then, the Haitian Parliament rejected two Préval nominees for Prime Minister on technical grounds, before ratifying Michele Pierre-Louis, who was sworn in on September 6, 2008. Nonetheless, the parliament, comprising 19 political parties, continues to be a fractious body, creating a serious governance challenge. Some observers have warned that, should conditions not improve, supporters of ousted President Jean Bertrand Aristide may push for his return. Aristide's last government (2001-2004) was marred by tension and violence, and his departure from office led to the introduction of U.N. forces to stabilize the country's security situation. To overcome the current crisis, observers maintain that President Préval will have to solidify his governing coalition, a formidable task, and secure significant support from the international community. The World Bank is providing $10 million in grant funding, and the IDB is reportedly providing a $24.5 million grant to Haiti. Emergency assistance from individual donor countries has increased significantly in recent weeks, particularly since the U.S. and Canadian governments announced major pledges to the World Food Program (WFP) for its efforts in Haiti. The WFP has received 49% of the support estimated to be needed over the next two years to support the Haitian government's efforts to strengthen social safety nets and create food price stabilization programs. The Bush Administration initially responded to the food crisis in Haiti by redirecting $6.5 million in development assistance funds to support President Préval's plan to subsidize the cost of rice ($1 million) and to create short-term employment programs ($5.5 million). Haiti had already been allocated a regular appropriation of approximately $234 million in U.S. assistance in FY2008, including some $34 million in P.L. 480 Title II food aid. The FY2009 request for Haiti was for roughly $246 million, including $35.5 million in P.L. 480 food assistance. On April 14, 2008, President Bush directed the Secretary of Agriculture to draw down the Bill Emerson Humanitarian Trust by $200 million to help meet global emergency food needs. USAID has indicated that it will use that $200 million worth of commodities plus an additional $40 million in emergency P.L. 480 Title II food aid to assist 10 priority countries in FY2008, including Haiti. The food aid will be distributed by the WFP and private voluntary organizations. On May 16, 2008, USAID announced that it would provide $20 million worth of emergency food aid to Haiti, and on May 23, 2008, USAID pledged an additional $25 million to support the WFP's programs in Haiti. In late June 2008, Congress appropriated $1.2 billion in FY2008 and FY2009 supplemental assistance for P.L. 480 food aid in the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ). Members from both the House and Senate have asked the Administration to provide Haiti with no less than $60 million in emergency supplemental food assistance. The additional food aid could be used to support the Préval government's effort to subsidize the cost of rice and WFP programs in Haiti, including communal kitchens and school feeding programs. Haiti, however, will have to compete for food aid allocations with other larger countries that also have pressing needs, such as Afghanistan and Sudan. While responding to Haiti's emergency food needs is the immediate priority, some advocates have urged Congress to consider funding programs to promote agricultural development in Haiti as a long-term solution to the country's food insecurity. They have recommended U.S. support for new initiatives aimed at diversifying food production and supporting agricultural, conservation, and infrastructure projects. Many analysts also point to the large Haitian diaspora as a possible avenue to promote rural development projects, possibly through short-term consultancies with the Haitian government. To assist Haiti with rebuilding its economy by encouraging investment and job creation in the once vibrant apparel sector, the 109 th Congress passed the Haitian Hemispheric Opportunity through Partnership Encouragement in December 2006 (HOPE I). The act provided duty-free treatment for select apparel imports from Haiti that are made in part from less expensive third country (e.g. Asian) yarns and fabrics, provided Haiti meets eligibility criteria related to labor, human rights, and anti-poverty policies. Early assessments of HOPE I were disappointed in the progress made. To enhance the effectiveness of these provisions, the 110 th Congress expanded them in June 2008 when it passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 )âthe Farm Bill, Title XV of which includes the Haitian Hemispheric Opportunity through Partnership Encouragement Act of 2008 (HOPE II). Support for the duty preferences recognizes the dominant role of the U.S. market as the main destination for Haitian apparel exports. Apparel assembly is also Haiti's core export sector and essential for its economic well-being because it generates up to 80% of the country's foreign exchange used to finance Haiti's large food import bill, among other needs. In 2007, apparel constituted over 80% of Haiti's total exports and 93% of exports to the United States (81% knit, 12% woven articles), so the sector provides one potential avenue for employment growth. The preferences also support textile firms in the Dominican Republic, which have an expanding co-production arrangement with Haiti. The HOPE Acts differ from other trade arrangements with the Caribbean that emphasize apparel benefits. Unlike apparel provisions in the Caribbean Basin Trade Partnership Act (CBTPA), of which Haiti is a beneficiary country, and the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA-DR), which does not include Haiti, those in the HOPE Acts permit duty-free treatment for apparel imports in limited quantities assembled or knit-to-shape in Haiti with inputs from third-party countries, or those outside the region that are not in a trade arrangement or agreement with the United States. The competitive advantage to Haitian firms derives from their ability to use less expensive Asian inputs and still receive duty-free treatment. To the extent that this advantage is in place for an extended period of time, it is intended to encourage increased investment in the apparel assembly business in Haiti, contributing to growth in output, employment, and exports. HOPE I provided three major tariff preferences for limited amounts of articles imported directly from Haiti: (1) quotas for the duty-free treatment of apparel articles that meet the regional value-added content rule (50% rising to 60%), effectively allowing the remaining portion of inputs to be sourced from outside the region; (2) additional quotas for duty-free treatment of a limited amount of woven apparel that cannot meet the 50%-60% value-added rule (allowing all inputs for these articles to be sourced from anywhere in the world); and (3) a single transformation rule of origin that allows for duty-free treatment of brassieres made from components sourced anywhere in the world, provided the garments are cut and sewn or otherwise assembled completely in Haiti, the United States, or both. HOPE I, however, did not result in dramatic growth in Haitian textile exports to the United States, inhibited by the limited time frame and complicated rules of origin. Further, U.S. textile producers objected to the rules, contending that because they permit use of third-party fabrics and other inputs, they effectively displace jobs in the United States and the Caribbean with those in Asia. As an alternative, the industry suggested allowing preferences only for goods no longer produced in the Western Hemisphere. U.S. textile producers also found the rules of origin to be vague and difficult to enforce, and raised concern that the tariff preferences could divert apparel production to Haiti from countries in the region that are partners to U.S. reciprocal trade agreements. Proponents of the HOPE II responded that it would clarify rules of origin and simplify other implementation problems. They further argued that the preferences are quantitatively limited, apply to a very small portion of U.S. apparel imports, and are in place for only a specified period of time, presenting little threat to larger U.S. and regional textile producers. Support for enhancements in HOPE II rested on arguments that these benefits outweighed potential costs and therefore would be a constructive part of an ongoing multifaceted response to Haiti's development needs. The HOPE II Act enhances the tariff preferences by extending them for 10 years through September 30, 2018, making the rules more flexible and simpler, and expanding duty free treatment for U.S. apparel imports wholly assembled or knit-to-shape in Haiti. Specifically, HOPE II: (1) maintains the value-added rule in HOPE I, freezing the cap on total apparel imports and keeping the original five-year sunset provision because the rule was little used and is highly complicated; (2) increases the cap for select woven apparel imports; (3) provides a new cap for select imports of knit apparel, with significant exclusions; (4) adds a new uncapped "3 for 1" earned import allowance (EIA) that allows duty-free treatment of imports made from qualifying inputs (e.g. fabrics made from U.S. or countries a party to U.S. trade agreements) and articles made from non-qualifying inputs (e.g. from Asian fabrics) in a 3 for 1 ratio; (5) includes a new uncapped benefit for apparel using non-U.S. fabrics deemed to be in "short supply," (6) expands the single transformation rule from brassieres to apparel articles covered under CAFTA-DR, headgear, and select sleepwear, luggage, and handbags; and, (7) allows for direct shipment of apparel articles sent from Haiti to the Dominican Republic for finishing, reducing transportation costs and lead times incurred under the HOPE I requirement that articles be returned to Haiti for direct shipment to the United States. HOPE II also requires that Haiti create a new apparel sector monitoring program (Labor Ombudsman) to ensure compliance with internationally recognized core labor standards. Some Members of Congress also pushed to provide immediate debt relief to Haiti to help the Préval government free up limited fiscal resources to address the food crisis. According to the Haitian Central Bank, Haiti's foreign public debt totals roughly $1.7 billion, a large portion of which is owed to multilateral institutions such as the World Bank, IDB, and International Monetary Fund (IMF). A March 2008 IMF report projects that the Haitian government will make debt service payments of roughly $71.7 million in 2008. On April 16, 2008, the House unanimously passed an amendment to the Jubilee Act ( H.Amdt. 993 to H.R. 2634 ) that recommends immediate cancellation of Haiti's outstanding debts to the international financial institutions. A companion bill ( S. 2166 ) has been introduced in the Senate. Hearings were held, but the bill is still in committee. The Jubilee Act seeks to change multilateral lending practices and cancel debt for many low-income countries. Critics charge that providing immediate cancellation of Haiti's debt is probably unnecessary because Haiti is already advancing through the Heavily Indebted Poor Countries (HIPC) debt relief process. They assert that Haiti, similar to other heavily indebted countries, should be encouraged to adopt sound reforms and policy changes that will (hopefully) help it avoid future excessive indebtedness. Providing Haiti with unconditional debt relief, they argue, would encourage the Haitian government to increase borrowing. In November 2007, the Haitian government published a Poverty Reduction Strategy in line with IMF and World Bank recommendations. Many observers had predicted that Haiti would be able to meet the so-called "completion point" required for debt relief by late 2008 or early 2009, but the current crisis could delay this outcome. Proponents counter that given Haiti's immediate food crisis, the Secretary of the Treasury should urge the multilateral donors to cancel Haiti's foreign debt immediately because Haitian public finances could be better used to subsidize food purchases that are desperately needed right away. Immediate assistance would also accelerate debt relief anticipated under the HIPC program, but which may not be forthcoming soon because Haiti is unlikely to meet the remaining conditions for debt relief in the near future. | Haiti faces several interrelated challenges, the most immediate being a lingering food crisis that in April 2008 led to deadly protests and the ouster of Haiti's prime minister. Haiti also suffers from a legacy of poverty, unemployment, and under-development that is compounding security problems for its new and fragile democracy. On May 23, 2008, the Bush Administration announced that it would send an additional $25 million in emergency food aid to Haiti, bringing its total emergency contribution to $45 million. In late June 2008, Congress appropriated $1.2 billion in FY2008 and FY2009 supplemental assistance for P.L. 480 food aid in the FY2008 Supplemental Appropriations Act, H.R. 2642 ( P.L. 110-252 ). Haiti is one of ten priority countries likely to receive a portion of that assistance. In June 2008, the House and Senate also passed the Food, Conservation, and Energy Act of 2008 ( H.R. 6124 / P.L. 110-246 ), the Farm Bill. Title XV includes the Haitian Hemispheric Opportunity through Partnership Encouragement (HOPE) Act of 2008, which provides tariff preferences for U.S. imports of Haitian apparel, its largest export sector. This report will not be updated. |
The United Nations Population Fund (UNFPA), which began operations in 1969 as the U.N. Fund for Population Activities, is the world's largest source of population and reproductive health programs and the principal unit within the United Nations for global population issues. In 2009, the organization provided services in 155 developing and transition countries, with funds totaling $783.1 million, drawn exclusively from voluntary contributions made by governments and some foundations. In the past three decades, there has been continuing and contentious debate within the United States, and especially among Members of Congress, as to whether the United States should financially contribute to UNFPA. The debate has centered on the extent to which, if any, UNFPA aids China's coercive family planning programs and policies. In 15 of the past 25 years, the United States has been one of the leading contributors to UNFPA. For the other years, the United States withheld funding to the organization through the so-called "Kemp-Kasten" amendment that has been included in foreign operations appropriations since FY1985. Kemp-Kasten states that U.S. funds will not be made available to any organization or program which, as determined by the President, supports or participates in the management of a program of coercive abortion or involuntary sterilization. U.S. contributions to UNFPA will likely be considered during the second session of the 111 th Congress as part of the debate on the annual State-Foreign Operations appropriations bill and other related legislation. From FY2002 through FY2008, the George W. Bush Administration found UNFPA ineligible for U.S. funding under Kemp-Kasten and transferred proposed annual contributions to other foreign aid activities. In March 2009, President Barack Obama announced that the United States would resume U.S. contributions to UNFPA, specifying that $50 million would be made available to the organization as directed in the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). In FY2010, the United States provided $55 million to UNFPA as required by Division F of the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ). For FY2011, the President requested that the United States contribute $50 million to the organization. This report provides an overview of the U.N. Population Fund, its current mission and operations, and recent funding trends. It further discusses the role of the United States in supporting UNFPA programs, the varying interpretations by several Administrations of legislative authorities pertaining to UNFPA's eligibility for U.S. resources, and congressional debates over how much and under what conditions the United States should voluntarily contribute to UNFPA. Finally, it reviews the findings of several private and U.S. government investigations of China's family planning programs and the role UNFPA plays in their implementation. The United Nations, since its earliest days, has maintained an interest in population issues. In 1947, the United Nations established a Population Commission that collected and analyzed global population data and supported member government efforts to examine information about national populations. Following several years of U.N. debate over the rapid rise of the world's population, the General Assembly approved a resolution in 1966 calling on the United Nations and other international organizations to extend technical assistance on population matters. In 1967, the U.N. Secretary-General created a Trust Fund for Population Activities, which in 1969 was renamed the U.N. Fund for Population Activities (UNFPA). Initially, UNFPA was administered by the United Nations Development Program (UNDP), the organization's primary international development organ. Within a few years, at the direction of the General Assembly, UNFPA had expanded its operations beyond statistical collection and analysis to the provision of maternal and child health/family planning, communication and education, and population policy assistance. By 1972, UNFPA was operating in 78 countries with a budget of over $30 million. With such rapid growth in the Fund's scope and programs, UNFPA became a separate entity under the direct authority of the General Assembly, with the same status as UNDP and the U.N. Children's Fund (UNICEF). In these initial years, the United States provided the majority of UNFPA funding through voluntary contributions. In 1968 and 1969, when seven governments extended financial support, the $4 million transfer by the United States represented nearly 80% of total contributions. By 1972, the number of donors had grown to 52, but the United States remained by far the largest source of funds, with 46% of the total. Over the next decade, the U.S. share declined to about 25% as other nations increased their contributions. UNFPA played a significant role in the World Population Conferences, held a decade apart in Bucharest (1974) and Mexico City (1984). Following the 1974 meeting of 133 nations, the U.N. General Assembly called for the expansion of international population assistance, with UNFPA taking a lead role, to implement the plan of action endorsed at the Bucharest Conference. Partially due to the growing attention on world population issues, UNFPA operations expanded rapidly during this period. The scope of UNFPA's work also broadened, so that by the early 1980s, the organization focused on eight primary areas: family planning, including delivery systems and fertility regulation techniques; data collection; formulation and evaluation of population policies and programs; communications and education; population dynamics, including demographic projections and their analysis; implementation of policies and programs, including efforts "beyond family planning" related to law and population, status of women, and economic policies; special programs focusing on women, children, the elderly, the disabled, and programs to promote social justice; and multisector activities, including support for population conferences and training. UNFPA was a major catalyst in organizing, financing, and implementing outcomes of the 1994 International Conference on Population and Development (ICPD), held in Cairo. The Cairo Conference marked a turning point in the international debate over the impact of population issues on global development and established a policy framework that continues to guide current family planning and reproductive health policies. The Plan of Action that emerged from the Cairo Conference, to a much greater extent than before, integrated population concerns into the broad context of development, concluding that education and health (including reproductive health), were prerequisites for sustainable development. The Conference shifted population program strategies away from demographic goals and toward human welfare and poverty reduction objectives. The Conference further focused far more attention on the status and empowerment of women. Moving beyond strictly health issues, the conference endorsed programs to promote expanded opportunities for the education of women and girls, to end gender discrimination and violence against women, and to strengthen women's grassroots activist organizations. Since the Cairo Conference, UNFPA programs have and continue to be guided by the ICPD's Program of Action, which contains several goals, including universal access to reproductive health services by 2015; universal primary education and closing the gender gap in education by 2015; reducing maternal mortality by 75% by 2015; reducing infant mortality; and increasing life expectancy. In 1999, an additional goal—reducing HIV infection rates in persons 15-24 years of age by 25% in the most-affected countries by 2005 and by 25% globally by 2010—was incorporated into the Program of Action and integrated into UNFPA's work. UNFPA is headquartered in New York City and supports five regional, six sub-regional, and 129 field offices worldwide. It has approximately 1,119 staff members and in 2009 operated in 155 countries, areas, and territories. In 2009, UNFPA's total income was $783.1 million, a decrease of approximately $62 million from 2008 (see Table 1 ). The organization attributes this decline to the global economic downturn. UNFPA derives most of its income from voluntary contributions to its regular budget which finances continuing core country programs and the organization's administrative costs. A growing but less flexible source of revenue has been from supplementary donations that are provided either for cost-sharing purposes or for placement in trust funds. Through supplementary resource transfers, donors can earmark exactly how their contributions will be spent. In 2000, for example, the Netherlands provided $41 million specifically to procure contraceptive commodities. While UNFPA receives voluntary contributions from many countries and from some private foundations, most of its income for regular country programs and operating expenses comes from a handful of donors. In the past eight years, approximately 60% to 75% of UNFPA's regular income has come from six country donors (see Table 2 ). The Netherlands and Japan have consistently been the largest contributors. In 2009, the first year the United States contributed to UNFPA since 2001, it was the fourth-largest donor, representing approximately 9.5% of the UNFPA regular budget. Currently, UNFPA activities focus on seven program areas that support the broad strategy of improving reproductive health: Preventing HIV/AIDS —promoting safer sexual behavior among young people, ensuring that condoms are available and widely and correctly used, empowering women to protect themselves and their children, and encouraging men to take responsibility for preventing the spread of HIV/AIDS; Making motherhood safer —expanding the availability of emergency obstetric care for women who develop complications, having skilled workers available, and meeting unmet needs for contraceptive services; Supporting young people —providing accurate information, counseling, and services to prevent unwanted pregnancies and sexually transmitted diseases; Promoting gender equality —promoting legal and policy reforms, supporting gender-sensitive data collection, and backing programs that empower women economically; Assisting in emergencies —providing supplies and services to protect reproductive health during disasters; Securing reproductive health supplies —coordinating the delivery of supplies, forecasting needs, and building logistical capacity at the country level; and Preventing and treating obstetric fistula — providing access to medical care, increasing education and family planning services, postponing pregnancy for young girls, improving girls' nutrition, and repairing physical and emotional damage. In the years since the Cairo Conference, UNFPA has allocated roughly 60% of its annual resources to reproductive health and family planning service programs and 20% to strategies for population and development. The balance of UNFPA spending focuses on coordinating activities, gender equity, and women's empowerment programs. (See Figure 1 for UNFPA program functions in 2009.) Over the past decade, roughly 33% of UNFPA programs have been carried out in sub-Saharan Africa, with an additional 28% focused in Asia. In 2009, UNFPA maintained its largest program in Sudan ($19.90 million), followed by Ethiopia ($16.38 million), and the Democratic Republic of the Congo ($16.32 million). (See Figure 2 for UNFPA assistance by region in 2009.) UNFPA program expenditures in China have ranged between $4 million and $6 million annually in recent years. In 2009, UNFPA contributed approximately $4.57 million to projects in China. In 2008, it contributed $6.76 million. The United States was an important actor in the launch of UNFPA in 1969. During the mid-to-late 1960s, Congress began to express heightened concern over the impact of rapid population growth on development prospects in poor countries, noting that the world's population was growing by about 2% annually compared with only a 1% growth in food production. In 1967, for the first time, Congress amended the Foreign Assistance Act of 1961 to specifically authorize and earmark funds for population assistance programs, urging the United States especially to channel family planning resources through the United Nations and other international organizations. Some Members believed that such earmarks were necessary because the State Department and the U.S. Agency for International Development (USAID) had not been giving the issue adequate attention. These initial U.S. contributions, however, were conditioned on the requirement that other donors match the American payment in an equal amount. This incentive helped UNFPA exceed its 1970 projected resource goal when 22 other countries contributed a combined $7.7 million. In 1971, with the same matching requirement tied to the U.S. pledge of $15 million, UNFPA received donations of $14.5 million from 45 nations. As shown in Table 3 , U.S. contributions continued to climb throughout the 1970s and early 1980s. At the same time, however, the number and size of transfers from other donors rose faster, so that the share of UNFPA resources from the United States declined from 50% to around 27%. In FY2009, the U.S. contribution to UNFPA peaked at $50 million. For FY2010, UNFPA is expected to receive $55 million from the United States, the largest U.S. contribution to date. The highest UNFPA contribution earmarked by Congress prior to FY2009—$46 million—was enacted in the FY1985 foreign aid appropriation, P.L. 98-461 . However, only a portion of these funds—$36 million—was transferred to the organization as U.S. policy and its support for UNFPA shifted. In August 1984, government representatives from around the world met in Mexico City for the 2 nd U.N. International Conference on Population. At the conference, the Ronald Reagan Administration announced new eligibility requirements for organizations receiving U.S. bilateral population assistance funds. The new policy stipulated that no non-governmental organizations (NGOs) that received population assistance funding from the United States could actively promote or perform abortion as a family planning method in other countries. This change became known as the "Mexico City policy" and was applied by the Reagan and George H.W. Bush Administrations for nine years, reversed by President Bill Clinton in 1993, and reinstituted by President George W. Bush in 2001. Also at the 1984 Mexico City Conference, the Reagan Administration announced it would establish requirements for UNFPA to provide assurances that the organization was not engaged in, or was not providing funds for, abortion or coercive family planning programs. Concerns focused on UNFPA's activities related to China's coercive family planning practices. UNFPA had launched its first program in China in 1980, focusing largely on increasing Beijing's capacity for data collection and improving maternal and child health and family planning services. At the time, the Administration reportedly held up $19 million (of $38 million allocated for UNFPA for FY1984) until the organization could provide the necessary assurances. These funds were released later in FY1984. Following the Mexico City Conference, attention returned to the FY1985 UNFPA earmark of $46 million and how much the United States should transfer, given the new White House policy. USAID, which at the time maintained responsibility for managing UNFPA contributions, undertook a review in early 1985 of UNFPA's program, especially in China, to determine whether the organization was involved in any way with involuntary abortions. In March 1985 that review found that UNFPA did not include involuntary abortion as part of its programs, and therefore did not violate legislative restrictions or conditions announced at the Mexico City Conference on funding organizations engaged in involuntary practices. As a result, UNFPA remained eligible for U.S. support but did not receive the full earmarked amount of $46 million. On March 30, 1985, USAID contributed $36 million to UNFPA, withholding $10 million "to express United States disapproval of coercion in the implementation of the China population control program." The $10 million matched roughly the amount UNFPA spent annually in China. Because AID wanted to re-program the $10 million for other bilateral population assistance programs, the Administration needed to overcome the specific legislative earmark of $46 million in the FY1985 appropriation. Accordingly, the White House requested authority as part of an FY1985 supplemental appropriation submission to shift $10 million from UNFPA to other population aid groups. Rather than approve the Reagan Administration's request for authority to transfer the $10 million from UNFPA, Congress agreed to the "Kemp-Kasten " amendment as part of the FY1985 Supplemental Appropriations bill, H.R. 2577 . The amendment states that U.S. funds would not be made available to "any organization or program which, as determined by the President, supports or participates in the management of a program of coercive abortion or involuntary sterilization." The House Appropriations Committee did not provide details on what was meant by the phrase, "support or participate in the management" of a program. However, in the "additional views" section of the Committee Report, Representative Jack Kemp stated that management of coercive programs may include providing resources to collect and analyze data necessary to the enforcement of such a program; training of the individuals who plan, manage, and carry out such a program, education and publicity about the programs; assistance to the official bodies of government that are charged with developing and implementing such a program; and other such assistance. Congressman Kemp also stated that the amendment would most likely affect U.S. funding of the UNFPA, "because of its involvement with the program of coercive abortion in the People's Republic of China." The Kemp-Kasten amendment was enacted on August 15, 1985, as part of the FY1985 Supplemental Appropriations Act ( P.L. 99-88 ). Despite the directive from the amendment that the President, or alternatively the Secretary of State, issue any determination regarding the Kemp-Kasten amendment, President Reagan delegated his authority to the Secretary of State on September 19, 1985, who in turn authorized the re-delegation of this authority to the Director of the International Development Cooperation Agency (IDCA). On September 25, 1985, IDCA Administrator Peter McPherson announced the Administration's determination that UNFPA, because of its activities in China, was participating in the management of a program of coercive abortion and involuntary sterilization. In letters to congressional leaders, Administrator McPherson cited Representative Kemp's interpretation, as set out in his additional views in H.Rept. 99-142, of what characterized the participation of an organization in a coercive abortion program. The Administrator concluded that China's "one-child- per-couple policy has resulted in coerced abortion and involuntary sterilization." The Reagan Administrator further announced that since the Kemp-Kasten amendment and his determination under it now superseded the $46 million UNFPA earmark for FY1985, USAID would reprogram $10 million for voluntary family planning programs for use elsewhere in the world. He also stated that if Kemp-Inouye was enacted again in FY1986, UNFPA could receive funds under only three conditions: (1) UNFPA withdraws its program from China; (2) China would begin to punish abuses concerning coercive abortion and involuntary sterilizations; or (3) UNFPA "radically" changes its program in China, such as by supplying only contraceptive materials. Almost immediately, the Population Institute, an NGO, filed suit against Administrator McPherson and the U.S. government to block the redirection of UNFPA funds and invalidate the determination. On August 12, 1986, the Court upheld the Administration's decision to withhold UNFPA funding. From 1986 to 1992, USAID continued to request funds for UNFPA, although with the understanding that a decision on whether to transfer the money would be reviewed under the terms of the Kemp-Kasten amendment, which Congress also continued to enact each year in the foreign assistance appropriations. In each year, USAID found that UNFPA was ineligible for U.S. support. The issue of coercive practices within China's family planning program and the role of UNFPA remained controversial throughout the Clinton Administration. As one of his first acts as chief executive, President Clinton reversed the Mexico City policy of Presidents Reagan and Bush, and issued a determination finding that UNFPA programs in China did not violate the terms of Kemp-Kasten. The policy reversal was based on several factors, including the following: Ambiguity of the Kemp - Kasten language —The Administration noted that the Court of Appeals, in considering the case brought by the Population Institute, deferred to the USAID interpretation of Kemp-Kasten because it was a "reasonable reading of an ambiguous provision and did not otherwise conflict with the expressed intention of Congress." The Administration argued that because of this ambiguity, the new Administration had a right to interpret Kemp-Kasten for itself. Over - reliance on the 1985 statements by Representative Kemp —The Administration pointed especially to the 1985 Court of Appeals opinion that questioned the relevance of the additional views of Representative Kemp interpreting the Kemp-Inouye amendment. The Court observed that, although the Administration considered Representative Kemp's remarks as the clearest explanation of an "ambiguous term," Congressman Kemp could not convince his colleagues to adopt his views in the committee report itself. Focus should be on the terms " coercive " and " involuntary " and the intent of the organization in question — The Clinton Administration believed that it was reasonable to apply the Kemp-Kasten restrictions only in cases where the organization knowingly and intentionally provided direct support for, or helped manage people or agencies who were clearly engaged in, coercive abortion or involuntary sterilization. The Administration concluded that although it remained concerned about coercive practices in China, it believed that UNFPA did not "knowingly" or "intentionally" support directly such practices. Congress continued to include Kemp-Kasten language in Foreign Operations Appropriations acts, and in most years attached additional conditions on UNFPA contributions that required the organization to (1) keep U.S. funds in a separate account, (2) not spend U.S. money in China, and (3) to forego transfers from the United States equal to the amount UNFPA allocated for its China program. In some years, the United States withheld about $3.5 million from UNFPA, an amount that approximated the size of UNFPA's expenditures in China. For a brief period in 1997, the controversy over whether to fund UNFPA subsided when UNFPA's program in China expired and new activities did not resume immediately. Nevertheless, despite opposition from the United States, UNFPA re-established a program in China, and in FY1999 appropriation legislation, Congress prohibited all U.S. contributions to the organization. Congress restored funding in FY2000, but with the requirement that an amount equal to UNFPA expenditures in China be withheld. This resulted in a $3.5 million deduction in FY2000 and FY2001. (See the Appendix for details on Administration actions and legislative restrictions regarding UNFPA funding from FY1985 to FY2011.) The first budget submitted by President Bush for FY2002 included a proposed $25 million U.S. contribution to UNFPA. While the new Administration reinstated the so-called "Mexico City policy" restrictions that applied to bilateral family planning funds, there was no indication of a change in policy regarding UNFPA and the Kemp-Kasten conditions attached to U.S. contributions. Subsequently, in the FY2002 Foreign Operations Appropriations, Congress provided "not more than" $34 million for UNFPA. Although such language represented a ceiling for the amount of funds for UNFPA, as opposed to a floor, or minimum amount that must be provided, the language was similar to prior year Foreign Operations bills that had been fulfilled by the Clinton Administration, minus the withholding requirement. However, in the face of the conflicting evidence released in late 2001 by the Guy and Biegman investigation teams (see section " UNFPA and China " for further details on the group's findings), in mid-January 2002, the White House placed a hold on U.S. contributions to UNFPA pending a review of the organization's program in China. In a statement before the Senate Foreign Relations Committee on February 27, 2002, Assistant Secretary of State for Population, Refugees and Migration Arthur Dewey noted that the legislative text regarding UNFPA funding—"not more than $34 million"—gave the Administration considerable discretion over exactly how much to provide UNFPA. While stating that the United States supported UNFPA's work worldwide to provide safe and voluntary family planning, enhance maternal and infant health, and prevent the spread of HIV/AIDS, the Administration remained concerned about periodic reports of abuse and coercion in China's family planning program. Given new information and the requirements of the Kemp-Kasten amendment, Assistant Secretary Dewey argued that the State Department was obligated to investigate the matter further before releasing any funds in FY2002. The State Department sent an investigation team to China for a two-week review of UNFPA programs on May 13, 2002. The team was led by former Ambassador William Brown, and included Bonnie Glick, a former State Department official, and Dr. Theodore Tong, a public health professor at the University of Arizona. The State Department's assessment team filed its report with Secretary Powell on May 29, making a series of findings and recommendations. The group found that there was no evidence that UNFPA "has knowingly supported or participated in the management of a program of coercive abortion or involuntary sterilization" in China; despite some relaxation of government restrictions in counties where UNFPA operates, China maintained coercive elements in its population programs in law and practice; and Chinese leaders viewed "population control as a high priority" and remained concerned over implications for socioeconomic change. On the basis of these findings, Ambassador Brown and his colleagues recommended that (1) the United States should release not more than $34 million of previously appropriated funds to UNFPA; (2) until China ends all forms of coercion in law and practice, no U.S. government funds should be allocated to population programs in China; and (3) appropriate resources, possibly from the United States, should be allocated to monitor and evaluate Chinese population control programs. President Bush withheld U.S. funding from UNFPA from FY2002 through FY2008 due to concerns that the organization supported or participated in what the Administration viewed as a program of coercive abortion and involuntary sterilization in China. These decisions were made in response to the findings and recommendations of the Brown investigation. The Administration consistently maintained that it would be willing to reconsider its position if UNFPA ended its program in China or if the program was restructured in a way consistent with U.S. law. On July 22, 2002, then-Secretary of State Powell, to whom President Bush had delegated the decision, announced that UNFPA remained in violation of Kemp-Kasten and ineligible for U.S. funding. The State Department's analysis of the Secretary's determination found that even though UNFPA did not "knowingly" support or participate in a coercive practice, that alone would not preclude the application of Kemp-Kasten. Instead, a finding that the recipient of U.S. funds—in this case UNFPA—simply supports or participates in such a program, whether knowingly or unknowingly, would trigger the restriction. The assessment team found that the Chinese government imposes fines and penalties on families ("social compensation fees") that have children exceeding the number approved by the government. The Department further noted that UNFPA had funded computers and data-processing equipment that had helped strengthen the management of the Chinese State Family Planning Commission. Beyond the legitimate uses of these and other items financed by UNFPA, such equipment facilitated, in the view of the State Department, China's ability to impose social compensation fees or perform abortions by coercion. The State Department analysis concluded that UNFPA's involvement in China's family planning program "allows the Chinese government to implement more effectively its program of coercive abortion." President Barack Obama has expressed his support for UNFPA. On March 24, 2009, a State Department spokesperson confirmed that the U.S. government would contribute $50 million to UNFPA in FY2009 as provided by the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). This decision, according to Administration officials, highlights the President's "strong commitment" to international family planning, women's health, and global development. In FY2010 and FY2011, the President requested that the United States contribute $50 million to UNFPA during each fiscal year. This section addresses the most recent legislative actions regarding U.S. contributions to UNFPA. See the Appendix for a description of Administration activities and legislative actions since 1985. For FY2011, the Obama Administration requested $50 million for U.S. contributions to UNFPA, which would be drawn from the International Organizations and Programs account (IO&P). This contribution, according to the Administration, would place the United States in line with other top UNFPA donors and "signal strong support" for the organization When putting forth its request, the Administration also emphasized that UNFPA does not support abortion as a means of family planning. On December 16, 2009, President Obama signed the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ). Division F of that bill, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, directed that $55 million shall be made available for UNFPA under the International Organizations and Programs (IO&P) account. As in previous years, certain conditions applied, including that none of the funds made available may be used by UNFPA for a country program in China; U.S. contributions to UNFPA must be kept in an account separate from other accounts at UNFPA and should not commingle with other sums; and for UNFPA to receive U.S. funding, it must not fund abortions. The bill also established related reporting requirements for the Secretary of State. Not later than four months after the enactment of the act , the Secretary was required to submit a report to the Committees on Appropriations indicating the funds UNFPA is budgeting for a country program in China. If the Secretary's report indicated that funds will be spent on such a program, then the amount of such funds shall be deducted from the funds made available to UNFPA for the remainder of the fiscal year in which the report is submitted. For FY2010, the Obama Administration had requested that the United States contribute $50 million to UNFPA under the IO&P account. On March 11, 2009, President Obama signed the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ). Division H of that bill, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2009, allocated $50 million for UNFPA. It specified that not more than $30 million of this amount should be derived from the IO&P account. The remaining amount should be made available from the Global Health and Child Survival (GHCS) account. In addition, Section 7079 of P.L. 111-8 established a number of conditions for U.S. contributions to UNFPA. Specifically, none of the funds made available should be used by UNFPA for a country program in China. In addition: Funds appropriated by the act "that are not made available because of the operation of any provision of law, shall be made available to UNFPA notwithstanding any such provision of law." Some expressed concern that this provision takes away the authority of the President to determine whether UNFPA is eligible for U.S. contributions under the Kemp-Kasten amendment. U.S. contributions to UNFPA shall be made available for specific purposes, including (1) providing and distributing safe equipment, medicine and supplies; (2) supplying contraceptives to prevent unintended pregnancies and the spread of sexually transmitted diseases; (3) preventing and treating obstetric fistula; (4) reestablishing maternal health services in areas with poor infrastructure; (5) promoting the abandonment of female genital cutting; and (6) promoting access to basic services such as water, sanitation, food, and health care. U.S. contributions to UNFPA must be kept in a separate account by the organization and should not commingle with other sums. For UNFPA to receive U.S. funding, it must not fund abortions. On March 24, 2009, the Obama Administration announced that the United States would contribute $50 million (as directed in P.L. 111-8 ) to UNFPA under the Kemp-Kasten amendment. The Bush Administration had previously requested $25 million for UNFPA funding if the organization was deemed eligible under the Kemp-Kasten amendment. The funds would be appropriated under the Child Survival and Health Programs account. One issue that has been debated among many Members of Congress and past and current Administrations involves whether, and to what extent, UNFPA programs in China violate the Kemp-Kasten amendment. As previously mentioned, initial UNFPA programs in China concentrated on bolstering China's capacity for data collection and analysis, and maternal and child health/family planning activities. Following the Cairo population conference in 1994 and the conclusion of UNFPA's third Chinese program, UNFPA and Beijing officials began to discuss significant changes for a fourth agreement that would more closely follow the principles set out in Cairo. The subsequent UNFPA program, launched in 1998, concentrated efforts in 32 counties where birth targets and quotas had been eliminated by the Chinese government. The fourth program shifted from a more administrative family planning approach—focusing on population control and imposed contraceptive methods and orders—to an "integrated, client-oriented reproductive health approach in the project counties" that included education and counseling regarding informed choice of contraceptive methods and reproductive health rights. According to UNFPA, service delivery points were upgraded to offer integrated reproductive health services in both the Chinese State Family Planning Commission and the Ministry of Health. UNFPA said that there had been a "downward trend" in the abortion ratio in these counties, and that the organization had played a "catalytic role in introducing a comprehensive, voluntary reproductive health approach," that included rigorous monitoring of the projects. The fifth program, covering the period 2003-2005, expanded many of the earlier initiatives. In June 2005, UNFPA approved a sixth program for China that began in 2006 and spans five years. The $27 million program is to build on the policy changes made in 1998 and includes two components. The reproductive health element seeks to increase the utilization of high-quality, client-centered, gender-sensitive reproductive health and family planning services, and to reduce the vulnerability and risk behavior associated with HIV/AIDS among migrants, young people, and other vulnerable groups. The population and development component centers on strengthening the government's capacity for addressing population-related policies, especially those regarding gender, migration, and aging issues, and enhancing the government's ability to collect and apply surveillance data, particularly data related to HIV/AIDS. During implementation of the fourth and fifth programs, UNFPA's operations in China have been closely scrutinized by several investigatory teams, including one dispatched by the State Department in 2002. Most of these groups concluded that UNFPA was not involved in supporting coercive or involuntary family planning programs in China, although one—sponsored by the Population Research Institute (PRI)—concluded otherwise. These conflicting reports, together with continuing reviews of UNFPA practices in China and varying interpretations by U.S. officials, sparked renewed controversy and extensive congressional debate beginning in 2001 over the appropriate role of the United States in financially supporting UNFPA operations worldwide. The four non-U.S. government sponsored investigations came to the following conclusions. PRI's report concluded that UNFPA "directly supports coercive family planning with funding, and through its complicity with the implementation of policies which are fundamentally coercive in principle and practice." The PRI team, led by Josephine Guy, spent four days in Sihui County, Guangdong Province, in late September 2001, conducting numerous interviews with alleged victims and witnesses of coercive practices. According to the team's interview notes and videos, non-voluntary abortions and use of IUDs, mandatory examinations, and punishment for non-compliance—both imprisonment and economic fines—continued in this county which was among the 32 in which UNFPA supported programs. This team found that UNFPA plays a "positive and important catalytic role in the reform of reproductive health and family planning services in China" and in moving China away from coercive family planning practices and abuses. It recommended that UNFPA continue its program in China and expand its scope and resources in the future. This UNFPA-sponsored review team, led by Ambassador Nicolaas Biegman, former Dutch Ambassador to the U.N. and including diplomats from Honduras, the Czech Republic, and Botswana, conducted a six-day investigation in October 2001, interviewing officials and visiting sites in Beijing and in Sihui and Qianjiang Counties. The British parliamentary team found that although problems remain in some parts of China regarding reproductive rights, the Chinese government was "moving in the right direction, with the support of UNFPA." The bi-partisan group spent a week in Beijing and Yunnan Province in April 2002, reporting that UNFPA programs were having a "positive effect" in reforming Chinese reproductive health services and offering women "a choice over their own lives." This group returned from a September 2003 visit finding, among other things, that the Chinese government was taking steps to end coercive family planning practices, that UNFPA was a major force in China's transition to voluntary policies, and that UNFPA did not support or participate in managing China's family planning program. While the group acknowledged that in such a brief trip it could not gain a comprehensive view of China's family planning activities or the work of UNFPA, it felt confident in recommending that the United States should maintain a policy of constructive engagement with China regarding family planning matters, and that U.S. funding for UNFPA should be restored, and the Kemp-Kasten amendment revised. The nine-member mission was sponsored by Catholics for a Free Choice. Critics of the Administration policy, including some Members of Congress, have expressed concern over what they perceive to be a shift in the interpretation of Kemp-Kasten restrictions related to UNFPA and other international organizations. They point to a USAID notification to the Global Health Council that the agency would not provide funding for the Council's 31 st annual meeting in June 2004 because UNFPA would be a participant. Some believe that this represented a State Department warning to UNICEF, the World Health Organization, and other organizations that continued involvement in joint programs with UNFPA might jeopardize their funding support from the United States. In 2003, the State Department decided that it would fund a $1 million HIV/AIDS program supporting African and Asian refugees only if the implementing NGO group—Reproductive Health for Refugees Consortium—did not include Marie Stopes International among its members. Marie Stopes International is a British-based reproductive health organization that is also a major implementing partner of UNFPA in China. The State Department, while not making a legal determination under the Kemp-Kasten amendment, felt that an action not to fund Marie Stopes International would be the "approach most consistent with U.S. policy." On August 11, 2003, however, the Consortium declined to accept the $1 million grant due to the exclusion of Marie Stopes International. | The United Nations Population Fund (UNFPA), established in 1969, is the world's largest source of population and reproductive health programs and the principal unit within the United Nations for global population issues. In 2009, the organization provided services in 155 developing and transition countries, with funds totaling $783.1 million, drawn primarily from voluntary contributions made by nations and some foundations. The United States, with strong support from Congress, was an important actor in the launch of UNFPA in 1969. During the mid-to-late 1960s, Congress began to express heightened concern over the impact of rapid population growth on development prospects in poor countries. In 1967, Congress earmarked funds for population assistance programs, urging the United States to channel family planning resources through the United Nations and other international organizations. Since it was established, UNFPA has transitioned from an organization focused on statistical collection and analysis to an agency providing maternal and child health/family planning assistance. UNFPA played a large role in shaping the 1994 International Conference on Population and Development, held in Cairo. The Cairo Conference marked a turning point in the international debate over the impact of population issues on global development, and established a policy framework called the Plan of Action that continues to guide current family planning and reproductive health policies, including the work of UNFPA. The Plan integrated population concerns into the broad context of development—concluding that education and health, including reproductive health, were prerequisites for sustainable development. In the past three decades, there has been continuing and contentious debate within the United States, especially among Members of Congress, as to whether the United States should financially support UNFPA. This debate has centered on the extent to which, if any, UNFPA aids China's coercive family planning programs and policies. In 15 of the past 25 years, the United States did not contribute to the organization as a result of executive branch determinations that UNFPA's program in China violated the "Kemp-Kasten" amendment, which bans U.S. aid to organizations involved in the management of coercive family planning programs. From FY2002 through FY2008, the George W. Bush Administration found UNFPA ineligible for funding under the Kemp-Kasten amendment. In March 2009, President Barack Obama expressed his support for UNFPA and announced that the United States would contribute $50 million to the organization as directed in the Omnibus Appropriations Act, 2009 (P.L. 111-8). On December 16, 2009, President Obama signed the Consolidated Appropriations Act, 2010 (P.L. 111-117). Division F of that bill, the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, directed that $55 million should be made available for UNFPA. For FY2011, the Obama Administration requested $50 million for U.S. contributions to UNFPA, which would be drawn from the International Organizations and Programs account (IO&P). While UNFPA receives voluntary contributions from many countries and some private foundations, most of its income comes from a handful of donors. The Netherlands, Sweden, and Japan have consistently been the largest contributors. In 2009, the U.S. contribution to UNFPA was the fourth-largest donation, representing approximately 9.5% of UNFPA's annual regular budget. This report will be updated as events warrant. |
On February 20, 2003, the omnibus appropriations resolution for FY2003( H.J.Res. 2 ) was signed into law as P.L. 108-7 . It included funding forInterior and related agencies and 10 other regular appropriations bills not enacted forFY2003. Previously, Interior and related agencies were operating under a series of resolutions, that continued funding at FY2002 levels. The final FY2003appropriation provided $19.08 billion for the Interior and related agencies plus$825.0 million to repay transferred amounts for fire fighting in FY2002 . It alsoincluded a 0.65% across-the-board cut that is not reflected in the numbers in thisreport, as it in unclear how they would be calculated for the Interior and relatedagencies appropriations. The annual Interior and related agencies appropriations bill includes funding foragencies and programs in four separate federal departments, as well as numeroussmaller agencies and bureaus. The bill includes funding for the Interior Department,except for the Bureau of Reclamation (funded by Energy and Water DevelopmentAppropriations laws), and funds for some agencies or programs in three otherdepartments--Agriculture, Energy, and Health and Human Services. Title I of thebill includes agencies within the Department of the Interior which manage land andother natural resource or regulatory programs, the Bureau of Indian Affairs, andinsular areas. Title II of the bill includes the Forest Service of the Department ofAgriculture; several activities within the Department of Energy, including researchand development programs, the Naval Petroleum and Oil Shale Reserves, and theStrategic Petroleum Reserve; and the Indian Health Service in the Department ofHealth and Human Services. In addition, Title II includes a variety of relatedagencies, such as the Smithsonian Institution, National Gallery of Art, John F.Kennedy Center for the Performing Arts, the National Endowment for the Arts, theNational Endowment for the Humanities, and the Holocaust Memorial Council. Table 1. Status of Department of the Interior and RelatedAgencies Appropriations, FY2003 On February 4th, 2002, President Bush submitted his FY2003 budget toCongress. The FY2003 request for Interior and related agencies totaled $18.94billion compared to the $19.16 billion enacted for FY2002 ( P.L. 107-63 ), a decreaseof $219.7 million. For agencies within DOI, the Administration requested a total of$9.45 billion, including $2.36 billion for the National Park Service; $2.25 billion forthe Bureau of Indian Affairs; $1.83 billion for the Bureau of Land Management;$1.28 billion for the U.S. Fish and Wildlife Service; $867.3 million for the U.S.Geological Survey; $423.5 million for Departmental Offices (including $159.0million for the Special Trustee for American Indians); $279.4 million for the Officeof Surface Mining Reclamation and Enforcement; and $170.3 million for theMinerals Management Service. For related agencies, the FY2003 budget requested$3.95 billion for the Forest Service; $2.82 billion for the Indian Health Service; and$1.72 billion for Energy programs. For other related agencies, the SmithsonianInstitution would have received $528.0 million; the National Endowment for theHumanities, $125.8 million; and the National Endowment for the Arts, $99.5 million. In this report, the FY2003 budget totals do not include amounts for PresidentBush's proposal to shift to agencies the full cost of federal employee pensions andhealth benefits. (1) The term "appropriations" generallyrepresents total fundsavailable, including regular annual and supplemental appropriations, as well asrescissions, transfers, and deferrals. Increases and decreases generally are calculatedon comparisons between the funding levels appropriated for FY2002 and requestedby the President or recommended by Congress for FY2003. The FY2003 requestscontained some substantial changes in agencies' budgets from the FY2002 levels. Increases were proposed for some agencies, including the Indian Health Service($+56.5 million), Bureau of Indian Affairs ($+32.9 million), Minerals ManagementService ($+13.6 million), Smithsonian Institution ($+ 9.1 million), and the U.S. Fishand Wildlife Service ($+6.9 million). Decreases were proposed for other agencies,such as Forest Service ($-181.7 million), Department of Energy ($-49.2 million),U.S. Geological Survey ($-46.7 million), Bureau of Land Management ($-47.2million), Office of Surface Mining Reclamation and Enforcement ($-27.1 million),and National Park Service ($-24.5 million). On February 27th, 2002 the House Appropriations Interior Subcommittee began hearings on the FY2003 budget for Interior and related agencies. Interior SecretaryNorton testified on topics including the Cooperative Conservation Initiative,landowner partnerships and other conservation tools, Indian trust funds, Indianeducation, the maintenance backlog of the National Park Service, Evergladesrestoration, funds for the National Wildlife Refuge System, the CooperativeEndangered Species Conservation Fund, energy programs and activities, land useplanning, wildland fire management, homeland security, and assistance to territoriesand freely associated states. Members also questioned the Secretary regardingproposed cuts to the U.S. Geological Survey and the proposed transfer of its toxicsubstances program to the National Science Foundation, and the Administration'sexamination of workforce restructuring and privatizing jobs. Also addressed duringquestioning were the strategic petroleum reserve; oil and gas exploration, includingthe Arctic National Wildlife Refuge; the Klamath Basin; and the proposedelimination of the Urban Park and Recreation Recovery program. Subcommitteehearings continued from February through April, 2002. On June 25, 2002, the House Appropriations Interior Subcommittee marked up and ordered reported to the full Committee on Appropriations its FY2003 fundingrecommendations. On July 9, 2002, the Committee marked up theserecommendations, and on July 11, 2002, H.R. 5093 was reported( H.Rept. 107-564 ). The measure was debated in the House on July 16 and 17, andpassed, amended, on July 17, 2002 (377-46). The House bill was sent to the Senateand placed on the Senate calendar on July 18, 2002. The Senate development of its Interior appropriations bill began when the Senate Appropriations Interior Subcommittee held a hearing on June 13, 2002. Interior Secretary Norton testified, voicing similar concerns as in her Housetestimony. The Secretary also emphasized that the Administration requested funds for enhanced security measures, including $23.7 million for the National ParkService to begin construction of enhanced security systems at the WashingtonMonument and the Lincoln and Jefferson Memorials. Bypassing subcommitteemarkup, on June 27, 2002, the Senate Committee on Appropriations marked up andordered reported its FY2003 funding recommendations. On June 28, 2002, the billwas reported ( S. 2708 , S.Rept. 107-201 ) and placed on the Senatecalendar. On September 4, 2002, the Senate began consideration of H.R. 5093 , the House funding bill, with the Senate version as a substitute amendment. The Senate debated the bill for 10 days, agreeing to a number of amendments, butdiscontinued debate on September 25, 2002. The Senate did not pass an Interiorfunding bill in the 107th Congress. Controversies involving funding for, andmanagement of, wildfires were largely responsible for the protracted debate and lackof a vote on final passage. There were unsuccessful attempts to invoke cloture on awildland fire amendment offered by Sen. Byrd (No. 4480) to provide $825 millionin FY2002 emergency funds for firefighting costs. An amendment by Sen. Craig(No. 4518) on forest thinning was a major focus of the floor debate, with noresolution. Both fire amendments remained pending when the Senate discontinueddebate on the bill. (For more information, see "U.S. Forest Service" below.) The Senate debated other contentious issues. On September 10, 2002, the Senate adopted a second degree amendment (No. 4481) to provide an estimated $6billion in farm disaster/drought relief assistance. Another controversy involved anamendment by Sen. Dodd (No. 4522) on federal recognition of Indian tribes, whichwas tabled. Issues in addition to fire and drought that generated significant discussion during House and/or Senate consideration included: stewardship contracting and wildernessin the Tongass National Forest (see FS); development in the Arctic National WildlifeRefuge and renewal of grazing permits and leases (see BLM); Missouri River flows(see FWS); Everglades restoration; (see NPS and cross-cutting issues); funding forland acquisition and conservation (see cross-cutting issues); development of oil andgas leases off the California coast (see MMS); and management of the Indian tribes'trust funds and assets (see BIA and OST). Several issues that have been the focus ofattention in previous years, including funding for the National Endowment for theArts and energy conservation and weatherization programs, were not as controversialin this appropriation cycle. On January 23rd, 2003, the Senate passed H.J.Res. 2 , the Omnibus Appropriations bill for FY2003 that included funding for Interior and relatedagencies and the 10 other FY2003 appropriations bills that have not been enacted. For Interior and related agencies, the Senate bill contained $18.97 billion forFY2003, and $825 million for FY2002 to replace monies spent on wildfire fighting,for a bill total of $19.80 billion. These figures do not reflect across-the-board cutscontained in the omnibus measure, as it is unclear how they would be calculated forthe Interior and related agencies bill overall and for particular departments, agencies,and programs in the bill. Specifically, the omnibus bill contained an across-the-boardrescission of 1.6%. Another section of the bill requires an increase to that rescissionby the amount necessary to offset $5 billion in additional education spending. According to CBO, this amount could generate an additional 1.252% reduction, fora total reduction in the Senate-passed bill currently estimated at 2.852%. The Senate omnibus bill, like the House-passed bill of last year, contained more money for DOI and related agencies for FY2003 than the Administration. TheHouse-passed bill has the highest total amount--$19.71 billion for FY2003, plus a $700 million fire supplemental for FY2002, for a bill total of $20.41 billion. Although the Senate-passed bill did not specifically fund the Conservation SpendingCategory (Table 18) , the House bill provides $1.44 billion for FY2003, higher thanthe Administration ($1.32 billion). The House-passed bill provides higher fundingfor wildland fire fighting in FY2003 than the Senate or the Administration. Both theHouse and Senate proposed increases over FY2002 for the U.S. Geological Survey,while the Administration proposed a sizeable decrease for that agency. TheHouse-passed bill also contained increases over the Administration's and Senate'slevels for the Bureau of Land Management, National Park Service, Fish and WildlifeService, Forest Service, Energy Department programs, and Indian Health Service. Conferees on H.J.Res. 2 were appointed by the Senate on January23, 2003, and by the House on January 29, 2003. The House-passed version of theInterior bill was contained in H.R. 5093 (107th Congress). The House and Senate agreed to the conference report ( H.Rept. 108-10 ) on H.J.Res. 2 , the Consolidated Appropriations resolution for FY2003, onFebruary 13, 2003, providing appropriations for the Interior and Related Agenciesand 10 other regular appropriations measures. On February 20, 2003, PresidentGeorge Bush signed the measure into law as P.L. 108-7 . Previously, Interior andrelated agencies were operating under a series of resolutions that continued fundingat FY2002 levels. The final appropriation for FY2003 provided $19.08 billion forthe Interior and related agencies plus $825.0 million for fire fighting to repaytransferred amounts for fire fighting in FY2002. It provided that a 0.65% cut beapplied on a proportionate basis to each account, and to each program, project, andactivity within an account. The figures in this report do not reflect across-the-boardcuts, as it is unclear how they would be calculated for the Interior and relatedagencies. Table 2. Interior and Related Agencies Appropriations, FY1999 to FY2003 (budget authority inbillions of current dollars) Note: These figures exclude permanent budget authorities, and generally do not reflect scorekeepingadjustments. However, they reflect rescissions. During the ten year period from FY1994 to FY2003, Interior and related agencies appropriations increased by 42% in current dollars, from $13.4 billion to$19.1 billion. Most of the growth occurred during the latter years. For instance,during the five year period from FY1994 to FY1998, appropriations increased by 3%in current dollars, from $13.4 billion to $13.8 billion. By contrast, during the mostrecent five years, from FY1999 to FY2003, funding increased by 33% in currentdollars, from $14.3 billion to $19.1 billion. The single biggest increase during thedecade occurred from FY2000 to FY2001, when the total appropriation rose 27% incurrent dollars, from $14.9 billion to $18.9 billion. Much of the increase wasprovided to land management agencies for land conservation and wildland firemanagement. See Table 17 for a comparison of FY2002-FY2003 InteriorAppropriations, and Table 19 for a budgetary history of each agency, bureau, andprogram from FY1998 to FY2003. FY2001 and FY2002 Regular Appropriations to Combat Terrorism. It is not clear what level of funding foranti-terrorism came from the regular FY2001 and FY2002 Interior appropriationslaws. The annual appropriations laws, as well as agency budgets, typically includemoney for combating terrorism as part of larger line items or program requests. Oneexample is the $3.0 million provided to the Bureau of Land Management in FY2002to identify and evaluate oil and gas resources and reserves on public lands in light ofterrorist attacks on the United States. The Administration asserted that such attackshave potential for disruptions to America's energy supply. FY2001 and FY2002 Supplemental Appropriations. On September 18, 2001, Congress enacted a $40billion Emergency Supplemental Appropriation for FY2001, P.L.107-38 , (2) in responseto the terrorist attacks on the United States on September 11th, 2001. The $40 billionpackage was distributed in three phases. First, $10 billion was to be immediatelyavailable and dispersed by the President in consultation with the House and SenateAppropriations Committee leaders. Second, an additional $10 billion was availableto be obligated following a 15-day notification to the Congress. Third, a final $20billion could be obligated only after money was allocated in another emergencyappropriations act ( P.L. 107-117 ). For more information on the FY2001supplemental, see CRS Report RL31173, Combating Terrorism: First EmergencySupplemental Appropriations-Distribution of Funds to Departments and Agencies . Of the $20 billion provided by P.L. 107-38 that did not need additional legislation, programs under the jurisdiction of the Department of Interior and Relatedagencies appropriations received $3.1 million. Specifically, there was $1.7 millionfor the National Park Service, Operations of the National Park System, and $1.4million for the U.S. Park Police (National Park Service) for emergency responsecosts in New York City and Washington, D.C. (3) P.L. 107-38 also required OMB to submit to Congress a proposal for the allocation of the $20 billion that needed to be specified in another appropriations act. The OMB submitted its $20 billion proposal on October 17, 2001. On January 10,2002, Congress enacted P.L. 107-117 , providing emergency supplemental funds forFY2002. (4) The law contained $88.1 million in totalappropriations for anti-terrorismactivities for the programs in the Department of the Interior (5) and related agenciesappropriations bills. Further FY2002 Emergency Supplemental Funding (P.L. 107-206). On August 2, 2002, President Bushsigned into law ( P.L. 107-206 ) the FY2002 Supplemental Appropriations Act forFurther Recovery From and Response to Terrorist Attacks on the United States. Thelaw contained $30 billion for anti-terrorism, defense, homeland security, andeconomic revitalization, and $5.1 billion for contingent emergency spending. Included in the "contingent" amount were funds for several agencies funded throughthe DOI and related agencies bills, but those funds were not obligated. Under �1404of P.L. 107-206 , the President had 30 days within enactment to decide whether todesignate all or none of the $5.1 billion as emergency spending in accordance withthe Balanced Budget and Emergency Deficit Control Act of 1985. The money wasnot to be obligated unless the President designated it as emergency funding. OnAugust 13th, 2002, President Bush announced his rejection of the $5.1 billion incontingent emergency spending, remarking that some of the money has "nothing todo with a national emergency." The President indicated he would seek, in a separatesupplemental request, $1 billion of the $5.1 billion for selected programs. On September 3, 2002, President Bush submitted a supplemental FY2003 request for $1.0 billion that would fund some of the activities left unfunded when herejected the $5.1 billion contingent emergency appropriations for FY2002. Therequest did not include funds for DOI and related agencies. (For more informationon supplemental funding, see CRS Report RL31406 , Supplemental Appropriationsfor FY2002: Combating Terrorism and Other Issues . The FY2003 Budget to Combat Terrorism. For FY2003, the Administration sought $37.7 billion forhomeland security of which $25.2 billion was discretionary budget authority fornon-Department of Defense operations. (6) Among the categories for homelandsecurity funding were: supporting first responders, defending against bio-terrorism,securing our borders, sharing information and using technology, aviation security and"other homeland security." However, the FY2003 budget did not specify thehomeland security responsibilities that would be carried out by agencies funded inthe Interior and related agencies bill. According to DOI, "additional" funding in the FY2003 budget for combating terrorism totaled $88.8 million. The additional funding was divided among theNational Park Service, Office of the Secretary of the Interior, and Bureau ofReclamation. Specifically, of the $88.8 million, $56.5 million was for the NationalPark Service for heightened security and terrorist prevention in the operation ofparks, to protect "the symbols and icons of American Freedom that are contained inthe National Park System." Part of the NPS funding was to be used by the U.S. ParkPolice for counter-terrorism activities and to augment security in urban areas. Another $5.6 million of the $88.8 million was for law enforcement and physicalsecurity for the Office of the Secretary of the Interior. The remaining $26.7 millionwas for the Bureau of Reclamation, which is funded in Energy and WaterAppropriations laws. Department of Homeland Security. On November 25, 2002, a measure ( H.R. 5005 ) to create the Department of Homeland Security (DHS) became law ( P.L.107-296 ). The Department was created to coordinate federal activities related tocombating terrorism, combining and supplying transfer authority for approximately30activities currently conducted in various departments and agencies. There is nospecific mention in the law of the transfer to the new department of any programsfunded in the Interior and related agencies bill. There was only one reference in theHouse report language (accompanying H.R. 5005 ) to the Secretary ofthe Interior's identification of Indian tribes that perform law enforcement functions. See CRS Report RL31493 , Homeland Security: Department Organization andManagement . The Secretary of Homeland Security received certain authority totransfer appropriations to aid in the establishment of the department ( P.L. 107-294 ). For information on transfer authority as related to the Homeland SecurityDepartment, see CRS Report RL31514, Department of Homeland Security:Appropriations Transfer Authority . For further information on the Department of the Interior , see its World Wide Web site at http://www.doi.gov . Bureau of Land Management. The Bureau of Land Management (BLM) manages approximately 264 million acresof public land for diverse, and at times conflicting uses, such as mineralsdevelopment, energy development, livestock grazing, recreation, and preservation. The agency also is responsible for about 700 million acres of federal subsurfacemineral resources throughout the nation, and supervises the mineral operations on anestimated 56 million acres of Indian Trust lands. Another key BLM function iswildland fire management on about 370 million acres of DOI, other federal, andcertain non-federal land. For FY2003, Congress enacted $1.88 billion for the BLM, excluding $189.0 million enacted to repay transfers from other appropriations for fire fighting inFY2002. This level is more than the FY2003 amount that was requested by theAdministration ($1.83 billion) and originally passed by the Senate ($1.86 billion) butless than the amount that had been approved by the House ($1.91 billion, excludinga $200.0 million supplemental for FY2002 for fire fighting expenses). It is slightlyhigher than FY2002 ($1.87 billion). See Table 3 . Management of Lands and Resources. For Management of Lands and Resources, Congress enacted $825.7 million forFY2003. This is a $50.1 million increase (6%) over FY2002 ($775.6 million). Thisline item funds an array of BLM land programs, including protection, recreationaluse, improvement, development, disposal, and general BLM administration. Energy and Minerals. For the energy and minerals program, including Alaska minerals, for FY2003 Congress enacted $109.1 million, a $9.6million increase (10%) over FY2002 ($99.5 million). Congress supported, whilegoing beyond, the President's request for additional funds ($107.1 million) overFY2002. The Administration had sought the additional funds to increase theavailability of oil and gas on federal lands--a goal of the President's National EnergyPlan--including Alaska North Slope oil and gas development. In particular, theAdministration requested additional monies to expedite the permitting and rights ofway processes, increase oil and gas lease sales, evaluate and eliminate barriers toenergy production, and increase environmental inspections. The conferees on theInterior appropriations bill added funds beyond the request, for purposes includingpermitting and rights of way in Nevada and applications for permits to drill. The FY2003 law retains Senate language related to the renewal of the right of way for the Trans-Alaska Pipeline, a controversial right of way across federal lands. The language deems the Final Environmental Impact Statement (EIS) for therenewal of the right of way to be sufficient to meet the requirements of �102(2)(C)of the National Environmental Policy Act, to preclude legal challenges to thedocument's sufficiency for that purpose. However, the FY2003 law droppedlanguage regarding another controversial right of way. The Senate-passed bill wouldhave prohibited appropriations for DOI from being used to issue a right of way fora pipeline related to the Cadiz Groundwater Storage and Dry-Year Supply Program. The Cadiz project was developed to store Colorado River water, for later use, in thegroundwater basin underlying parts of San Bernardino County in California. The FY2003 law bars funds in the bill from being used for energy leasing activities within the boundaries of national monuments, as they were on January 20,2001, except where allowed by the presidential proclamations that created themonuments. Supporters of this language feared that the Administration could adjustthe boundaries of national monuments in order to allow energy leasing, whileopponents asserted that the language would preclude development of needed energyresources. An identical provision was enacted in FY2002. Arctic National Wildlife Refuge. In earlier action, the House Committee on Appropriations had agreed to report language on the energy andminerals program in general, and also stating that no funds were included in theFY2003 funding bill "for activity related to potential energy development within theArctic National Wildlife Refuge [ANWR]" ( H.Rept. 107-564 , H.R. 5093 ). Section 1003 of the Alaska National Interest Lands Conservation Act(ANILCA, P.L. 96-487 ) currently prohibits leasing "or other development leading toproduction of oil and gas" on ANWR lands (which were then known as the ArcticNational Wildlife Range), unless authorized by Congress. Thus, the Committee'sreport language generally was viewed as barring the use of funds for preleasingstudies and other preliminary work related to oil and gas drilling in ANWR. Thereport of the Senate Committee on Appropriations did not contain this prohibition. Conferees on the FY2003 Interior appropriations bill included language in the joint explanatory statement stating that they "do not concur with the House proposalconcerning funding for the energy and minerals program." This change from theHouse report language has been interpreted by some as potentially making availablefunds for preliminary work related to development in ANWR. However, as noted,the prohibition contained in ANILCA remains in effect, so the ability to use moneyin the bill may not be clear with respect to particular pre-leasing activities. Grazing. The FY2003 Interior appropriations law provides for the automatic renewal of grazing permits and leases that expire, are transferred,or waived during FY2003 and that were issued by the Secretary of the Interior or theSecretary of Agriculture. The automatic renewal continues until the permit renewalprocess is completed under applicable laws and regulations, including any necessaryenvironmental analyses. The terms and conditions in expiring permits or leaseswould continue under the new permit or lease until the renewal process is completed(except for certain Agriculture permits under the Senate bill). A provision inprevious appropriations laws contained similar language for the Secretary of theInterior but not for the Secretary of Agriculture. This controversial provision wasadvocated as necessary to address heavy agency workloads in processing the grazingpermits and leases that are up for renewal. Opponents fear that permits with possiblydetrimental terms or conditions could continue. Land Use Planning. For FY2003, Congress enacted $47.6 million for land use planning, a substantial increase (44%) over the $33.0 millionappropriated for FY2002. All BLM lands (except some in Alaska) are covered bya land use plan, and plans are to be amended or revised as new issues arise andconditions change. The Senate, House, and Administration had sought increasedfunds over FY2002. The additional funds are to be used to initiate new land useplans and to accelerate the development or amendment of land use plans that areunderway to reflect current conditions, requirements, and issues. TheAdministration's priority is to address issues including increased energydevelopment, enhanced protection from wildfire, and resolution of resource conflicts. The additional funds are part of a multi-year effort to update land use plans, abouthalf of which are out of date, according to the BLM. Wildland Fire Management. For wildland fire management for FY2003, Congress enacted $654.4 million, a reductionfrom the FY2002 level ($678.4 million). The wildland fire funds appropriated toBLM are used for fire fighting on all Interior Department lands. Interiorappropriations laws also provide funds for wildland fire management to the ForestService (Department of Agriculture) for fire programs primarily on its lands. A focusof both departments is the National Fire Plan, developed after the 2000 fire season,which emphasizes reducing hazardous fuels, among other provisions. The confereesdid not concur with Senate report language requiring 70% of hazardous fuels fundsto be used in the wildland urban interface, on the grounds that existing collaborationwith communities and criteria for project selection are adequate for determining howto spend these funds. The FY2003 law also contains $189.0 million for DOI'swildland fire management to repay amounts transferred from other accounts for firefighting during FY2002. (For more information, see "U.S. Forest Service" below.) Payments in Lieu of Taxes Program (PILT). For PILT, Congress enacted $220.0 million, anincrease over FY2002 ($210.0 million). The Administration had sought significantlyless-- $165.0 million--for this program that compensates local governments forfederal land within their jurisdictions. The program has been controversial becausein recent years appropriations have been substantially less than authorized amounts. Land Acquisition. For Land Acquisition, the FY2003 law contains $33.5 million, divided among 18 projects in8 states. This is a sizeable reduction (33%) from FY2002 ($49.9 million). TheAdministration and House had supported higher amounts ($44.7 million and $47.5million respectively), while the Senate had approved a lower level ($30.2 million). The money would be appropriated from the Land and Water Conservation Fund. TheBLM seeks to emphasize alternatives to fee title land purchases, such as landexchanges and purchase of conservation easements and development rights, whichit asserts are less expensive approaches. (For more information, see the "LandAcquisition" section below.) Table 3. Appropriations for BLM, FY2002-FY2003 ($ in millions) a Includes contingent emergency appropriations. b Do not include FY2002 supplemental funds requested bythe Administration and passed by thechambers as part of the FY2003 bills, or $189.0 million enacted for FY2003 to replace moniesborrowed from other accounts in FY2002. c The FY2003 figures of "0" are a result of an appropriationof $7.9 million with $7.9 million inoffsetting fees. For further information on the Bureau of Land Management , see its World Wide Web site at http://www.blm.gov/nhp/index.htm . CRS Issue Brief IB89130. Mining on Federal Lands , by [author name scrubbed]. CRS Report RS20902 . National Monument Issues , by [author name scrubbed]. CRS Report RL31392 . PILT (Payments in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. Fish and Wildlife Service. For FY2003, the Administration requested $1.28 billion for the Fish and Wildlife Service(FWS), a slight increase (0.5%) over FY2002. (With the addition of some largeaccounts that are permanently appropriated, and therefore do not require action in anannual appropriation bill, the Administration's proposed total FWS spending wouldremain flat, at $1.94 billion.) The Senate passed $1.21 billion for FWS for FY2003in annual appropriations. The House-passed version was $1.40 billion. The FY2003appropriations law provides $1.25 billion in annual appropriations. By far the largest portion of the FWS annual appropriation is for the Resources Management account. The Senate's bill contained $902.7 million for FY2003, down$0.9 million from the Administration's FY2003 budget request but up $52.1 millionfrom FY2002. The House approved $918.4 million. The FY2003 appropriations lawprovides $917.4 million. Endangered Species Funding. Funding for the Endangered Species program is one of the perennially controversialportions of the FWS budget. For FY2003, the Administration proposed that theprogram remain at the FY2002 level of $125.7 million, although its subprogramswould show significant changes from previous years. The Senate rejected theproposed amount, and raised the program by $5.7 million over FY2002 ($131.5million). The House approved $130.2 million. The FY2003 appropriations lawprovided $132.6 million. (See Table 4 .) A number of related programs also benefit conservation of species that are listed or proposed for listing under the Endangered Species Act. The CooperativeEndangered Species Conservation Fund (for grants to states and territories) woulddecrease from $96.2 million to $91.0 million under the President's request. TheFY2003 appropriations law provides $81.0 million. The Landowner IncentiveProgram would increase by $10 million to $50 million under the President'sproposal; the FY2003 appropriations law provides a net of $0, by rescinding the $40million appropriated in FY2002 and appropriating $40 million for FY2003. Stewardship Grants would remain at $10 million under the President's proposal andthe new law reallocates the $10 million appropriated for FY2002 to FY2003. Thereport of the Senate Committee on Appropriations was critical of this and thepreceding program as well, and likewise provided only sufficient funds for itsevaluation and the distribution of previously appropriated funds. (7) Overall, FY2003 enacted funding for the Endangered Species program and related programs would decrease from FY2002 by $58.4 million (21.5%). TheSenate had approved a decrease of 21.6% from FY2002. By contrast, the Presidenthad approved an increase of 1.7% while the House had passed a largerincrease--10.9%. Table 4. Funding for Endangered Species Programs, FY2002-FY2003 ($ in thousands) Missouri River. The FY2003 lawexpresses the sense of Congress that various parties in a dispute over managementof the Missouri River (and the resulting effects on chicks and nests of two listedspecies -- least tern and piping plover) should reach agreement on a flow schedulefor the river as soon as possible in 2003. The language does not address thesurrounding controversy about two proposals by the Corps of Engineers. Bothproposals would modify the flow regime of the river, to the benefit of the bargeindustry, but both, according to FWS, would harm the two listed species. One of theproposals would require moving the chicks and nests off Missouri River sandbars andinto a captive rearing facility; the other proposal would not risk flooding of nests, butwould avoid that by simply flooding much suitable habitat continuously during thenesting season. The provision does not insulate Corps activities from citizen suitsunder the Endangered Species Act (ESA), and some environmental groups, allegingharm to listed species from past transfers of nests, already have indicated theirintention to sue the Corps under ESA for its management of Missouri River flows. The language originally was adopted as an amendment to the Senate-passed bill. They House bill contained no similar language. National Wildlife Refuge System. On March 14, 2003, the nation will observe the centennial of the creation by PresidentTheodore Roosevelt of the first National Wildlife Refuge on Pelican Island inFlorida. Accordingly, various renovations, improvements, and activities are plannedto celebrate this event. For FY2003, the Administration, House, and Senate proposedoverall increases for the National Wildlife Refuge System (NWRS) at 17.7%, 17.7%,and 13.1% respectively. The FY2003 law provides for a 15.9% increase. See Table5 . (8) With respect to the operations andmaintenance component of the System, thePresident proposed an increase of 7.6%; the bill as enacted provided a 25.8%increase. For NWRS infrastructure improvements, the Administration recommended$52.0 million, more than double the previous year; the proposal was supported by theHouse. The FY2003 appropriations law contained no specific funding for thisprogram. The law continued an existing prohibition on expenditures to establish anew unit of the NWRS unless the purchase is approved in advance by the House andSenate Appropriations Committees. This prohibition would not apply to creation ofnew refuges approved by the Migratory Bird Conservation Commission, since itsacquisition funds are permanently appropriated. Interest in energy development in the Arctic National Wildlife Refuge (ANWR) in Alaska is intense, and the House Committee on Appropriations proposed that theallocation for management of ANWR increase from $2.19 million to $2.38 million,even though funds for the general management of specific refuges are not usuallyearmarked in appropriations bills. As is usually the case, no specific earmark isprovided for ANWR management, nor for any other specific refuge, in the SenateCommittee report. The conference committee did not change the House allocation. However, the conference agreement did remove a restriction within the BLM budgetregarding potential development in ANWR. (See discussion under Arctic NationalWildlife Refuge under BLM, above.) Table 5. Funding for National Wildlife Refuge System, FY2002-2003 ($ in millions) The FY2003 Budget Justification also addresses the impact on FWS law enforcement of recent terrorist attacks in the United States. It states: The September 11, 2001 terrorist attacks continue to have rippling effects on law enforcement programs throughout thecountry, including the [NWRS], which has increased security at refuge facilities. Therefuge system has responsibilities to provide protection for the resources, visitors,and facilities along coastal areas, the Mexico and Canada borders, and urban areas. In addition, many refuge officers are being sent on temporary assignments throughoutthe U.S. to support the Department of the Interior's national security efforts to protectemployees and visitors, and other facilities. [p.119.] There are several refuges along U.S. coasts. One Refuge--Cabeza Prieta--is bounded by the Mexican border, and several are near the Canadian border. It is notclear what portion of the NWRS request is to be spent on increased security in theseborder areas or in general. The President proposed $49.9 million for LawEnforcement (up $1.5 million over FY2002), plus $2.0 million for infrastructureimprovement. The FY2003 appropriations law provides $51.9 million, with noset-aside for infrastructure. Wildlife Refuge Fund. The National Wildlife Refuge Fund (also called the Refuge Revenue Sharing Fund) compensatescounties for the presence of the non-taxable federal lands of the NWRS. A portionof the Fund is supported by the permanent appropriation of receipts from variousactivities carried out on the NWRS. However, these receipts are not sufficient forfull funding of authorized amounts. Congress generally makes up some of thedifference in annual appropriations. The Administration requested $14.4 million forFY2003, identical to the FY2002 level; this amount also was approved in theFY2003 appropriations law. When combined with the receipts, the appropriationwill cover 55% of the authorized full payment. Land Acquisition. For FY2003, theAdministration proposed $70.4 million, a 29.0% decrease from the FY2002 level of$99.1 million. The FY2003 appropriations law provided $73.4 million. For FY2003,76.1% of the total is allocated to specified refuges. The remainder is for acquisitionmanagement, land exchanges, emergency acquisitions, etc. (For more information,see the "Land Acquisition" section below.) Multinational Species Conservation Fund (MSCF). The MSCF has generated considerable constituentinterest despite the small size of the program. It benefits Asian and Africanelephants, tigers, the six species of rhinoceroses, and great apes. The President'sbudget proposed to move the funding for the Neotropical Migratory BirdConservation Fund (NMBCF) into the MSCF. For FY2003, the President proposed$5.0 million for the MSCF. Older portions of the MSCF would receive level fundingwhile the NMBCF portion would be reduced 67%--from $3.0 million in FY2002 to$1.0 million in FY2003. See Table 6 . Congress rejected the proposed transfer forFY2003, and appropriated $3.0 million for the Migratory Bird program. It alsoincreased funding over the President's request for all four subprograms as well as forthe Neotropical Migratory Bird program. Table 6. Funding for Multinational Species Conservation Fund and Migratory Bird Fund, FY2002-2003 ($ in thousands) a This program was first authorized in FY2002, and is not part of the MSCF, though the transferwasproposed in the President's budget for FY2003. For this reason, the FY2003 request of $1 million isincluded in the FY2003 column total only for the Request column. For further information on the Fish and Wildlife Service , see its World Wide Web site at http://www.fws.gov/ . CRS Report RL31278 . Arctic National Wildlife Refuge: Background and Issues . [author name scrubbed], coordinator. CRS Issue Brief IB10111. Arctic National Wildlife Refuge: Controversies for the 108th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Issue Brief IB10072. Endangered Species: Difficult Choices , by [author name scrubbed] and [author name scrubbed]. CRS Report 90-192(pdf) . Fish and Wildlife Service: Compensation to Local Governments , by [author name scrubbed]. CRS Report RS21157 . Multinational Species Conservation Fund , by [author name scrubbed]. National Park Service. TheNational Park Service (NPS) has stewardship responsibilities for a park systemcurrently comprising 388 separate and diverse units covering 84 million acres. Inaddition to the national park designation, the park system has more than 20 othertypes of designations used to classify park sites. The NPS protects, interprets, andadministers the park system's diversity of natural and historic areas representing thecultural identity of the American people. The NPS also provides limited, temporaryfunding support and technical assistance to 23 national heritage areas outside of thepark system. An estimated 276 million people visited park units in 2002. The FY2003 appropriations law provides $2.25 billion for the NPS, a decrease of $134.8 million (5.7%) from FY2002. The Administration had requested a totalof $2.36 billion for the NPS for FY2003, a $24.5 million decrease from the FY2002level ($2.38 billion). See Table 7. The President pledged to eliminate the NPSmulti-billion dollar maintenance backlog over the next few years, improve securityat NPS sites in response to terrorist attacks on the United States, and get morenon-government, partnership groups involved in park support. The Senate approved$2.29 billion for the National Park Service, while the House approved $2.40 billion. Operation of the National Park System. The park operations line item accounts for roughlytwo-thirds of the total NPS budget. It covers resource protection, visitors' services,facility operations, facility maintenance, and park support programs. The FY2003appropriations law provides $1.57 billion, or $78.5 million above the FY2002 levelof $1.49 billion. The Administration had requested $1.58 billion. An environmental coalition comprised of some 27 Members of Congress and park support and environmental groups--Americans for National Parks-- sought a$280 million increase in the NPS operating budget to fund science, resourceprotection, and education programs, in addition to repair and enhancement of parkinfrastructure, an Administration priority. (9) OnOctober 16, 2002, the Senate agreedto a Sense of the Senate amendment to the Interior appropriations bill( H.R. 5093 ) that Congress should continue efforts to increase fundingfor operations of the National Park Service and seek to eliminate the deferredmaintenance backlog by FY2007. However, that bill was not enacted into law. The President's request included funds for a proposed Cooperative Conservation Initiative (CCI) which would provide matching funds for park projects, and someother DOI agency projects, undertaken by nonprofit and private entities. The Senate rejected the idea of the proposed CCI; the Senate Committee on Appropriations asserted that the establishment of another grant program could not be justified whenmany existing needs are not being met. The House did not specify funding for theCCI as proposed, but supported the concept of conservation partnerships. Congressdid not fund this Initiative. However, the FY2003 appropriations law retained $5million for the NPS Challenge Cost Share Program in support of the CCI. Table 7. Appropriations for NPS, FY2002-FY2003 ($ in millions) a Figures reflect a rescission of contract authority. Construction and Maintenance. The construction line item funds the construction, rehabilitation, and replacement of parkfacilities. For this line item, for FY2003 the Administration requested $322.4million, a decrease of $65.3 million from the FY2002 level ($387.7 million). Fundsfor the construction line item historically have tended to be substantially increasedduring the appropriations process. The FY2003 appropriations law provides $327.8million, $5.4 million above the President's request, but $59.8 million below theFY2002 appropriation. The Administration requested an additional $529.4 millionfor facility operation and maintenance, an activity funded within the Operation of theNational Park System Line Item. The FY2003 law provides $522.8 million forfacility operation and maintenance. Combined, the Administration requested $851.8million for construction and facility operation and maintenance, a decrease of $15.1million from FY2002 ($866.9). Excluding the request for facility operation, theAdministration sought some $663 million for FY2003 for construction and facilitymaintenance, including annual and deferred maintenance. (10) Combined, the FY2003law provided $850.7 million, $16.2 million below FY2002 appropriations. The estimated range of deferred maintenance for the NPS is $4.1 billion to $6.8 billion according to the DOI Budget Office. In his FY2002 budget, President Bushproposed to fulfill his campaign promise to eliminate NPS deferred maintenancewithin five years through a combination of new appropriations, transportation fundmoney, and revenues from recreation fees. While the FY2003 budget contained astatement renewing this commitment, park and environmental groups have criticizedas low the amount of new money committed to eliminating the backlog. United States Park Police (USPP). This line item supports the programs of the U.S. Park Police who operate primarilyin urban park areas. The USPP also provides investigative, forensic, and otherservices to support law enforcement trained rangers working in park unitssystem-wide. The FY2003 appropriations law provided $78.4 million, the fullamount of the Administration's request. This is an increase of $13.1 million over theinitial FY2002 appropriation ($65.3 million) but a decrease of $12.1 million from thetotal FY2002 appropriation ($90.6 million). After the regular FY2002 appropriation,the NPS received $25.3 million in emergency appropriations for increased securityfollowing the September 11, 2001, terrorist attacks. The Administration's FY2003budget had emphasized anti-terrorism protection at national icon sites in Washington,D.C., New York, Philadelphia, and other locations. National Recreation and Preservation. This line item funds park recreation and resource protection programs, as well asprograms connected with local community efforts to preserve natural and culturalresources. The FY2003 request of $46.8 million was $19.3 million less than FY2002funding ($66.2 million). The primary decreases were a $5.5 million reduction for theheritage partnerships program and a $12.9 reduction to the statutory and contractualaid program. The FY2003 appropriations law provided $61.7 million, 4.5 millionless than FY2002 but $14.9 million above the budget request, that mostly restoresfunding for the heritage partnership program and statutory and contractual aid. Urban Park and Recreation Recovery (UPARR). Citing the need to support "higher priorities," inFY2003 the Administration did not request funds for the UPARR program except for$300,000 for the administration of previously awarded grants. This locally popularmatching grant program was designed to help low income inner city neighborhoodsrehabilitate recreational facilities. Although the President did not request funds forUPARR in FY2002, last year Congress restored funding at $30.0 million, the sameas provided in FY2001. In the FY2003 law, Congress provided $300,000 forprogram administrative expenses but did not provide funding for new grants. Land Acquisition and State Assistance. The FY2003 appropriations law provided $172.5 million for NPS Land Acquisitionand State Assistance, consisting of $74.5 million for NPS federal land acquisitionand $98.0 million for state land acquisition assistance. This constitutes a substantialreduction from the President's FY2003 request--$286.1 million--and the FY2002appropriation--$274.1 million. The federal program provides funds to acquire lands,or interests in lands, for inclusion within the National Park System, while the stateassistance program is a park land acquisition program for states. The Administration had sought $86.1 million for the NPS federal land acquisition program, a decrease of $44.1 million from the FY2002 appropriation($130.1 million). The Administration's request for Land and Water ConservationFund (LWCF) state assistance was $200 million, including $50 million for grantsunder it's proposed Cooperative Conservation Initiative and $150 million for thetraditional LWCF state grants program (compared with $144 million for FY2002). State-side funds were to continue to be awarded through a formula allocation. Recreational Fee Demonstration Program (Fee Demo). Under this program, the four major federal landmanagement agencies retain and spend receipts from entrance and user fees. Thereceipts are available without further appropriation for projects at the collecting sites,with a portion distributed to other agency sites. The NPS estimates Fee Demoreceipts of $149.0 million for FY2003, and the FY2003 budget states that at least halfof the receipts will be used for deferred maintenance. Fee Demo was begun inFY1996 and extended in appropriations laws, most recently through FY2004. TheAdministration's FY2003 budget stated an intent to propose legislation to make theprogram permanent and remove it from the appropriations process, and the agencieshave collaborated on developing a permanent program. Several 107th Congress billsproposed differing forms of fee program permanence but none were enacted. Whilethere have been few objections to new and higher fees for the National Park System,many citizens have objected to paying fees for previously free or low cost recreationin national forests. Everglades Restoration. Restoring theEverglades, an initiative with multiple components, is in its early stages. One of thecomponents, the Modified Water Delivery Project, has been controversial and drawncongressional attention. The Modified Water Delivery Project seeks to improvewater deliveries to Everglades National Park (ENP) and, to the extent possible,restore the natural hydrological conditions within ENP. To complete this project asplanned, a portion of land within the 8.5 SMA would have to be acquired to be usedfor flood protection for the rest of the area. (11) Herein lies the controversy. Some ofthe owners are unwilling to sell their land and have pursued legal action to preventthe acquisition of their land. (12) The Corps assertsthat if necessary, it has the authorityto acquire land from unwilling sellers through its condemnation authority. (13) The FY2003 law appropriating funds for the Department of the Interior contains a provision authorizing the U.S Army Corps of Engineers (Corps) to implement aflood protection plan (Alternative 6D) for the "8.5 Square Mile Area"(8.5 SMA) aspart of the Modified Waters Delivery Project (Division F, Title I, �157 of P.L.108-7 ). (14) The authorization to implementAlternative 6D, including the acquisitionof necessary lands by the Corps, has three conditions. First, the Corps may acquireresidential property needed to carry out Alternative 6D only if the owners are firstoffered comparable property in the 8.5 SMA that will be provided with floodprotection. Second, the Corps is authorized to acquire land from willing sellers inthe flood protected portion of the 8.5 SMA to carry out the first condition and toprovide financial assistance to carry out the acquisitions. Third, the Corps and thenon-federal sponsor (generally the South Florida Water Management District) maycarry out these provisions with funds provided under the Everglades National ParkProtection and Expansion Act of 1989 (16 U.S.C. 410r-8) and funds provided by theDOI for land acquisition for restoring the Everglades. (15) As stated, if this land is not acquired by the Corps, the Modified Water Delivery Project, as well as portions of the Comprehensive Everglades Restoration Plan(CERP), cannot be implemented as planned. Legislation authorizing CERP providesthat the Modified Water Delivery Project must be completed before several CERPprojects involving water flows on the east side of ENP can receive appropriations(�601(b)(2)(D)(iv) of Title IV, P.L. 106-541 ). Authorization to implement the Alternative 6D Plan has been controversial in Congress. A provision authorizing the implementation of Alternative 6D wasstricken from the House version of the FY2003 Interior appropriations bill( H.R. 5093 ) when points of order were raised against it on July 16,2002. In contrast to the House, on January 23, 2003, the Senate passed an omnibusappropriations bill that included an amendment authorizing the Corps to implementits flood protection plan, under Alternative 6D, for the 8.5 SMA. For more information on the Modified Water Delivery Project, see CRS Report RS21331(pdf) , Everglades Restoration: Modified Water Delivery Project . For information on funding for Everglades restoration, see "Everglades Restoration" under cross-cutting issues. For further information on the National Park Service , see its World Wide Website at http://www.nps.gov/ . CRS Issue Brief IB10093. National Park Management and Recreation , by [author name scrubbed] and David Whiteman, coordinators. Historic Preservation. The Historic Preservation fund (HPF), administered by the NPS, provides grants-in-aidto states (primarily through State Historic Preservation Offices (SHPOs), certifiedlocal governments, and territories and the Federated States of Micronesia foractivities specified in the National Historic Preservation Act. These activities includeprotection of cultural resources and restoration of historic districts, sites, buildings,and objects significant in American history and culture. Preservation grants arenormally funded on a 60% federal- 40% state matching share basis. In addition, theHistoric Preservation Fund provides funding for cultural heritage projects for Indiantribes, Alaska Natives, and Native Hawaiians. Programs of the Historic PreservationFund were reauthorized through FY2005 by The National Historic Preservation Act(NHPA) Amendments of 2000, P.L. 106-208 . The FY2003 Bush Administration's budget would have provided $67.0 million in funding for the Historic Preservation Fund, the same as the Senate-passed level.It recommended funding the grants-in-aid to states and territories at $34.0 million. The final FY2003 enacted appropriation ($69.0 million) is an increase of $2.0 millionfrom the FY2003 Administration budget and the Senate-passed figure. However, itis a decrease of $5.5 million from the FY2002 appropriation ($74.5 million), and$7.5 million from the House-passed level ($76.5 million), including a decrease of $6million in the grants-in-aid program to states and territories. See Table 8 . Now funded in tandem with the Historic Preservation Fund is former President Clinton's Millennium initiative, Save America's Treasures. Save America'sTreasures grants are given to preserve "nationally significant intellectual and culturalartifacts and historic structures" including monuments, historic sites, artifacts,collections, artwork, documents, manuscripts, photographs, maps, journals, film andsound recordings. The appropriation for Save America's Treasures has been used,for example, for restoration of the Star Spangled Banner; properties throughout theU.S., including the Rosa Parks Museum in Alabama and the Mark Twain House inConnecticut; repair and restoration of the Sewall-Belmont House; the NationalWomen's Party headquarters; and the Declaration of Independence and the U.S.Constitution located in the National Archives. Although the program was funded inFY2001 ($34.9 million) and FY2002 ($30.0 million), it was criticized for notreflecting geographic diversity. As a result, the FY2001 Interior appropriations law( P.L. 106-291 ) required that any project recommendations would be subject to formalapproval by the House and Senate Committees on Appropriations prior todistribution of funds. Projects require a 50% cost share, and no single project canreceive more than one grant from this program. The FY2003 enacted appropriationslevel for Save America's Treasures is $30.0 million. In the past, the HPF has included the preservation and restoration of historic buildings and structures on Historically Black Colleges and Universities (HBCU)campuses. Funds in Section 507 of P.L. 104-333 (the Omnibus Parks and PublicLands Management Act of 1996) were earmarked for preservation projects forspecific colleges and universities. Grants were awarded to complete repairs onHBCU buildings, particularly those listed in the National Register of Historic Placesthat required immediate repairs. An appropriation in FY2001 of $7.2 millionrepresented the unused authorization remaining from P.L. 104-333 . There was nofunding for HBCU's under HPF for FY2002, and it was eliminated from the FY2003Bush Administration budget because technically the authorized funding has beenexpended. There is no longer permanent federal funding for the National Trust for Historic Preservation, previously funded as part of the Historic Preservation Fund Account. The National Trust was chartered by Congress in 1949 to "protect and preserve"historic American sites significant to our cultural heritage. It is a private non-profitcorporation. The National Trust has generally not received any direct federal fundingon a regular basis since FY1998, in keeping with Congress' plan to replace federalfunds with private funding and to make the Trust self-supporting. However, aone-time appropriation in FY2002 was provided to the National Trust for theendangered properties endowment. The National Trust still maintains severalfinancial assistance programs including the Preservation Services Fund, a programof matching grants to initiate preservation projects, and the National PreservationLoan Fund, providing below-market-rate loans to nonprofit organizations and publicagencies to preserve properties listed in the National Register of Historic places,particularly those on the "Most Endangered Historic Places" list. In FY2002, $2.5million was appropriated to the endowment for the National Trust Historic SitesFund, to be matched dollar for dollar with non-federal funds, for the care andmaintenance of the most endangered historic places. The FY2003 budgetrecommended eliminating that one-time grant for the National Trust. TheHouse-passed appropriation for FY2003 included $2.5 million for the Historic SitesFund endowment and the FY2003 final appropriation provides funding for theendowment at $2.0 million. Table 8. Appropriations for the Historic Preservation Fund (FY2002-FY2003) ($ in thousands) a The term "grants in aid to States and Territories" is used in conjunction with thebudget and refers to the same program as Grants in aid to State Historic PreservationOffices. For further information on Historic Preservation , see its World Wide Web site at http://www2.cr.nps.gov/ . CRS Report 96-123. Historic Preservation: Background and Funding, by [author name scrubbed]. U.S. Geological Survey. The U.S. Geological Survey (USGS) is the nation's primary science agency in providing earthand biological science information related to natural hazards; certain aspects of theenvironment; and energy, mineral, water, and biological sciences. In addition it isthe federal government's principal civilian mapping agency and a primary source ofdata on the quality of the nation's water resources. The traditional presentation of the budget for the USGS is in the line item Surveys, Investigations, and Research , with six activities falling under that heading: National Mapping Program; Geologic Hazards, Resources, and Processes; WaterResources and Investigations; Biological Research; Science Support; and Facilities. For FY2003, the USGS will receive $925.3 million, which is $11.3 million over theFY2002 enacted level, and $58.0 million over the FY2003 request from theAdministration. The FY2003 enacted level was 3.1 million below the level passedby the House ($928.4 million) and $10.7 million above the Senate approved level of$914.6 million. No funds were provided in the conservation spending category,whereas $25 million was attributed to conservation spending in FY2002. National Mapping Program. The FY2003 appropriations law provided $134.1 million for the National MappingProgram and related activities. This is $4.8 million above the request by theAdministration ($129.3 million) and $0.8 million above FY2002. The FY2003appropriation included $81.6 million for Cooperative Topographic Mapping, $35.9million for land remote sensing activities, and $16.5 million for geographic analysisand monitoring. The committee expressed interest in the continuing efforts todevelop and implement the National Map for urban areas in this country. TheNational Map is expected to be a compilation of digital and topographic maps thatcover the entire country. This map is expected to provide up to date information thatwill assist private, local, state and federal responses to emergencies. The House had approved $135.1 million for the National Mapping Program in FY2003--$5.8 million above the request and $1.8 million above FY2002. In reportlanguage, the House Appropriations Committee also emphasized the importance ofcompleting and implementing the National Map. The Senate passed $131.1 millionfor this program, $1.8 million above the request but $2.2 million below FY2002. Geologic Hazards, Resources, and Processes. For the Geologic Hazards, Resources, andProcesses activity, FY2003 enacted funding is $234.7 million, $10.0 million abovethe Administration's request and $1.9 million above FY2002 funding levels. TheAdministration had proposed decreases totaling $13.7 million, which covered nofewer than twelve line item programs across the three budget subactivities: HazardAssessments, Landscape and Coastal Assessments, and Resource Assessments. Contrary to the Administration's request, funding for FY2003 was increased slightlyfor each of these programs (compared to FY2002 levels). Hazards Assessments,Landscape and Coastal Assessments, and Resource Assessments received $75.4million, $79.2 million, and $80.0 million, respectively for FY2003. Funding forsome programs were maintained and others received increases in funding forFY2003. For example, funding for volcanic equipment in Shemya, Alaska wasrestored to FY2002 levels, as well as funding for a coastal erosion study in NorthCarolina. There was an increase of funding ($1.5 million above FY2002) for thecoastal program, including over $4 million dedicated to research efforts in the Gulfof Mexico. A recommendation for a transfer of $4.0 million from the NPS to theUSGS to support a Critical Ecosystems Initiative in the Everglades, made by theSenate Committee on Appropriations, was not enacted. For FY2003 appropriations, the House had approved $234.7 million--$10.1 million over the request and $1.9 million more than FY2002. Increases aboveFY2002 funding were given to the National Coastal Program, research examining theimpact of global dust events affecting the continental United States, oil and gasresource assessments, and geothermal resource assessments. The Senate hadapproved $234.9 million for this program, $10.2 million above the request and $2.1million over FY2002. The Senate Committee on Appropriations had not agreed withmany of the program reductions assumed in the budget request and restored a numberof them. (For details, see Congressional Record, January 15, 2003, S574). Water Resources and Investigations. The FY2003 enacted level for the Water Resources and Investigations activity was$208.5 million, $30.7 million above the Administration's request ($177.8 million)and $2.7 million above FY2002 ($205.8 million). The Administration had soughtto discontinue USGS financial support for the Toxic Substances Hydrology Programand to reduce funding for the National Water Quality Assessment Program(NAWQA). Funding for these programs, however, were increased above thePresident's request, including $63.6 million for NAWQA and $13.5 million for theToxic Substances Hydrology Program. As with the FY2002 budget request, theFY2003 request sought to discontinue USGS support for Water Resources ResearchInstitutes based on the finding that most institutes have been very successful inleveraging funding for program activities from non-USGS sources. For FY2003,funding for Water Resources Research Institutes was kept at the FY2002 level of$6.0 million. The National Stream Flow Information program retained its FY2002funding level of $14.3 million, and funding for Hydrologic Research andDevelopment increased to $15.5 million for FY2003. Included in FY2003Appropriations are $1 million for the Long-term Estuary Assistance Program and anincrease of $0.5 million for the Interstate Commission for the Potomac River Basinto conduct basin-wide groundwater assessment. The conferees did not include funds for the Rathdrum Prairie/Spokane Valley aquifer study as proposed by the Senate. In the joint explanatory statement, theconferees explained that it was supportive of the project, yet believed that requiredagreements and funds were not secured. Further, the conferees stated a willingnessto consider the project next year. The House had approved $209.7 million for FY2003 for Water Resources and Investigations--an increase of $31.8 million over the request and $3.8 million morethan FY2002. The Senate had passed $206.6 million for water resourcesinvestigations--$28.8 million over the request and $0.8 million above FY2002. TheSenate Committee on Appropriations had not concurred with the Administration'sproposed reductions and restored funding for the National Water Quality AssessmentProgram, Toxic Substances Hydrology Program, National Streamflow InformationProgram, and Water Resources Research Institutes. Biological Research. For FY2003, Biological Research activities received $170.9 million, $10.4 million above the Administration's request of $160.5 million and $4.5 million above FY2002 ($166.4million). For Biological Research and Monitoring, $133.0 million was provided forFY2003, including $2.7 million for chronic wasting disease research. For biologicalinformation management and delivery, $22.9 million was appropriated for FY2003. The conference managers expressed their concerns about the National BiologicalInformation Infrastructure program (NBII), specifically for "an apparent lack ofdirection and budget accountability" (Congressional Record, February 12, 2003,H1061). The NBII is a program designed to provide increased access to data andinformation on the nation's biological resources. The conference managers directedthe USGS to create a plan that would prioritize a vision for the NBII, addressingnational and international activities of NBII, and how the program relates to theUSGS's programmatic and strategic goals for data sharing. Further, the managersrequested a list of accomplishments for each "node" of the NBII and an explanationof how these accomplishments support USGS Science Centers and DOI landmanagement agencies. The conference managers expect pertinent committees toreceive this plan by April 30, 2003. For FY2003, the House had approved $170.4 million for Biological Research--$9.9 million more than the request and $4.0 million over FY2002. TheSenate had approved $166.9 million, $6.4 million above the request and $0.5 millionover FY2002. The Senate Committee on Appropriations had not agreed with manyof the proposed reductions, restoring funding for several activities. Science Support Funding. Science Support focuses on those costs associated with modernizing the infrastructure formanagement and dissemination of scientific information. For FY2003, $85.7 millionwas appropriated for Science Support, $0.4 million below the Administration'srequest and $0.5 million below the FY2002 level. A decrease of $1.6 million fromthe House enacted level for accessible data transfer was enacted. The House hadapproved $87.4 million for Science Support--$1.3 million above the request and$1.1 million more than FY2002. The Senate had agreed to $85.7 million, $0.4million below the request and $0.5 million less than FY2002. Facilities Funding. Facilities focuses on the costs for maintenance and repair of facilities. The FY2003 appropriation forFacilities is $91.4 million, $2.4 million above the Administration's request of $89.0million and $1.9 million above FY2002 levels ($89.4 million). This includes adecrease of $1.3 million for the Leetown Research Center expansion from FY2002and an increase of $0.8 million for the Tunison Laboratory. The House had approved$91.2 million for Facilities-- $2.2 million over the request and $1.7 million aboveFY2002. The Senate had passed $89.4 million for facilities. The conferencemanagers expressed their strong support for USGS partnerships with institutions thatemphasize collaboration, federal-state partnerships, and public-private partnerships. Table 9. Appropriations for the U.S. Geological Survey, FY2002-FY2003 ($ in millions) For further information on the U.S. Geological Survey , see its World Wide Website at http://www.usgs.gov/ . Minerals Management Service. The Minerals Management Service (MMS) administers two programs: the OffshoreMinerals Management (OMM) Program and the Minerals Revenue Management(MRM) Program, formerly known as the Royalty Management Program. OMMadministers competitive leasing on outer continental shelf lands and overseesproduction of offshore oil, gas and other minerals. MRM collects and disbursesbonuses, rents, and royalties paid on federal onshore and Outer Continental Shelf(OCS) leases and Indian mineral leases. MMS anticipates collecting about $4.2billion in revenues in FY2003 from offshore and onshore federal leases. Revenuesfrom onshore leases are distributed to states in which they were collected, the GeneralFund of the U.S. Treasury, and various designated programs. Revenues from theoffshore leases are allocated among the coastal states, Land and Water ConservationFund, the Historic Preservation Fund, and the U.S. Treasury. The FY2003 appropriations law provided $271.7 million for MMS, less $100.2 million in receipts, for a total appropriation of $171.4 million. The FY2003 totalincluded $6.1 million for oil spill research. It also included $265.5 million forRoyalty and Offshore Minerals Management, comprised of $165.3 million fromappropriations and $100.2 from offsetting collections. The Administration's proposed budget for MMS for FY2003 was $270.6 million. This proposal included $6.1 million for oil spill research, and $264.4million for Royalty and Offshore Minerals Management (including $137.5 millionfor OMM activities and $83.3 million for MRM programs). Of the total budget,$170.3 million would derive from appropriations, and $100.2 million from offsettingcollections which MMS has been retaining from OCS receipts since 1994. TheFY2003 total is about 4% higher than the $259.5 million total budget for FY2002(which includes $102.7 million in receipts). Offsetting collections would decline by$2.5 million from FY2002 to FY2003. The Senate supported a total of $270.7million for MMS, including $137.6 million for OMM and $83.3 million for MRMprograms (with $100.2 million from offsetting collections). The House approved$271.1 million for MMS, including $138.0 million for OMM and $83.3 million forMRM, and would spend $100.2 million from offsetting collections. The MMS revised its mineral leasing revenue estimates downward by 40% in FY2003 from the FY2002 estimates. For instance, in the FY2002 budget request,mineral leasing revenues were estimated to be $7.9 billion in FY2002 and $7.3billion in FY2003. Current revenue estimates for these years are $5.1 billion and $4.2billion respectively. Price fluctuation is the most significant factor in the revenueswings. Oil prices that were in the $26-$30 per barrel range came down dramaticallyto the $20-$22 per barrel range in 2001. Also, natural gas prices fell significantlyduring the past year in part because of the relatively mild winter. Over the pastdecade, royalties from natural gas production have accounted for between 40%-45%of MMS receipts, while oil accounts for not more than 25%. Below is a discussionof related issues of interest to Congress that have been considered within the contextof the appropriations process. The Outer Continental Shelf Lands Act of 1953 (OCSLA, 43 U.S.C. 1331) requires the Secretary of the Interior to submit a 5-year leasing program that specifiesthe time, location and size of lease sales to be held during that period. The new5-year leasing program (2002 -2007) went into effect July 1, 2002. MMS willconduct 20 oil and natural gas lease sales during the five year period. Half of thosesales will be in the Western or Central Gulf of Mexico (GOM), two in the EasternGOM and the remainder around Alaska. Sales in the Eastern GOM are especiallycontroversial. Industry groups contend that the sales are too limited given what theysay is an enormous resource potential while environmental groups and some stateofficials argue that the risks to the ecology and the economy are too great. TheFY2003 appropriations law continues the moratorium in the Eastern Gulf of Mexicooutside Lease Sale 181. A controversial oil and gas development issue in offshore California involving MMS drew congressional interest. A breach-of-contract lawsuit was filed by nineoil companies seeking $1.2 billion in compensation for their undeveloped leases. The companies claim that MMS failed to conduct consistency determinationsrequired by the court. A federal statute, the Coastal Zone Management Act of 1972(16 U.S.C. 1451) was amended in 1990 to allow for consistency determinations.Using this Act, the state of California could determine whether development of oiland gas leases are consistent with the state's coastal zone management plan. In 1999,the MMS extended 36 out of the 40 leases at issue by granting lease suspensions. However, in June 2001 the Ninth Circuit Court struck down the MMS suspensionsarguing that MMS failed to show consistency with the state's coastal zonemanagement plan. The Bush Administration appealed this decision January 11,2002, in the Ninth Circuit and proposed a more limited lease development plan thatinvolves 20 leases using existing platforms. The Court however upheld its decisionfavoring California. The Administration appealed the decision to the U.S. Court ofAppeals in San Francisco. On December 2, 2002, a three-judge panel upheld theearlier decision. The Department of the Interior has 90 days (early March 2003) toappeal this decision to the Supreme Court. The leases are in effect, pending theappeal. The FY2003 appropriations law includes a (non-binding) Sense of the Congress provision barring Interior bill funding for any exploration and development of the 36leases that were extended by the MMS. In earlier action, the House had approvedlegislative language to the Interior appropriations bill to prohibit funding in the billfrom being used to develop these leases. The language sought a permanentprohibition on new drilling in the contested area. On September 10, 2002, theSenate agreed to a Sense of the Senate amendment to bar Interior bill funding for anyexploration and development of the above mentioned 36 leases, but the bill was notpassed by the Senate. A similar sense of the Senate amendment was approved by theSenate on January 23, 2003, and included in the Senate-passed omnibusappropriations bill. Also, 107th Congress legislation ( S. 1952 ) by Senators Boxer (D-CA) and Landrieu (D-LA) sought to compensate the companies for surrenderingall undeveloped leases off California's coast with financial credits to acquire oil andgas leases in the Gulf of Mexico. The credits could be as much as $3 billion. In May 2002, the Administration announced its plans to buy back oil and gas leases from Chevron, Conoco and Murphy oil companies off Pensacola, Florida for$115 million in an area known as Destin Dome. Included in the announcement wereoil and gas lease buybacks in the Everglades National Park, Big Cypress NationalPreserve and the Ten Thousand Islands National Wildlife Refuge that would requireapproval by Congress. For further information on the Minerals Management Service , see its World Wide Web site at http://www.mms.gov/ . Office of Surface Mining Reclamation and Enforcement. The Surface Mining Control and Reclamation Act of1977 (SMCRA, P.L. 95-87 ) established the Office of Surface Mining Reclamationand Enforcement (OSM) to ensure that land mined for coal would be returned to acondition capable of supporting its pre-mining land use. SMCRA also establishedan Abandoned Mine Lands (AML) fund, with fees levied on coal production, toreclaim abandoned sites that pose serious health or safety hazards. Congress'sintention was that individual states and Indian tribes would develop their ownregulatory programs incorporating minimum standards established by law andregulations. OSM is required to maintain oversight of state regulatory programs. Insome instances states have no approved program, and in these instances OSM directsreclamation in the state. The Administration, Senate, and House all recommended a decrease in funds for OSM from the FY2002 level. The Administration's request for the Office ofSurface Mining for FY2003--at $279.4 million--reflected a drop of $27.1 millionfrom the FY2002 level of $306.5 million. The House approved $290.1 million, andthe Senate passed $297.1 million. The Senate-passed total was enacted in theFY2003 appropriations law. The OSM budget has two components: Regulation and Technology programs and Abandoned Mine Lands (AML, or Abandoned Mine Reclamation Fund). ForRegulation and Technology, the Administration sought $105.4 million, an increaseof roughly $2.3 million from the FY2002 level ($103.1 million). Included in theFY2003 request was $10 million in funding for the Appalachian Clean StreamsInitiative (ACSI), the same level as in FY2002, and $1.5 million for the SmallOperators Assistance Program (SOAP). For the AML Fund, the Administrationsought $174.0 million for FY2003, a reduction of $29.4 million from the $203.4enacted for FY2002. Major components of this reduction included a decrease of $17million for State and Tribal conventional AML grants, and a reduction of nearly $11million described as a "one time reduction to Federal emergency projects." For FY2003, Congress enacted $105.4 million for Regulation and Technology. The House, Senate, and Administration had supported this level. For the AML,Congress enacted $191.7 million for FY2003. In earlier action, the House hadapproved $184.7 million for AML, $10.7 million more than the Administrationrequest, but a reduction still of $18.7 million from the FY2002 enacted level forAML. The House Committee on Appropriations specifically rejected theAdministration's proposal to make any cuts in spending for Federal high priorityprojects. However, the Senate Committee recommended $191.7 million for AML,more than restoring the $17 million cut by the Administration for State and Tribalconventional AML grants. Specifically, the Senate Committee included $17.5million for these grants and $210,000 for federal high priority reclamation projects. The Committee also agreed to the request of $10 million for ACSI and $1.5 millionfor SOAP. The omnibus appropriations legislation approved by the Senate onJanuary 23, 2003, adopted the Committee's recommendation, and these were thelevels enacted in the FY2003 appropriations law. Grants to the states from annual AML appropriations are based on states' current and historic coal production. "Minimum program states" are states withsignificant AML problems, but with insufficient levels of current coal production togenerate significant fees to the AML fund. The minimum funding level for each ofthese states was increased to $2 million in 1992. However, over the objection ofthese states, Congress has appropriated $1.5 million to minimum program statessince FY1996. The FY2003 law also appropriates $1.5 million to minimum programstates. In general, several states have been pressing in recent years for increases in the AML appropriations. The unappropriated balance of AML collections in the fundis expected to be roughly $1.65 billion by the end of FY2003. For further information on the Office of Surface Mining Reclamation and Enforcement , see its World Wide Web site at http://www.osmre.gov/osm.htm . Bureau of Indian Affairs. The Bureau of Indian Affairs (BIA) provides a variety of services to federally recognizedAmerican Indian and Alaska Native tribes and their members, and historically hasbeen the lead agency in federal dealings with tribes. Programs provided or fundedthrough the BIA include government operations, courts, law enforcement, fireprotection, social programs, education, roads, economic development, employmentassistance, housing repair, dams, Indian rights protection, implementation of land andwater settlements, management of trust assets (real estate and natural resources), andpartial gaming oversight. BIA's FY2002 direct appropriations were $2.22 billion (including supplemental appropriations but excluding a $10.0 million rescission). For FY2003, theAdministration proposed $2.25 billion, an increase of 1% over FY2002. The Senateand House passed, and Congress enacted, approximately $2.27 billion. The enactedamount is 1.2% over the FY2003 request and 2.7% over the FY2002 appropriation. Table 10 below presents figures for FY2002 enacted and FY2003 Administration,Senate, House, and enacted appropriations for the BIA and its major budgetcomponents; selected BIA programs are shown in italics. For trust management improvement (see discussions below), the Administration requested a total BIA-wide increase of $34.8 million, spread across such programsas tribal courts, probate, real estate services and appraisals, social services, security,forestry, and executive oversight. The Senate approved the full requested amount,but the FY2003 appropriations law reduced the BIA-wide increase to $31.9 million. For the BIA office handling petitions for federal recognition of tribes (the Branch of Acknowledgment and Research, or BAR), an activity criticized for lackof resources, the Administration proposed an additional $0.05 million (5%) overFY2002. The Senate agreed with the Administration's request, while the Houseapproved an additional $0.55 million over FY2002, a 52% increase. Congressenacted the House level of $1.6 million. See Table 10 . Related to tribal recognition(and Indian gaming), a provision for a study commission on Native American policy,added by the House Appropriations Committee to the FY2003 Interior bill, wasdropped by the full House. A proposed Senate floor amendment to the bill, to placea moratorium on BAR tribal recognition approvals or denials pending certainprocedural changes, was tabled. The Senate, in 108th Congress floor consideration of the FY2003 omnibus appropriations bill, added a new title that would enact a settlement of an Indian landclaim by Sandia Pueblo of New Mexico involving Cibola National Forest. This titleremained in the Consolidated Appropriations Resolution for FY2003 as enacted. Table 10. Appropriations for the Bureau of Indian Affairs, FY2002-FY2003 ($ in thousands) Key issues for the BIA include the proposed reorganization of the Bureau's trust asset management functions, the movement toward greater tribal influence on BIAprograms and expenditures (especially the role of contract support costs), andproblems in the BIA school system. BIA Reorganization. Current BIA reorganization proposals arise from issues and events related to trust funds and assetsmanagement. Historically, the BIA has been responsible for managing Indian tribes'and individuals' trust funds and trust assets. Trust assets include trust lands and thelands' surface and subsurface economic resources (e.g., timber, grazing lands, orminerals); trust asset management includes real estate services, processing oftransactions (sales, leases, etc.), surveys, appraisals, probate functions, land titlerecords activities, and other functions. The BIA had, however, historicallymismanaged Indian trust funds and trust assets, especially in the areas ofrecord-keeping and accounting. This led to a legislative reform act in 1994 and anextensive court case in 1996. The 1994 act created the Office of Special Trustee forAmerican Indians (OST) (see below), assigning it responsibility for oversight of trustmanagement reform. Trust fund management was transferred to the OST in 1996,but the BIA still manages trust assets. BIA and OST, together with several offices created by the Secretary of the Interior Norton (Office of Historical Trust Accounting and Office of Indian TrustTransition), are implementing the Secretary's current trust management improvementproject. The project includes improvements in trust asset systems, policies, andprocedures, historical accounting for trust accounts, reduction of backlogs, andmaintenance of the improved system. The current project replaces an earlier HighLevel Implementation Plan (HLIP) created under the Clinton Administration. Whilea computerized trust fund accounting system, operated by OST, had been installedsuccessfully under the HLIP in 2000, a new computerized trust asset managementsystem drew much tribal, congressional, and court criticism. That criticism led thecurrent Secretary to have a consultant, Electronic Data Systems, Inc. (EDS), reviewthe trust asset system and the entire trust reform effort. EDS's 2001 reports included a recommendation for a single executive controlling trust reform. In late 2001, citing this recommendation, the Secretaryproposed to split off BIA's trust asset management responsibilities into a new Bureauof Indian Trust Asset Management (BITAM), and requested approval from bothAppropriations Committees for a reprogramming of FY2002 funds to carry out theBITAM reorganization. The Committees did not approve the reprogrammingrequest, instead directing the Secretary to consult with Indian tribes. Theconsultation process took place during much of 2002 through a joint tribal-DOI TrustReform Task Force. The great majority of commenting tribes opposed the BITAMproposal and many tribes and tribal organizations offered alternative plans. TheBIA's proposed FY2003 budget did not include the BITAM reorganization proposal(or a reprogramming request). The Senate Appropriations Committee's June 2002report ( S.Rept. 107-201 ) forbade the Secretary to implement the BITAM proposal orto use FY2003 funds for any action that would alter the BIA's tribal or individualtrust authority. In the fall of 2002, the tribal members of the Trust Reform TaskForce decided that they could not agree with the Department on trust standards andoversight. In December 2002 the head of the BIA announced a new proposedreorganization of BIA and OST trust management structures. Under the plan, theBIA's trust operations at regional and agency levels will be split off from other BIAservices, and the OST will have trust officers at BIA regional and agency officesoverseeing trust management and providing information to the Indian trustbeneficiaries. Tribes and tribal organizations were critical of the new proposal. Inrecent court filings, the Secretary states that the Interior AppropriationsSubcommittees did not object to the necessary reprogramming and that thereorganization will proceed. Tribal Control. Greater tribal control over federal Indian programs has been the goal of Indian policy since the 1970s. Inthe BIA this policy has taken three forms: tribal contracting to run individual BIAprograms under Title I of the Indian Self-Determination and Education AssistanceAct ( P.L. 93-638 , as amended); tribal compacting with the BIA to manage all or mostof a tribe's BIA programs, under the Self-Governance program (Title IV of P.L.93-638 , as added by P.L. 103-413 ); and shifting programs into a portion of the BIAbudget called Tribal Priority Allocations (TPA), in which tribes have more influencein BIA budget planning and within which each tribe has authority to reprogram allits TPA funds. In FY2002, TPA accounted for 42% of the BIA's operation of Indianprograms (including most of the BIA funding for tribal governments' operations,human services, courts, natural resources, and community development) and for 34%of total BIA direct appropriations. Table 10 shows the Administration, Senate,House, and enacted TPA figures for FY2003 Contract support costs, authorized under the Indian Self-determination Act, fund the non-operational and overhead costs incurred by tribes in administering programsunder self-determination contracts and self-governance compacts, and are calculatedusing a negotiated tribal cost rate (a percentage of the funding base covered by atribe's contracts or compact). Issues raised by contract support costs include theconsistent shortfall in contract support cost appropriations, tribes' claim ofentitlement to full support cost funding, identity of programs included in tribes'funding base, and rate-setting methods. The BIA estimates that appropriations forcontract support costs met 88% of reported tribal need in FY2001 and 91% inFY2002 and will meet 92% of the need in FY2003. Table 10 shows FY2003contract support costs. BIA School System. The BIA funds 185 elementary and secondary schools and peripheral dormitories, with over 2,000structures, educating about 48,000 students in 23 states. Tribes and tribalorganizations, under self-determination contracts and other grants, operate 121 ofthese institutions; the BIA operates the remainder. BIA schools' key problems arelow student achievement and a high level of inadequate school facilities. BIA students' academic achievement, as measured by standardized tests, is on average far below that of public school students. To improve BIA schools' academicperformance, the Administration proposes a "School Privatization Initiative" underwhich BIA-operated schools will all either become tribally operated or be privatizedby the end of FY2007. Some Indian tribes and organizations expressed doubt overthis proposal, arguing that funding for tribally-operated schools is presently belowneed and that under the initiative tribes would be forced to choose between operatingschools with inadequate resources or allowing them to be privatized. Both the Senateand House Committees opposed the proposed privatization initiative and removedits funding. No funding for the initiative was included in the FY2003 appropriationslaw. Many BIA school facilities are old and dilapidated, with health and safety deficiencies. BIA education construction covers both construction of new schoolfacilities to replace facilities that cannot be repaired, and improvement and repair ofexisting facilities. Schools are replaced or repaired according to priority lists. TheBIA in 2001 estimated the backlog in education facility repairs at $942 million. Table 10 shows FY2002 education construction appropriations, as well as theFY2003 proposed amount and the Senate, House, and enacted amounts. For further information on the Bureau of Indian Affairs , see its World Wide Web site at http://www.doi.gov/bureau-indian-affairs.html . CRS Report 97-851(pdf) . Federal Indian Law: Background and Current Issues , by [author name scrubbed]. Report of the Joint Tribal/BIA/DOI Advisory Task Force on Reorganization of the Bureau of Indian Affairs to the Secretary of the Interior and the AppropriationsCommittees of the United States Congress. [Washington: The Task Force]. August 1994. Departmental Offices. National Indian Gaming Commission. The National Indian Gaming Commission (NIGC) was established by the IndianGaming Regulatory Act of 1988 ( P.L. 100-497 ) to oversee Indian tribal regulationof tribal bingo and other "Class II" operations, as well as aspects of "Class III"gaming (casinos, racing, etc.). The NIGC may receive federal appropriations but itsbudget authority consisted chiefly of annual fees assessed on tribes' Class IIoperations. As Indian gaming expanded rapidly in the 1990s, Congress decided theNIGC needed a larger budget. The FY1998 Interior Appropriations Act, amendingthe Indian Gaming Regulatory Act, increased the ceiling for total NIGC fees to $8million, made Class III as well as Class II operations subject to fees, and increasedNIGC's appropriations authorization from $1 million to $2 million. However, theNIGC says it has recently experienced a new increase in demand for its oversightresources, especially audits and field investigations, primarily because of the rapidexpansion of California Indian gaming (following the March 2000 state referendumauthorizing California to negotiate more liberal Class III gaming compacts withtribes). During FY1999-FY2002, all NIGC activities were funded from fees, with no direct appropriations. For FY2003, however, the Administration proposedappropriations of $2 million for the NIGC, in addition to the Commission's feereceipts of $8 million. The House agreed to the proposed amount, but the Senatemade no FY2003 appropriations. Congress did not enact NIGC appropriations inFY2003, but the appropriations law included a provision that increases the NIGC'sfee ceiling to $12 million for FY2004. Also, the conference report directs the NIGCto consult with tribes about a new fee schedule. Office of Special Trustee for American Indians. The Office of Special Trustee for American Indians,in the Secretary of the Interior's office, was authorized by Title III of the AmericanIndian Trust Fund Management Reform Act of 1994 ( P.L. 103-412 ). The Office ofSpecial Trustee (OST) generally oversees the reform of Interior Departmentmanagement of Indian trust assets, the direct management of Indian trust funds,establishment of an adequate trust fund management system, and support ofdepartment claims settlement activities related to the trust funds. Indian trust fundsformerly were managed by the BIA, but numerous federal, tribal, and congressionalreports had shown severely inadequate management, with probable losses to Indiantribal and individual beneficiaries. In 1996, at Congress' direction and as authorizedby P.L. 103-412 , the Secretary of the Interior transferred trust fund management fromthe BIA to the OST. (See "Bureau of Indian Affairs," above.) FY2002 funding for the Office of Special Trustee was $110.2 million, which included $99.2 million for federal trust programs--trust systems improvements,settlement and litigation support, and trust funds management--and $11.0 millionfor the Indian land consolidation pilot project. The purpose of the land consolidationproject is to purchase and consolidate fractionated ownerships of allotted Indian trustlands, thereby reducing the costs of managing millions of acres broken up into tinyfractional interests. The Administration proposed a FY2003 budget of $159.0 million for the OST, an increase of 44% over FY2002. Included in the FY2003 request were $151.0million for federal trust programs (up $51.8 million, or 52%) and $8.0 million for theIndian land consolidation pilot project (down $3 million, or 27%). The Senateapproved an increase for the OST to $162.0 million, 47% over FY2002. It includedthe same amount as the Administration for federal trust programs and an additional$3 million for the Indian land consolidation project. The House approved $149.3million for FY2003, an increase of 35% over FY2002 and a decrease of 6% from theAdministration's request. The House approved the requested amount for landconsolidation ($8.0 million) but cut the requested amount for trust programs by $9.8million, to $141.3 million. For FY2003, Congress enacted the House figures. Indian trust funds comprise two sets of funds: (1) tribal funds owned by about 290 tribes in approximately 1,400 accounts, with a total asset value of about $3.1billion; and (2) individual Indians' funds, known as Individual Indian Money (IIM)accounts, in over 252,000 accounts with a total asset value of about $400 million. (Figures are from the OST FY2003 budget justifications.) The funds include moniesreceived both from claims awards, land or water rights settlements, and otherone-time payments, and from income from non-monetary trust assets (e.g., land,timber, minerals), as well as investment income. The trust funds controversy also involves a class action lawsuit filed in 1996, in the federal district court for the District of Columbia, against the federalgovernment by IIM account holders. The latest stage of the IIM lawsuit relates to anhistorical accounting for IIM funds, to determine the amount of money owed to theplaintiffs. The FY2001 Interior appropriations conference report, and the FY2002House and conference reports, had directed DOI to develop a sampling methodologyfor IIM accounting, as DOI had intended to do, but required submission of the plan,with a cost-benefit analysis, to Congress prior to implementation. Both repeated theprohibition on allocating funds for an historical accounting before submission of theplan and report. The requested report was transmitted to the Committees in earlyJuly 2002 by the DOI's Office of Historical Trust Accounting. The plaintiffs in thelawsuit object to an historical accounting methodology and, using a differentmethodology based on federal and state leasing returns, have estimated that they areowed about $137 billion. Recently the district court held the Secretary of the Interiorand the Assistant Secretary-Indian Affairs in contempt for continuing problems intrust management reform (following a trial on the contempt issues). While the courtdid not grant the plaintiffs' request that it appoint a receiver to take over reform ofIIM accounts management, it did direct both defendants and plaintiffs to submit plansfor future trust management and historical accounting by January 6, 2003. Bothparties submitted plans on that date. The House Appropriations Committee expressed its concern that the IIM lawsuit was jeopardizing DOI trust reform implementation, and added a number ofprovisions to the FY2003 Interior appropriations act. The provisions would limit thetime period to be covered by the historical accounting, require a summary of a fullhistorical accounting of 5 of the plaintiffs, cap the compensation of twocourt-appointed officials monitoring trust reform, direct that a new OST advisoryboard be appointed in accordance with the 1994 act, and authorize the InteriorSecretary to help employees pay for legal costs related to the IIM suit. The fullHouse agreed to all these provisions except the limit on the time period for historicalaccounting. The Senate agreed to none of these provisions, but the FY2003appropriations law included all the provisions approved by the full House. For further information on the Office of Special Trustee for American Indians ,see its World Wide Web site at http://www.ost.doi.gov/ . Insular Affairs. The Office of Insular Affairs (OIA) provides financial assistance to the territories and three former insularareas, manages relations between these jurisdictions and the federal government, andattempts to build the capacity of units of local government. Funding for the OIAconsists of two parts: (1) permanent and indefinite appropriations that do not requireaction by the 108th Congress or the Administration, and (2) discretionary and currentmandatory funding subject to the appropriations process. The combined funding ofboth parts for FY2002 was $353.0 million; the President's request for the FY2003budget was $343.5 million, a reduction of $9.5 million, or 2.7%. The Senateapproved a total of $348.5 million. The House approved $346.7 million. ForFY2003 the approved funding level is $349.6 million. Permanent and indefinite appropriations historically constitute roughly 70% to 80% of the OIA budget and comprise two elements. For FY2002 theseappropriations totaled $250.6 million; for FY2003 they total $252.4 million, asfollows: $146.4 million total to three freely associated states formerly included in the Trust Territory of the Pacific Islands. This payment is set forth in theCompacts of Free Association negotiated with representatives of the Republic of theMarshall Islands, the Federated States of Micronesia, and the Republic ofPalau. (16) $106.0 million in fiscal assistance to the U.S. Virgin Islands for estimated rum excise and income tax collections, and to Guam for income taxcollections. Discretionary and current mandatory funds that require annual appropriations constitute the remaining balance (roughly 20% to 30%) of the OIA budget. TheFY2003 request of the Bush Administration sought to reduce the discretionaryportion of the OIA budget to $91.0 million, a reduction of $11.2 million (11%) fromFY2002. The FY2003 appropriations law includes discretionary funding slightlyhigher than the request--$97.2 million. Discretionary funding is comprised of twoparts. Funding for the Assistance to Territories account has been set at $76.2 million;for the Compact of Free Association (CFA) assistance account, $21.0 million. Little debate has occurred in recent years on funding for the territories and the OIA. In general, Congress continues to monitor economic development and fiscalmanagement by government officials in the insular areas. For further information on Insular Affairs, see its World Wide Web site at http://www.doi.gov/oia/index.html . For information on the Department of Agriculture, see its World Wide Web siteat http://www.usda.gov/ . Department of Agriculture: ForestService. For information on the Department of Agriculture, see itsWorld Wide Web site at http://www.usda.gov/ . U.S. Forest Service. The ForestService (FS) budget enacted for FY2003 is $3.98 billion of discretionaryappropriations, $153.7 million (4%) less than was appropriated for FY2002 ($4.13billion), excluding $636 million appropriated in FY2003 to repay transfers to wildfiresuppression from other FY2002 appropriations. The FY2003 appropriations are$28.0 million (1%) more than the request, and $26.9 million (1%) more than theSenate provided, but $168.6 million (4%) less than the House passed (excluding a$500 million fire supplemental for FY2002). Forest Fires and Forest Health. Fire funding and fire protection programs were perhaps the most controversial issue confronted during consideration of theFY2003 Interior appropriations bill. In fact, during the 107th Congress, the Senatedid not pass an Interior appropriations bill largely due to disputes about fire fundingand a new program for wildfire protection. The discussion includes questions aboutfunding levels and locations for various fire protection treatments, such as thinningand prescribed burning to reduce fuel loads and clearing around structures to protectthem during fires. Another focus is whether logging and access roads help in firecontrol or exacerbate conflagrations. Still another issue is whether, and to whatextent, environmental analysis, public involvement, and challenges to decisionshinder fuel reduction activities. National Fire Plan. The FY2003 funding debate continued the increased attention in recent years to wildfires and the damage they cause. The severe fire seasons in thesummers of 2000 and 2002 prompted substantial debates and proposals related to firecontrol and fire protection. The severe 2000 fire season led the ClintonAdministration to propose a new program, called the National Fire Plan, whichapplied to BLM lands as well as to Forest Service lands, with $1.8 billion tosupplement the $1.1 billion requested before the fire season began. The National FirePlan comprises the Forest Service wildland fire program and fire fighting on DOIlands; the DOI wildland fire monies are appropriated to the BLM. Congress largelyenacted the proposal for FY2001, adding money to the FY2001 request for wildfireoperations, fuel reduction, and burned area restoration, fire preparedness, andprograms to assist local communities. Total appropriations for the FY2001 NationalFire Plan, covering BLM and FS fire funds, were $2.89 billion. Many of theincreases were continued in FY2002, although the less severe 2001 fire season ledto decreases in fire suppression operations, restoration and rehabilitation, emergencycontingency funds, and private land fire assistance. The FY2002 National Fire Planwas funded at $2.24 billion. FY2003 Appropriations. For FY2003, the Bush Administration had proposed to fund the National Fire Plan at $2.02 billion, $216 million (10%) less than theFY2002 level. The FY2003 enacted appropriation was $2.03 billion, $11 million(1%) more than requested, but $204 million less than the FY2002 level. (See Table11 .) The appropriation is less than the House passed ($2.17 billion), but more thanthe Senate passed ($2.01 billion). Table 11. Federal Wildland Fire Management Funding, FY2002-FY2003 ($ in millions) The FS and BLM wildland fire line items include funds for fire suppression (fighting fires), preparedness (equipment, training, baseline personnel, prevention,and detection), and other operations (rehabilitation, fuel treatment, research, and stateand private assistance). The FY2003 enacted appropriation for suppression matchedthe decrease proposed in the President's FY2003 request by eliminating theemergency contingent funds for FY2002. (See Table 11 ). Specifically, theappropriation includes $160.4 million for the BLM for fire suppression, and $420.7million for FS fire suppression. This is a small decrease from BLM FY2002suppression funding (-$1.0 million), and a substantial decrease (nearly -$101million) from FS FY2002 suppression funding For BLM fire preparedness, the appropriation matched the President's request of $277.2 million, a slight reduction from the FY2002 level of $280.8 million. ForFS fire preparedness, the appropriation was $616.0 million, down from the FY2002level of $622.6 million. This roughly split the difference between the House-passedincrease (to $640.0 million), and the President's proposed and Senate-passedreduction (to $600.7 million). For other BLM fire operations, the appropriation roughly matched the request and the House and Senate enactments of about $216 million, a reduction of about $20million from the FY2002 regular and emergency contingent appropriation. For otherFS fire operations, the appropriation was $343.2 million, down $4.5 million from therequest, and down $109.5 from the House, but up $12.9 million from the Senate. This is a decrease of $73.2 million from the $416.4 million appropriated for FY2002. FY2002 Supplemental Funds. The 2002 fire season also was severe, with conflagrations threatening towns in Colorado, Arizona, Oregon, and elsewhere. Asof November 15, 2002, wildfires had burned 7,112,733 acres, nearly as much as in2000, the most severe fire season since the 1950s. (17) The FS and BLM used theirFY2002 suppression funding, and borrowed from other accounts (such as landacquisition) as authorized. As a result, Congress and the Administration debatedwhether to include, in the FY2003 appropriation, supplemental funds for FY2002 torepay funds borrowed to pay for firefighting. In the FY2003 appropriations law,Congress ultimately enacted $825 million ($636 million for FS and $189 million forBLM) to repay the funds borrowed for FY2002 firefighting (Title III of Division N). Whether to appropriate supplemental funds for FY2002, and at what level, had been a subject of much debate during consideration of the FY2003 appropriationsbill. The House had added $700 million in FY2002 funds to the FY2003 InteriorAppropriations bill for fire suppression ($500 million for FS and $200 million forBLM). In late August, the Administration requested $825 million ($636 million forFS and $189 million for BLM) to supplement the FY2002 firefighting efforts. During Senate floor consideration of H.R. 5093 , Sen. Byrd offered anamendment (No. 4480) to add the Administration's request to the Interior bill. Adraft substitute, widely attributed to Sen. Domenici, sought $1.25 billion ($1.0 billionfor FS and $250 million for BLM), but this amendment was not offered in the Senate. Instead, Sen. Craig offered an amendment (on behalf of himself and Sen. Domenici)to the Byrd amendment to allow hazardous wildfire fuel reduction projects with lessenvironmental and public review. The introduced amendment and various substituteswere debated sporadically from September 5 through September 25, with noresolution. The Senate twice tried to end debate on the fire issue by invoking clotureon the Byrd amendment, but neither attempt was successful. Largely due to the lack of agreement on wildland fire funding and related issues, the Senate discontinued debate on the Interior appropriations bill in the 107thCongress. The Byrd and Craig/Domenici amendments remained pending when theSenate halted debate. The House Resources Committee persisted in consideringrelated authorizing legislation, but none was enacted in the 107th Congress. (SeeCRS Report RL31679.) Stewardship Contracting. The FY2003 appropriations law included a provision extending the authorization for stewardship through 2013 to the BLM and to anunlimited number of FS contracts (�323 of Division F). This authority allows theagencies to require fuel reduction or other stewardship activities as part of timber salecontracts--essentially trading goods (timber) for services (e.g., fuel reduction). Supporters assert that this is an efficient way to achieve non-commercial benefitsusing commercial contracts. Opponents counter that this creates incentives to allowmore trees to be cut, so as to gain more non-commercial benefits, and grants theagencies too much discretion over the use of timber receipts. Other Agency Programs. While funding for wildfires was the center of debate, Congress examined other Forest Service programs to determineFY2003 funding levels. The Administration had proposed terminating the EconomicAction Program (EAP), which includes rural community assistance and woodrecycling, and the Pacific Northwest economic assistance program. The FY2003appropriations law contained $26.4 million for EAP, with $5.0 million more for EAPin the Wildfire Management account -- a total of $31.4 million. The law did notinclude language from both House and Senate versions of the bill directing anallocation for the Pacific Northwest. The FY2003 total is $26.2 million (45%) belowthe FY2002 appropriations of $57.6 million. The Administration proposed a $19.2 million (13%) cut in land acquisition, for a total of $130.5 million. The House and Senate both had passed small cuts from theFY2002 land acquisition appropriation of $149.7 million, but the FY2003 enactedlevel was $133.8 million, $15.9 million (11%) less than the FY2002 appropriation. The request also proposed reducing Infrastructure Improvement (which is used toaddress the nearly $7 billion deferred maintenance backlog) by $10.1 million (17%),to $50.9 million. The FY2003 appropriations law reduced this further, to $45.9million, while shifting $4.9 million to other capital improvements. The FY2003 budget request included a new Emerging Pest and Pathogens Fund, to rapidly control invasive species problems since early aggressive efforts can reduceor eliminate a problem while it is still small. The request was for $12.0 million, andthe Senate included $14.0 million, but the House included no money for this Fundand no FY2003 funds were enacted. The other new proposed program was $15.0million for Expedited Consultations, where the FS can pay another federal agency toconsult on projects that might jeopardize an endangered or threatened species; thiswould assure that the other agencies' budgets do not limit the FS's ability to proceedon its projects. The FY2003 appropriations law did not include funding forExpedited Consultations. The Administration proposed $49.5 million, a $16.4 million (49%) increase over FY2002 in the Forest Stewardship Program, which provides technical assistance formanaging private forests. The FY2003 appropriations law, however, contained appropriations of $32.2 million, a $1.0 million (3%) decrease from FY2002. TheAdministration also proposed $69.8 million, a $4.8 million (7%) increase, in theForest Legacy Program, under which the Forest Service purchases title or easementsfor lands threatened with conversion to nonforest uses, e.g. , residences. The Househad reduced this to $60.0 million, while the Senate had increased it to $74.0 million. The FY2003 appropriations law provides $68.8 million, $1.0 million (1%) less thanrequested, but $3.8 million (6%) more than FY2002 appropriations. Tongass National Forest . The FY20003 appropriations law contained legislative language on the Tongass National Forest. The language prohibits administrativeappeals and judicial review of "The Record of Decision for the 2003 SupplementalEnvironmental Impact Statement for the 1997 Tongass Land Management Plan" (�335 of Division F). With this provision, Congress has essentially approved theagency's decision to recommend no additional wilderness in the Tongass NationalForest in Alaska. Some groups had been advocating additional wildernessdesignations and further restrictions on road building and timber harvesting in theTongass. For further information on the U.S. Forest Service , see its World Wide Web site at http://www.fs.fed.us/ . For information on the Government Performance and Results Act for the U.S. Forest Service, see the USDA Strategic Plan World Wide Web site at http://www.usda.gov/ocfo/strat/index.htm . CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RL31679. Wildfire Protection: Legislation in the 107th Congress and Issues in the 108th Congress , by [author name scrubbed]. CRS Report RS20822(pdf) . Forest Ecosystem Health: An Overview , by [author name scrubbed]. CRS Report RL30755 . Forest Fire Protection , by [author name scrubbed]. CRS Report RL30647 . The National Forest System Roadless Areas Initiative, by [author name scrubbed]. CRS Report RS20985 . Stewardship Contracting for the National Forests , by [author name scrubbed]. Department of Energy. Forfurther information on the Department of Energy (DOE), see its World Wide Website at http://www.energy.gov/ . For information on the Government Performance and Results Act for the DOE or any of its bureaus, see DOE's Strategic Plan World Wide Web site at http://www.cfo.doe.gov/stratmgt/plan/doesplan.htm . Fossil Energy Research, Development, and Demonstration. The FY2003 appropriations law contained$624.9 million for Fossil Energy R&D. This represents a 7% increase over FY2002($582.8 million), and a 28% increase over the President's FY2003 request ($489.3million). (18) Much of the difference in fundingbetween the enacted level and theAdministration's request is in fuel cells, transportation fuels, natural gas andpetroleum production technologies. In earlier action, the Senate approved fundingfossil energy programs at $625.7 million, while the House approved funding levelwas even higher--$664.2 million. The FY2003 appropriations law provided $150.0 million for the Clean Coal Power Initiative (CCPI) and approves Clean Coal Technology Program (CCTP)deferrals of $87 million for FY2003. The joint explanatory statement of theconference report states that up to $15.0 million in prior year funds may be used toadminister the CCTP in FY2003. The program is a cooperative cost-sharedindustry/government program for "funding advanced research and development anda limited number of joint government-industry-funded demonstrations of newtechnologies that can enhance the reliability and environmental performance ofcoal-fired power generators." The CCPI is along the lines of the Clean CoalTechnology Program, which has completed most of its projects and has been subjectto rescissions and deferrals since the mid-1990s. The Administration had requested $150.0 million for CCPI for FY2003 as part of a $2 billion ten-year commitment, but had not recommended a deferral frompreviously appropriated Clean Coal Technology Program funds. The CCTP has beenfunded separately from the other fossil R&D programs. The Administration hadsought to consolidate it with coal R&D programs under Fossil Energy Research andDevelopment. Under the proposal, the CCTP would have received no additionalappropriations, but would have received $40.0 million in FY2003 from previouslydeferred budget authority to continue with several projects that are still active. However, the CCTP was retained as a separate program in the FY2003appropriations law. The CCTP eventually will be phased out. The Senate had supported the President's request of $150.0 million for its CCPI but recommended a deferral of $60 million for the CCTP. The House also agreed to$150.0 million for CCPI, while deferring $50 million in CCTP funding until FY2004and using up to $14 million in prior year balances to administer the CCTP inFY2003. The Senate did not support using $14 million in prior year balancestowards the FY2003 Fossil Energy program. Under the Administration's request, research and development (R&D) on natural gas would have been be cut by nearly half, to $22.6 million, and R&D onpetroleum by about a third, to $35.4 million. The Senate however, supported theseprograms at $46.3 for natural gas and 44.3 million for petroleum programs. TheHouse approved $48.2 million for natural gas and $54.9 million for petroleumtechnology programs. The FY2003 law contained $47.3 million for natural gasprograms and $42.3 for petroleum technology. The Administration's request wouldhave phased out funding for the Fuels program, including R&D on ultra-clean fuelstechnology, reducing the request to $5.0 million for FY2003 from $32.2 million inFY2002. The Senate approved $27.3 million for the Fuels program, while the Housesupported spending $31.6 million. The FY2003 law retained the fuels program,providing $31.4 million. The FY2003 appropriations law contains $68.9 million forthe Energy Technology Center (ETC), as compared with the Administration's requestof $64.9 million. The Senate had supported $69.9 million, while the House approved$67.9 million for ETC programs. The FY2003 law also provided $40.2 million forsequestration R&D, which would test new and advanced methods for greenhouse gascapture, separation, and reuse. This is an increase from the FY2002 level of $32.2million, but a decrease from the Administration's request of $54.0 million. TheSenate and the House both had approved $42.0 million. The Administration also proposed to transfer the Fossil Energy (FE) Infrastructure program that funds natural gas research activities ($10.0 million inFY2002) to the Department of Transportation's Office of Pipeline Safety, in orderto reduce any duplication of effort. The Senate and House supported maintaining theinfrastructure program within Fossil Energy, and the FY2003 law retained theInfrastructure program within Fossil Energy with an appropriation of $9.1 million. For further information on Fossil Energy , see its World Wide Web site at http://www.fe.doe.gov/ . CRS Report RS20877. The Clean Coal Technology Program: Current Prospects , by [author name scrubbed]. Strategic Petroleum Reserve. The SPR, authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in late1975, consists of caverns formed out of naturally-occurring salt domes in Louisianaand Texas in which more than 570 million barrels of crude oil are stored. Thepurpose of the SPR is to provide an emergency source of crude oil which may betapped in the event of a presidential finding that an interruption in oil supply, or aninterruption threatening adverse economic effects, warrants a drawdown from theReserve. Sharp increases in the price of oil beginning in the spring of 1999 spurred calls for drawdowns from the Reserve. The Clinton Administration authorized someexchanges and swaps of oil from the SPR, and also instituted a program to acceptroughly 28 million barrels as royalty-in-kind (RIK) payments for production fromfederal leases. Acquiring oil for the SPR by RIK avoids the necessity for Congressto make outlays to finance direct purchase of oil; however, it also means a loss ofrevenues to the Treasury in so far as the royalties are paid in wet barrels rather thanin cash. In mid-November 2001, President Bush ordered that the SPR be filled tocapacity (700 million barrels) using RIK oil. Deliveries of RIK oil began in thespring of 2002. The fill rate has varied and should average about 55,000 barrels aday (b/d) between December 2002 and the end of FY2003. The FY2003 appropriation law provided a total of $180.9 million for the Strategic Petroleum Reserve. This consists of $172.9 million for facilities, operationand management; $2 million in new money for the SPR Petroleum Account,reflecting a level of $7 million for transportation of RIK oil, less a $5 millionrescission of unobligated prior-year funds; and $6 million for the NHOR, reflectinglower costs for leasing of the storage facilities. The FY2003 law reauthorized theSPR through FY2008. The FY2003 budget request for the SPR was $187.7 million, an increase of $8.7 million from the appropriation for FY2002 ($179.0 million). The request had threecomponents. First, it included $154.9 million for storage facilities development andoperations management, and $14.0 million for management of the SPR sites. Second, $11.0 million was included in the SPR Petroleum Account to support thecosts of transporting RIK oil to SPR sites. Third, the request included $8.0 millionfor the Northeast Heating Oil Reserve (NHOR), established by the ClintonAdministration, which houses 2 million barrels of home heating oil in above-groundfacilities in Connecticut and New Jersey. In the Senate, the Committee on Appropriations had recommended a total of $189.9 million, including $158.9 for facilities development and operations, $16.0million for management, $7.0 million for transporting RIK oil to the SPR, and $8million for the Northeast Home Heating Oil Reserve. The Committee reduced theSPR Petroleum Account by $4.0 million, transferring that money to development andoperations for the express purpose of helping to pay for injection of oil into theReserve. The House approved $190.9 million, essentially following the Senatemodel with an additional $1 million for management. The omnibus appropriations legislation approved by the Senate on January 23, 2003, included $172.9 million for the SPR, $7 million for the SPR PetroleumAccount, and $6 million for the NHOR - a total of $185.9 million. The Senate alsoincluded language giving permanent authorization to the SPR, and affirmingPresident Bush's previous expression that the SPR should be filled to capacity assoon as practicable. Similar language had been agreed to by the conferees on theomnibus energy legislation ( H.R. 4 ) that was not enacted before the107th Congress adjourned. For further information on the Strategic Petroleum Reserve , see its World Wide Web site at http://www.fe.doe.gov/programs/reserves/spr . CRS Issue Brief IB87050. The Strategic Petroleum Reserve , by [author name scrubbed]. Naval Petroleum Reserves. The National Defense Authorization Act for FY1996 ( P.L. 104-106 ) authorized sale ofthe federal interest in the oil field at Elk Hills, CA (NPR-1). On February 5, 1998,Occidental Petroleum Corporation took title to the site and wired $3.65 billion to theU.S. Treasury. P.L. 104-106 also transferred most of two Naval Oil Shale Reserves(NOSR) to DOI; the balance of the second was transferred to DOI in the spring of1999. On January 14, 2000, DOE returned the undeveloped NOSR-2 to the UteIndian Tribe; the FY2001 National Defense Authorization ( P.L. 106-398 ) providedfor the transfer. The U.S. retains a 9% royalty interest in NOSR-2, those proceedsto be applied to the costs of remediation for a uranium mill tailings site near Moab,Utah. This leaves in the Naval Petroleum Reserves program two small oil fields in California and Wyoming, which will generate estimated revenue to the governmentof roughly $7.2 million during FY2003. The request to maintain the NavalPetroleum Reserves (NPR) for FY2003 was $20.8 million, a decrease of $1.5 millionfrom FY2002 ($22.4 million, including $17.4 million in new appropriations and $5.0million in prior year funds). The conference report on the FY2003 appropriations billprovided $17.8 million, making a "general reduction" of $3 million from the House-and Senate-approved levels. This level was enacted into law for FY2003.. In settlement of a long-standing dispute between California and the federal government over the state's claim to Elk Hills as "school lands," the CaliforniaTeachers' Retirement Fund is to receive 9% of the sale proceeds after the costs ofsale have been deducted. The agreement between DOE and California provided forfive annual payments of $36.0 million beginning in FY1999, with the balance due tobe paid in equal installments in FY2004 and FY2005. The FY2003 budget requestincluded an advance appropriation of $36.0 million for the Elk Hills School LandsFund, to be paid at the start of FY2004. This was enacted in the FY2003appropriations law. For further information on Naval Petroleum and Oil Shale Reserves , see its World Wide Web site at http://www.fe.doe.gov/programs/reserves/npr. Energy Conservation. The FY2003 request for DOE's Energy Efficiency Program notes that "energy efficiencyprograms produce substantial benefits for the Nation," according to the BudgetAppendix to the U.S. Government's FY2003 Budget (Budget Appendix, p. 403). However, the Administration also stresses that the FY2003 budget proposes changesthat reflect findings of the National Energy Policy Report and the President'sManagement Agenda . Specifically, the request states that the "Energy Efficiency[Office] will terminate projects that provide insufficient public benefit, redirectactivities to better provide public benefits, place certain activities on a watch list toensure they advance effectively, and expand several programs that could achievesignificantly increased benefits with additional funding." (DOE Budget Highlights,p. 103). Thus, DOE proposed to decrease conservation funding under DOE's Officeof Energy Efficiency and Renewable Energy (EERE) from $912.8 million in FY2002to $901.6 million in FY2003. See Table 12 . Table 12. Appropriations for DOE Energy Conservation, FY2002-FY2003 ($ in millions) a Includes funds for a study by the National Academy of Sciences. b Includes $3.0 million for cooperative programs with states and $5.0 million forenergy efficiency science initiatives. In the 107th Congress, the House-approved level of $984.7 million for the DOE Energy Conservation Program would have increased funding over FY2002 by $71.9million, or 8%, not accounting for inflation. Compared to the Administration'srequest, the House level would have increased funding by $83.0 million, or 9%. TheHouse level included $250.0 million for weatherization grants, $50.0 million for stateenergy grants, $687.6 million for R&D, and a $3.0 million general reduction. In the 108th Congress, the Senate-passed bill contained $884.3 million for the FY2003 DOE Energy Conservation Program. This was $37.4 million less than the$921.7 million that the Senate Appropriations Committee had recommended in the107th Congress. Compared to the House-passed bill in the 107th Congress, the Senatelevel was $100.4 million, or 10%, lower. This difference includes $73.3 million lessfor R&D and $30.0 million less for grants, but did not include a $3.0 millionreduction that was included in the House level. As enacted, the FY2003 bill includes $897.6 million for the DOE Energy Conservation Program. Compared to the Administration's request, the enacted levelwould cut would cut $4.0 million, or 0.4%. Compared to FY2002, the enacted levelcuts $15.2 million, or 2%, not accounting for inflation. This includes cuts of $5.0million for weatherization grants and $18.2 million for R&D. Transportation R&Dfalls by $4.7 million, including decreases of $5.7 million for Fuels Utilization and$4.0 million for Hybrid Vehicles. It also includes FreedomCAR-related increases of$8.1 million for Advanced Combustion Engines and $6.1 million for Fuel Cells. Industry R&D falls by $10.6 million, including cuts of $2.8 million for PetroleumIndustry Vision and $2.8 million for Combustion Systems. Power Technologiesincreases by $6.8 million. Buildings Research and Standards falls by $2.6 million,including a cut of $4.5 million for Technology Road Maps. Energy Star increases by$1.2 million. In the 107th Congress, the report of the House Committee on Appropriations proposed $1.0 million in new funding for DOE to "do a better job of measuringpotential program success" through program reviews by the National Academy ofSciences to help decide whether to expand or scale-back programs. The FY2003 lawallocates $500,000 for this purpose. Also, the House report directs that EERE adopta procurement practice to "allow full and open competition to occur, whenappropriate." The report of the Senate Committee on Appropriations directed EEREto "revise and restructure" the budget request documents for FY2004, noting thatthey often lack a complete explanation of recommended funding changes. Theconference report does not add any further provisions. For further information on the Energy Conservation Budget , see the Web site at http://www.mbe.doe.gov/budget/03budget/ . For further information on EnergyConservation Programs , see the Web site at http://www.eren.doe.gov/ . CRS Issue Brief IB10020. Energy Efficiency: Budget, Oil Conservation, and Electricity Conservation Issues , by [author name scrubbed]. CRS Report RS20852(pdf) . The Partnership for a New Generation of Vehicles: Status and Issues , by [author name scrubbed]. Department of Health and Human Services: Indian Health Service. For further information on the Indian HealthService see the agency's Internet site at http://www.dhhs.gov/ . Indian Health Service. The Indian Health Service (IHS) carries out the federal responsibility of assuring comprehensivemedical and environmental health services for approximately 1.5 million to 1.7million American Indians and Alaska Natives (AI/AN) who belong to over 560federally recognized tribes located in 34 states. Health care is provided through asystem of federal, tribal, and urban Indian operated programs and facilities that serveas the major source of health care for AI/AN. IHS provides direct health careservices through 36 hospitals, 58 health centers, 4 school health centers, and 44health stations. Tribes and tribal groups, under IHS contracts, operate another 13hospitals, 161 health centers, 3 school health centers, and 249 health stations,including 170 Alaska Native village clinics. IHS, tribes, and tribal groups alsooperate 11 regional youth substance abuse treatment centers and more than 2,200units of staff quarters. IHS funding is separated into two Indian health budget categories: services and facilities. The Senate-passed bill recommended a total of $2.821 billion inappropriations for FY2003, up $5.7 million or 0.2% above the President's request of$2.816 billion, and $62.2 million or 2.3% over the FY2002 appropriation of $2.759billion. The House-passed bill provided a total of $2.901 billion for FY2003, up$84.2 million or 3% from the President's request, and $141.5 million or 5.1% overthe FY2002 appropriation. The FY2003 appropriations law provides a total of$2.868 billion for FY2003, $52.7 million (1.9%) over the President's request and$109.2 million (4%) over the FY2002 appropriation. Of the total IHS appropriationsenacted for FY2003, approximately 87% would be used for health services, and 13%for the health facilities' program. IHS services are funded not only throughcongressional appropriations, but also from money reimbursed from private healthinsurance and federal programs such as Medicare, Medicaid, and the State Children'sHealth Insurance Program. IHS estimates that it will collect another $450 million inreimbursements in FY2003. The IHS's service budget has several subcategories: clinical services, preventive health services, and other services. Clinical services include basic primary care forinpatient and outpatient services at IHS hospitals and clinics. The House provideda total of $1.996 billion for FY2003, $51.2 million or 2.6% over the Administrationrequest of $1.945 billion, and $104.4 million or 5.5% above the FY2002 level of$1.892 billion. The Senate recommended $1.949 billion for FY2003, $47 millionless than the House, but 0.2% over the request and 3% above the FY2002appropriations level. Congress enacted $1.987 billion, 2.1% above the request and5% over FY2002. Within clinical services, the enacted appropriations will supportprograms for hospitals and clinics ($1.22 billion), dental health ($100.3 million), mental health ($50.6 million), and substance abuse treatment ($137.7 million). Alsoin the clinical services budget, the House appropriated $483.1 million for contracthealth care, 4.9% over FY2002 and $15 million more than the Senaterecommendation of $468.1 million. Congress enacted $478.1 million, 3.8% over theFY2002 amount. Contract health services are services purchased from local andcommunity health care providers when IHS cannot provide medical care and specificservices through its own system. For preventive health services, both the House and Senate recommended $103.3 million, the same amount requested by the President, and 3.6% over theFY2002 appropriation of $99.7 million. The FY2003 appropriations law providedthe requested amount. Congress accepted the President's funding request for publichealth nursing ($39.9 million), health education in schools and communities ($11.1million), and immunizations ($1.6 million). The total also will fund the communityhealth representatives' program ($50.8 million), a tribally administered program thatsupports community members who work to prevent illness and disease in theircommunities. For other health related activities, the House recommended a total of $409.2 million and the Senate, $403.3 million. Congress enacted $402.1 million. TheHouse, Senate, and Congress allocated $31.5 million for off-reservation urban healthprojects, and $2.4 million for costs associated with providing tribal managementgrants to tribes. The House and Senate differed, however, in amounts forscholarships to Indian health professionals; the House recommended $35.4 million,while the Senate provided a total of $31.3 million and directed IHS to recruit healthprofessionals from among the general population. Congress enacted the Senateamount. The House also expected IHS to implement a program offering bonuspayments to health professionals, similar to the approach taken in a South Dakotademonstration program where a tribe was able to hire full time personnel at less costthan the cost of paying part time contract health services. For IHS direct operations, including technical management and tribal consultation support, the Senate recommended $57.2 million, and the House slightlyless at $56.1 million. Congress enacted $60.6 million. For self-governance funding,however, there was a large difference as the Senate recommended $10.1 million, andthe House provided only $1.1 million. The House Committee report said that onlythis amount was needed to cover 8 positions in the self governance office, becausethere had been no new self-governance compacts recently, and the committeebelieved that the funds should be used for other underfunded programs. Congressenacted $5.6 million for self-governance. Contract support costs are awarded to tribes for administering programs under contracts or compacts authorized under the Indian Self-Determination Act ( P.L.93-638 , as amended). They include costs for expenses tribes incur for financialmanagement, accounting, training, and program start-up. The Senate and the Houseboth proposed that $270.7 million be used for contract support costs, and that amountwas enacted. The Senate did not agree with the President's proposed reductions in staffing levels, travel, training, and copying costs for direct operations. On another matter, theSenate Committee on Appropriations expressed concern about the Administration'srecent proposal to transfer and consolidate IHS's Office of Legislative Affairs intothe parallel office in the Department of Health and Human Services (DHHS). TheCommittee noted that this IHS office handles a variety of complex Native Americanand Alaskan Indian health service issues, which require more expertise and attentionthan would be possible under a consolidation. As such, the Committee did not agreeto the consolidation, while the House was silent on the issue. The conference reportstated that DHHS consolidations or realignments of any IHS programs must beapproved by both Appropriations Committees through the reprogramming process. The IHS's facilities category includes money for the construction, maintenance, and improvement of health and sanitation facilities. The House recommended a totalof $391.9 million for FY2003, a 6.1% increase over the preceding year'sappropriation of $369.5 million, and a 8.1% increase over the President's FY2003request of $362.6 million. The Senate provided $365.4 million for FY2003, a 1.1%decrease from the FY2002 appropriation, but an increase of 0.8% or $2.8 millionover the President's FY2003 request. Congress enacted $376.2 million, 1.8% abovethe FY2002 amount and 3.8% over the President's request. The House and Senate disagreed with several changes put forward in the President's budget. They both prohibited IHS funds from being used to constructsanitation facilities in new houses funded under the Department of Housing andUrban Development (HUD); both bodies assert that HUD should provide thefunding. The FY2003 appropriations law included the prohibition. For further information on the Indian Health Service , see the agency's Web siteat http://www.ihs.gov/ . Office of Navajo and Hopi Indian Relocation. The Office of Navajo and Hopi Indian Relocation(ONHIR) was reauthorized for FY1995-2000 by P.L. 104-301 . The 1974 relocationlegislation ( P.L. 93-531 , as amended) was the end result of a dispute between theHopi and Navajo tribes involving land originally set aside by the federal governmentfor a reservation in 1882. Pursuant to the 1974 act, lands were partitioned betweenthe two tribes. Members of one tribe who ended up on the other tribe's land were tobe relocated. ONHIR classifies families as relocated when they occupy theirreplacement home. Most relocatees are Navajo. A large majority of the estimated3,477 Navajo families formerly on the land partitioned to the Hopi already haverelocated under the Act, but the House Appropriations Committee estimates thatabout 233 families (almost all Navajo) have yet to complete relocation, includingabout 24 Navajo families still on Hopi partitioned land (some of whom refuse torelocate). The remaining families are not on Hopi partitioned land but are in variousstages of acquiring replacement housing. ONHIR's chief activities consist of housingacquisition and construction, land acquisition, and certification of families' eligibilityfor relocation benefits. For FY2002, ONHIR received appropriations of $15.1 million. For FY2003, the Administration proposed $14.5 million, a decrease of $657,000, or 4%. TheSenate, House, and Congress approved the proposed amount of $14.5 million. For much of the relocation period, negotiations and litigation have proceeded among the Navajo Nation, the Hopi Tribe, the Navajo families on Hopi partitionedland, and the federal government on a number of issues, especially regarding HopiTribe claims against the United States. In 1995, the United States and the Hopi Tribereached a proposed settlement agreement on Hopi claims. Attached to the settlementagreement was a separate accommodation agreement between the Hopi Tribe and theNavajo families, which provided for 75-year leases for Navajo families on Hopipartitioned land. The Navajo-Hopi Land Dispute Settlement Act of 1996 ( P.L.104-301 ) approved the settlement agreement between the United States and the HopiTribe. Not all issues have been resolved by these agreements, however, andopposition to the agreements and the leases is strong among some of the Navajofamilies. Navajo families with homesites on Hopi partitioned land faced a March 31,1997, deadline for signing the leases (accommodation agreements). According toONHIR, 70 of the 73 Navajo families then on Hopi-partitioned land had signedaccommodation agreements by the end of September 1999. The Hopi Tribe has called for enforcement of relocation against Navajo families without leases. Like the FY1997-FY2002 Interior appropriations acts, the FY2003appropriations law would forbid ONHIR from evicting any Navajo family from Hopipartitioned lands unless a replacement home were provided. This language appearsto prevent ONHIR from forcibly relocating Navajo families during FY2003 since theONHIR has a large backlog of relocatees who are approved for replacement homesbut have not yet received them. These relocatees would have priority in receivingreplacement homes. The settlement agreement approved by P.L. 104-301 , however,allows the Hopi Tribe under certain circumstances to begin actions against the UnitedStates after February 1, 2000, for failure to give the Hopi "quiet possession" of allHopi-partitioned lands if Navajo families on these lands have not either relocated orentered into accommodation agreements with the Hopi Tribe. The Hopi Tribe hasnot yet filed such a quiet possession claim against the United States. The Tribe hasagreed to wait while the U.S. pursues legal actions against Navajo who have neithersigned agreements nor relocated, but has asserted that evictions should have alreadystarted. Smithsonian, National Endowment for the Arts, and National Endowment for the Humanities. One of the perennialissues addressed by Congress concerning the programs and agencies delineatedbelow is whether federal government support for the arts and culture is an appropriatefederal role, and if it is, what should be the shape of that support. If the continuedfederal role is not appropriate, might the federal commitment be scaled back suchthat greater private support or state support would be encouraged? Each program hasits own unique relationship to this overarching issue. Smithsonian. The Smithsonian Institution (SI) is a museum, education and research complex of 16 museums andgalleries, the National Zoo, and research facilities throughout the United States andaround the world. Nine of its museums and galleries are located on the Mall betweenthe U.S. Capitol and the Washington Monument, and SI counted 42 million visits in2001. The National Zoo had 2.8 million visits, the Museum of Natural History had9.1 million visits, and the National Air and Space Museum (NASM) had 9.8 millionvisits. The Smithsonian is estimated to be 70% federally funded. A federal commitment to fund the Institution was established by legislation in 1846. Today,the Smithsonian receives both federal appropriations and various types of trust funds. SI Budget and Appropriations. The FY2003 appropriations law provides $548.5 million for the Smithsonian, $20.6million above the House-passed bill and the FY2003 request, $17.6 million above theSenate-passed level and $29.7 million above the FY2002 level. For Smithsonian'sSalaries and Expenses, the FY2003 appropriation provides $449.1 million, $12.4million above the House and Senate-passed level ($436.7 million), $14.4 millionabove the budget request for FY2003 ($434.7 million) and $28.1 million above theFY2002 enacted level. See Table 13 . For the National Museum of the American Indian (NMAI), the FY2003 enactedappropriation provides $16.0 million for completion of construction of the Mallmuseum, the same as the Senate-passed bill. The House-passed bill and thePresident's budget request had included $10.0 million for the NMAI. Initially, theNMAI was controversial. Opponents of constructing a new museum argued that thecurrent Smithsonian museums needed renovation, repair, and maintenance of thecollection with an estimated 142 million items, more than the public needed anothermuseum on the Mall. Proponents argued that there had been too long a delay inproviding a museum in Washington to house the Indian collection. Private donations to the Smithsonian for the NMAI and a fund-raising campaign focusing on individuals, foundations, and corporations totaled $36.7 million,representing one-third of the original estimated cost ($110 million) and the amountrequired to meet the non-appropriated portion of project funding. Of this amount, anestimated $15 million came from the Indian community directly. Based on a newestimate of $219.3 million for the Indian museum, the Smithsonian indicated that $20million in trust funds would cover opening costs and that additional fund raisingwould be required. The groundbreaking ceremony for the NMAI took placeSeptember 28, 1999. The projected opening of the Museum is 2004. The FY2003 enacted appropriation provides $83.4 million for "repair, restoration, and alteration of facilities", an increase of $2.1 million above theHouse-passed bill ($81.3 million), and $5.1 million above the Senate measure ($78.3million). This line item includes funds for critical repairs at the National Zoo,renovation of the Patent Office Building and the National Museum of NaturalHistory, and routine repair in all Smithsonian facilities. Work was begun last yearon the National Museum of Natural History and the Patent Office Building (the homeof two Smithsonian Museums--the National Portrait Gallery and the SmithsonianMuseum of American Art--with a projected total cost estimate of $151 million.) The SI is responsible for over 400 buildings with approximately 8 million square feetof space. Four of the Smithsonian's buildings plus the National Zoo constituteapproximately one-third of the SI's public space: the National Museum of NaturalHistory (1910), the American Art and Portrait Gallery (1836-1860), the Castlebuilding (1846), and the Arts and Industries building (1849). A study by the National Academy of Public Administration (NAPA), A Study of the Smithsonian Institution's Repair, Restoration and Alteration of FacilitiesProgram, confirms what the Institution had already concluded: that funding forrepair and renewal of SI's facilities has not kept pace with need, resulting inincreased deterioration of the physical plant. The NAPA report contends that theSmithsonian needs to spend more than $1.5 billion over the next decade to fullyrepair, renovate, and improve its facilities. SI Trust Funds. In addition to federal appropriations, the Smithsonian receives trust funds to expand its programs. The SItrust fund includes contributions from private sources, and government grants andcontracts from other agencies. General trust funds include investment income andbusiness revenues from what the Smithsonian identifies as "business ventures"(including the Smithsonian magazine, retail shops, restaurants, concessions, catalogs,and entertainment initiatives, i.e. Resident Associates and other entertainmentprograms.) There are also trust funds that are private donor designated funds. Designated trust funds are those that include gifts, grants, and contributions fromindividuals, foundations, and corporations that specify and direct the purpose offunds. In FY2001, contributions from private individuals, foundations, and corporatesources for designated projects totaled $178.8 million, and for FY2002, they wereprojected to total $80 million. One large single contribution to the Smithsonian froma private donor (Steven F. Udvar-Hazy)--$60 million--was pledged for the NationalAir and Space Museum's Dulles Center (FY1999). The Dulles extension isscheduled to open in December of 2003. Finally, government grants and contracts (separate from the regular appropriation) are provided by various government agencies and departments forprojects specific to the Smithsonian because of their expertise in certain fieldsincluding science, history, art, and education. For FY2002, in addition to the regularappropriation, government grants and contracts were projected to be $70 million. Part of this funding is available to the Smithsonian's Astrophysical Observatory. Tracking of the Smithsonian's Trust fund expenditures is of major concern to the Congress. In FY2003, the Senate Committee on Appropriations recommendedinstituting a plan that the Smithsonian has now developed to track trust fund budgetproposals and expenditures. According to the Inspector General of the Smithsonian,there was a discrepancy between what the Board of Regents approved for 1998through 2000 ($699 million) compared to actual expenditures of $1.07 billion. The House Committee on Appropriations, in FY2003 report language, expressed concern about the controversies between the Smithsonian and benefactors'control over SI properties and exhibits. One particular issue is the renaming of theAir and Space Theater, replacing the name of Langley with a corporate sponsorname. The Committee recommended reopening negotiations, and requests a reviewof all benefactor agreements within the last two years. In addition, the Committeewould like further review of the practices for compensation of Smithsonianleadership. Two of the controversies concerning the Smithsonian in previous years were resolved. They involved the proposed closing of the Smithsonian Center forMaterials Research and Education (SCMRE) and the Conservation and ResearchCenter (CRC) in Front Royal, Virginia. On May 6, 2001, in response to objectionsby scientists and others, the Smithsonian reversed its policy with regard to the CRCand SCMRE and continued to maintain both centers. The FY2002 InteriorAppropriations law provided that an independent "blue ribbon" Science Commissionwould be established and meet before any final decision about closing either the CRCor the SCMRE. The direction of SI's research priorities is still of concern toCongress. Table 13. Smithsonian Institution Appropriations FY2002-2003 ($ in thousands) a Includes $21,707,000 contained in the FY2002 Emergency SupplementalAppropriation, P.L. 107-117 , for SI's Anti-Terrorism funding. For further information on the Smithsonian , see its World Wide Web site at http://www.si.edu/ . National Endowment for the Arts and National Endowment for the Humanities. One of the primary vehicles for federalsupport for the arts and the humanities is the National Foundation on the Arts and theHumanities, composed of the National Endowment for the Arts (NEA), the NationalEndowment for the Humanities (NEH), and the Institute of Museum Services (IMS),now constituted as the Institute of Museum and Library Services (IMLS) with anOffice of Museum Services (OMS). The authorizing act, the National Foundationon the Arts and the Humanities Act, was last reauthorized in 1990 and expired at theend of FY1993, but NEA and NEH have since been operating on temporary authoritythrough appropriations law. The 104th Congress established the Institute of Museumand Library Services and created the Office of Museum Services ( P.L. 104-208 ). The FY2003 appropriation for NEA provides $116.5 million (which includes $17 million for the Challenge America Arts Fund), the same as the Senate passed billand the FY2003 Administration request. The House had approved a total of $126.5million for NEA ($99.5 million plus $27.0 million for the Challenge America ArtsFund). The House had agreed to a floor amendment (234-192) to increase NEA by$10 million and NEH by $5 million by reducing Interior departmental managementsalaries and expenses. The FY2003 appropriation's law and the Senate-passed billincluded Challenge America Arts fund within NEA's total for Grants andAdministration, a slightly different accounting method than used by the House andthe Administration. See Table 14 . NEA's direct grant program currently supportsapproximately 1,600 grants. State arts agencies are now receiving over 40% of grantfunds, with 1,000 communities participating nationwide, particularly fromunder-represented areas. The NEA now administers the Challenge America ArtsFund, a program of matching grants for arts education, outreach and community artsactivities for rural and undeserved areas. The NEA is required to submit a detailedreport to the House and Senate Appropriations Committees describing the use offunds for the Challenge America program. The FY2003 appropriation for NEH is $125.8 million, the same as the FY2003 budget request and the Senate-passed measure, $1.3 million above the FY2002 level,but $5.3 million below the House-passed FY2003 level. The NEH supportsextensive grants for humanities education, research, preservation and publichumanities programs; grants for the creation of regional humanities centers; andgrants to help develop humanities programs under the jurisdiction of the 56 statehumanities councils. NEH also supports a Challenge Grant program to stimulate andmatch private donations in support of humanities institutions. Effective with FY2003, the appropriation for the Office of Museum Services moved from the Interior and related agencies appropriations bill to the appropriationsbill for the Departments of Labor, Health and Human Services (HHS), and Education(ED) and related agencies. The rationale for this transfer was that the Office ofLibrary Services, the larger of the two components of IMLS, is already underLabor-HHS-Ed appropriations, and having one single funding stream under oneappropriation would make bookkeeping simpler and reduce duplicative review forAppropriations subcommittees. The FY2003 appropriation (under Labor-HHS-Edappropriations) for IMLS is $245.5 million for both libraries and museums (includingearmarks for museums and libraries and $10.0 million for educating librarians for the21st century initiative). The OMS portion of the appropriation is approximately $30million, compared to $26.9 million for FY2002. The Office of Museum servicesprovides grants in aid to museums in the form of leadership grants, museumconservation, museum assessment, and General Operating Support (GOS) to helpover 400 museums annually to improve the quality of their services to the public. Among the questions Congress continually considers is whether funding for the arts and humanities is an appropriate federal role and responsibility. Some opponentsof arts support argue that NEA and NEH should be abolished altogether, contendingthat the federal government should not be in the business of supporting arts andhumanities. Other opponents argue that culture can and does flourish on its ownthrough private support. Proponents of federal support for arts and humanitiescontend that the federal government has a long tradition of support for culture,beginning as early as 1817 with congressional appropriations for works of art toadorn the U.S. Capitol. Some representatives of the private sector say that they areunable to make up the gap that would be left by the loss of federal funds for the arts.Others argue that abolishing NEA and NEH would curtail or eliminate the programsthat have national significance and purpose (such as national touring theater anddance companies, radio and television shows, traveling museum exhibitions, etc.) Former President Clinton's Committee on the Arts, in Creative America (1997),recommended federal funding for NEA and NEH at $2.00 per person by the year2000. In contrast, total funding for NEA and NEH now represents approximately 84cents per person. Previous NEA Controversies. Although there appears to be an increase in congressional support for the NEA, the debate often recurs on previousquestionable NEA grants when appropriations are considered, in spite of attempts toresolve these problems through previous statutory provisions. The debate involvedwhether or not some of the grants given were for artwork that might be deemedobscene. To date, no NEA projects have been judged obscene by the courts. OnNovember 5, 1996, a federal appeals court upheld an earlier decision, NEA v. Finley ,ruling that applying the "general standards of decency" clause to NEA grants was"unconstitutional." However, in anticipation of congressional reaction to NEA'sindividual grants, NEA eliminated grants to individuals by arts discipline with someexceptions. On June 25, 1998, the Supreme Court reversed the federal appeals courtdecision for NEA v. Finley (CA9,100F.3d 671) by a vote of 8 to 1, stating that theNEA "can consider general standards of decency" when judging grants for artisticmerit, and that the decency provision does not "inherently interfere with Firstamendment rights nor violate constitutional vagueness principles." Congress enacted NEA reform measures in past appropriations laws. Among these reforms were increases in funding allocations from 35% to 40% to states forbasic state arts grants and for grants to under served populations. In addition,language emphasizing arts education was included. A 15% cap was placed on NEAfunds allocated to each state, exempting only those grants with a national impact.Members of the House and Senate were added to the National Council on the Arts. Both NEA and NEH were given specific authority to solicit funding and to investthose funds. In the FY2003 final appropriation, the language is retained that has beenin previous appropriations related to funding priorities and restrictions on grants,including that no grant may be used generally for seasonal support to a group; and nogrants may be for individuals except for literature fellowships, National Heritagefellowships, or American Jazz Master fellowships. Table 14. Arts and Humanities Funding FY2002-FY2003 ($ in thousands) a The total for NEA grants and administration includes the Challenge Americaprogram. b Beginning with FY2003, the Office of Museum Services as part of IMLS isincluded in the appropriations bill for the Departments of Labor-HHS-Ed and RelatedAgencies. For further information on the National Endowment for the Arts , see its web site at http://arts.endow.gov/ . For further information on the National Endowment for the Humanities , see its web site at http://www.neh.gov/ . For further information on the Institute of Museum Services , see its web site at http://www.imls.gov/ . CRS Report RS20287 . Arts and Humanities: Background on Funding , by [author name scrubbed]. The Land and Water Conservation Fund (LWCF). The four principle land management agencies--Bureauof Land Management, Fish and Wildlife Service, National Park Service, and ForestService--draw primarily on the LWCF to acquire lands. The presentations abouteach of those agencies earlier in this report identifies funding levels for their landacquisition activities. The LWCF also funds acquisition and recreationaldevelopment by state and local governments through a state grant programadministered by the National Park Service. The LWCF is authorized at $900 millionannually through FY2015. However, each agency's acquisitions, as well as the stategrant program, are funded through annual appropriations. Appropriations for federalacquisitions generally are earmarked to specific management units, while the stategrant program rarely is earmarked. Through FY2002, the total amount that could have been appropriated from the LWCF since its inception was $25.4 billion. Actual appropriations have been $12.5billion. In recent years, until FY2003, appropriators had provided generallyincreasing amounts from the Fund for land acquisition. The total had more thanquadrupled, rising from a low of $138 million in FY1996 to $573 million in FY2002. The FY2003 appropriation is less than the FY2000 level. Table 15 shows LWCFappropriations for the past four years (FY2000-FY2003), the Bush Administrationrequests for FY2002 and FY2003, and congressional action for FY2003. Table 15. LWCF Funding: FY2000 through FY2003 ($ in millions) Source: Data for FY2000 and FY2001compiled by the Department of the InteriorBudget Office; data for FY2002 from Interior Appropriations Conference Report( H.Rept. 107-234 ); and data for FY2003 from budget proposals and appropriationscommittees documents. Note: In some recent years, Congress has appropriated LWCF Funds to federal agencies for purposes other than land acquisition and stateside grants. This startedwhen Congress provided $72 million for other purposes in the FY1998 Interiorappropriations law. Funding in FY1999 was entirely for land acquisition. Sincethen, funding for other purposes has included $15 million in FY2000, $456 millionin FY2001, $135 million in FY2002, and at least $170 million for FY2003. a This figure includes $50 million for a new Cooperative Conservation Initiative, which was not funded by either the House or the Senate, and was not included in thefinal bill. b This total does not include $3.0 million sought by DOI for the Shivaist IndianWater Settlement Act of 1999, which authorizes LWCF funds for the Paiute Tribein Utah. Congress may continue to lower LWCF appropriations, as it did in the early and mid 1990s, as part of efforts to address the federal budget deficit. In addition, otherpriorities have become more pressing in the wake of 9/11. The lower FY2003appropriation request of $532 million from the Bush Administration was in sharpcontrast with it's request for full funding for FY2002, and less than the $573 millionthat Congress provided in FY2002. The decline continued chronologically with eachstep in the FY2003 legislative process; the House passed less funding than theAdministration requested, then the Senate approved less funding then the House. The amount provided by the conference committee and enacted into law--$414million--is more than $100 million less than the House-passed total and is $50million less than the Senate-passed total. The amount enacted for FY2003 also issignificantly less than was appropriated in FY2000, FY2001, and FY2002. It is lessin total than in FY2002 but also less for each of the five accounts that make up theLand and Water Conservation Fund. The FY20003 enacted total also is significantly less than Administration requested. One example of a reduction is that the FY2003 law provides a $15million dollar earmark through the National Park Service to provide grants to Floridato acquire land critical to the South Florida (Everglades) Ecosystem Restoration; boththe House- and Senate-passed bills, and the Bush administration request, hadincluded $20 million. As in recent years, some of the Fund is appropriated for other programs. For instance, the following programs received the specified amounts from the LWCF(some of the programs received additional funding outside the LWCF). Programsand amounts include: the FWS's Landowner Incentive Program ($40 million); theFWS's Stewardship Grants Program ($10 million); the FWS's CooperativeEndangered Species Conservation Fund ($51.5 million); the FWS's State and TribalWildlife Grants ($65 million); and the BIA's Land and Water Claims Settlements ($3million). In FY2003, The Bush Administration requested $200 million for the state grant program portion of the Land and Water Conservation Fund, of which $50 millionwould have funded a proposed Cooperative Conservation Initiative. This Initiativesought to promote conservation through partnerships that match BLM, NPS, andFWS funds with local contributions. In addition to the $50 million provided fromLWCF, the Administration sought another $50 million for the Initiative from theoperating accounts of the three DOI land management agencies, for a total of $100million. Congress did not fund this proposed Initiative, although the Houseexpressed strong interest in the concept on which it is based, of using programs thatcan leverage federal funds, identifying numerous opportunities. Conservation Spending Category. The House and Senate Appropriations Committees created the ConservationSpending Category (CSC) in the FY2001 Interior appropriations law. The CSCcombines funding for about 2 dozen resource protection programs including theLWCF (it also includes some coastal and marine programs funded throughCommerce appropriations). This action was in response to the ClintonAdministration request for substantial funding increases in these programs under hisLands Legacy Initiative and widespread congressional interest in increasingconservation funding. The FY2001 law appropriated $1.21 billion for FY2001 (and$470 million through the Commerce appropriations law). The amount appropriatedin FY2001 through Interior appropriations was a substantial increase from a total of$557 million for these programs the preceding year. The FY2001 law also authorizedthat total spending under the category would grow each year, from $1.6 billion inFY2001 (of which $1.2 billion would be in Interior Appropriations programs) to $2.4billion in FY2006. All funding each year is subject to the appropriations process. For FY2002, the Bush Administration did not use the framework of the CSC, but requested a total of $1.26 billion for this group of programs. Congress used thecategory and appropriated $1.30 billion. In its FY2003 budget request, again theAdministration did not use the CSC category. However, the House AppropriationsSubcommittee on Interior and Related Agencies estimated that the FY2003 requesttotaled $1.32 billion for programs in this category, a slight increase from FY2002funding. The House-passed bill provided $1.44 billion. The report accompanying theSenate-passed bill states that the CSC is not being used because the Budget Act inwhich it was established has expired and there is no budget resolution. It also statesthat total funding for FY2003 under this bill meets the aggregate total projected forthe CSC in FY2003. Neither the FY2003 appropriations law nor the accompanyingconference report contain calculations of FY2003 funding for the CSC. Rather, thejoint explanatory statement of the conference report states that no funds in the act arederived from the CSC, but that most of the programs previously funded under thatcategory are continued in FY2003. CRS Report RL30444(pdf) . Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106th Congress, by Jeffrey Zinn and M.Lynne Corn. CRS Report RS20471. The Conservation Spending Category: Funding for Natural Resource Protection , by Jeffrey Zinn. CRS Report 97-792. Land and Water Conservation Fund: Current Status and Issues , by Jeffrey Zinn. CRS Issue Brief IB10015. Protecting Natural Resources and Managing Growth: Issues in the 107th Congress , by Jeffrey Zinn. Everglades Restoration. Thealterations of the natural flow of water by a series of canals, levees, and pumpingstations, combined with agricultural and urban development, are thought to be theleading causes of environmental deterioration in the South Florida ecosystem. In1996, Congress authorized the U.S. Army Corps of Engineers (Corps) to create acomprehensive plan to restore, protect, and preserve the entire South Floridaecosystem, which includes the Everglades (P.L 104-303). A portion of thisplan--The Comprehensive Everglades Restoration Plan (CERP), completed in1999--provides for federal involvement in the restoration of the ecosystem. Congress authorized the Corps to implement CERP in the Water ResourcesDevelopment Act of 2000 (WRDA 2000; Title VI of P.L. 106-541 ). Based on CERPand other previously authorized restoration projects, the federal government, alongwith state, local, and tribal entities, is currently engaged in a collaborative effort torestore the South Florida ecosystem. The principal objective of CERP is to redirect and store "excess" freshwater currently being discharged to the ocean via canals, and use it to restore the naturalhydrological functions of the South Florida ecosystem. CERP seeks to deliversufficient water to the natural system without impinging on the water needs ofagricultural and urban areas. The federal government is responsible for half the costof implementing CERP, and the other half is borne by the State of Florida, and to alesser extent, local tribes and other stakeholders. CERP consists of 68 projects thatare expected to be implemented over approximately 36 years, with an estimated totalcost of $7.8 billion; the total federal share is estimated at $3.9 billion. (19) Restoration activities are conducted by federal agencies in the South Florida ecosystem under CERP and other laws. For example, for FY2003, Congressappropriated $90.0 million to the Corps for restoration work in Central and SouthernFlorida, yet only a portion of this total was appropriated for projects authorized byCERP. The remaining amount is expected to be for projects authorized by otherlaws, namely the Everglades National Park and Protection Act of 1989 ( P.L.101-229 ) and the Water Resources Development Act of 1996 ( P.L. 104-303 ). FromFY1993 to FY2003, federal appropriations for projects and services related to therestoration of the South Florida ecosystem have exceeded $1.9 billion dollars, andstate funding has topped $3.6 billion. (20) Theaverage annual federal cost forrestoration activities in Southern Florida in the next 10 years is expected to beapproximately $286 million/year. (21) For FY2003,the administration requestedapproximately $260 million for restoration activities in the South Florida ecosystem,of which approximately $46 million was for the implementation of CERP. (22) Of theprojects and activities specified in the FY2003 appropriations conference report, over$180 million has been appropriated for restoration activities in the Everglades. (23) Appropriations for restoration projects in the South Florida ecosystem have been included in several annual appropriations laws. The Department of the Interior (DOI)and Related Agencies Appropriations laws have provided funds to several DOIagencies for restoration projects. Specifically, DOI conducts CERP and non-CERPactivities in Southern Florida through the National Park Service (NPS), Fish andWildlife Service (FWS), U.S. Geological Survey (USGS), and Bureau of IndianAffairs (BIA). For FY2003, the DOI requested $96.1 million for CERP andnon-CERP activities related to restoration in the South Florida ecosystem. Of thistotal, the NPS requested $70.4 million for land acquisition, construction, and researchactivities; the FWS requested $13.2 million for land acquisition, refuges, ecologicalservices, and other activities; the USGS requested $12.1 million for research,planning, and the Critical Ecosystem Studies Initiative; and the BIA requested $0.4million for water projects on Seminole and Miccosukee Tribal lands. See Table 16 . Appropriations for other restoration projects in the South Florida ecosystem have been provided to the Corps (Energy and Water Development Appropriations),National Oceanic and Atmospheric Administration (NOAA) (Departments ofCommerce, Justice, and State, the Judiciary, and other Related AgenciesAppropriations), U.S. Environmental Protection Agency (EPA) (VA, HUD, andRelated Agencies Appropriations), and U.S. Department of Agriculture (USDA)(U.S. Department of Agriculture and Related Agencies Appropriations). Table 16. Appropriations for Everglades Restoration in the DOI Budget (FY2002-FY2003) ($ in thousands) a Columns with N/A (not available) indicate that funding levels are not specified in bills. b This includes total funding for park operations in Everglades National Park, DryTortugas National Park, Biscayne National Park, and Big Cypress National Preserve. c This category includes appropriations for activities authorized by CERP as well asthe operating expenses for the South Florida Ecosystem Task Force. d Several activities performed by the DOI that are related to Everglades restorationare not specified in appropriations bills. These activities usually are part of a largercategory of funding and in some cases their funding is determined by the agenciesand reported later. For restoration activities in the Everglades in FY2003, the DOI received approximately $30 million less than in FY2002. The primary reductions in fundingwere for the Modified Waters Delivery Project (from $35.2 million to $10.0 million)and land acquisitions conducted by the FWS ($8.5 million to $2.5 million). Appropriations for the Modified Waters Delivery Project were largely provided inprior fiscal years. The FY2003 level was $11.5 million less than theAdministration's request, including decreases of $5.0 million and $3.8 million forland acquisitions in the State of Florida to be conducted by the NPS and FWS,respectively. The FY2003 law provided the Fish and Wildlife Service with $1.8million to purchase land near the Pelican Island National Wildlife Reserve (NWR)and $0.8 million to purchase land near the Key Deer NWS. Other programs relatedto Everglades restoration were appropriated at the FY2003 requested levels. Thisincludes the Critical Ecosystem Initiative for $4.0 million; ecological services for theFish and Wildlife Service for $2.5 million; and surveys, investigations, and researchby the USGS for $8.1 million. The FY2003 appropriations law also authorizes theimplementation of a flood control plan (Alternative 6D) as part of the ModifiedWater Delivery Project. (See the Everglades section under the National Park Servicesection above.) The Interior appropriations bills passed by the House and Senate had provided similar levels of funding for the NPS to conduct restoration activities in SouthernFlorida, with some exceptions. The $4.0 million for the Critical Ecosystem StudiesInitiative allocated to the NPS in the House bill was given to the USGS by theSenate. For the FWS, the Senate passed $3.3 million less for FWS land acquisitionsthan the House. Specifically, the Senate passed $1 million for the acquisition oflands at the J.N. Ding Darling National Wildlife Reserve and $1.5 million for theNational Key Deer Refuge; the House passed $3 million and $1.5 millionrespectively for the same lands, as well as $1.3 million for lands near the Pelican BayNational Wildlife Reserve. The FWS seeks to acquire these lands on the groundsthat doing so would benefit restoration activities in CERP. For BIA, the Houseprovided $0.3 million for water quality studies on the Seminole Indian Reservation,which was not included in the Senate- passed bill but contained in the FY2003appropriations law. There is little detailed information in either bill or report language about appropriations recommended for the FWS, USGS, and BIA for restoration activitiesin the South Florida ecosystem. Some of these restoration activities are part of largerprograms that are funded in appropriations bills. For example, the USGS proposesto collect data, construct models, and conduct studies in South Florida that areexpected to benefit restoration activities. Some of these restoration activities fallunder the categories of water resources investigations and biological research, whichare broad activities funded by the USGS. Detailed information about these activitiescan be found in agency budget justifications and in a cross-cut budget prepared bythe South Florida Ecosystem Restoration Program http://www.sfrestore.org . For further information on Everglades Restoration , see the web site of the South Florida Ecosystem Restoration Program at http://www.sfrestore.org and theweb site of the Corps of Engineers at http://www.evergladesplan.org/ . CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed]. CRS Report RL31621(pdf) . Florida Everglades Restoration: Background on Implementation and Early Lessons , by [author name scrubbed]. CRS Report RL31278 . Arctic National Wildlife Refuge: Background and Issues . [author name scrubbed], coordinator. CRS Issue Brief IB10094. Arctic National Wildlife Refuge: Legislative Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL30444(pdf) . Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106th Congress, by Jeffrey Zinn and M.Lynne Corn. CRS Issue Brief IB10072. Endangered Species: Difficult Choices , by [author name scrubbed] and [author name scrubbed]. CRS Report 97-851(pdf) . Federal Indian Law: Background and Current Issues , by [author name scrubbed]. CRS Report 90-192(pdf) . Fish and Wildlife Service: Compensation to Local Governments , by [author name scrubbed]. CRS Report 96-123. Historic Preservation: Background and Funding , by [author name scrubbed]. CRS Report 97-792. Land and Water Conservation Fund: Current Status and Issues , by Jeffrey Zinn. CRS Report RL31115 . Legal Issues Related to Proposed Drilling for Oil and Gas in the Arctic National Wildlife Refuge , by [author name scrubbed]. CRS Issue Brief IB89130. Mining on Federal Lands , by [author name scrubbed]. CRS Report RS21157 . Multinational Species Conservation Fund , by [author name scrubbed]. CRS Report RS20902 . National Monument Issues , by [author name scrubbed]. CRS Issue Brief IB10093. National Park Management and Recreation , by [author name scrubbed] and David Whiteman, coordinators. CRS Report RL31392 . PILT (Payments in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. CRS Issue Brief IB10015. Protecting Natural Resources and Managing Growth: Issues in the 107th Congress , by Jeffrey Zinn. Report of the Joint Tribal/BIA/DOI Advisory Task Force on Reorganization of the Bureau of Indian Affairs to the Secretary of the Interior and the AppropriationsCommittees of the United States Congress. [Washington: The Task Force]. August 1994. CRS Report RS20002(pdf) . Federal Land and Resource Management: A Primer , by [author name scrubbed]. CRS Report RL30867. Federal Land Management Agencies: Background on Land and Resource Management , by [author name scrubbed], [author name scrubbed], M. LynneCorn, [author name scrubbed], [author name scrubbed], David Whiteman, and PamelaBaldwin. CRS Report RL30335(pdf) . Federal Land Management Agencies' Permanently Appropriated Accounts, by [author name scrubbed], [author name scrubbed], and Carol HardyVincent. CRS Report RL30126. Federal Land Ownership: Constitutional Authority; the History of Acquisition, Disposal, and Retention; and Current Acquisition andDisposal Authorities , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10076. Public (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RS20287 . Arts and Humanities: Background on Funding , by [author name scrubbed]. CRS Report RS20877. The Clean Coal Technology Program: Current Prospects , by [author name scrubbed]. CRS Issue Brief IB10020. Energy Efficiency: Budget, Oil Conservation, and Electricity Conservation Issues , by [author name scrubbed]. CRS Report RS20822(pdf) . Forest Ecosystem Health: An Overview , by [author name scrubbed]. CRS Report RL30755 . Forest Fire Protection , by [author name scrubbed]. CRS Congressional Distribution Memorandum. Forest Service Performance Measures , by [author name scrubbed] (available from author). CRS Report RL30647 . The National Forest System Roadless Areas Initiative, by [author name scrubbed]. CRS Report RS20852(pdf) . The Partnership for a New Generation of Vehicles: Status and Issues , by [author name scrubbed]. CRS Issue Brief IB87050. The Strategic Petroleum Reserve , by [author name scrubbed]. Information regarding the budget, supporting documents, and relateddepartments, agencies and programs is available at the following web or gopher sites. House Committee on Appropriations . http://www.house.gov/appropriations Senate Committee on Appropriations . http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide . http://www.crs.gov/products/appropriations/apppage.shtml Congressional Budget Office . http://www.cbo.gov/ General Accounting Office . http://www.gao.gov House Republican Conference . http://www.gop.gov/committeecentral/docs/pubs/appropriationsroundup/ Office of Management and Budget . http://www.whitehouse.gov/OMB/ Department of the Interior (DOI) . http://www.doi.gov/ Bureau of Indian Affairs (BIA) . http://www.doi.gov/bureau-indian-affairs.html Bureau of Land Management (BLM) . http://www.blm.gov/nhp/index.htm Fish and Wildlife Service (FWS) . http://www.fws.gov/ Historic Preservation . http://www2.cr.nps.gov/ Insular Affairs . http://www.doi.gov/oia/index.html Minerals Management Service (MMS) . http://www.mms.gov/ National Park Service (NPS) . http://www.nps.gov/ Office of Surface Mining Reclamation and Enforcement (OSM) . http://www.osmre.gov/osm.htm Office of Special Trustee for American Indians . http://www.ost.doi.gov/ U.S. Geological Survey (USGS) . http://www.usgs.gov/ Departments. Agriculture, Department of (USDA). http://www.usda.gov/ Department of Agriculture: U.S. Forest Service . http://www.fs.fed.us/ USDA Strategic Plan . http://www.usda.gov/ocfo/strat/index.htm Energy, Department of (DOE) . http://www.energy.gov/ Energy Conservation Budget http://www.mbe.doe.gov/budget/03budget/ Energy Conservation Programs http://www.eren.doe.gov/ Fossil Energy. http://www.fe.doe.gov/ Strategic Petroleum Reserve . http://www.fe.doe.gov/programs/reserves/spr Health and Human Services, Department of (HHS) . http://www.dhhs.gov/ Indian Health Service (IHS) . http://www.ihs.gov/ Agencies. Advisory Council on Historic Preservation . http://www.achp.gov Institute of American Indian and Alaska Native Culture and Arts Development . http://www.iaiancad.org/ Institute of Museum Services . http://www.imls.gov/ John F. Kennedy Center for the Performing Arts . http://Kennedy-Center.org/ National Capital Planning Commission . http://www.ncpc.gov National Endowment for the Arts . http://arts.endow.gov/ National Endowment for the Humanities . http://www.neh.gov/ National Gallery of Art . http://www.nga.gov/ Smithsonian . http://www.si.edu/ U.S. Holocaust Memorial Council and U.S. Holocaust Memorial Museum . http://www.ushmm.org/ Woodrow Wilson International Center for Scholars . http://wwics.si.edu/ Table 17. Department of the Interior and Related AgenciesAppropriations (in thousands) Source: House Appropriations Committee and Congressional Record . Notes: Figures in data column one reflect FY2001 appropriations, and in data column tworeflect FY2002 appropriations. Figures in data column threereflect the budget requests by the Bush Administration for FY2003. Figures in data column four and five reflectappropriations passed by the Senate andHouse respectively. a Beginning with FY2003, the Office of Museum Services as part of the IMLS is included in the appropriations bill for the Departments ofLabor-HHS-Education and Related Agencies. b Funding ($17.0 million) for Challenge America Arts Fund is included in the total for the NationalEndowment for the Arts. c Figures do not reflect scorekeeping adjustments. The FY2003 request includes an adjustmentof $506.0 million for retirement accruals. d FY2003 Senate-passed figures do not reflect across-the-board reductions estimated at 2.852%as it is unclear how these reductions would be calculatedfor Interior and related agencies. e Figures in this column do not reflect a supplemental of $700 million sought for FY2002firefighting efforts. f FY2003 enacted figures do not reflect an across-the-board cut of 0.65% in the FY2003 omnibusappropriations law ( P.L. 108-7 ) as it is unclear how thecut would be calculated for Interior and related agencies. The total also does not include $825.0 million for wildlandfire emergencies, consisting of $189.0million for BLM and $636.0 million for the Forest Service. These funds are to repay amounts transferred from otheraccounts for fire fighting in FY2002. Table 18. Conservation Spending Category:Interior Appropriations ($ in millions) a Source: House Appropriations Committee. a The Balanced Budget and Emergency Deficit Control Act of 1985 (2 U.S.C. 901(c)) as amended established 3 discretionary spending categories: General Purpose,Highway, and Mass Transit. Title VIII of P.L. 106-291 , the Department of theInterior and Related Agencies Appropriations Act for FY2001, established a fourthcategory of discretionary spending - for "conservation." That law also identified thespecific activities that would be included within the "conservation spendingcategory." The category essentially includes those activities, identified by Congress,in particular budget accounts (or portions thereof) providing appropriations topreserve and protect lands, habitat, wildlife, and other natural resources; to providerecreational opportunities; and for other purposes. This table presents the current andproposed distribution of these conservation funds. Dashes indicate that the fundingis understood to be zero. Further, several programs in this category have not receivedseparate funding under conservation spending for FY2001-FY2003. They includeCompetitive Grants for Indian Tribes, FWS Neotropical Migratory Birds, FSStewardship Incentives Program, and National Wildlife Refuge fund, FWS. In FY2003, the House, Senate, and appropriations law ( P.L. 108-7 ) did not contain calculations of funding for the CSC. The joint explanatory statement of theconference report on the enacted measure stated that no funds in the law are derivedfrom the CSC, but that most of the programs previously funded under that categoryare continued in FY2003. b The Administration is seeking $3.0 million under the DOI Departmental Management (DM) line item for the Shivaist Indian water settlement Act of 1999,which authorizes LWCF funds for the Paiute Tribe in Utah. c Subtotals and totals may not add due to rounding. d $50 million of this total is part of a new Cooperative Conservation Initiative, andthe remaining $150 million would be distributed to states using an allocation formuladeveloped by the administration for the traditional land acquisition and sitedevelopment activities of states. e For FY2001, an additional $50 million was appropriated for formula grants whichwere authorized in Title IX of the FY2001 Commerce appropriations law. Further,the FY2002 enacted amount reflects a rescission of $25.0 million. f In FY2003, four additional programs are proposed to be funded from LWCF: FWSCooperative Endangered Species Conservation Fund; FWS North AmericanWetlands Conservation Fund; FS Forest Legacy; and FS Forest Stewardship. g Funds for FS, Forest Stewardship were not considered part of the CSC in FY2001and FY2002 so funds in those years are not counted in the column totals. Becausethe program is proposed to be included in the CSC in FY2003, the requested levelis included in the column total. This could tend to exaggerate the difference betweenlevels of CSC funding in FY2003 and earlier years. Table 19. Historical Appropriations Data from FY1998 to FY2003 ($ in thousands) a Beginning in FY1996, appropriations for the territories and other insular areas were consolidatedwithin the Departmental Offices account. DepartmentalOffices also includes Insular Affairs and Office of the Special Trustee for American Indians. b Beginning in FY2003, the Office of Museum Services as part of the IMLS is included in theappropriations bill for the Departments ofLabor-HHS-Education and Related Agencies. c Funding ($17.0 million) for Challenge America ArtsFund is included in the total figure for the NationalEndowment for the Arts. d Figures in this column do not reflect an across-the-board cut of 0.65% in the FY2003 omnibusappropriations law ( P.L. 108-7 ) as it is unclear how thecut would be calculated for Interior and related agencies. The total also does not include $825.0 million for wildlandfire emergencies, consisting of $189.0million for BLM and $636.0 million for the Forest Service. These funds are to repay amounts transferred from otheraccounts for fire fighting in FY2002. | The Interior and Related Agencies Appropriations bill includes funds for the Department of the Interior (DOI), except for the Bureau of Reclamation, and funds for some agencies or programswithin three other departments--Agriculture, Energy, and Health and Human Services. It also fundsnumerous smaller related agencies. On February 4, 2002, President Bush submitted his FY2003budget for Interior and related agencies, totaling $18.94 billion compared to $19.17 billion enactedfor FY2002 ( P.L.107-63 ). While the House passed an Interior funding bill in the 107th Congress, theSenate did not. Thus, a series of resolutions were enacted to continue funding at FY2002 levels. On January 23rd, 2003, the Senate passed H.J.Res. 2 , the omnibus appropriations bill for FY2003 that included funding for Interior and related agencies and 10 other regularappropriations bills not enacted for FY2003. For Interior and related agencies, the Senate billcontained $18.97 billion for FY2003, plus an $825 million fire supplemental for FY2002, for a billtotal of $19.80 billion. The Senate bill required an across-the board cut of 2.852% that the numbersin this report do not reflect, as it is unclear how they were to be calculated for the Interior and relatedagencies. The House-passed measure ( H.R. 5093 , 107th Congress) contained $19.71billion for FY2003, plus a $700 million fire supplemental for FY2002, for a bill total of $20.41billion. The conference report on the measure ( H.Rept. 108-10 ) was signed into law on February20, 2003 ( P.L. 108-7 ). The FY2003 law contained $19.08 billion for Interior and related agencies, plus $825.0 million for fire fighting to repay transferred amounts for fire fighting in FY2002. It provides that an acrossthe board 0.65% cut be applied on a proportionate basis to each account, and to each program,project, and activity within an account. Again, the figures in this report do not reflect proportionatecuts, as it is unclear how they too would be calculated for the Interior and related agencies. The lawdoes not specifically fund the Conservation Spending Category, although the House bill hadrecommended $1.44 billion for FY2003, higher than the Administration ($1.32 billion). It providesincreases over the Administration's request for some agencies, including the U.S. GeologicalSurvey, Bureau of Land Management, Forest Service, Indian Health Service, and Energy Departmentprograms, while providing decreases from the request for other agencies. Controversial issues addressed during Interior bill consideration included: fire management, stewardship contracting, and wilderness in the Tongass National Forest (see FS); development in theArctic National Wildlife Refuge and renewal of grazing permits and leases (see BLM); MissouriRiver flows (see FWS); Everglades restoration; (see NPS and cross-cutting issues); funding for landacquisition and conservation (see cross-cutting issues); development of oil and gas leases off theCalifornia coast (see MMS); management of the Indian tribes' trust funds and assets (see BIA andOST); and drought assistance. This report will not be updated. Key Policy Staff a Division abbreviations: DSP = Domestic SocialPolicy; G&F = Government and Finance; RSI =Resources, Science, and Industry. |
Morning hour debates have been a part of House floor procedure only since the 103 rd Congress. They began on February 23, 1994, for a 90-day trial period under procedures outlined in a joint leadership unanimous consent agreement (formally, "a standing order of the House"). Morning hour debates were created, in part, to offset the new restrictions on special order speeches that took effect the same day. These restrictions, such as a ban on special orders after midnight and a four-hour limitation on longer special orders, scaled back opportunities for non-legislative debate available through special orders. The 1994 agreement establishing morning hour debates for a 90-day trial period was later extended to cover the remainder of the 103 rd Congress. Morning hour debates continued in the 104 th Congress under a slightly modified unanimous consent agreement. The modification concerned the length and starting time of morning hour debates on Tuesdays "after the first Tuesday in May" (see the " Days and Meeting Times " section for more information). An identical unanimous consent agreement (agreed to on January 6, 2009) governs morning hour speeches in the 111 th Congress. Morning hour debates are not provided for in the rules of the House. Instead, they are a unanimous consent practice of the chamber. The House gives unanimous consent to holding morning hour debates when it agrees to the joint leadership unanimous consent agreement governing these debates. In the 111 th Congress, the chair refers to this agreement at the start of the morning hour debate period when he announces, "[p]ursuant to the order of the House of January 6, 2009, the Chair will now recognize ..." The unanimous consent agreement governs recognition for morning hour debates and establishes the days and meeting times for these debates (for more information, see later sections of this report). During morning hour debates, Members must abide not only by the unanimous consent agreement but also by the rules of the House, the chamber's precedents, and the Speaker's announced policies. Relevant House rules include those governing debate, decorum, and the Speaker's power of recognition. House precedents discuss how the chamber has interpreted and applied its rules. There is not an established body of precedents for morning hour debates because these debates are a relatively new feature of House floor procedure. The term "Speaker's announced policies" refers to the Speaker's policies on certain aspects of House procedure such as decorum in debate, the conduct of electronic votes, and recognition for one-minute and special order speeches. While the Speaker's announced policies do not govern recognition for morning hour debates (the unanimous consent agreement governs recognition), they do regulate television coverage of morning hour debates. The Speaker's policies prohibit House-controlled television cameras from panning the chamber during the morning hour debate period. Instead, a caption (also called a "crawl") appears at the bottom of the television screen indicating that the House is conducting morning hour debates. Morning hour debates are in order only on Mondays and Tuesdays. They take place infrequently on Mondays because the House is not always in session that day. The starting time and length of morning hour debates are established by the joint leadership unanimous consent agreement. The House convenes for Monday morning hour debates 90 minutes earlier than the time established for that day's session. For example, if the House is scheduled to meet at noon, the morning hour debate period begins at 10:30 a.m. The Monday morning hour debate period can last up to one hour, with a maximum of 30 minutes of debate on each side. The full hour is rarely used. Tuesday morning hour speeches on or before May 18, 2009, take place in the same manner as Monday morning hour debates. The agreement provides, however, that Tuesday morning hour debates after May 18, 2009, begin 60 minutes before the chamber's meeting hour for a maximum duration of 50 minutes, with 25 minutes allocated to each side. The different procedures for Tuesday morning debates after early May were first established in the joint leadership unanimous consent agreement of May 12, 1995. These procedures, which are included in the agreement for the 111 th Congress, are designed to accommodate the chamber's practice of convening earlier for legislative business after early May. In the 105 th Congress, the procedures were only on those Tuesdays after early May when the House was scheduled to meet at 10:00 a.m. On Tuesdays after early May when the chamber's appointed meeting hour was a later time (e.g., 12:00 noon), the Tuesday morning debates took place in the same manner as Monday morning hour debates. When Monday and Tuesday morning hour debates are completed, the House recesses until the meeting hour established for that day's session. The daily prayer, the pledge of allegiance, and approval of the previous day's Journal take place when the House meets after this recess. The joint leadership unanimous consent agreement requires that the majority and minority leaders give the Speaker a list showing how each party's time for morning hour debates will be allocated among its Members. The chair follows this list in recognizing Members for morning hour debates. A majority party Representative appointed as "Speaker pro tempore " often presides in the chair during morning hour debates. During each morning hour debate period, he alternates recognition between the majority and minority for both the initial morning hour speech (i.e., if a majority Member is recognized for the first speech on Monday, a minority Member is recognized for first speech on Tuesday) and subsequent ones. Individual Members must limit their morning hour debate speech to five minutes or less. Only the majority leader, minority leader, or the minority whip may deliver a morning hour debate speech longer than five minutes. Members reserve time for morning hour debates through their party leadership: Democratic Representatives reserve time through the Office of the Minority Leader, and Republican Members do so through the Republican cloakroom or the party leadership desk on the House floor. Reservations can be made no earlier than one week before the speech date. While most Members reserve five minutes for their morning hour speech, some Representatives reserve as little as one minute. Individual Members often use the morning hour debate period to deliver speeches on subjects unrelated to legislation before the House. They deliver eulogies and tributes to individuals and organizations from their congressional district. They also use the period to deliver speeches on broad policy issues and to present their views on local, national, and international events. Because morning hour debates take place early in the day, they are sometimes used by individual Members and the party leadership to share information relevant to that day's session. For example, Members deliver morning hour speeches to explain a bill they are introducing that day and to invite cosponsors. The chairman of the Rules Committee has spoken during morning hour debates to announce an emergency meeting of the committee. This use of morning hour debates to disseminate information among colleagues parallels how Members often employ one-minute speeches as a visual form of the "Dear Colleague" letter. On occasion, Members of the same party use the morning hour debate period to deliver a series of speeches about the party's views on a particular bill or policy issue. For example, on February 11, 1997, four minority party Members delivered morning hour debate speeches on campaign finance reform. This coordinated use of morning hour debates by party Members is similar to how the parties sometimes use "leadership special orders" (i.e., the first hour of longer special orders that is usually reserved for the party's leadership or a designee) to focus on a specific theme with participation from other party Members. | On Mondays and Tuesdays, the House of Representatives meets earlier than the hour established for that day's session for a period called "morning hour debates" (also known as "morning hour speeches"). This period provides a rare opportunity for non-legislative debate in the House; remarks in the House are usually limited to pending legislative business. During morning hour debates, individual Members deliver speeches on topics of their choice for up to five minutes. The majority and minority leaders give the Speaker a list showing how each party's time for morning hour debates will be allocated among its Members. The chair follows this list in recognizing Members for morning hour debates. At the conclusion of morning hour debates, the House recesses until the starting time for that day's session. This report examines current House practices for morning hour debates and how these debates are used. It will be updated if rules and procedures change. |
Shortly after combat operations began pursuant to the congressional authorization to use military force in response to the terrorist attacks of September 11, 2001, President Bush issued a Military Order (M.O.) authorizing trial by military commission of non-citizens suspected of terrorist acts or associations who were to be designated as subject to the M.O. President Bush subsequently determined that 20 of the detainees at the U.S. Naval Station in Guantánamo Bay held in connection with the conflict were subject to the M.O., and 10 were eventually charged for trial before military commissions. The M.O. specified that persons subject to it would have no recourse to the U.S. court system to appeal a verdict or obtain any other sort of relief, but the Supreme Court essentially invalidated that provision in its 2004 opinion, Rasul v. Bush . Military commissions are courts usually set up by military commanders in the field to try persons accused of certain offenses during war. They may also try persons for ordinary crimes in cases of martial law or military occupation, where regular civil courts are not able to function. Past military commissions trying enemy belligerents for war crimes directly applied the international law of war, without recourse to domestic criminal statutes, unless such statutes were declaratory of international law. Historically, military commissions have applied the same set of procedural rules that applied in courts-martial. By statute, military commissions have long been available to try "offenders or offenses designated by statute or the law of war." For the most part, military commissions have been employed where U.S. armed forces have established a military government or martial law, as in the war with Mexico, the Civil War, the Philippine Insurrection, and in occupied Germany and Japan after World War II. President Bush's Military Order establishing military commissions to try suspected terrorists was the focus of intense debate both at home and abroad. Critics argued that the tribunals could violate any rights the accused may have under the Constitution as well as their rights under international law, thereby undercutting the legitimacy of any verdicts rendered by the tribunals. The Bush Administration established rules prescribing detailed procedural safeguards for the tribunals. These rules were praised as a significant improvement over what might have been permitted under the language of the M.O., but some continued to argue that the enhancements did not go far enough. Critics also noted that the rules did not address the issue of indefinite detention without charge, as appeared to be possible under the original M.O., or that the Department of Defense (DOD) may continue to detain persons who have been cleared by a military commission. The Pentagon reportedly stated that its Inspector General (IG) looked into allegations, made by military lawyers assigned as prosecutors to the military commissions, that the proceedings were rigged to obtain convictions, but the IG did not substantiate the charges. Congress took no action with respect to military commissions until after the Supreme Court's Rasul decision. At the end of December 2005, Congress enacted the Detainee Treatment Act of 2005 (DTA). The DTA did not authorize military commissions, but amended title 28, U.S. Code to revoke all judicial jurisdiction over habeas claims by persons detained as "enemy combatants," and it created jurisdiction in the Court of Appeals for the District of Columbia Circuit to hear appeals of final decisions of military commissions. The Supreme Court, in Hamdan v. Rumsfeld , invalidated the military commission system established by presidential order, holding that although Congress had in general authorized the use of military commissions, such commissions were required to follow procedural rules as similar as possible to courts-martial proceedings, as required by the Uniform Code of Military Justice (UCMJ). In response, Congress promptly passed the Military Commissions Act of 2006 (MCA) to authorize military commissions and establish procedural rules that are modeled after, but depart from in some significant ways, the UCMJ. The Department of Defense issued regulations for the conduct of military commissions pursuant to the MCA. One detainee, David Matthew Hicks of Australia, was convicted of material support to terrorism pursuant to a plea agreement in 2007. In 2008, Salim Hamdan was found guilty of one count of providing material support for terrorism and sentenced to 66 months' imprisonment, but credited with five years' time served. Ali Hamza Ahmad Suliman al Bahlul of Yemen was found guilty of multiple counts of conspiracy and solicitation to commit certain war crimes and of providing material support for terrorism in connection with his role as al Qaeda's "propaganda chief." He refused representation and boycotted most of his trial, and was subsequently sentenced to life imprisonment. On January 22, 2009, President Barack Obama issued an Executive Order requiring that the Guantanamo detention facility be closed no later than a year from the date of the Order. The Order requires specified officials to review all Guantanamo detentions to assess whether the detainee should continue to be held by the United States, transferred or released to another country, or be prosecuted by the United States for criminal offenses. During the review period, the Secretary of Defense is required to take steps to ensure that all proceedings before military commissions and the United States Court of Military Commission Review are halted, although some pretrial proceedings have continued to take place. Fifteen detainees currently stand charged under the MCA, while charges were dismissed without prejudice against five other detainees, one of whom has been ordered released by a federal judge. One case was moved to a federal district court. In May, 2009, the Obama Administration announced that it was considering restarting the military commission system with some changes to the procedural rules. The Department of Defense informed Congress about modifications to the Manual for Military Commissions, to take effect July 14, 2009. President Obama's Detention Policy Task Force issued a preliminary report July 20, 2009, reaffirming that the White House considers military commissions to be an appropriate forum for trying some cases involving suspected violations of the laws of the war, although federal criminal court would be the preferred forum for trials of detainees. The disposition of each case referred is to be assigned to a team comprised of DOJ and DOD personnel, including prosecutors from the Office of Military Commissions. Appended to the report was a set of criteria to govern the disposition of cases involving Guantanamo detainees. This protocol identifies three broad categories of factors to be taken into consideration: Strength of interest, namely, the nature and gravity of offenses or underlying conduct; identity of victims; location of offense; location and context in which individual was apprehended; and the conduct of the investigation. Efficiency, namely, protection of intelligence source and methods; venue; number of defendants; foreign policy concerns; legal or evidentiary problems; efficiency and resource concerns. Other prosecution considerations, namely, the extent to which the forum and offenses that can be tried there permit a full presentation of the wrongful conduct, and the available sentence upon conviction. Federal prosecutors are to evaluate their cases under "traditional principles of federal prosecution." The Military Commissions Act of 2006 ("MCA") grants the Secretary of Defense express authority to convene military commissions to prosecute those fitting the definition under the MCA of "alien unlawful enemy combatants." The Secretary delegated the authority to a specially appointed "convening authority," who has responsibility for accepting or rejecting charges referred by the prosecution team, convening military commissions for trials, detailing military commission members and other personnel, approving requests from trial counsel to communicate with the media, approving requests for expert witnesses, approving plea agreements, carrying out post-trial reviews and forwarding cases for review, along with other duties spelled out in the MCA or in DOD's Regulation for Trial by Military Commission. The MCA eliminates the requirement for military commissions to conform to either of the two uniformity requirements in article 36, UCMJ, which President Bush's military commissions were held in Hamdan to violate. Instead, it establishes chapter 47A in title 10, U.S. Code and excepts military commissions under this chapter from the requirements in article 36. It provides that the UCMJ "does not, by its terms, apply to trial by military commissions except as specifically provided in this chapter." While declaring that the enacted chapter is "based upon the procedures for trial by general courts-martial under [the UCMJ]," it establishes that "[t]he judicial construction and application of [the UCMJ] are not binding on military commissions established under this chapter." It expressly exempts these military commission from UCMJ articles 10 (speedy trial), 31 (self-incrimination warnings) and 32 (pretrial investigations), and amends articles 21, 28, 48, 50(a), 104, and 106 of the UCMJ to except military commissions under chapter 47A. Other provisions of the UCMJ are to apply to trial by military commissions under chapter 47A only to the extent provided therein. The MCA establishes jurisdiction for military commissions somewhat more narrowly than that asserted in President Bush's M.O. The M.O. was initially criticized by some as overly broad in its assertion of jurisdiction, because it could be interpreted to cover non-citizens who had no connection with Al Qaeda or the terrorist attacks of September 11, 2001, as well as offenders or offenses not triable by military commission pursuant to statute or the law of war. A person designated by the President as subject to the M.O. was amenable to detention and possible trial by military tribunal for violations of the law of war and "other applicable law." The MCA largely validated the President's jurisdictional scheme for military commissions. The MCA authorizes military commissions to try any "unlawful enemy combatant," which includes: (i) a person who has engaged in hostilities or who has purposefully and materially supported hostilities against the United States or its co-belligerents who is not a lawful enemy combatant (including a person who is part of the Taliban, al Qaeda, or associated forces); or (ii) a person who, before, on, or after the date of the enactment of the Military Commissions Act of 2006, has been determined to be an unlawful enemy combatant by a Combatant Status Review Tribunal or another competent tribunal established under the authority of the President or the Secretary of Defense. Thus, persons who do not directly participate in hostilities, but "purposefully and materially" support hostilities, are subject to treatment as an "unlawful enemy combatant" under the MCA. Citizens who fit the definition of "unlawful enemy combatant" are not amenable to trial by military commission under the MCA, but their detention is not expressly precluded. The MCA does not define "hostilities" or explain what conduct amounts to "supporting hostilities." To the extent that the jurisdiction is interpreted to include conduct that falls outside the accepted definition of participation in an armed conflict, the MCA might run afoul of the courts' historical aversion to trying civilians before military tribunals when other courts are available. It is unclear whether this principle would apply to aliens captured and detained overseas, but the MCA does not appear to exempt from military jurisdiction permanent resident aliens captured in the United States who might otherwise meet the definition of "unlawful enemy combatant." It is generally accepted that aliens within the United States are entitled to the same protections in criminal trials that apply to U.S. citizens. Therefore, to subject persons to trial by military commission who do not meet the exception carved out by the Supreme Court in ex parte Quirin for unlawful belligerents, to the extent such persons enjoy constitutional protections, would likely raise significant constitutional questions. To date, no resident aliens have been charged for trial before a military commission under the MCA. The MCA did not specifically identify who makes the determination that defendants meet the definition of "unlawful enemy combatant." The government sought to establish jurisdiction based on the determinations of Combatant Status Review Tribunals (CSRTs), set up by the Pentagon to determine the status of detainees using procedures similar to those the Army uses to determine POW status during traditional wars. The CSRTs, however, are not empowered to determine whether the enemy combatants are unlawful or lawful, which led two military commission judges to hold that CSRT determinations are inadequate to form the basis for the jurisdiction of military commissions. One of the judges determined that the military commission itself is not competent to make the determination, while the other judge appears to have determined that the government's allegations did not set forth sufficient facts to conclude that the defendant, Salim Hamdan, was an unlawful enemy combatant. The Court of Military Commission Review (CMCR) reversed. While it agreed that the CSRT determinations are insufficient by themselves to establish jurisdiction, it found the military judge erred in declaring that the status determination had to be made by a competent tribunal other than the military commission itself. In denying the government's request to find that CSRT determinations are sufficient to establish jurisdiction over the accused, the CMCR interpreted the MCA to require more than establishing membership in Al Qaeda or the Taliban. The CMCR found: no support for [the government's] claim that Congress, through the M.C.A., created a "comprehensive system" which sought to embrace and adopt all prior C.S.R.T. determinations that resulted in "enemy combatant" status assignments, and summarily turn those designations into findings that persons so labeled could also properly be considered "unlawful enemy combatants." Similarly, we find no support for [the government's] position regarding the parenthetical language contained in § 948a(1)(A)(i) of the M.C.A.—"including a person who is part of the Taliban, al Qaeda, or associated forces." We do not read this language as declaring that a member of the Taliban, al Qaeda, or associated forces is per se an "unlawful enemy combatant" for purposes of exercising criminal jurisdiction before a military commission. We read the parenthetical comment as simply elaborating upon the sentence immediately preceding it. That is, that a member of the Taliban, al Qaeda, or associated forces who has engaged in hostilities or who has purposefully and materially supported hostilities against the United States or its co-belligerents will also qualify as an "unlawful enemy combatant" under the M.C.A. (emphasis added [by the court]). The CMCR further explained that executive branch memoranda defining "enemy combatant" status were implemented solely for purposes of continued detention of personnel captured during hostilities and applicability of the Geneva Conventions. By contrast: Congress in the M.C.A. was carefully and deliberately defining status for the express purpose of specifying the in personam criminal jurisdiction of military commission trials. In defining what was clearly intended to be limited jurisdiction, Congress also prescribed serious criminal sanctions for those members of this select group who were ultimately convicted by military commissions. Further, because detainees could not have known when their CSRT reviews were taking place that the determination could subject them to the jurisdiction of a military commission, the CMCR suggested that the use of CSRT determinations to establish jurisdiction would undermine Congress's intent that military commissions operate as "regularly constituted court[s], affording all the necessary 'judicial guarantees which are recognized as indispensable by civilized peoples' for purposes of Common Article 3 of the Geneva Conventions." As a consequence of the decision, the prosecution has had the burden of proving jurisdiction over each person charged for trial by a military commission. The Manual for Military Commissions was amended in May 2009 to reflect this practice. The MCA provides jurisdiction to military commissions over "any offense made punishable by this chapter or the law of war when committed by an alien unlawful enemy combatant...." Crimes to be triable by military commission are defined in subchapter VII (10 U.S.C. §§ 950p - 950w). Offenses include the following: murder of protected persons; attacking civilians, civilian objects, or protected property; pillaging; denying quarter; taking hostages; employing poison or similar weapons; using protected persons or property as shields; torture, cruel or inhuman treatment; intentionally causing serious bodily injury; mutilating or maiming; murder in violation of the law of war; destruction of property in violation of the law of war; using treachery or perfidy; improperly using a flag of truce or distinctive emblem; intentionally mistreating a dead body; rape; sexual assault or abuse; hijacking or hazarding a vessel or aircraft; terrorism; providing material support for terrorism; wrongfully aiding the enemy; spying; contempt; perjury and obstruction of justice. 10 U.S.C. § 950v. Conspiracy (§ 950v(b)(28)), attempts (§ 950t), and solicitation (§ 950u) to commit the defined acts are also punishable. The MCA adopted the list of offenses DOD had authorized for trial by military commission under the presidential order . That list was not meant to be exhaustive. Rather, it was intended as an illustration of acts punishable under the law of war or triable by military commissions. The regulations contained an express prohibition of trials for ex post facto crimes. Although many of the crimes defined in the MCA seem to be well established offenses against the law of war, at least in the context of an international armed conflict, a court might conclude that some of the listed crimes are new. For example, a plurality of the Supreme Court in Hamdan agreed that conspiracy is not a war crime under the traditional law of war. The crime of "murder in violation of the law of war," which punishes persons who commit hostile acts that result in the death of any persons, including lawful combatants, may also be new, depending on how it is interpreted. The Department of Defense has argued that the element "in violation of the law of war" is established by showing that the perpetrator is an unprivileged belligerent. While it appears to be well established that a civilian who kills a lawful combatant is triable for murder and cannot invoke the defense of combatant immunity, it is not clear that the murder constitutes a violation of the law of war (rather than domestic or martial law), or that the same principle applies in armed conflicts of a non-international nature, where combatant immunity does not apply. The International Criminal Tribunal for the former Yugoslavia (ICTY) has found that war crimes in the context of non-international armed conflict include murder of protected persons, but have implied that the killing of a combatant is not necessarily a war crime. Thus, prison guards at Omarska and other detention camps were found guilty, among other crimes, of "murder, as a violation of the laws or customs of war." Similarly, the International Criminal Court applies a definition of murder in the context of a non-international armed conflict to require that the victim is a protected person, while the killing (or wounding) of a "combatant adversary" is defined as a war crime only if it is done "treacherously." While one of the Guantanamo military commission judges found, without elaborating on what "murder in violation of the law of war" entails, that Congress could reasonably conclude that it constitutes a common law violation of the law of war, another read the crime to consist of two elements: "the [attempted] killings ...were committed by an unlawful enemy combatant AND (2) that the method, manner or circumstances used violated the law of war." There is historical support for the view that the offense pertains to means and methods of killing, but the requirement that the offender be an "unlawful combatant" is not well supported. Military commissions were used during the U.S. Civil War to try the charge of "murder in violation of the law of war," but this charge apparently applied to privileged belligerents who committed murder perfidiously or who killed prisoners of war, while unprivileged belligerents were charged simply with murder. The charge of "murder, in violation of the laws of war" was occasionally brought against Filipino natives during the Philippine Insurrection, generally involving the killing of unarmed civilians or prisoners. However, it is not easy to discern why some cases were charged as "murder" while others had added the phrase "in violation of the laws of war." Sometimes the distinction appears to turn on the status of the victim, while sometimes the determining factor seems to be the status of the perpetrator, or more precisely, the authority under which the hostile act was carried out. Murder qualified by reference to the law of war was charged most frequently against those whose legitimacy as combatants was not challenged. In one case in which insurgents killed U.S. soldiers during a firefight, the conviction for murder in the violation of the laws of war was overturned in part on the basis that "[t]he killing of the deceased soldiers in an engagement with a regular detachment of the public enemy is not murder but a natural consequence incidental to a state of war." Similarly, defining as a war crime the "material support for terrorism" does not appear to be supported by historical precedent. The military judge in the Hamdan military commission case deferred to Congress's determination in the MCA that "material support for terrorism" describes a traditional offense against the law of war, citing Civil War precedents for trying crimes such as cooperating with guerrillas or "guerrilla-marauders." Yet the Supreme Court's decision in Ex parte Milligan may have limited the extent to which such crimes may be tried by military commissions where martial law has not been established, and may also call into question whether such crimes are properly considered war crimes or should be treated as ordinary crimes triable by military commissions when necessity demands it. Charges related to aiding guerrillas were typically accompanied by a specification stating that the accused was a citizen and owed allegiance to the United States, but not ordinarily stating that the activity violated the law of war, suggesting that the offense was a violation of martial law rather than the international law of war applicable to belligerents. Many persons were tried by military commissions during the Philippine Insurrection for consorting with insurgents or other armed outlaws, but only after the commanding general issued a proclamation to the public explaining its obligation under the law of military occupation (a subset of the law of war analogous to martial law) to refrain from such activity. In any event, the Obama Administration has expressed misgivings as to whether the crime of "material support for terrorism" amounts to an ex post facto law, and recommended the offense be eliminated from the MCA. All but one of the detainees against whom charges have been filed so far have had at least one count of "material support for terrorism" among them, although in most cases the allegations underlying the charge appear under other charges as well. Part IV of the Manual for Military Commissions (M.M.C.) sets forth the elements of crimes defined by the MCA. There are few substantive differences between the M.M.C. definitions and those previously set forth DOD regulations for military commissions prior to the MCA. The M.M.C. definition of "Aiding the Enemy" incorporates the element of wrongfulness added by 10 U.S.C. § 950v(26), necessitating a new finding that the accused owed some form of allegiance to the United States at the time the conduct took place. Two crimes, "mutilation or maiming" and "causing serious injury," were altered to remove the element that required that the victim was in the custody or control of the accused. The crime "murder by an unprivileged belligerent" was broadened in the definition of "murder in violation of the law of war" to include not just killing, but also deaths resulting from an act or omission of the accused, where the accused intended to kill the victim or victims. The law of war has traditionally applied within the territorial and temporal boundaries of an armed conflict between at least two belligerents. It traditionally has not been applied to conduct occurring on the territory of neutral states or on territory not under the control of a belligerent, to conduct that preceded the outbreak of hostilities, or to conduct during hostilities that do not amount to an armed conflict. Unlike the conflict in Afghanistan, the conflict related to the September 11 attacks does not have clear boundaries in time or space, nor is it entirely clear who the belligerents are. The broad reach of President Bush's M.O. to encompass conduct and persons customarily subject to ordinary criminal law evoked criticism that the claimed jurisdiction of the military commissions exceeded the customary law of armed conflict, although DOD regulation purported to restate customary law. The MCA provides jurisdiction to military commissions over covered offenses "when committed by an alien unlawful enemy combatant before, on, or after September 11, 2001." The elements of crimes set forth in the Manual for Military Commissions include a nexus to an armed conflict, but neither the manual nor the MCA contains a definition. The Supreme Court has not clarified the scope of the conflict authorized by Congress in 2001, but it has not simply deferred to the President's interpretation. In enacting the MCA, Congress seems to have provided the necessary statutory definitions of criminal offenses to overcome previous objections with respect to subject matter jurisdiction of military commissions. However, questions may still arise with respect to the necessity for conduct to occur in the context of an armed conflict in order to be triable by military commission. There is no express requirement to that effect in the MCA. The overall purpose of the statute together with the elements of some of the crimes arguably may be read to require a nexus. In 2008, the military judge in the Hamdan case concluded as much, holding that a charge of "[m]embership in a conspiracy that planned and carried out the attacks of September 11 th , 2001 will be deemed to be in violation of the law of war; membership in a conspiracy that planned or carried out other attacks long before that date and unrelated to hostilities will not." The DOD regulations for military commissions prior to the MCA provided for military commissions to consist of panels of three to seven military officers as well as one or more alternate members who had been "determined to be competent to perform the duties involved" by the Secretary of Defense or his designee, and could include reserve personnel on active duty, National Guard personnel in active federal service, and retired personnel recalled to active duty. The rules also permitted the appointment of persons temporarily commissioned by the President to serve as officers in the armed services during a national emergency. The presiding officer was required to be a judge advocate in any of the U.S. armed forces, but not necessarily a military judge. The MCA provides for a qualified military judge to preside over panels of at least five military officers, except in the cases in which the death penalty is sought, in which case the minimum number of panel members is twelve. Procedures for assigning military judges as well as the particulars regarding the duties they are to perform are left to the Secretary of Defense to prescribe, except that the military judge may not be permitted to consult with members of the panel outside of the presence of the accused and counsel except as prescribed in 10 U.S.C. § 949d. The military judge has the authority to decide matters related to the admissibility of evidence, including the treatment of classified information, but has no authority to compel the government to produce classified information. Like the previous DOD rules, the MCA empowers military commissions to maintain decorum during proceedings. Previously, the presiding officer was authorized "to act upon any contempt or breach of Commission rules and procedures," including disciplining any individual who violates any "laws, rules, regulations, or other orders" applicable to the commission, as the presiding officer saw fit. Presumably this power was to include not only military and civilian attorneys but also any witnesses who had been summoned under order of the Secretary of Defense. The MCA, 10 U.S.C. § 950w authorizes the military commissions to "punish for contempt any person who uses any menacing word, sign, or gesture in its presence, or who disturbs its proceedings by any riot or disorder." It is unclear whether this section is meant to expand the jurisdiction of military commissions to cover non-enemy combatant witnesses or civilian observers, but the M.M.C. expressly provides for jurisdiction over all persons, including civilians, and permits military judges to sentence those convicted with both fines and terms of confinement. In the case of military commissions established under the UCMJ, there is statutory authority for military commissions to punish contempt with a fine of $100, confinement for up to 30 days, or both. Neither the MCA nor the M.M.C. sets any limit on punishment for contempt. The MCA provides that military commissions have the same power as a general court-martial to compel witnesses to appear in a manner "similar to that which courts of the United States having criminal jurisdiction may lawfully issue." However, rather than providing that the trial counsel and the defense are to have equal opportunity to obtain witnesses and evidence, as is the case in general courts-martial, the MCA provides the defense a "reasonable opportunity" to obtain witnesses and evidence. The M.M.C. provides the trial counsel with responsibility for producing witnesses requested by the defense, unless trial counsel determines the witness's testimony is not required, but the defense counsel may appeal the determination to the convening authority or, after referral, the military judge. Under article 47 of the UCMJ, a duly subpoenaed witness who is not subject to the UCMJ and who refuses to appear before a military commission may be prosecuted in federal court. Presumably, this article could be used to prosecute civilians residing in U.S. territory who refuse to comply with a subpoena issued under the MCA. The M.M.C. provides the military judge or any person designated to take evidence authority to issue a subpoena to compel the presence of a witness or the production of documents. As is the case with general courts-martial, the military judge may issue a warrant of attachment to compel the presence of a witness who refuses to comply with a subpoena. Subpoena authority under the UCMJ may not be used to compel a civilian witness to travel abroad in order to provide testimony, so the corresponding authority under the MCA be insufficient to compel civilian witnesses to travel to Cuba. Testimony by video transmission may be permitted in such cases. One of the perceived shortcomings of the M.O. had to do with the problem of command influence over commission personnel. M.C.O. No. 1 provided for a "full and fair trial," but contained few specific safeguards to address the issue of impartiality. The President or his designee were empowered to decide which charges to press; to select the members of the panel, the prosecution and the defense counsel, and the members of the review panel; and to approve and implement the final outcome. The President or his designees had the authority to write procedural rules, interpret them, enforce them, and amend them. Justice Kennedy remarked in his concurring opinion in Hamdan v. Rumsfed that the concentration of authority in the Appointing Authority was a significant departure from the structural safeguards Congress has built into the military justice system. The MCA, by providing requirements for the procedural rules to guard against command influence, may alleviate these concerns. In particular, the MCA prohibits the unlawful influence of military commissions and provides that neither the military commission members nor military counsel may have adverse actions taken against them in performance reviews. Many of the procedural rules are left to the discretion of the Secretary of Defense or his designee, more so than is the case under the UCMJ. Rule 104 of the Rules for Military Commissions (R.M.C.) prohibits command influence in terms similar to those in the Manual for Courts-Martial, except that they apply more broadly to "all persons" rather than only to "all persons subject to the [UCMJ]." On the other hand, it has been argued that the multiple roles assigned to the convening authority, the DOD official who decides which charges to bring, allocates resources among the parties, and then approves or disapproves the findings of the military commission, create an inherent risk of unfairness (or the perception of unfairness). While the convening authority for courts-martial also plays multiple roles, these functions serve as commanders' tools for enforcing discipline among subordinates, a context that arguably differs in important ways from bringing criminal cases against alleged enemies. Improper influence by the legal advisor to the convening authority has been alleged at a few military commission proceedings, prompting military judges to issue orders in some cases granting relief. Executive branch control over who serves as military judges has also led to charges of unfairness. The MCA lists a minimum set of rights to be afforded the accused in any trial, and provides the accused an opportunity to appeal adverse verdicts based on "whether the final decision was consistent with the standards and procedures specified" in the MCA, and "to the extent applicable, the Constitution and the laws of the United States." The MCA provides that the accused is to be informed of the charges as soon as practicable after the charges and specifications are referred for trial. The accused is to be presumed innocent until determined to be guilty. The presumption of innocence and the right against self-incrimination are to result in an entered plea of "Not Guilty" if the accused refuses to enter a plea or enters a "Guilty" plea that is determined to be involuntary or ill informed. The accused has the right not to testify at trial and to have the opportunity to present evidence and cross-examine witnesses for the prosecution. Because the public, and not just the accused, has a constitutionally protected interest in public trials, the extent to which trials by military commission are open to the press and public may be subject to challenge by media representatives. The First Amendment right of public access extends to trials by court-martial, but is not absolute. It does not impose on the government a duty "to accord the press special access to information not shared by members of the public generally." The reporters' right to gather information does not include an absolute right to gain access to areas not open to the public. In general, trials may be closed only where the following test is met: the party seeking closure demonstrates an overriding interest that is likely to be prejudiced; the closure is narrowly tailored to protect that interest; the trial court has considered reasonable alternatives to closure; and the trial court makes adequate findings to support the closure. The MCA provides that the military judge may close portions of a trial only to protect information from disclosure where such disclosure could reasonably be expected to cause damage to the national security, such as information about intelligence or law enforcement sources, methods, or activities; or to ensure the physical safety of individuals. The information to be protected from disclosure does not necessarily have to be classified. To the extent that the exclusion of the press and public is based on the discretion of the military judge without consideration of the constitutional requirements relative to the specific exigencies of the case at trial, the procedures may implicate the First Amendment rights of the press and public. The M.M.C. provides, in Rule 806, that the military judge may close proceedings only to protect information designated for such protection by a government agency or to secure the physical safety of individuals. However, the rule also provides that "in order to maintain the dignity and decorum of the proceedings or for other good cause, the military judge may reasonably limit the number of spectators in, and the means of access to, the courtroom, and exclude specific persons from the courtroom." Such limitations must be supported by written findings. Another method military judges have adopted to protect classified information is to employ a time-delay on the audio feed of the proceedings to the public in the gallery in order to permit the judge or other authorized person to turn off the audio in the event classified information has been or is about to be disclosed. The measure was said to be necessary because the statements of the accused are presumptively classified. If the switch is activated, the judge was to order a halt to the proceedings to evaluate the nature of the information or to permit the prosecution to assert a national security privilege. Under UCMJ art. 39, the accused at a court-martial has the right to be present at all proceedings other than the deliberation of the members. Under the DOD rules for military commissions prior to the MCA, the accused or the accused's civilian attorney could be precluded from attending portions of the trial for reasons involving national security, but a detailed defense counsel was to be present for all hearings. The MCA does not provide for the exclusion of the accused from portions of his trial, and does not allow classified information to be presented to panel members that is not disclosed to the accused. The accused may be excluded from trial proceedings (other than panel deliberations) by the military judge only upon a determination that the accused persists in disruptive or dangerous conduct. However, the accused may be excluded from in camera considerations regarding classified information. The accused may not waive the right to be present at his trial, but may forfeit it through disruptive behavior or refusal to attend proceedings. As is the case in military courts-martial, an accused before a military commission under the MCA has the right to have military counsel assigned free of charge. The right to counsel attaches much earlier in the regular military justice system, where the accused has a right to request an attorney prior to being interrogated about conduct relating to the charges contemplated. Under the MCA, at least one qualifying military defense counsel is to be detailed "as soon as practicable after the swearing of charges…." The accused may also hire a civilian attorney who is a U.S. citizen, is admitted to the bar in any state, district, or possession, has never been disciplined, has a SECRET clearance (or higher, if necessary for a particular case), and agrees to comply with all applicable rules. If civilian counsel is hired, the detailed military counsel serves as associate counsel. Unlike the DOD rules, the MCA provides that the accused has the right to self-representation. Previous DOD rules provided that defense counsel was to be assigned free of cost once charges were referred, but permitted the accused to request another JAG officer to be assigned as a replacement if available in accordance with any applicable instructions or supplementary regulations that might later be issued. The MCA does not expressly provide the accused an opportunity to request a specific JAG officer to act as counsel. However, under the DOD regulations, the accused may request a specific military attorney from the defense team at the beginning of the proceedings, and may request a replacement counsel from the Chief Defense Counsel if he believes his detailed counsel has been ineffective or if he is otherwise materially dissatisfied with his assigned counsel. If the accused retains the services of a civilian attorney, the MCA provides that military defense counsel is to act as associate counsel. The M.M.C. provides that, in the event the accused elects to represent himself, the detailed counsel shall serve as "standby counsel," and the military judge may require that such defense counsel remain present during proceedings. The MCA requires civilian attorneys defending an accused before military commission to meet the same strict qualifications that applied under DOD rules. A civilian attorney must be a U.S. citizen with at least a SECRET clearance with membership in any state or territorial bar and no disciplinary record. The MCA does not set forth in any detail what rules might be established to govern the conduct of civilian counsel. Under the present regulation, the Chief Defense Counsel has the responsibility of determining the eligibility of civilian defense counsel, and may reconsider the determination based on "subsequently discovered information indicating material nondisclosure or misrepresentation in the application, or material violation of obligations of the civilian defense counsel, or other good cause." Alternatively, the Chief Defense Counsel may refer the matter to either the convening authority or the DOD Deputy General Counsel (Personnel and Health Policy), who may revoke or suspend the qualification of any member of the civilian defense counsel pool. The MCA does not address the monitoring of communications between the accused and his attorney, and does not provide for an attorney-client privilege. Rule 502 of the Military Commission Rules of Evidence (Mil. Comm. R. Evid.) provides for substantially the same lawyer-client privilege that applies in courts-martial. With respect to the monitoring of attorney-client communications, the previous DOD rules for military commissions initially provided that civilian counsel were required to agree that communications with the client were subject to monitoring. That requirement was later modified to require prior notification and to permit the attorney to notify the client when monitoring is to occur. Although the government was not permitted to use information against the accused at trial, some argued that the absence of the normal attorney-client privilege could impede communications between them, possibly decreasing the effectiveness of counsel. Civilian attorneys were bound to inform the military counsel upon learning of information about a pending crime that could lead to "death, substantial bodily harm, or a significant impairment of national security." The required agreement under the present regulations imposes a similar duty to inform, but does not mention monitoring of communications. The Sixth Amendment to the U.S. Constitution guarantees that those accused in criminal prosecutions have the right to be "confronted with the witnesses against [them]" and to have "compulsory process for obtaining witnesses in [their] favor." The Supreme Court has held that "[t]he central concern of the Confrontation Clause is to ensure the reliability of the evidence against a criminal defendant by subjecting it to rigorous testing in the context of an adversary proceeding before the trier of fact." In courts-martial, the Military Rules of Evidence (Mil. R. Evid.) provide that "[a]ll relevant evidence is admissible, except as otherwise provided by the Constitution of the United States [and other applicable statutes, regulations and rules]." Relevant evidence is excluded if its probative value is outweighed by other factors. The accused has the right to view any documents in the possession of the prosecution related to the charges, and evidence that reasonably tends to negate the guilt of the accused, reduce the degree of guilt or reduce the punishment, with some allowance for protecting non-relevant classified information. Supporters of the use of military commissions to try suspected terrorists have viewed the possibility of employing evidentiary standards that vary from those used in federal courts or in military courts-martial as a significant advantage over those courts. The Supreme Court seemed to indicate that the previous DOD rules were inadequate under international law, remarking that "various provisions of Commission Order No. 1 dispense with the principles, articulated in Article 75 [of Protocol I to the Geneva Conventions] and indisputably part of the customary international law, that an accused must, absent disruptive conduct or consent, be present for his trial and must be privy to the evidence against him." The MCA provides that the "accused shall be permitted to present evidence in his defense, to cross-examine the witnesses who testify against him, and to examine and respond to evidence admitted against him on the issue of guilt or innocence and for sentencing." It is not clear what evidence might be excluded from this requirement as irrelevant to the issues of guilt, innocence, or appropriate punishment. A possible issue will be whether evidence relevant to the credibility of a witness or the authenticity of a document is permitted to be excluded from the accused's right to examine and respond to evidence, unless expressly provided elsewhere in the MCA. The MCA provides that defense counsel is to be afforded a reasonable opportunity to obtain witnesses and other evidence, including evidence in the possession of the United States, as specified in regulations prescribed by the Secretary of Defense. It does not guarantee the defense equal opportunity with the prosecution to obtain such evidence, as is the case at general courts-martial. Unlike the previous DOD rules in M.C.O. No. 1, the MCA does not expressly direct the prosecution to provide to the accused all of the evidence trial counsel intends to present. However, as noted above, the accused is entitled to examine and respond to evidence relevant to establishing culpability. The MCA provides that the accused is entitled to exculpatory information known to the prosecution, with procedures permitting some variance for security concerns. The MCA provides for the protection of national security information during the discovery phase of a trial. The military judge must authorize discovery in accordance with rules prescribed by the Secretary of Defense to redact classified information or to provide an unclassified summary or statement describing the evidence. However, where M.C.O. No. 1 permitted the withholding of any "Protected Information," the MCA permits the government to withhold only properly classified information that has been determined by the head of a government agency or department to require protection because its disclosure could result in harm to the national security. The military judge may authorize the government to delete specified portions of evidence to be made available to the accused, or may allow an unclassified summary or statement setting forth the facts the evidence would tend to prove, to the extent practicable in accordance with the rules used at general courts-martial. The MCA does not provide defense counsel with access to the classified information that serves as the basis for substitute or redacted proffers. The MCA provides for the mandatory production of exculpatory information known to trial counsel (defined as exculpatory evidence that the prosecution would be required to disclose in a general court-martial ), but does not permit defense counsel or the accused to view classified information. The military judge is authorized to permit substitute information, in particular when trial counsel moves to withhold information pertaining to the sources, methods, or activities by which the information was acquired. If the military judge finds that evidence is classified, he or she must authorize the trial counsel to protect the sources and methods by which such evidence was acquired. The military judge may (but need not) require that the defense and the commission members be permitted to view an unclassified summary of the sources, methods, or activities, to the extent practicable and consistent with national security. R.M.C. 701(e) provides that trial counsel must provide exculpatory evidence that he would be required to produce in general courts-martial, subject to exceptions where the government asserts a national security privilege. In such a case, the military judge may issue a protective order, but the defense is entitled to an adequate substitute for the information. Such a substitute may involve, to the extent practicable, the deletion of specified items of classified information from documents made available to the defense; the substitution of a portion or summary of the information for such classified documents; or the substitution of a statement admitting relevant facts that the classified information would tend to prove. In the event the military judge determines that the government's proposed substitute would be inadequate or impracticable for use in lieu of evidence that the government seeks to introduce at trial, evidence that is exculpatory, or evidence that is necessary to enable the defense to prepare for trial, and the government objects to methods the judge deems appropriate, the judge is required to "issue any order that the interests of justice require." Such an order must give the government an opportunity to comply to avoid a sanction, and may include striking or precluding all or part of a witness's testimony, declaring a mistrial, ruling against the government on any issue as to which the evidence is probative and material to the defense, or dismiss charges, or at least those charges or specifications to which the evidence relates, with or without prejudice. Evidence is admissible at military commissions under the MCA if it is deemed to have "probative value to a reasonable person." The Secretary of Defense is permitted to provide by regulation that the military judge is to exclude evidence if its probative value is substantially outweighed by the "danger of unfair prejudice, confusion of the issues, or misleading the commission"; or by "considerations of undue delay, waste of time, or needless presentation of cumulative evidence," and has done so. The MCA prohibits the use of statements obtained through torture as evidence in a trial, except as proof of torture against a person accused of committing torture. For information obtained through coercion that does not amount to torture, the MCA provides a different standard for admissibility depending on whether the statement was obtained prior to or after the enactment of the DTA. Statements elicited through such methods prior to the DTA are admissible if the military judge finds the "totality of circumstances under which the statement was made renders it reliable and possessing sufficient probative value" and "the interests of justice would best be served" by admission of the statement. Statements taken after passage of the DTA are admissible if, in addition to the two criteria above, the military judge finds that "the interrogation methods used to obtain the statement do not violate the cruel, unusual, or inhumane treatment or punishment prohibited by the Fifth, Eighth, and Fourteenth Amendments to the U.S. Constitution." Accordingly, Mil. Comm. R. Evid. 304 provides that an accused's statements that were elicited by torture may not be admitted against him if he makes a timely motion to suppress or an objection to the evidence. Initially, statements introduced by any party that were allegedly produced by lesser forms of coercion, where the degree of coercion is disputed, could only be introduced after the military judge made the appropriate findings according to the above formula. With changes to the regulations made in May, 2009, however, the military judge will be required to preclude any evidence elicited through cruel, inhuman or degrading treatment, without regard to when the statement was made. The defense is required to make any objections to the proposed use of any statements by the accused prior to entering a plea, if the trial counsel has disclosed the intent to use the statement, otherwise the objection will be deemed to have been waived. The military judge may require the defense to establish the grounds for excluding the statement. However, the government has the burden of establishing the admissibility of the evidence. If the statement is ruled admissible, the defense is permitted to present evidence with respect to the voluntariness of the statement, and the military judge must instruct the members to consider that factor in according weight to the evidence. Testimony given by the accused for the purpose of denying having made a statement or for disputing the admissibility of a statement is not to be used against him for any purpose other than in prosecution for perjury or false statements. Mil. Comm. R. Evid. 304 is modeled on Mil. R. Evid. 304, which prescribes rules for courts-martial to provide for the admission into evidence of confessions and admissions (self-incriminating statements not amounting to an admission of guilt). Under court-martial rules, such a statement and any evidence derived as a result of such a statement are admissible only if the statement was made voluntarily. Involuntary statements are those elicited through coercion or other means in violation of constitutional due process. To be used as evidence of guilt against the accused at court martial, a confession or admission must be corroborated by independent evidence. There is no requirement for corroboration of such statements at military commissions; however, the military judge may take the existence of corroborating evidence into consideration in determining the probative value and reliability of the statement. In one case before a military commission, the military judge ordered a detainee's statements to Afghan officials at the time of his capture suppressed on the basis of death threats against the detainee as well as his family. Such treatment is regarded as torture under the Military Commission Rules of Evidence. Further, the military judge ruled that statements subsequently made by the accused to U.S. interrogators likewise were required to be suppressed because they were taken under circumstances that did not sufficiently dissipate the coercive effect of the earlier threats. The government sought to appeal the latter ruling, but has since dropped the charges against the detainee after he prevailed in his habeas petition. Hearsay evidence is an out-of-court statement, whether oral, written, or conveyed through non-verbal conduct, introduced into evidence to prove the truth of the matter asserted. M.C.O. No. 1 did not exclude hearsay evidence. The MCA allows for the admission of hearsay evidence that would not be permitted under the Manual for Courts-Martial only if the proponent of the evidence notifies the adverse party sufficiently in advance of trial of the intention to offer the evidence, as well as the "particulars of the evidence (including [unclassified] information on the general circumstances under which the evidence was obtained)." Originally, the evidence was to be inadmissible only if the party opposing its admission "clearly demonstrates that the evidence is unreliable or lacking in probative value." The May, 2009 changes to the regulations reverse the burden of demonstrating reliability to the proponent of the evidence. The rule regarding hearsay is provided in Mil. Comm. R. Evid. 801 to 807. In contrast to the relatively restrictive rule applied in courts-martial, where hearsay is not admissible except as permitted by a lengthy set of exceptions, the military commission rules provide that hearsay is admissible on the same basis as any other form of evidence except as provided by these rules or an act of Congress. The rules do not set forth any prohibitions with respect to hearsay evidence. Mil. Comm. R. Evid. 803 provides that hearsay may be admitted if it would be admissible at courts-martial. Alternatively, hearsay is admissible if the party proffering it notifies the adverse party thirty days in advance of trial or hearing of its intent to offer such evidence and provides any materials in its possession regarding the time, place, and conditions under which the statement was procured. Absent such notice, the military judge is responsible for determining whether the opposing party has been provided a "fair opportunity under the totality of the circumstances." Hearsay evidence is admissible only if the proponent demonstrates by a preponderance of the evidence that such hearsay is reliable under the totality of the circumstances. At military commissions convened pursuant to the MCA, classified information is to be protected during all stages of proceedings and is privileged from disclosure for national security purposes. Whenever the original classification authority or head of the agency concerned determines that information is properly classified and its release would be detrimental to the national security, the military judge "shall authorize, to the extent practicable," the "deletion of specified items of classified information from documents made available to the accused"; the substitution of a "portion or summary of the information"; or "the substitution of a statement admitting relevant facts that the classified information would tend to prove." The military judge must consider a claim of privilege and review any supporting materials in camera, and is not permitted to disclose the privileged information to the accused. With respect to the protection of intelligence sources and methods relevant to specific evidence, the military judge is required to permit trial counsel to introduce otherwise admissible evidence before the military commission without disclosing the "sources, methods, or activities by which the United States acquired the evidence" if the military judge finds that such information is classified and that the evidence is reliable. The military judge may (but need not) require trial counsel to present an unclassified summary of such information to the military commission and the defense, "to the extent practicable and consistent with national security." The MCA does not explicitly provide an opportunity for the accused to contest the admissibility of substitute evidence proffered under the above procedures. It does not appear to permit the accused or his counsel to examine the evidence or a proffered substitute prior to its presentation to the military commission. If constitutional standards required in the Sixth Amendment are held to apply to military commissions, the MCA may be open to challenge for affording the accused an insufficient opportunity to contest evidence. An issue may arise as to whether, where the military judge is permitted to assess the reliability of evidence based on ex parte communication with the prosecution, adversarial testing of the reliability of evidence before the panel members meets constitutional requirements. If the military judge's determination as to reliability is conclusive, precluding entirely the opportunity of the accused to contest its reliability, the use of such evidence may serve as grounds to challenge the verdict. On the other hand, if evidence resulting from classified intelligence sources and methods contains "'particularized guarantees of trustworthiness' such that adversarial testing would be expected to add little, if anything, to [its] reliability," it may be admissible and survive challenge. Classified evidence is privileged under Mil. Comm. R. Evid. 505. Commentary to the rule notes that, because the defense has had no opportunity to evaluate the evidence to formulate any objections, "the military judge's consideration must encompass a broad range of potential objections." During the examination of witnesses at trial, the trial counsel may make an objection to any question or motion that might lead to the disclosure of classified information. The military judge is required to take appropriate action, such as reviewing the matter in camera or granting a delay to allow the trial counsel to confer with the relevant agency officer to determine whether the privilege should be asserted. The judge may order that only parts of documents or other materials be entered into evidence, or permit proof of the contents of such materials without requiring introduction into evidence of the original or a duplicate. In the event the defense reasonably expects to disclose classified information at trial, defense counsel must notify the trial counsel and the judge, and is precluded from disclosing information known or believed to be classified until the government has had a reasonable opportunity to move for an in camera determination as to protective measures. Mil. Comm. R. Evid. 505 is modeled after the corresponding rule that applies in general courts-martial, which in turn are modeled after the procedures that apply in federal criminal court, the Classified Information Procedures Act. The MCA provides that military commissions may adjudge "any punishment not forbidden by [it or the UCMJ], including the penalty of death…." It specifically proscribes punishment "by flogging, or by branding, marking, or tattooing on the body, or any other cruel or unusual punishment, ... or [by the] use of irons, single or double." A vote of two-thirds of the members present is required for sentences of up to 10 years. Longer sentences require the concurrence of three-fourths of the members present. The death penalty must be approved unanimously, both as to guilt and to the sentence, by all members present for the vote. In cases where the death penalty is sought, a panel of 12 members is required (unless the convening authority certifies that 12 members are not "reasonably available" because of physical conditions or military exigencies, in which case no fewer than nine are required), with all members present for the vote agreeing on the sentence. The death penalty must be expressly authorized for the offense, and the charges referred to the commission must have expressly sought the penalty of death. The death sentence may not be executed until the commission proceedings have been finally adjudged lawful and all appeals are exhausted, and after the President approves the sentence. The President is permitted to "commute, remit, or suspend [a death] sentence, or any part thereof, as he sees fit." For sentences other than death, the Secretary of the Defense or the convening authority are permitted to adjust the sentence downward. Chapter X of the Rules for Military Commissions covers sentencing. "Aggravating factors" that may be presented by the trial counsel include evidence that "any offense of which the accused has been convicted comprises a violation of the law of war." Unlike the rules for courts-martial, there is no express opportunity for the trial counsel to present evidence regarding rehabilitative potential of the accused. However, the rules provide that the accused may make a sworn or unsworn statement to present mitigating or extenuating circumstances or to rebut evidence of aggravation submitted by the trial counsel. In the case of an unsworn statement, which may be written or oral, the accused is not subject to cross-examination by the trial counsel. The death penalty may only be adjudged if expressly authorized for the offense listed or if it is authorized under the law of war; and all twelve members of the commission voted to convict the accused; and found that at least one of the listed aggravating factors exists, agreed that such factors outweigh any extenuating or mitigating circumstances, and voted to impose the death penalty. Aggravating factors include that "the accused was convicted of an offense, referred as capital, that is a violation of the law of war," that the offense resulted in the death of or substantially endangered the life of one or more other persons, the offense was committed for the purpose of receiving money or a thing of value, the offense involved torture or certain other mistreatment, the accused was also found guilty of another capital crime, the victim was below the age of fifteen, or that the victim was a protected person. Other aggravating circumstances include specific law-of-war violations, which, except for spying, are not to be applied to offenses of which they are already an element. Subchapter VI of the MCA prescribes post-trial procedure and appeals, similar to procedures DOD had implemented. It provides for an administrative review of the trial record by the convening authority followed by a review panel. The MCA codified the establishment of the review body set up under the previous DOD rules for military commissions. The Court of Military Commission Review (CMCR) is comprised of appellate military judges who meet the same qualifications as military judges or comparable qualifications for civilian judges. The accused may appeal a final decision of the military commission with respect to issues of law to the CMCR. Like the UCMJ, the MCA prohibits the invalidation of a verdict or sentence due to an error of law unless the error materially prejudices the substantial rights of the accused. If the CMCR approves the verdict, the accused may appeal the final decision to the United States Court of Appeals for the District of Columbia Circuit. Appellate court decisions may be reviewed by the Supreme Court under writ of certiorari. Post-trial procedures for military commissions are set forth in Chapter XI of the Rules for Military Commissions. Post-trial proceedings may be conducted to correct errors, omissions, or inconsistencies, where the revision can be accomplished without material prejudice to the accused. Sessions without members may be ordered to reconsider any trial ruling that substantially affects the legal sufficiency of any findings of guilt or the sentence. Once the record is authenticated and forwarded to the convening authority, the accused is permitted, within 20 days unless additional time is approved, to submit matters relevant to whether to approve the sentence or disapprove findings of guilt. The convening authority is required to consider written submissions. If the military commission has made a finding of guilty, the legal advisor also reviews the record and provides recommendations to the convening authority. The convening authority may not take an action disapproving a finding of not guilty or a ruling that amounts to a finding of not guilty. However, in the case of a finding of not guilty by reason of lack of mental responsibility, the convening authority may commit the accused to a suitable facility for treatment pending a hearing to determine whether the accused may be released or detained under less than the most stringent circumstances without posing a danger to others. Rehearings of guilty findings may be ordered at the discretion of the convening authority, except where there is a lack of sufficient evidence to support the charge or lesser included offense. Rehearings are permitted if evidence that should not have been admitted can be replaced by an admissible substitute. Any part of a sentence served pursuant to the military commission's original holding counts toward any sentence that results from a hearing for resentencing. In all cases in which the convening authority approves a finding of guilty, the record is forwarded to the CMCR, unless the accused (where the sentence does not include death) waives review. No relief may be granted by the CMCR unless an error of law prejudiced a substantial trial right of the accused. The accused has 20 days after receiving notification of the CMCR decision to submit a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit. Within two years after a military commission conviction becomes final, an accused may petition the convening authority for a new trial on the ground of newly discovered evidence or fraud on the military commission. Prior to the MCA, DOD regulations for military commissions provided that the accused could not be tried for the same charge twice by any military commission once the commission's finding on that charge became final (meaning once the verdict and sentence had been approved). However, the regulations appeared to permit revisions of a verdict prior to its becoming final in ways that might have resulted in double jeopardy. The MCA provides that "[n]o person may, without his consent, be tried by a military commission under this chapter a second time for the same offense." Jeopardy attaches when a guilty finding becomes final after review of the case has been fully completed. The MCA prevents double jeopardy by expressly eliminating the possibility that a finding that amounts to a verdict of not guilty is subject to reversal by the convening authority or to review by the CMCR or the D.C. Circuit. The severity of a sentence adjudged by the military commission cannot be increased on rehearing unless the sentence prescribed for the offense is mandatory. These protections are covered in Chapter XI of the Rules for Military Commission. Proceedings are not authorized to reconsider any ruling that amounts to a finding of not guilty as to any charge or specification, except with respect to a charge where the record indicates guilt as to a specification that may be charged as a separate offense under the MCA. Proceedings for increasing the severity of a sentence are not permitted unless the commission failed to adjudge a proper sentence under the MCA or the sentence was less than that agreed to in a plea agreement. The inadequacy of an indictment in specifying charges could raise double jeopardy concerns. If the charge does not adequately describe the offense, another trial for the same offense under a new description is not as easily prevented. The MCA requires that charges and specifications be signed under oath by a person with personal knowledge or reason to believe that matters set forth therein are true, and requires that they be served on the accused written in a language he understands. There is no express requirement regarding the specificity of the charges in the MCA, but the Rules for Military Commission provide that the charge must state the punitive article of the act, law of war, or offense as defined in the Manual for Military Commissions that the accused is alleged to have violated. A specification must allege every element of the charged offense expressly or by necessary implication. The Rules for Military Commissions make the trial counsel responsible for causing the accused to be served a copy of the charges in English and another language that the accused understands, where appropriate. After the accused is arraigned, the military judge may permit minor changes in the charges and specifications before findings are announced if no substantial right of the accused is prejudiced, but no major changes may be made over the objection of the accused without a new referral. President Bush's 2001 Military Order also left open the possibility that a person subject to the order might be transferred at any time to some other governmental authority for trial, or that a person already charged for crimes in federal courts could be made subject to the Order and transferred for trial by military commission. Double jeopardy might have arisen in either event, depending on whether jeopardy had attached prior to transfer, even if the trial did not result in a final verdict. The MCA does not expressly address such transfers or prohibit trial in another forum. The Rules for Military Commissions, however, provide the accused a waivable right to move to dismiss charges on the basis that he has previously been tried by a federal civilian court for the same offense. One bill has been introduced in the 111 th Congress to amend the MCA. For additional legislation pertaining to detainees and habeas corpus, see CRS Report R40419, Analysis of Selected Legislative Proposals Addressing Guantanamo Detainees , by [author name scrubbed]. Sec. 1031 of the National Defense Authorization Act for FY2010 ("NDAA FY2010"), S. 1390 , 111 th Cong, 1 st Sess. (2009), (as passed by the Senate), would replace chapter 47a of title 10, U.S. Code, as enacted by the MCA 2006. Some key differences between § 1031 of S. 1390 and the MCA 2006 include: Military commissions would have jurisdiction over "alien unprivileged enemy belligerents," defined somewhat differently from "alien unlawful enemy combatants" in the current law. The definition eliminates references to Al Qaeda and the Taliban. Military commissions would have express authority to determine their own jurisdiction. While MCA offenses remain substantially unchanged, the amendment requires that offenses occurred "in the context of and associated with armed conflict." Crimes that occurred prior to enactment of the bill would be prosecutable only to the extent that they are codifications of crimes traditionally triable by military commissions. (The MCA currently declares all covered offenses to be codifications of existing crimes). Confessions allegedly elicited through cruel, inhuman, or degrading treatment prohibited by section 1003 of the Detainee Treatment Act of 2005 (42 U.S.C. § 2000dd) would be inadmissible, regardless of when the statement was made. The MCA bars the use of such confessions only if they were made after the enactment of section 1003. (This change codifies an amendment to the Manual for Military Commission already made under the Obama Administration). In the case of hearsay evidence, the party offering the evidence would have the burden of demonstrating that it is reliable, whereas under current law, the opponent has the burden of proving that it is unreliable. (This change also codifies an amendment to regulations already made under the Obama Administration). The Court of Appeals of the Armed Services (CAAF) rather than the Court of Military Commission Review would serve as the exclusive appellate court. All trials that produce a guilty verdict would be referred automatically for review by the CAAF, unless waived where permitted. The CAAF's scope of review would include questions of fact as well as law, and the CAAF would have the authority to order charges dismissed. The Court of Appeals for the D.C. Circuit would have no appellate role. The Supreme Court would retain discretionary jurisdiction through writ of certiorari. The obligation to disclose exculpatory information would include mitigating evidence, and the obligation would extend to all information that is known or reasonably should be known to any government officials who participated in the investigation and prosecution of the case. This amendment essentially codifies the rules in the Manual for Military Commissions applicable to discovery, which defines "exculpatory information" to include evidence that tends to reduce the degree of guilt of the accused of an offense charged or reduce the punishment. Further, "evidence known to trial counsel," includes evidence that the prosecution would be required to disclose in a trial by general court-martial, which covers information under the control of the government. The Obama Administration has proposed some amendments to section 1031 of S. 1390 . It proposes excluding all involuntarily given statements by the accused, rather than just those obtained through the use of torture or cruel, inhuman, or degrading treatment. The voluntariness standard would entail taking into account the "challenges and realities of the battlefield and armed conflict." It does not propose a requirement that battlefield captives be warned that their statements can be used against them, as is the case in ordinary criminal prosecutions in U.S. courts. The Obama Administration would retain language asserting that offenses are codifications of the common law of war, but would eliminate the material support charge. The Administration supports the Senate proposal for treating hearsay evidence, but would adopt a somewhat different standard as to when the exception should apply, based on whether the hearsay evidence is more probative than other evidence that could be procured through reasonable efforts, rather than strictly on the availability of the witness to testify. The Administration proposes keeping the present appellate structure intact, but modifying the role of the Court of Military Commissions Review to make it more like one of the services Courts of Criminal Appeals, empowering it to address questions of fact as well as law. The Administration would include a five-year sunset provision for the M.C.A. The following charts provide a comparison of the military tribunals under the regulations issued by the Department of Defense, standard procedures for general courts-martial under the Manual for Courts-Martial, and military tribunals as authorized by the Military Commissions Act of 2006. Chart 1 compares the legal authorities for establishing military tribunals, the jurisdiction over persons and offenses, and the structures of the tribunals. Chart 2, which compares procedural safeguards incorporated in the MCA to court-martial procedures and to proposed amendments, follows the same order and format used in CRS Report RL31262, Selected Procedural Safeguards in Federal, Military, and International Courts , by [author name scrubbed], in order to facilitate comparison of the proposed legislation to safeguards provided in federal court, the international military tribunals that tried World War II crimes at Nuremberg and Tokyo, and contemporary ad hoc tribunals set up by the UN Security Council to try crimes associated with hostilities in the former Yugoslavia and Rwanda. For a comparison with previous rules established under President Bush's Military Order, refer to CRS Report RL33688, The Military Commissions Act of 2006: Analysis of Procedural Rules and Comparison with Previous DOD Rules and the Uniform Code of Military Justice , by [author name scrubbed]. | On November 13, 2001, President Bush issued a Military Order (M.O.) authorizing trial by military commission of certain non-citizens suspected of participating in the war against terrorism. The Supreme Court struck down military commissions established pursuant to the M.O. as inconsistent with the Uniform Code of Military Justice (UCMJ). To permit military commissions to go forward, Congress approved the Military Commissions Act of 2006 (MCA), conferring authority to promulgate rules that depart from the strictures of the UCMJ and possibly U.S. international obligations. The Department of Defense (DOD) published regulations to govern military commissions pursuant to the MCA. Three prosecutions under those regulations resulted in convictions. Shortly after taking office, President Obama took action to suspend the operation of military commissions pending a review of all Guantanamo detentions for the purpose of assessing options for the lawful disposition of each detainee. The Detention Policy Task Force set up to conduct the review issued a preliminary report announcing that while federal criminal court would be the preferred forum for trying enemy terrorists who are suspected of having violated U.S. criminal law, military commissions, with significant reforms, would remain an option for prosecuting violations of the law of war. This report provides a background and analysis of military commissions rules under the MCA. After reviewing the history of the implementation of military commissions in the "global war on terrorism," the report provides an overview of the procedural safeguards provided in the MCA. The report identifies pending legislation, including Senate-passed S. 1390, and describes proposals suggested by the Obama Administration. Finally, the report provides two charts comparing the MCA with proposed legislation. The first chart describes the composition and powers of the military tribunals, as well as their jurisdiction. The second chart, which compares procedural safeguards under the MCA with those established for courts-martial as well as proposed amendments to the MCA, follows the same order and format used in CRS Report RL31262, Selected Procedural Safeguards in Federal, Military, and International Courts, to facilitate comparison with safeguards provided in federal court and international criminal tribunals. For similar charts comparing military commissions as envisioned under the MCA to the rules that had been established by DOD for military commissions and to general military courts-martial conducted under the UCMJ, see CRS Report RL33688, The Military Commissions Act of 2006: Analysis of Procedural Rules and Comparison with Previous DOD Rules and the Uniform Code of Military Justice, by [author name scrubbed]. |
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. 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. 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. "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. 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. 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. 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. |
Trafficking in persons, or human trafficking, refers to the subjection of men, women, and children to compelled service for the purposes of exploitation. Examples of human trafficking include trafficking for commercial sexual exploitation, including child sexual exploitation; forced labor, including bonded labor, involuntary domestic servitude, and forced child labor; and the unlawful recruitment and use of child soldiers. Reports suggest that human trafficking is a global phenomenon, victimizing millions of people and contributing to a multi-billion dollar criminal industry. It is a centuries-old problem that, despite international efforts, continues to occur in virtually every country in the world. On June 30, 2016, the State Department released its latest edition of the flagship annual U.S. publication on international human trafficking, the Trafficking in Persons (TIP) Report , discussed further in the " State Department Reporting Requirements " section below. Briefly, the TIP Report categorized 185 countries, including the United States, into four tiers, based on their respective governments' level of effort to address human trafficking: Tier 1 (best), Tier 2, Tier 2 Watch List, and Tier 3 (worst). An additional three countries were designated as "Special Cases" without a tier ranking because of political instability and the inability to obtain relevant government information. Only Tier 1 countries, approximately 19.5% of the countries assessed, were fully compliant with U.S.-established minimum standards to eliminate severe forms of human trafficking; the rest were considered noncompliant and varied in terms of their level of effort to improve. Among the least compliant were the 27 countries identified as Tier 3 in the 2016 TIP Report , including 8 that had previously been Tier 2 Watch List: Burma, Djibouti, Haiti, Papua New Guinea, Sudan, Suriname, Turkmenistan, and Uzbekistan. As required by law, Tier 3 countries are subjected to selected foreign assistance restrictions, unless the President determines that continuing to provide aid is in the U.S. national interest. The nongovernmental organization Walk Free Foundation also provided a global evaluation of human trafficking trends in its 2016 Global Slavery Index report. The 2016 Global Slavery Index report estimated that some 45.8 million (up from 35.8 million estimated in 2014) individuals worldwide were exploited through human trafficking, forced labor, debt bondage, forced or servile marriage, or commercial sexual exploitation. In contrast to the TIP Report , which categorizes countries solely on the basis of government efforts, the Global Slavery Index also seeks to provide country-by-country estimates of people experiencing conditions tantamount to modern slavery. For example, the 2016 Global Slavery Index reported the following: Countries with the greatest prevalence of their population subjected to "modern slavery" included North Korea (for comparison, the State Department listed North Korea as Tier 3 in the 2016 TIP Report ), Uzbekistan (Tier 3), Cambodia (Tier 2), India (Tier 2), and Qatar (Tier 2 Watch List). Countries with the highest absolute numbers of people subjected to modern slavery, according to the 2016 Global Slavery Index , included India (Tier 2 in the 2016 TIP Report ), China (Tier 2 Watch List), Pakistan (Tier 2 Watch List), Bangladesh (Tier 2), and Uzbekistan (Tier 3). Countries taking the least action to address human trafficking included North Korea (Tier 3 in the 2016 TIP Report ), Iran (Tier 3), Eritrea (Tier 3), Equatorial Guinea (Tier 3), Papua New Guinea (Tier 3), Guinea (Tier 2 Watch List), the Democratic Republic of the Congo (DRC, Tier 2 Watch List), and South Sudan (Tier 3). Several other older, but nevertheless widely referenced global reports on human trafficking include a 2014 report prepared by the United Nations Office on Drugs and Crime (UNODC) and two reports prepared by the International Labor Organization (ILO). Surveying U.N. member countries, UNODC reported in 2014 that, between 2010 and 2012, 124 countries had identified trafficking victims representing 152 nationalities. The UNODC report cautioned that its estimates were minimum figures, as it is generally recognized that the actual scope and prevalence of human trafficking is far higher than officially reported. The UNODC report also revealed that trafficking operations were seemingly as diverse as they were widespread, ranging from individuals exploiting their partners or employees to highly sophisticated transnational criminal syndicates involving a large number of victims. In 2012, the ILO estimated that some 20.9 million men, women, and children were subjected to forced labor, including trafficking, debt bondage, and slavery-like conditions. In 2014, the ILO followed up with an analysis of the financial value of forced labor and related trafficking on the international economy, estimating that it generated $150 billion in illegal profits annually. According to the ILO, two-thirds of this total amount stemmed from commercial sexual exploitation, while the rest resulted from forced labor. Key forced labor sectors included the construction, manufacturing, and utilities industries (generating some $34 billion in annual illicit income), followed by agriculture ($9 billion) and domestic work ($8 billion). The U.S. government, including Congress, has played a leading role in international efforts to combat human trafficking, particularly through the enactment of the Trafficking Victims Protection Act of 2000 (TVPA, Division A of P.L. 106-386 ) and its subsequent amendments and reauthorizations (TVPRAs of 2003, 2005, 2008, and 2013). Other related legislation has included the Child Soldiers Prevention Act of 2008 (CSPA of 2008, Title IV of P.L. 110-457 ) and Title XVII of the National Defense Authorization Act, Fiscal Year 2013 ("End Trafficking in Government Contracting," P.L. 112-239 ). In the 114 th Congress, trade and customs legislation addressed human trafficking, including the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Title I of P.L. 114-26 ) and the Trade Facilitation and Trade Enforcement Act of 2015 ( P.L. 114-125 ). Other legislation on international aspects of human trafficking have also been enacted, including appropriations, the International Megan's Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders ( P.L. 114-119 ); and other country-specific statutes. See Appendix for further review of legislation in the 114 th Congress. In addition, recent Administrations have taken several steps to enhance U.S. responses to international human trafficking. Prior to enactment of the TVPA, in 1999, President Bill Clinton issued Executive Order 13126 on the "Prohibition of Acquisition of Products Produced by Forced or Indentured Child Labor." In 2002, President George W. Bush issued National Security Presidential Directive 22 on "Combating Trafficking in Persons." In 2012, President Barack Obama issued Executive Order 13627 on "Strengthening Protections Against Trafficking in Persons in Federal Contracts." In remarks at the Clinton Global Initiative in September 2012, President Obama described the fight against human trafficking as "one of the great human rights causes of our time" and emphasized the importance of the U.S. government in leading such efforts. The U.S. Department of State leads federal efforts to combat human trafficking. The Secretary of State chairs the President's Interagency Task Force (PITF) on Trafficking in Persons, and the Director of the State Department's Office to Monitor and Combat Trafficking in Persons (J/TIP) chairs the Senior Policy Operating Group (SPOG), a working-level interagency entity that coordinates the U.S. government's response to human trafficking. J/TIP also administers an international anti-trafficking grants program and annually prepares, with department-wide input, the congressionally mandated TIP Report . The State Department's J/TIP Office is one of seven organizational units with functional policy responsibilities that report to the Under Secretary of State for Civilian Security, Democracy, and Human Rights. Congress mandated the establishment of the J/TIP Office in the TVPA of 2000 and it is currently headed by Susan Coppedge, confirmed by the Senate in October 2015. Pursuant to the TVPA, the J/TIP director is responsible for advising the Secretary of State on human trafficking matters, coordinating foreign assistance programs across the State Department and U.S. Agency for International Development (USAID), and serving as chair of the SPOG. In addition, the J/TIP director oversees the annual publication of the TIP Report , required by the TVPA, as well as the administration of an international grants program for projects seeking to combat human trafficking. For FY2015, J/TIP awarded more than $18 million in grants and cooperative agreements to nongovernmental and international organizations under this program. Moreover, J/TIP supports the Secretary of State in his role as chair of the PITF, liaises with the legislative branch on human trafficking matters, and addresses human trafficking priorities in multilateral fora. In early January 2016, Secretary of State John Kerry convened the statutorily mandated PITF, where senior officials representing 17 federal departments, agencies, and offices provided status updates on their organization's anti-trafficking activities. Secretary Kerry committed to raising human trafficking issues at every bilateral meeting and personally calling all foreign ministers whose countries were at risk of a downgrade in the 2016 TIP Report . Other key international human trafficking issues addressed at this meeting included ongoing efforts to address supply chain transparency and implement requirements to prevent human trafficking in U.S. federal procurement supply chains. The Director of National Intelligence James Clapper reported that human trafficking has been among the intelligence community's national intelligence collection priorities since 2012 and that the National Intelligence Council intends on issuing its first-ever national intelligence estimate on human trafficking during the summer of 2016. In addition to the regional bureaus, other offices within the State Department address issues related to human trafficking: the Bureau of Democracy, Human Rights and Labor Affairs (DRL); the Bureau of Population, Refugees and Migration Affairs (PRM); the Bureau of International Narcotics and Law Enforcement Affairs (INL); and the Office of Global Women's Issues. DRL, for example, leads the State Department's efforts to address child soldiers and, more generally, human rights issues, including through its annual publication Country Reports on Human Rights Practices . PRM addresses trafficking issues in the context of protecting vulnerable refugee and migrant populations from exploitation. INL supports justice sector and law enforcement capacity building, including human trafficking-related training. Other U.S. agencies involved in international efforts to combat human trafficking include USAID and the U.S. Departments of Labor (DOL), Justice (DOJ), Defense (DOD), and the Treasury (described below). The U.S. Government Accountability Office (GAO) and various agency inspectors general offices have also issued evaluations over the years on human trafficking-related international programming. USAID: Led by USAID's Bureau for Democracy, Conflict, and Humanitarian Assistance, USAID administers foreign assistance for regional and bilateral anti-trafficking projects. In 2012, USAID released a Counter-Trafficking in Persons Policy and followed up in 2013 with a Counter-Trafficking in Persons Field Guide . DOL: DOL supports international projects to address exploitative child labor, which includes child trafficking, and sponsors research on forced labor. In December 2014, DOL released an updated list of products produced by forced or indentured child labor, pursuant to Executive Order 13126, as well as an updated list of goods produced by child labor or forced labor in 74 countries, pursuant to the TVPRA of 2005. In September 2015, DOL issued its most recent annual report on Findings on the Worst Forms of Child Labor . DOJ: With funding from the State Department and USAID, DOJ's Office of Overseas Prosecutorial Development, Assistance and Training and International Criminal Investigative Assistance Program teams provide international technical assistance and training on human trafficking-related themes, among other topics. The Attorney General is mandated to report to Congress on U.S. government activities to combat trafficking in persons for each fiscal year; the most recent report covers FY2015. DOD: Following allegations in the media regarding exploitative labor conditions in U.S. overseas contingency operations, DOD has enhanced efforts to raise awareness about human trafficking among its cadre of direct hires and contractors. DOD workforce awareness of slavery and human trafficking issues has reportedly increased from 72% in 2008 to nearly 90% in 2015. Treasury: The Treasury Department's Office of Foreign Assets Control administers country-specific sanctions programs that authorize the freezing and blocking of assets of specially designated individuals associated with the recruitment and use of child soldiers, among other concerns, in Burundi, Central African Republic, the Democratic Republic of Congo, and Somalia. Internationally, the U.S. government is party to multiple treaties related to human trafficking that variously require participating countries to criminalize all forms of human trafficking, support international efforts to protect victims, prosecute traffickers, and prevent opportunities for traffickers to exploit. In 2000, the United Nations (U.N.) adopted the Protocol to Prevent, Suppress and Punish Trafficking in Persons, Especially Women and Children (hereinafter U.N. Trafficking Protocol), a supplement to the U.N. Convention Against Transnational Organized Crime. Since the U.N. Trafficking Protocol entered into force in 2003, the international community has seen an uptick in the number of countries enacting laws that prohibit and criminally punish human trafficking. The State Department reported that 30 countries passed new or amended legislation in 2015 to combat human trafficking. In September 2015, U.N. member states agreed on an updated set of Sustainable Development Goals (SDGs) that included goals to combat trafficking of women and children and to end modern slavery, forced labor, and all other forms of human trafficking. In December 2015, the U.N. Security Council held an unprecedented debate on human trafficking in armed conflict. The debate addressed sexual exploitation in the context of U.N. peacekeeping missions, possible risks in the U.N. procurement and supply chain that may contribute to TIP, and the enslavement of women by the terrorist group known as the Islamic State, ISIS, ISIL, or Daesh. Human trafficking victim identification and support was also featured in the context of the current international refugee crisis at the May 2016 World Humanitarian Summit. Pursuant to the TVPA, as amended, the State Department has annually reported on government responses to human trafficking in its TIP Report since 2001. As briefly outlined in the introduction, countries covered in the TIP Report , including the United Sates, receive one of four possible ranking designations: Tier 1 (best), Tier 2, Tier 2 Watch List, and Tier 3 (worst). Only Tier 1 countries are fully compliant with the TVPA's minimum standards (see Text Box below), while the rest are noncompliant and vary in terms of the level of effort their governments have exhibited to improve. Also published in conjunction with the annual TIP Report is a list of countries involved in recruiting and using child soldiers. Countries designated as Tier 3 or identified as recruiting or using child soldiers may, in turn, be subject to restrictions on certain types of U.S. foreign assistance. The annual T IP Report is due each year to Congress on June 1. To assess anti-trafficking progress among a subset of higher risk countries, known as the special watch list, the TVPA requires the State Department to issue each February an Interim Assessment . A discussion of the 2016 Interim Assessment and TIP Report follows. On March 2, the Department of State submitted to Congress the 2016 TIP Interim Assessment report. The report is required to be prepared by the Secretary of State no later than February 1 each year. It is to include "an assessment of the progress that each country on the special watch list... has made since the last annual report." The TIP Interim Assessment describes each country's recent efforts to combat human trafficking, with roughly equal amount of discussion of the country's accomplishments and remaining challenges. Based only on the descriptions in the Interim Assessment reports, it would be difficult to predict what tier ranking the countries would receive in the subsequent annual TIP Report . On June 30, the Department of State released its 2016 TIP Report . It reviewed 185 countries, and an additional three "special cases" (i.e., Libya, Somalia, and Yemen) based on their respective governments' level of effort to address human trafficking. The 36 countries identified as Tier 1 represent the only countries in the world deemed to be fully compliant with U.S.-established minimum standards to eliminate severe forms of human trafficking; the rest are noncompliant and vary in terms of their level of effort to improve (see Table 1 ). Ranked in the TIP Report since the 2010 edition, the United States is among the Tier 1 countries. New or returned to the Tier 1 list in the 2016 TIP Report are Colombia, Cyprus, Georgia, Lithuania, Philippines, Slovenia, and St. Maarten. Seventy-eight countries, or some 42.2% of all countries listed in the 2016 TIP Report , are ranked as Tier 2 (see Table 2 )—a category that includes countries that are not fully compliant with the minimum standards but are "making significant efforts to bring themselves into compliance." Thirteen countries are new to the Tier 2 list in 2016, while two—Luxembourg and Macedonia—were downgraded from Tier 1 in 2015 to Tier 2 in this year's report. The Tier 2 Watch List countries comprise those not in compliance with the minimum standards for the elimination of human trafficking—and those at risk of sliding down to Tier 3, the worst category (see Table 3 ). Countries on the Tier 2 Watch List include those that have failed to provide evidence of increasing efforts to combat human trafficking compared to the previous year, or those in which evidence of significant efforts to combat human trafficking is based on the country's commitments to take additional steps in the coming year. In 2015, two countries were upgraded from Tier 3 to Tier 2 Watch List (Kuwait and Thailand). The majority of countries on Tier 2 Watch List (25 of 44) are not new to the list in 2016. As required in law (22 U.S.C. 7107), countries are to be demoted to Tier 3 after two years on the Tier 2 Watch List. The President may waive the automatic downgrade to Tier 3 for up to two more years if the country has a written plan to achieve Tier 2 status, including allocation of sufficient resources to implement such a plan. After four consecutive years on the Tier 2 Watch List, however, the State Department must determine whether an upgrade to Tier 2 is warranted or whether a downgrade to Tier 3 is required. Seven countries in the 2016 TIP Report have reached the maximum of four consecutive years on Tier 2 Watch List: Guinea, Mali, Solomon Islands, Sri Lanka, Tanzania, Tunisia, and Ukraine. Countries deemed to be the least compliant with the minimum standards for the elimination of human trafficking—those that do not comply with such standards and are not making significant efforts to bring themselves into compliance—are designated in the TIP Report as Tier 3. In 2016, 27 such countries were so identified (see Table 4 ), including 8 that had previously been Tier 2 Watch List (Burma, Djibouti, Haiti, Papua New Guinea, Sudan, Suriname, Turkmenistan, and Uzbekistan). As required by law, Tier 3 countries are subjected to selected foreign assistance restrictions, unless the President determines that continuing to provide such aid is in the U.S. national interest. For FY2016, based on last year's report, the President in October 2015 fully waived these restrictions to 13 countries and partially waived them to 8 countries; aid to 2 countries was restricted pursuant to U.S. anti-trafficking requirements. Presidential determinations for FY2017 are expected to be announced in the fall of 2016. Pursuant to the Child Soldiers Prevention Act of 2008 (CSPA of 2008, Title IV of P.L. 110-457 ), the State Department has since 2010 annually published in the TIP Report a list of countries that recruit or use child soldiers in their armed forces, or that harbor nongovernment armed forces that recruit or use child soldiers. The State Department identified 10 such countries in 2016, up from 8 in 2015: Burma (Tier 3 in the 2016 TIP Report ), the Democratic Republic of Congo (DRC, Tier 2 Watch List), Iraq (Tier 2 and one of the two new countries on the list), Nigeria (Tier 2), Rwanda (Tier 2 Watch List and also new to the list), Somalia (unranked), South Sudan (Tier 3), Sudan (Tier 3), Syria (Tier 3), and Yemen (unranked). As required by law, listed countries are subjected to selected security assistance restrictions, unless the President determines that continuing to provide such aid is in the U.S. national interest. For FY2016, based on last year's report, the President in September 2015 fully waived these restrictions to three countries (DRC, Nigeria, and Somalia) and partially waived them to one (South Sudan). Presidential determinations for FY2017 are expected to be announced in the fall of 2016. The 2016 TIP Report covers actions taken by governments from April 1, 2015, to March 31, 2016. According to the State Department, information used to prepare the report is based on various sources. Tier ranking designations are not based on a concrete formula, but rather country-specific considerations that leave State Department officials with considerable discretion. The report is produced by the State Department's J/TIP Office. According to a 2012 report on J/TIP by the State Department Inspectors General (OIG), the TIP Report is unusual for the central role that Washington plays in the drafting of the report. As described by the State Department's OIG, the typical report drafting cycle is as follows: J/TIP sends a request to all U.S. overseas posts each December for information to use in the TIP Report . At the same time, J/TIP staff contact nongovernmental organizations (NGOs) to request similar information. Between mid-February and the end of March, J/TIP drafts the country summaries and proposed tier rankings for the TIP Report . A draft of the report is cleared by the Office of the Legal Adviser and J/TIP's Director in early to mid-April and is shared with regional bureaus and offices. Disagreements over facts and tier rankings occasionally arise and require resolution before the TIP Report is published; ultimately, resolution may be made by the Secretary of State. According to the 2012 OIG report, "the number of tier-ranking disputes between regional bureaus and J/TIP declined from 46 percent of all countries ranked in 2006 to 22 percent of those ranked in 2011." On August 3, 2015, a Reuters news article reported that tier-ranking disputes for the 2015 Trafficking in Persons Report involved 17 countries and that the J/TIP Office "won only three of those disputes, the worst ratio in the 15-year history of the unit." The article indicated that countries whose rankings were disputed included Malaysia, Cuba, China, India, Uzbekistan, and Mexico—all of which reportedly received better rankings than the J/TIP Office had recommended. In recent testimony to the Senate Foreign Relations Committee, J/TIP Director Coppedge acknowledged that some tier rankings were also disputed for the 2016 TIP Report , but she would not divulge publicly which countries were the subject of such disputes and whether the J/TIP Office's ranking recommendations had prevailed. Although many observers view the annual TIP Report as a credible reflection of global efforts to combat human trafficking, some have criticized the methodology used to evaluate foreign country efforts and assign tier rankings. As is often the case with the annual release of the T IP Report , several countries whose rankings declined were critical of the State Department's ranking decisions and methodology. Among those critical, dismissive, or disappointed this year were Belarus, Burma, Hong Kong, Macau, North Korea, and Rwanda. In contrast, those governments that received improved ratings were more likely to point toward the report as a credible indicator of international commitments to combat human trafficking. Others noted that the TIP Report ranking methodology, dependent on accurate and fulsome data on combating human trafficking, contains an inherent bias toward wealthier countries that can afford such investments. In 2015, the debate focused in particular over Malaysia's tier ranking. After four consecutive years on the Tier 2 Watch List from 2010 through 2013, it was downgraded, as required by law, to Tier 3 for lack of significant progress to combat human trafficking. In 2015 and 2016, however, the State Department ranked Malaysia as a Tier 2 Watch List country. The timing of the State Department's upgrade in 2015 was criticized by outside advocacy groups and many Members of Congress as politically motivated, despite Administration denials, to the Trans-Pacific Partnership (TPP) trade deal negotiations. Pursuant to the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Title I of P.L. 114-26 ), the authorities for fast-tracking the deal would not be applicable to Tier 3 countries. Following the June 30 release of the 2016 TIP Report , several Members of Congress continued to express incredulity over Malaysia's ranking, which remained on the Tier 2 Watch List for a second consecutive year. Others cited Malaysia's ranking to claim that the State Department's rankings remained swayed by political considerations. On the whole, however, many observers recognized the State Department's attempts to mend its reputation, following last year's groundswell of criticism over Malaysia's rating in the TIP Report . The State Department was widely praised by observers for what they viewed as an accurate portrayal of human trafficking problems in Burma and Uzbekistan, both rated Tier 3 in the 2016 TIP Report . In congressional testimony on the 2016 TIP Report , a civil society organization witness additionally praised the State Department for keeping Qatar on the Tier 2 Watch List. The State Department nevertheless received criticism for other rankings, including of Thailand, which some suggested should have been rated Tier 3 instead of Tier 2 Watch List. In the case of Thailand, many acknowledged the military regime's efforts to prioritize anti-human trafficking in the past year; however, others viewed the upgrade as premature. Some also raised suspicions that Thailand's Tier 2 Watch List rating could help the Obama Administration achieve other political objectives, including support from Southeast Asia on disputes with China over its territorial claims in the South China Sea as well as prospects for potentially joining the TPP. Some noted the possibility that the State Department's decision to upgrade Thailand could also affect the European Union's ongoing review of Thailand's illegal fishing and labor practices as well as improve Thai fish exports. In the case of other countries, such as Cuba, China, and India, some have challenged the State Department's assessments and called for reform of the ranking system. Some observers also criticized the State Department for the absence of Afghanistan on its list of countries using child soldiers, a category also published in the TIP Report . Although the list grew in 2016 to include two additions (Iraq and Rwanda) to the 10-country list, Afghanistan was not among them. Although the State Department acknowledged reports that the Afghanistan Local Police (ALP) is a government security force and that media outlets reported on their recruiting and sexually abusing children under the age of 18, the TIP Report noted that the ALP "falls outside of the armed forces of the country as defined by the CSPA [Child Soldiers Prevention Act of 2008]." As Congress continues to evaluate U.S. efforts to address human trafficking internationally, foreign assistance funding will remain a central focus. As required by the TVPA, as amended, countries that receive a Tier 3 ranking in the TIP Report are ineligible to receive nonhumanitarian, nontrade-related aid in the following fiscal year. In addition, pursuant to the CSPA, countries identified in the TIP Report as having recruited or used child soldiers are additionally restricted from receiving certain U.S. security assistance in the following fiscal year. Both provisions authorize the President to waive restrictions on aid in cases where the continuation of aid would promote U.S. national interests that supersede anti-trafficking policy goals. For FY2017, the President is expected to decide in the fall which restrictions will be made. FY2016 funding to address human trafficking internationally is governed by the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), in which Congress provided for not less than $72 million in State Department and foreign assistance efforts to combat human trafficking internationally. This amount included $12 million to support J/TIP personnel and administrative costs out of the Diplomatic and Consular Programs (D&CP) account. It also allocated $60 million in foreign assistance funding to address human trafficking out of the Development Assistance (DA) account ($9.8 million), the Economic Support Fund (ESF) account ($11.2 million), and the International Narcotics Control and Law Enforcement (INCLE) account ($39 million). Among the anti-human trafficking programs funded with U.S. foreign assistance is a J/TIP-administered international grant program, through which J/TIP awarded more than $18 million in grants and cooperative agreements in FY2015 to NGO and international organizations. In addition, the J/TIP Office manages efforts to establish Child Protection Compact (CPC) Partnerships, the first of which was agreed to with the government of Ghana in June 2015; in October 2015, the J/TIP Office announced grants totaling $5 million in support of the CPC Partnership with Ghana. As part of the FY2016 appropriations, P.L. 114-113 also specifically committed funding to address human trafficking in Guatemala ($5 million) and child trafficking through child protection compacts ($5 million in INCLE funds). The act further specified that not less than $4 million (in INCLE funds) may be appropriated for DNA forensic technology programs to combat human trafficking in Central America. If the End Modern Slavery Initiative Act of 2015 ( S. 553 , as reported to the Senate) is enacted, P.L. 114-113 would provide, in addition to the $60 million appropriated in foreign assistance for anti-trafficking purposes, $25 million, made available out of the DA and INCLE accounts. This additional funding would support grants to reduce the prevalence of modern slavery globally. The grants would be administered by S. 553 's newly envisioned independent, nonprofit corporation to be known as the End Modern Slavery Initiative Foundation. P.L. 114-113 included several additional provisions related to international human trafficking, including reporting requirements on the obligation and expenditure of counter-trafficking funds and a prohibition in Burma on the use of funds for military training and operations involving child soldiers. In addition, the act required that training of foreign security forces and justice-sector officials address issues related to the prevention of response to gender-based violence and human trafficking. It also limited the obligation of some funds for Central America until the Secretary of State certifies and reports that the governments of El Salvador, Guatemala, and Honduras are taking effective steps to combat human smuggling and trafficking. In February 2016, the State Department released its congressional budget justification for State, Foreign Operations, and Related Programs in FY2017, requesting $7.4 million to fund J/TIP out of the D&CP account and an additional $48.7 million in foreign operations programming. The following list provides an overview of bills in the 114 th Congress that pertain, at least in part, to international dimensions of trafficking in persons. Enacted Legislation H.R. 515 . International Megan's Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders—became P.L. 114-119 . H.R. 644 . Trade Facilitation and Trade Enforcement Act of 2015—became P.L. 114-125 . See in particular provisions amending the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 and the Tariff Act of 1930 and the Conference report ( H.Rept. 114-376 ). H.R. 757 . North Korea Sanctions and Policy Enhancement Act of 2016—became P.L. 114-122 . See in particular provisions on forced labor and trafficking of North Korean citizens and House Foreign Affairs Committee report ( H.Rept. 114-392 ). H.R. 2029 . Consolidated Appropriations Act, 2016—became P.L. 114-113 . See Division K, the Department of State, Foreign Operations, and Related Appropriations Act, 2016; see also S. 1725 and H.R. 2772 , both entitled Department of State, Foreign Operations, and Related Programs Appropriations Act, 2016, and respectively reported out of committee ( S.Rept. 114-79 and H.Rept. 114-154 ). H.R. 2146 . Defending Public Safety Employees' Retirement Act—became P.L. 114-26 . See Title I, the Bipartisan Congressional Trade Priorities and Accountability Act of 2015; see also S. 995 , the Bipartisan Congressional Trade Priorities and Accountability Act of 2015, which was reported out of the Senate Committee on Finance ( S.Rept. 114-42 ). Passed Either the House or Senate H.R. 350 . Human Trafficking Prevention, Intervention, and Recovery Act of 2015—passed the House; pertaining to the activities of the President's Interagency Task Force to Monitor and Combat Trafficking as they relate to child trafficking in the United States. H.R. 357 . Human Trafficking Prevention Act—passed the House; pertaining to federal government training on human trafficking. H.R. 400 . Trafficking Prevention in Foreign Affairs Contracting Act—passed the House; pertaining to anti-human trafficking requirements for federal contractors. H.R. 514 . Human Trafficking Prioritization Act—passed the House; pertaining to the bureaucratic status of the J/TIP Office within the State Department. H.R. 3694 . Strategy to Oppose Predatory Organ Trafficking Act—passed the House; pertaining to U.S. policy responses to the trafficking in human organs. S. 1635 . Department of State Operations Authorization and Embassy Security Act, Fiscal Year 2016—passed the Senate; pertaining to State Department responsibilities to combat human trafficking. S. 2943 . National Defense Authorization Act for Fiscal Year 2017—passed the Senate; pertaining to, among other provisions, authority for the Secretary of State to award grants seeking to reduce the prevalence of human trafficking in foreign countries. Other Pending Bills H.R. 57 . Equal Rights and Access for the Women of South Sudan Act—pertaining to the scope of foreign assistance provided to South Sudan, including trafficking prevention and trafficker prosecution. H.R. 191 . Repeal Executive Amnesty Act of 2015—pertaining to, among other issues, unaccompanied alien children (with bearing on the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008). H.R. 500 . Survivors of Human Trafficking Empowerment Act—pertaining to the establishment of a U.S. Advisory Council on Human Trafficking. H.R. 611 . Sex Trafficking Demand Reduction Act—pertaining to the minimum standards for the elimination of severe forms of trafficking in persons and government policies on the purchase of commercial sex. H.R. 1149 . Protection of Children Act of 2015—pertaining to unaccompanied alien children that has bearing on the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008. H.R. 1340 . International Violence Against Women Act of 2015—pertaining generally to foreign policy on violence against women, which has bearing on human trafficking policy. H.R. 1782 . Cuba Human Rights Act of 2015—pertaining to U.S. policy with respect to Cuba, including as related to combating human trafficking. H.R. 2140 . Vietnam Human Rights Act of 2015—pertaining to conditions, including some related to human trafficking, on foreign assistance to Vietnam. H.R. 2621 . China Human Rights Protection Act of 2015—pertaining to, among other issues, human trafficking in China. H.R. 2772 . Department of State, Foreign Operations, and Related Programs Appropriations Act, 2016—pertaining to State Department foreign assistance provisions to combat human trafficking. H.R. 2798 . Strengthening Refugee Resettlement Act—pertaining generally to refugee policies that has bearing on some trafficking victims with T-visas. H.R. 3226 . Business Supply Chain Transparency on Trafficking and Slavery Act of 2015—pertaining to the disclosure of company efforts to prevent trafficking in their global supply chains. H.R. 4720 . Expedited Family Reunification Act of 2016—pertaining to unaccompanied alien children (with bearing on the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008). H.R. 5332 . Women, Peace, and Security Act of 2016—pertaining to, among other issues, State Department training requirements on human trafficking. H.R. 5912 . Department of State, Foreign Operations, and Related Programs Appropriations Act, 2017—pertaining to State Department foreign assistance provisions to combat human trafficking. S. 224 . Women, Peace and Security Act of 2015—pertaining to, among other issues, State Department training requirements on human trafficking. S. 553 . End Modern Slavery Initiative Act of 2015—pertaining to the establishment of an End Modern Slavery Initiative Foundation to support international efforts to address human trafficking. S. 713 . International Violence Against Women Act of 2015—pertaining generally to foreign policy on violence against women, which has bearing on human trafficking policy. S. 1627 . Human Rights Accountability Act of 2015—pertaining to State Department reporting requirement responsibilities on human rights, including human trafficking. S. 1876 . A bill to rename the Office to Monitor and Combat Trafficking of the Department of State the Bureau to Monitor and Combat Trafficking in Persons and to provide for an Assistant Secretary to head such Bureau, and for other purposes—pertaining to the bureaucratic status of the J/TIP Office within the State Department. S. 1968 . Business Supply Chain Transparency on Trafficking and Slavery Act of 2015—pertaining to the disclosure of company efforts to prevent trafficking in their global supply chains. S. 2144 . North Korea Sanctions and Policy Enhancement Act of 2015—pertaining to U.S. policy with respect to North Korea, including as related to forced labor and trafficking of North Korean citizens. S. 2632 . Vietnam Human Rights Act of 2016—pertaining to conditions, including some related to human trafficking, on foreign assistance to Vietnam. S. 2937 . Department of State Authorization Act, Fiscal Year 2017—pertaining to State Department responsibilities to combat human trafficking. | Trafficking in persons, or human trafficking, refers to the subjection of men, women, and children to exploitative conditions that may be tantamount to slavery. Reports suggest that human trafficking is a global phenomenon, victimizing millions of people each year and contributing to a multi-billion dollar criminal industry. Common forms of human trafficking include trafficking for commercial sexual exploitation, forced labor, and debt bondage. Other forms of human trafficking include trafficking for domestic servitude and the use of children in armed conflict (e.g., child soldiers). Human trafficking is a centuries-old problem that, despite international and U.S. efforts to eliminate it, continues to occur in virtually every country in the world. The modern manifestation of the human trafficking problem is driven by gaps in the enforcement of anti-trafficking laws and regulations and the willingness of some labor and service providers to violate such laws in order to fulfill international demand. Such demand is particularly concentrated among industries and economic sectors that are low-skill and labor-intensive. Human trafficking is an international and cross-cutting policy problem that affects a range of major national security, human rights, criminal justice, social, economic, migration, gender, public health, and labor issues. The U.S. government and successive Congresses have long played a leading role in international efforts to combat human trafficking. The Trafficking Victims Protection Act (TVPA, Division A of P.L. 106-386, as amended) and its reauthorizations are the cornerstone legislative vehicles for current U.S. policy to combat international human trafficking. Since enactment of the TVPA in 2000, Congress has remained active on international human trafficking issues, particularly with appropriations identified for anti-trafficking assistance purposes, proposed legislation related to the TVPA, and other anti-trafficking initiatives. Periodic oversight hearings have focused in particular on the State Department's annual Trafficking in Persons (TIP) Report, a detailed country-by-country ranking and analysis of government efforts to achieve congressionally established minimum standards for the elimination of human trafficking. Although there is widespread support among policy makers for U.S. anti-trafficking goals, ongoing reports of continued trafficking worldwide raise questions regarding whether sufficient progress has been made to deter and ultimately eliminate the problem. This report provides an overview of recent global trends and U.S. foreign policy responses to address human trafficking. The report focuses in particular on efforts conducted by the State Department's Office to Monitor and Combat Trafficking in Persons (J/TIP) and the President's Interagency Task Force (PITF) on human trafficking, as well as discussion of the 2016 TIP Report. An Appendix includes the status of legislation introduced in the 114th Congress on international dimensions of human trafficking. Drawing on CRS Report R42497, Trafficking in Persons: International Dimensions and Foreign Policy Issues for Congress, this report reflects policy activity in the 114th Congress and will be updated to reflect international trafficking developments through the end of the second session. . |
Crime is ordinarily proscribed, tried, and punished according to the laws of the place where it occurs. American criminal law applies beyond the geographical confines of the United States, however, under certain limited circumstances. State prosecution for overseas misconduct is limited almost exclusively to multi-jurisdictional crimes, that is, crimes where some elements of the offense are committed within the state and others are committed beyond its boundaries. A surprising number of federal criminal statutes have extraterritorial application, but prosecutions have been relatively few. This may be because when extraterritorial criminal jurisdiction does exist, practical and legal complications, and sometimes diplomatic considerations, may counsel against its exercise. The Constitution does not forbid either congressional or state enactment of laws that apply outside the United States. Nor does it prohibit either the federal government or the states from prosecuting conduct committed abroad. In fact, several passages suggest that the Constitution contemplates the application of American law beyond the geographical confines of the United States. It speaks, for example, of "felonies committed on the high seas," "offences against the law of nations," "commerce with foreign nations," and of the impact of treaties. More specifically, it grants Congress the power "[t]o define and punish Piracies and Felonies committed on the high Seas, and Offences against the Law of Nations"; the power "[t]o regulate commerce with foreign Nations"; and "[t]o make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof." The power to define and punish felonies on the high seas and the power under the Necessary and Proper Clause have been referenced in the past as the source of Congress's authority to enact extraterritorial criminal legislation primarily in a maritime context. The powers have been understood to permit overseas application of federal criminal law, even extending to an American vessel at anchor well within the territory of another nation. Congress's commerce powers are three; one, that vests it with power "[t]o regulate Commerce with foreign Nations," affords it apparent authority to enact criminal statutes with extraterritorial application. The other two Commerce Clause powers permit Congress to regulate interstate commerce and commerce with the Indian tribes. The courts often speak of these two in exceptionally sweeping terms. The Foreign Commerce Clause may be even more far-reaching, although there is certainly support for a contrary view. Courts in some of the more recent cases have opted for a middle ground. One found that Congress did indeed have the legislative power to proscribe illicit overseas commercial sexual activity by an American who had traveled from the United States to the scene of the crime. Confronted with a vigorous dissent, the panel's majority expressly chose to avoid the issue of whether it would have reached the same result if the defendant had not agreed to pay for his sexual misconduct or some other commercial factor. Another court elected to construe the statute before it narrowly and thereby avoided the necessity of ruling on the scope of Congress's power under the foreign commerce clause. A third held that Congress's authority to regulate foreign commerce extended to the regulation of the channels of U.S. foreign commerce, but it left for another day the questions of whether the domestic effect on commerce prerogative has a foreign commerce counterpart or whether foreign commerce issues should be judged by standards of their own. Two other circuits, however, favor a more expansive view. The U.S. Court of Appeals for the Eleventh Circuit has held that Congress's foreign commerce power at least mirrors the "channels," "instrumentalities," and "substantive effect" components of its interstate commerce powers. The U.S. Court of Appeals for the Fourth Circuit has gone even further and ruled that the Foreign Commerce Clause embodies not only the "channels" and "instrumentalities" authority, but also encompasses the power to regulate any "activities that demonstrably affect [U.S. foreign] commerce." Its own enumerated powers aside, Congress has resorted on countless occasions to its authority to enact extraterritorial legislation in furtherance of the powers vested in one of the other branches or in reliance on powers it shares with one of the other branches—through the necessary and proper clause. It has, for instance, regularly called upon the authority deposited with the President and Congress in the fields of foreign affairs and military activities, powers which the courts have described in particularly wide-ranging terms. Nevertheless, the powers granted by the Constitution are not without limit. The clauses enumerating Congress's powers carry specific and implicit limits which govern the extent to which the power may be exercised overseas. Other limitations appear elsewhere in the Constitution, most notably in the due process clauses of the Fifth Amendment. Some limitations are a product of the need to harmonize potentially conflicting grants of authority. For example, although the Constitution reserves to the states the residue of governmental powers which it does not vest elsewhere, the primacy it affords the federal government in the area of foreign affairs limits the authority of the states in the field principally to those areas where they are acting with federal authority or acquiescence. In the area of extraterritorial jurisdiction, the most often cited limitation resides in the Due Process Clause of the Fifth Amendment. While the enumerated powers may carry specific limits which govern the extent to which the power may be exercised overseas, the general restrictions of the Fifth Amendment Due Process Clause have traditionally been mentioned as the most likely to define the outer reaches of the power to enact and enforce legislation with extraterritorial application. Unfortunately, many of the cases do little more than note that due process restrictions mark the frontier of the authority to enact and enforce American law abroad. Even the value of this scant illumination is dimmed by the realization that the circumstances most likely to warrant such due process analyses are the very ones in which the least process is due. Although American courts that try aliens for overseas violations of American law must operate within the confines of due process, the Supreme Court has observed that the Constitution's due process commands do not protect aliens who lack any "significant voluntary connection[s] with the United States." Moreover, the Court's more recent decisions often begin with the assumption that the issues of extraterritorial jurisdiction come without constitutional implications. Nevertheless, due process issues have surfaced in a handful, but growing number, of lower court decisions relating to extraterritoriality. A few courts describe a due process requirement that demands some nexus between the United States and the circumstances of the offense. Occasionally, they look to international law principles to provide a useful measure to determine whether the nexus requirement has been met. On other occasions, they consider the principles at work in the minimum contacts test for personal jurisdiction. At the heart of these cases is the notion that due process expects that a defendant's conduct must have some past, present, or anticipated locus or impact within the United States before he can fairly be held criminally liable for it in an American court. The commentators have greeted this analysis with some hesitancy, and some courts have simply rejected it. A related due process challenge is based on notice. It is akin to the concerns over secret laws and vague statutes, the exception to the maxim that ignorance of the law is no defense. Here, indicia of knowledge, of reason to know, of an obligation to know, or of reasonable ignorance of the law's requirements—some of which are reflected in international standards—seem to be the most relevant factors. Citizens, for instance, might be expected to know the laws of their own nation; seafarers to know the law of the sea and consequently the laws of the nation under which they sail; everyone should be aware of the laws of the land in which they find themselves and of the wrongs condemned by the laws of all nations. On the other hand, the application of American criminal statute to an alien in a foreign country under whose laws the conduct is lawful would seem to evidence a lack of notice sufficient to raise due process concerns. Conceding this outer boundary, however, the courts fairly uniformly have held that questions of extraterritoriality are almost exclusively within the discretion of Congress; a determination to grant a statutory provision extraterritorial application—regardless of its policy consequences—is not by itself constitutionally suspect. For this reason, the question of the extent to which a particular statute applies outside the United States has generally been considered a matter of statutory, rather than constitutional, construction. General rules of statutory construction have emerged which can explain, if not presage, the result in a given case. The first of these holds that a statute that is silent on the question of overseas application will be construed to have only territorial application unless there is a clear indication of some broader intent. Moreover, "when a statute provides for some extraterritorial application, the presumption against extraterritoriality operates to limit that provision to its terms." At one time, the second rule of construction stated that the nature and purpose of a statute may provide an indication of whether Congress intended a statute to apply beyond the confines of the United States. Although hints of it can be found earlier, the rule was first clearly announced in United States v. Bowman . The Supreme Court's emphatic endorsement of the domestic presumption in a civil context in Morrison cast some doubt on Bowman 's continued vitality. Early indications were that the courts and commentators were unwilling to go that far. The Court in RJR Nabisco , another civil case, however, may have changed that. In RJR Nabisco , the Court seemed to take direct aim at Bowman without naming it. There may be some real question of the extent to which the Court still considers Bowman good law. The final rule declares that unless a contrary intent is clear, Congress is assumed to have acted so as not to invite action inconsistent with international law. At one time, the cases seemed to imply the existence of another rule, that is, unless Congress declared that it intended a statute to apply overseas to both aliens and American nationals, it would be presumed to apply only to Americans. Yet as discussed below, the challenge seems less compelling in light of the generous reading of the internationally recognized grounds upon which to stake a claim. International law supports, rather than dictates, decisions in the area of the overseas application of American law. Neither Congress nor the courts are bound to the dictates of international law when enacting or interpreting statutes with extraterritorial application. Yet Congress looks to international law when it evaluates the policy considerations associated with legislation that may have international consequences. For this reason, the courts interpret legislation with the presumption that Congress or the state legislature intends its laws to be applied within the bounds of international law, unless it indicates otherwise. To what extent does international law permit a nation to exercise extraterritorial criminal jurisdiction? The question is essentially one of national interests. What national interest is served by extraterritorial application and what interests of other nations suffer by an extraterritorial application? The most common classification of these interests dates to a 1935 Harvard Law School study which divided them into five categories or principles corresponding to the circumstances under which the nations of the world had declared their criminal laws applicable: (1) the territorial principle that involves crimes occurring or having an impact within the territory of a country; (2) the nationality principle that involves crimes committed by its nationals; (3) the passive personality principle that involves crimes committed against its nationals; (4) the protection principle that involves the crimes which have an impact on its interests as a nation; and (5) the universal principle that involves crimes which are universally condemned. The American Law Institute's Third Restatement of the Foreign Relations Law of the United States contains perhaps the most comprehensive, contemporary statement of international law in the area. It indicates that reasonableness defines the latitude that international law affords a country to enact, try, and punish violations of its law extraterritorially; its assessment of reasonableness mirrors a balancing of the interests represented in the Harvard study principles. While the Restatement's views carry considerable weight with both Congress and the courts, the courts have traditionally ascertained the extent to which international law would recognize extraterritorial application of a particular law by citing the Harvard study principles, read expansively. The territorial principle of the Harvard study principles applies more widely than its title might suggest. It covers conduct within a nation's geographical borders. Yet, it also encompasses laws governing conduct on its territorial waters, conduct on its vessels on the high seas, conduct committed only in part within its geographical boundaries, and conduct elsewhere that has an impact within its territory. Congress often indicates within the text of a statute when it intends a provision to apply within its territorial waters and upon its vessels. Although rarely mentioned in the body of a statute, the courts have long and regularly acknowledged the "impact" basis for a claim of extraterritorial application. This is particularly so, when the facts in a case suggest other principles of international law, in addition to the territorial principle. If the territorial principle is more expansive than its caption might imply, the protective principle is less so. It is confined to crimes committed outside a nation's territory against its "security, territorial integrity or political independence." As construed by the courts, however, it is understood to permit the application abroad of statutes which protect the federal government and its functions. And so, it covers the overseas murder or attempted murder of federal officers or those thought to be federal officers; acts of terrorism calculated to influence American foreign policy; conduct that Congress has characterized as a threat to U.S. national security; false statements or forgery designed to frustrate the administration of U.S. immigration law; entering the United States as a stowaway; or overseas bribery in connection with the award of federal government contracts. The nationality principle rests the exercise of extraterritorial criminal jurisdiction on the citizenship of accused. It is the principle mirrored in the Supreme Court's statements in Blackme r v. United States , following the contempt conviction of an American living in Paris who ignored a federal court subpoena. As in the case of Blackmer , which evidenced both the nationality and the protective principles, cases involving the nationality principle often involve other principles as well. The passive personality principle recognizes extraterritorial criminal jurisdiction based on the nationality of the victim of the offense. It, too, has been asserted most often in the presence of facts suggesting other principles. The universal principle is based on the premise that offenses against all nations may be punished by any nation where the offender is found. At a minimum, it applies to piracy and offenses committed on the high seas on "stateless" vessels. Congress's declaration that a particular statute is to apply outside of the United States is the most obvious evidence of intent to create extraterritorial jurisdiction. Congress has expressly provided for the extraterritorial application of federal criminal law most often by outlawing various forms of misconduct when they occur "within the special maritime and territorial jurisdiction of the United States." The concept of special maritime and territorial jurisdiction, if not the phrase, dates from the First Congress, and encompasses navigable waters and federal enclaves within the United States as well as areas beyond the territorial confines of the United States. Although the concept of the special maritime and territorial jurisdiction of the United States once embraced little more than places over which the United States enjoyed state-like legislative jurisdiction, U.S. navigable territorial waters, and vessels of the United States, its application has been statutorily expanded. It now supplies an explicit basis for the extraterritorial application of various federal criminal laws relating to: air travel (special aircraft jurisdiction of the United States); customs matters (customs waters of the U.S.); U.S. spacecraft in flight; evasive, stateless submersible vessels on the high seas; overseas federal facilities and overseas residences of federal employees; members of U.S. Armed Forces overseas and those accompanying them; human trafficking and sex offenses abroad by federal employees, U.S. military personnel, or those accompanying them. The obligations and principles of various international treaties, conventions, or agreements to which the United States is a party supply the theme for a second category of federal criminal statutes with explicit extraterritorial application. The range of these treaty-based federal crimes differs. Some have extraterritorial application only when the offender is an American. Some address misconduct so universally condemned that they fall within federal jurisdiction regardless of any other jurisdictional considerations as long as the offender flees to the United States, is brought here for prosecution, or is otherwise "found in the United States" after the commission of the offense. Some enjoy extraterritorial application under any of a number of these and other explicit jurisdictional circumstances. Members of another category of explicit extraterritorial federal criminal statutes either cryptically declare that their provisions are to apply overseas or describe a series of jurisdictional circumstances under which their provisions have extraterritorial application, not infrequently involving the foreign commerce of the United States in conjunction with other factors. The Maritime Drug Law Enforcement Act (MDLEA) is somewhat unusual in that it expressly authorizes extraterritorial coverage of federal criminal law predicated on nothing more than the consent of the nation with primary criminal jurisdiction. MDLEA outlaws the manufacture, distribution, or possession with intent to manufacture or distribute controlled substances aboard vessels within the jurisdiction of the United States. It defines vessels within the jurisdiction of the United States not only in terms of ordinary U.S. maritime jurisdiction, but also envelops the maritime jurisdiction of other countries as long as they have consented to the application of the U.S. law aboard the vessel. The definition also encompasses "vessels without nationality" sometimes referred to as "stateless" vessels, that is, vessels for which no national registry is effectively claimed. MDLEA provides the basis for Coast Guard drug interdiction efforts in the Caribbean and in the eastern Pacific off the coast of Central and South America. The courts have concluded that MDLEA constitutes a valid exercise of Congress's constitutional authority to define and punish felonies on the high seas and offenses against the law of nations. They are divided over whether the prosecution must show some nexus between the United States and the offense and over the application of the subsection of the act that assigns jurisdictional determinations to the court rather than to the jury. At least until Mor r ison and RJR Nabisco , the lower courts understood Bowma n and Ford to mean that a substantial number of other federal crimes operate overseas by virtue of the implicit intent of Congress. In fact, they construed Bowman and Ford to suggest that American extraterritorial criminal jurisdiction includes a wide range of statutes designed to protect federal officers, employees, and property; to prevent smuggling; and to deter the obstruction or corruption of the overseas activities of federal departments and agencies. They held, for instance, that the statute outlawing the assassination of Members of Congress may be applied against an American for a murder committed in a foreign country, and that statutes prohibiting the murder or kidnaping of federal law enforcement officials apply in other countries even if the offenders are not Americans, and even if the offenders simply incorrectly believed the victims were federal law enforcement officers. They have also considered extraterritorial jurisdiction appropriate to (1) cases where aliens have attempted to defraud the United States in order to gain admission into the United States; (2) false statements made by Americans overseas; (3) the theft of federal property abroad; (4) counterfeiting, forging, or otherwise misusing federal documents or checks overseas by either Americans or aliens; and (5) murder of a foreign national in another nation designed to facilitate the operation of a criminal enterprise in the United States. RJR Nabisco casts serious doubt on the continued validity of these assessments, at least the absence of some textual, structural, or contextual indication that Congress intended the statutes at issue to apply abroad. This is equally true to the implications of the earlier jurisprudence. A logical extension of earlier law would have been to conclude that statutes enacted to prevent and punish the theft of federal property apply worldwide. And there seemed no obvious reason why statutes protecting the United States from intentional deprivation of its property by destruction should be treated differently from those where the loss is attributable to theft. The RJR Nabisco Court, however, did endorse implied extraterritoriality in the case of "piggyback" statutes—conspiracy, attempt, aiding and abetting, among them—whose provisions are necessarily predicated on some other crime. Earlier cases occasionally expressed the view that an individual might be guilty of conspiracy to violate a federal law within the United States notwithstanding the fact he never entered the United States; it was enough that he was a member of a conspiracy to violate the American law. The cases applied the same rationale to accessories to overseas federal crimes, and to piggyback offenses where criminal liability was predicated upon a crime that applies abroad. The Court in RJR Nabisco seemed to agree: "Congress's incorporation of these (and other) extraterritorial predicates into RICO gives a clear, affirmative indication that [RICO's criminal prohibitions] app[y] to foreign racketeering activity—but only to the extent that the predicates alleged in a particular case themselves apply extraterritorially." State criminal laws are less likely to apply overseas than federal laws. State law produces fewer instances where a statute was clearly enacted with an eye to its application overseas and fewer examples where frustration of legislative purpose is the logical consequence of purely territorial application. The Constitution seems to have preordained this result when it vested responsibility for protecting American interests and fulfilling American responsibilities overseas in the federal government. The primacy of the federal government in foreign affairs might suggest that the Constitution precludes the application of state law in other countries, but the courts and commentators have recognized a limited power of the states to enact law governing conduct outside the United States. Obviously, Congress may, by preemptive action, extinguish the legislative authority of a state in any area over which Congress has plenary powers. And the Supremacy Clause also renders treaties to which the United States is a party binding upon the states and therefore beyond their legislative reach. The constitutional limitations aside, and in the absence of federal legislative action, however, "the question ... is one of whether the state actually intended to legislate extraterritorially, not whether it has the power to do so." The states have chosen to make their laws applicable beyond their boundaries in only a limited set of circumstances and ordinarily only in cases where there is some clear nexus to the state. Perhaps the most common state statutory provision claiming state extraterritorial criminal jurisdiction is one that asserts jurisdiction in cases where some of the elements of the offense are committed within the state's borders or others are committed elsewhere. Another common claim is where an individual outside the state attempts or conspires to commit a crime within the state; or one within the state attempts or conspires to commit a crime beyond its boundaries. Still others define the state's extraterritorial jurisdiction to include instances where the victim of homicide, fatally wounded outside of the state, dies within it; where property stolen elsewhere is brought into the state; or where conduct outside the state constitutes the failure to comply with a legal duty imposed by state law. Although a substantial number of federal criminal statutes have undisputed extraterritorial scope and a great many more until recently thought to have apparent extraterritorial range, prosecutions have been relatively few. Investigators and prosecutors face legal, practical, and often diplomatic obstacles that can be daunting. Some of these are depicted in the description that follows of some of procedural aspects of the American investigation and prosecution of a crime committed abroad. With respect to diplomatic concerns, the Restatement observes: It is universally recognized, as a corollary of state sovereignty, that officials of one state may not exercise their functions in the territory of another state without the latter's consent. Thus, while a state may take certain measures of nonjudicial enforcement against a person in another state, ... its law enforcement officers cannot arrest him in another state, and can engage in criminal investigation in that state only with that state's consent. Failure to comply can result in strong diplomatic protests, liability for reparations, and other remedial repercussions, to say nothing of the possible criminal prosecution of offending foreign investigators. Consequently, investigations within another country of extraterritorial federal crimes without the consent or at least acquiescence of the host country are extremely rare. Congress has endorsed diplomatic efforts to increase multinational cooperative law enforcement activities. The United States has over 70 mutual legal assistance treaties in force. Their benefits are typically available to state and federal law enforcement investigators though the Department of Justice's Office of International Affairs. Initially negotiated to overcome impediments posed by foreign bank secrecy laws, the treaties generally offer more than the collection and delivery of documents. They ordinarily provide similar clauses, with some variations, for locating and identifying persons and items; service of process; executing search warrants; taking witness depositions; persuading foreign nationals to come to the United States voluntarily to present evidence here; and forfeiture-related seizures. Witness depositions may be taken in a foreign country using letters rogatory. Letters rogatory involve the formal request from the courts of one country to those of another asking that a witness's statement be taken. The procedure is governed by statute and rule. It is often a resource of last resort. The process, through diplomatic channels, is time consuming, cumbersome, and lies within the discretion of the foreign court to which it is addressed. American law enforcement officials have historically used other, often less formal, cooperative methods overseas to investigate and prosecute extraterritorial offenses. Over the last few decades the United States has taken steps to facilitate cooperative efforts. In addition to the more traditional presence of members of the Armed Forces and State Department personnel and contractors, federal civilian law enforcement agencies have assigned an increasing number of personnel overseas. For example, the Justice Department's Criminal Division has resident legal advisors in 45 countries abroad; and the Federal Bureau of Investigation (FBI) now operates legal attache offices in 78 foreign cities; the Drug Enforcement Administration (DEA) has offices in 92 cities overseas; the U.S. Immigration and Customs Enforcement agency operates out of 75 locations; and the Secret Service has 20 such offices. A few regulatory agencies with law enforcement responsibilities have working arrangements with their foreign counterparts. The Securities and Exchange Commission, for instance, with 105 similar foreign regulatory entities, is a signatory of the International Organization of Securities Commissions' multilateral memorandum of understanding (IOSCO MMOU) for enforcement cooperation and the exchange of information. Congress has enacted several measures to assign foreign law enforcement efforts in this country in anticipation of reciprocal treatment. For instance, the Foreign Evidence Request Efficiency Act of 2009 authorizes Justice Department attorneys to petition federal judges for any of a series of orders to facilitate investigations in this country by foreign law enforcement authorities. The authorization extends to the issuance of: search warrants; court orders for access to stored electronic communications and to communications records; pen register or trap and trace orders; and subpoena authority, both testimonial and for the production of documents and other material. Search and seizures conducted abroad occasionally have Fourth Amendment implications. The Supreme Court's United States v. Verdugo-Urquidez decision makes it clear that the Fourth Amendment does not apply to the search of the property of foreign nationals outside the United States, unless the property owner has some "previous significant voluntary connections with the United States." The Fourth Amendment's application to U.S. citizens and foreign nationals with significant connections to the United States is less clear. Prior to Verdugo-Urquidez , neither the Fourth Amendment nor its exclusionary rule were considered applicable to overseas searches and seizures conducted by foreign law enforcement officials, except under two circumstances. The first covered foreign conduct which "shocked the conscience of the court." The second reached foreign searches or seizures in which U.S. law enforcement officials were so deeply involved as to constitute "joint ventures" or some equivalent level of participation. The cases seldom explained whether these exceptions operated under all circumstances or only when searches or seizures involved the person or property of U.S. nationals. In the days when MLATs were scarce, however, the courts rarely, if ever, encountered circumstances sufficient to activate either exception. Since Verdugo-Urquidez , the courts have held, as a general rule, that the Fourth Amendment is inapplicable to searches or seizures of U.S. citizens by foreign officials in other countries, but have continued to acknowledge the "joint venture" and "shocked conscience" rarely found exceptions to the general rule. Prior to Verdugo-Urquidez, there seems to have been general agreement among the lower federal appellate courts that the Fourth Amendment governed the foreign search and seizure of the person or property of U.S. citizens by U.S law enforcement officials. Since then, the question more often has been not whether the Fourth Amendment governs, but what it demands. With some exceptions, a warrant issued by the neutral magistrate upon a finding of probable cause is the hallmark of a reasonable Fourth Amendment search or seizure in this country. Two concurring opinions in Verdugo-Urquidez and subsequent lower court endorsements suggest that the warrant requirement does not apply to searches by U.S. officials in other countries, at least where the Federal Rules of Criminal Procedure or other authority do not authorize the issuance of a warrant. Nevertheless, "the Fourth Amendment's reasonableness standard applies to United States officials conducting a search affecting a United States citizen in a foreign country." On the other hand, even under such circumstances, "a foreign search is reasonable if it conforms to the requirements of foreign law," and "such a search will be upheld under the good faith exception to the exclusionary rule when United States officials reasonably rely on foreign officials' representations of foreign law." Like the Fourth Amendment protection against unreasonable searches and seizures, the Fifth Amendment self-incrimination clause and its attendant Miranda warning requirements do not apply to statements made abroad to foreign officials, subject to the same "joint venture" and "shocked conscience" exceptions. The Fifth Amendment and Miranda requirements do apply to custodial interrogations conducted abroad by American officials regardless of the nationality of the defendant. Finally, as a general rule, to be admissible at trial in this country, any confession or other incriminating statements must have been freely made. As a general rule, prosecution of federal crimes must begin within five years. Federal capital offenses, certain federal sex offenses, and various violent federal terrorist offenses, however, may be prosecuted at any time. Prosecution of nonviolent federal terrorism offenses must begin within eight years. Moreover, the statute of limitations is suspended or tolled during any period in which the accused is a fugitive. Whatever the applicable statute of limitations, Section 3292 authorizes the federal courts to suspend it in order to await the arrival of evidence requested of a foreign government: Upon application of the United States, filed before return of an indictment, indicating that evidence of an offense is in a foreign country, the district court before which a grand jury is impaneled to investigate the offense shall suspend the running of the statute of limitations for the offense if the court finds by a preponderance of the evidence that an official request has been made for such evidence and that it reasonably appears, or reasonably appeared at the time the request was made, that such evidence is, or was, in such foreign country. Section 3292 suspensions may run for no more than six months if the requested foreign assistance is provided before the time the statute of limitations would otherwise have expired and for no more than three years in other instances. The suspension period begins with the filing of the request for foreign assistance and ends with final action by the foreign government upon the request. The government must show by a preponderance of the evidence that the purpose of the request is to obtain evidence located overseas. Because of the built-in time limits, however, the government need not show that it acted diligently in its attempts to gather overseas evidence. The circuits are divided over whether the section may be used to revive a statute of limitations by filing a request after the statute has run, and over whether the section can be used to extend the statute of limitations with respect to evidence that the government has already received at the time it filed the request. At least one circuit has held that the statutory reference to "the district court before which a grand jury is impaneled to investigate the offense" is intended to identify the court that may issue the suspension order and does not limit the statute to requests filed in aid of a pending grand jury investigation. Extradition is perhaps the oldest form of international law enforcement assistance. It is a creature of treaty by which one country surrenders a fugitive to another for prosecution or service of sentence. The United States has bilateral extradition treaties with roughly two-thirds of the nations of the world. Treaties negotiated before 1960 and still in effect reflect the view then held by the United States and other common law countries that criminal jurisdiction was territorial and consequently extradition could not be had for extraterritorial crimes. Subsequently negotiated agreements either require extradition regardless of where the offense occurs, permit extradition regardless of where the offense occurs, or require extradition where the extraterritorial laws of the two nations are compatible. More recent extradition treaties address other traditional features of the nation's earlier agreements that complicate extradition, most notably the nationality exception, the political offense exception, and the practice of limiting extradition to a list of specifically designated offenses. Federal crimes committed within other countries are more likely than not to be the work of those who live there. Yet, the "most common type of treaty provision provides that neither of the contracting parties shall be bound to deliver up its own citizens or subjects." Most treaties negotiated of late, however, contain either an article declaring that extradition may not be denied on the basis of nationality or one declaring that if extradition is denied on the basis of nationality, the case must be referred to local authorities for prosecution. "The political offense exception is now a standard clause in almost all extradition treaties of the world." Originally designed to protect unsuccessful insurgents in flight, it is often construed to include both the purely political offense such as treason and sedition and related political offenses such as an act of violence committed during the course of, and in furtherance of, a political upheaval. The exception is somewhat at odds with contemporary desires to prevent, prosecute, and punish acts of terrorism. Consequently, treaties forged over the last several years frequently include some form of limitation on the exception, often accompanied by a discretionary right to refuse politically or otherwise discriminatorily motivated extradition requests. Current U.S. extradition treaties signed prior to the 1980s list specific crimes to which the treaty is limited. In the nation's first extradition treaty the list was limited to murder and forgery; toward the end of the 20 th century the standard lists had grown close to more than 30 crimes. Treaties agreed to more recently opt for a generic description. As an alternative to extradition, particularly if the suspect is not a citizen of the country of refuge, foreign authorities may be willing to expel or deport him under circumstances that allow the United States to take him into custody. In the absence of a specific treaty provision, the fact that the defendant was abducted overseas and brought to the United States for trial rather than pursuant to a request under the applicable extradition treaty does not deprive the federal court of jurisdiction to try him. Federal crimes committed within the United States must be tried where they occur. Crimes committed outside the United States are tried where Congress has provided. Congress has enacted both general and specific venue statutes governing extraterritorial offenses. Section 3238, the general provision, permits the trial of extraterritorial crimes either (1) in the district into which the offender is "first brought" or in which he is arrested for the offense; or (2) prior to that time, by indictment or information in the district of the offender's last known residence, or if none is known, in the District of Columbia. The phrase "first brought" as used in section 3238 means "first brought while in custody." The phrase "is arrested" applies when the accused is initially taken into custody under an indictment that is subsequently dismissed. As the language of the section suggests, venue for all joint offenders is proper wherever venue for one of their number is proper. Courts are divided over whether section 3238 may be applied even though venue may have been proper without recourse to its provisions. On occasion, Congress will enact individual provisions covering venue for offenses committed abroad. The Controlled Substances Import and Export Act and the Maritime Drug Law Enforcement Act (MDLEA) are two such examples. The Controlled Substance section outlaws overseas possession with intent to import into the United States. MDLEA outlaws possession of controlled substances on vessels subject to the jurisdiction of the United States. They contain parallel venue provisions, which permit trial in the judicial district where the accused enters the United States or in the District of Columbia. A federal court may subpoena a United States resident or national found abroad to appear before it or the grand jury. Federal courts ordinarily have no authority to subpoena foreign nationals located in a foreign country. Mutual legal assistance treaties and similar agreements generally contain provisions to facilitate a transfer of custody of foreign witnesses who are imprisoned in a foreign nation and in other instances to elicit assistance to encourage foreign nationals to come to this country and testify voluntarily. Unable to secure the presence of witnesses who are foreign nationals, Rule 15 of the Federal Rules of Criminal Procedure permits federal courts to authorize depositions to be taken abroad, under "exceptional circumstances and in the interests of justice." They may admit such depositions into evidence in a criminal trial as long as the demands of the Federal Rules of Evidence and the Constitution's Confrontation Clause are also satisfied. Originally, only a defendant might request that depositions be taken under Rule 15 of the Federal Rules of Criminal Procedure, but they have been available to prosecutors since the 1970s. The Rule offers depositions as an alternative to long-term incarceration of material witnesses. Otherwise, depositions may be ordered only under exceptional circumstances. Some courts have said that to "establish exceptional circumstances the moving party must show the witness's unavailability and the materiality of the witness's testimony." Others would add to these that "the testimony is necessary to prevent a failure of justice" or additional considerations. As general matter, depositions are to be taken in the same manner as depositions in civil cases. Moreover, the Rule requires that the defendant be afforded an opportunity to attend depositions taken at the government's request. When a deposition is taken abroad, the courts prefer that the defendant be present, that his counsel be allowed to cross-examine the witness, that the deposition be taken under oath, that a verbatim transcript be taken, and that the deposition be captured on videotape; but they have permitted depositions to be admitted into evidence at subsequent criminal trials in this country, notwithstanding the fact that one or more of these optimal conditions are not present. In nations whose laws might not otherwise require, or even permit, depositions under conditions considered preferable under U.S. law, a treaty provision sometimes addresses the issue. Although the government will ordinarily take depositions under the conditions that would permit them to be used as evidence at trial, "[c]ompliance with Rule 15 is a necessary but not sufficient condition for use of a deposition at trial." The question of admissibility of overseas depositions rests ultimately upon whether the Confrontation Clause requirements have been met. The right of an accused under the Confrontation Clause embodies not only the prerogative of a literal face-to-face confrontation, but also the right to cross examine and to have the witness's testimonial demeanor exposed to the jury. The early cases relied on the Supreme Court's decisions either in Ohio v. Roberts or in Maryland v. Craig . Faced with the question of whether trial witnesses might testify remotely via a two-way video conference, Craig held that the Confrontation Clause's requirement of physical face-to-face confrontation between witness and defendant at trial can be excused under limited circumstances in light of "considerations of public policy and necessities of the case." Roberts dealt with the question of whether the admission of hearsay evidence violated the Confrontation Clause, and declared that as long as the hearsay evidence came within a "firmly rooted hearsay exception" its admission into evidence in a criminal trial constituted no breach of the clause. After Roberts and Craig , however, the Supreme Court held in Crawford v. Washington that "testimonial" hearsay could not be considered reliable and admitted into evidence without the safeguard of cross examination. Crawford forecloses subsequent reliance on Roberts ' across-the-board hearsay rule exception when faced with the question of whether a "testimonial" deposition may be admitted into evidence at trial. Crawford repudiates the suggestion that Roberts permits anything less than actual confrontation in the case of "testimonial" hearsay in the form of a deposition or any other form. The status of Craig 's video and public interest exception is less clear. At least one appellate panel has concluded that the prosecution's need for critical evidence does not alone supply the kind of public policy considerations necessary to qualify for a Craig exception; but another has held that national security interests may suffice. Since the pre- Crawford cases required a good faith effort to assure the defendant's attendance at overseas depositions, it might be argued that Crawford requires no adjustment in the area's jurisprudence. Moreover, the Eleventh Circuit's en banc Craig analysis implied that it thought the use of overseas depositions at trial more compatible with the confrontation clause than the use of video trial testimony. Yet in a later video case, the Fourth Circuit rejected a Confrontation Clause challenge when the circumstances satisfied the dual demands for a Craig exception: (1) denial of a face-to-face confrontation made necessary by important policy considerations, and (2) assurance of reliability in the form of an "oath, cross-examination, and observation of the witness' demeanor." The Federal Rules of Evidence govern the admissibility of evidence in federal criminal trials. A deposition taken overseas that has survived scrutiny under Rule 15 of the Federal Rules of Criminal Procedure and the Confrontation Clause is likely to be found admissible. The hearsay rule, Rule 802, which reflects the law's preference for evidence that is exposed to the adversarial process, poses the most obvious obstacle. The Rule, however, provides an explicit exception for depositions, one that has been applied to depositions taken abroad under the authority of Rule 15. When witnesses and other evidence are located in other countries, a defendant's statutory and constitutional rights may conflict with the government's need for secrecy for diplomatic and national security reasons. Rule 16 of the Federal Rules of Criminal Procedure entitles a defendant to disclosure of any of his statements in the government's possession, but the prosecution's case may have evolved from foreign intelligence gathering. The Sixth Amendment assures a criminal defendant of "compulsory process for obtaining witnesses in his favor," but providing a witness who is also a terrorist suspect and in federal custody may have an adverse impact on the witness's value as an intelligence source. The Sixth Amendment promises a criminal defendant the right to confront the witnesses against him, even a witness who presents classified information to the jury. Congress has provided the Classified Information Procedures Act (CIPA) as a means of accommodating the conflict of interests. The CIPA permits the court to approve prosecution prepared summaries of classified information to be disclosed to the defendant and introduced in evidence, as a substitute for the classified information. The summaries, however, must be an adequate replacement for the classified information, because ultimately the government's national security interests "cannot override the defendant's right to a fair trial." There is a statutory procedure designed to ease the evidentiary admission of foreign business records in federal courts. The section covers "foreign record[s] of regularly conducted activity" in virtually any form, i.e., any "memorandum, report, record, or data compilation, in any form, of acts, events, conditions, opinions, or diagnoses, maintained in a foreign country." It exempts qualified business records from the operation of the hearsay rule in federal criminal proceedings and permits their authentication upon foreign certification. Finally, it establishes a procedure under which the reliability of the documents can be challenged in conjunction with other pre-trial motions. While the prosecution's failure to provide timely notice of its intent to rely upon the section does not necessarily bar admission, its failure to supply a foreign certification of authenticity precludes admission under the section. Early appellate decisions upheld Section 3505 in the face of Confrontation Clause challenges, as in the case of depositions drawing support from Ohio v. Roberts . As noted above, Crawford cast doubt upon the continued vitality of the all-encompassing Roberts rule (hearsay poses no confrontation problems as long as it falls within a "firmly rooted hearsay exception") when it held that only actual confrontation will suffice in the case of "testimonial" hearsay. Although it left for another day a more complete definition of testimonial hearsay, Crawford did note in passing that "[m]ost of the hearsay exceptions covered statements that by their nature were not testimonial—for example business records." More than one later court panel has rejected a confrontation clause challenge to Section 3505 on the basis of this distinction. The Constitution grants Congress broad powers to enact laws of extraterritorial scope and imposes few limitations on the exercise of that power. The states enjoy only residual authority, but they too may and have enacted criminal laws which apply beyond the territorial confines of the United States. Prosecutions are relatively few, however, perhaps because of the practical, legal, and diplomatic obstacles that may attend such an endeavor. 8 U.S.C. § 1375a(d)(3) (informed consent violations by international marriage brokers) 15 U.S.C. § 1175 (manufacture or possession of gambling devices) 15 U.S.C. § 1243 (manufacture or possession of switchblade knives) 15 U.S.C. § 1245 (manufacture or possession of ballistic knives) 16 U.S.C. § 3372(a)(3) (possession of illegally taken fish or wildlife) 18 U.S.C. § 81 (arson) 18 U.S.C. § 113 (assault) 18 U.S.C. § 114 (maiming) 18 U.S.C. § 115 (violence against federal officials, former officials and members of their families) 18 U.S.C. § 117 (domestic assault by an habitual offender) 18 U.S.C. § 118 (interference with certain protective functions [State Department & diplomatic security]) 18 U.S.C. § 249 (hate crimes) 18 U.S.C. § 546 (smuggling goods into a foreign country from an American vessel) 18 U.S.C. § 661 (theft) 18 U.S.C. § 662 (receipt of stolen property) 18 U.S.C. § 831 (threats, theft, or unlawful possession of nuclear material or attempting or conspiring to do so) 18 U.S.C. § 931 (purchase, ownership, or possession of body armor by violent felons) 18 U.S.C. § 1025 (false pretenses) 18 U.S.C. §§§ 1081 - 1083 (gambling ships) 18 U.S.C. § 1111 (murder) 18 U.S.C. § 1112 (manslaughter) 18 U.S.C. § 1113 (attempted murder or manslaughter) 18 U.S.C. § 1115 (misconduct or neglect by ship officers) 18 U.S.C. § 1201 (kidnaping) 18 U.S.C. § 1363 (malicious mischief) 18 U.S.C. § 1460 (sale or possession with intent to sell obscene material) 18 U.S.C. § 1466A (obscene visual representation of sexual abuse of children) 18 U.S.C. § 1587 (captain of a slave vessel with slaves aboard) 18 U.S.C. § 1591 (sex trafficking of children) 18 U.S.C. § 1656 (piratical conversion of vessel by captain, officer or crew member) 18 U.S.C. § 1658 (plundering a ship in distress) 18 U.S.C. § 1659 (attack upon a vessel with intent to plunder) 18 U.S.C. § 1654 (Americans arming or serving on privateers outside the United States to be used against the United States or Americans) 18 U.S.C. § 1801 (video voyeurism) 18 U.S.C. § 1957 (prohibited monetary transactions) 18 U.S.C. § 2111 (robbery) 18 U.S.C. § 2191 (cruelty to seamen) 18 U.S.C. § 2192 (incite to revolt or mutiny) 18 U.S.C. § 2193 (revolt or mutiny by seamen) 18 U.S.C. § 2194 (shanghaiing sailors) 18 U.S.C. § 2195 (abandonment of sailors overseas) 18 U.S.C. § 2196 (drunkenness of seamen) 18 U.S.C. § 2197 (misuse of documents associated vessels) 18 U.S.C. § 2198 (seduction of a female passenger) 18 U.S.C. § 2199 (stowaways) 18 U.S.C. § 2241 (aggravated sexual abuse) 18 U.S.C. § 2242 (sexual abuse) 18 U.S.C. § 2243 (sexual abuse of a minor or ward) 18 U.S.C. § 2244 (abusive sexual contact) 18 U.S.C. § 2252(a) (sale or possession of material involving sexual exploitation of children) 18 U.S.C. § 2252A(a) (sale or possession of child pornography) 18 U.S.C. § 2261 (interstate domestic violence) 18 U.S.C. § 2261A (stalking) 18 U.S.C. § 2262 (interstate violation of a protective order) 18 U.S.C. §§ 2271-2279 (destruction of ships) 18 U.S.C. § 2283 (transportation of explosives, biological, chemical, radioactive or nuclear materials for terrorist purposes on the high seas or aboard a U.S. vessel or in U.S. waters) 18 U.S.C. § 2284 (transportation of a terrorist on the high seas or aboard a U.S. vessel or in U.S. waters) 18 U.S.C. § 2318 (transporting counterfeit phonorecord labels, copies of computer programs or documentation, or copies of motion pictures or other audio visual works) 18 U.S.C. § 2332b (acts of terrorism transcending national boundaries) 18 U.S.C. § 2388 (war-time activities affecting armed forces) 18 U.S.C. § 2422(b) (causing a minor to engage in prostitution or other sexual acts) 18 U.S.C. § 2425 (transmission of information about a minor) 18 U.S.C. § 3261 (offenses committed by members of the United States armed forces or individuals accompanying or employed by the United States armed forces overseas) 46 U.S.C. § 70503 (maritime drug law enforcement) 46 U.S.C. § 70508 (operation of stateless submersible vessels) 48 U.S.C. § 1912 (offenses committed on United States defense sites in the Marshall Islands or Federated States of Micronesia) 48 U.S.C. § 1934 (offenses committed on United States defense sites in Palau) 18 U.S.C. § 32 (destruction of aircraft) 18 U.S.C. § 831 (threats, theft, or unlawful possession of nuclear material or attempting or conspiring to do so) 18 U.S.C. § 1201 (kidnaping) 18 U.S.C. § 2318 (transporting counterfeit phonorecord labels, copies of computer programs or documentation, or copies of motion pictures or other audio visual works) 49 U.S.C. § 46502(a) (air piracy or attempted air piracy) 49 U.S.C. § 46504 (interference with flight crew or attendants within the special aircraft jurisdiction of the United States) 49 U.S.C. § 46506 (assaults, maiming, theft, receipt of stolen property, murder, manslaughter, attempted murder or manslaughter, robbery, or sexual abuse) 18 U.S.C. § 32(b) Offenses : - violence aboard a foreign civil aircraft (likely to endanger the safety of the aircraft) while in flight; - destruction of or incapacitating or endangering damage to foreign civil aircraft; - placing a bomb aboard a foreign civil aircraft; or - attempting or conspiring to do so Jurisdictional factors: - a United States national was on board; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 37 Offenses : - violence causing or likely to cause serious bodily injury or death at an international airport; - destruction of or serious damage to aircraft or facilities at an international airport; or - attempting or conspiring to do so Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 112 Offenses : - assaulting an internationally protected person; - threatening an internationally protected person; or - attempting to threaten an internationally protected person Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 175 Offenses : - develop, produce, stockpile, transfer, acquire, retain, or possess biological weapons or delivery systems, misuse of biological weapons; - assisting a foreign power to do so; or - attempting, threatening or conspiring to do so Jurisdictional factor : - "there is extraterritorial Federal jurisdiction over an offense under this section committed by or against a national of the United States," 18 U.S.C. §175(a) 18 U.S.C. § 229 Offenses : - using chemical weapons outside the United States; or - attempting, or conspiring to do so Jurisdictional factors : - the victim or offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 831 Offenses : - threats, theft, or unlawful possession of nuclear material; or - attempting or conspiring to do so Jurisdictional factors : - a United States national or an American legal entity was the victim of the offense; - the offender was a United States national or an American legal entity; or - the offender is afterwards found in the United States; - the offense involved a transfer to or from the United States; or - the offense was a threat directed against the United States 18 U.S.C. § 832 Offenses : -participating in nuclear and weapons of mass destruction threats to the United States Jurisdiction ; "There is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C. § 732(b) 18 U.S.C. § 878 Offenses : - threatening to assault, kill or kidnap an internationally protected person Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1091 Offense : genocide - killing members of a national, ethnic, racial or religious group - assaulting members of a national, ethnic, racial or religious group - imposing reproductive and other group destructive measures on a national, ethnic, racial or religious group - forcibly transferring children of a national, ethnic, racial or religious group Jurisdictional factors : - the offender was a United States national - the offender is a stateless person habitually residing in the United States - the offender is present in the United States - the offense occurred in part in the United States 18 U.S.C. § 1116 Offense : killing an internationally protected person Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1117 Offense : conspiracy to kill an internationally protected person Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1201 Offense : - kidnaping an internationally protected person; or - attempting or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1203 Offense : - hostage taking; or - attempting or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 2280 Offenses : - violence committed against maritime navigation; or - attempting or conspiracy to commit violence against maritime navigation Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2280 a Offenses : - violence committed against maritime navigation involving weapons of mass destruction; or - attempting or conspiracy to commit violence against maritime navigation involving weapons of mass destruction Jurisdictional factors : - committed aboard or against United States vessel or vessel subject to United States jurisdiction; - the offender was a United States national; - a United States national was seized, threatened, injured, or killed; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2281 Offenses : - violence committed against a maritime platform; or - attempting or conspiracy to commit violence against a maritime platform Jurisdictional factors : - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2281a Offenses : - additional offenses committed against a maritime platform; or - attempting or conspiracy to commit additional offenses against a maritime platform Jurisdictional factors : - the offender was a United States national; - a United States national was seized, threatened, injured, or killed; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2332a Offenses : - using a weapon of mass destruction outside the United States; or - threatening, attempting, or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 2332f (effective upon the terrorist bombing convention entering into force for the U.S.) Offenses : - bombing public places, government facilities, or public utilities outside the United States; or - threatening, attempting, or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender is present in the United States; - the offense was committed on United States registered vessel or aircraft; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2332g Offenses : - producing, acquiring, or possessing anti-aircraft missiles; or - threatening, attempting, or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender aids or abets the commission of the offense 18 U.S.C. § 2332h Offenses : - producing, acquiring, or possessing radiological dispersal devices; or - threatening, attempting, or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender aids or abets the commission of the offense 18 U.S.C. § 2332i) Offenses : - acts of nuclear terrorism; or - threatening, attempting, or conspiring to commit such acts Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender is found in the United States - the offense was committed on United 18 U.S.C. § 2339C Offenses : - financing terrorism outside the U.S.; or - attempting or conspiring to do so Jurisdictional factors : - predicate act of terrorism was directed against + United States property, + United States nationals or their property, or + property of entities organized under United States law; - offense was committed on United States registered vessel or aircraft operated by the United States.; - the offense was intended to compel action or abstention by the United States; - the offender was a United States national; or - (effective upon the terrorism financing convention entering into force for the U.S.) the offender is present in the United States 18 U.S.C. § 2340A Offenses : - torture under color of law outside the United States; or - attempted torture Jurisdictional factors : - the offender was a United States national; or - the offender is present in the United States 18 U.S.C. § 2441 Offense : - war crimes Jurisdictional factors : - an American or member of the American armed forces was the victim of the offense; or - the offender was an American or member of the American armed forces 49 U.S.C. § 46502(b) Offenses : - air piracy outside the special aircraft jurisdiction of the United States; or - attempted air piracy outside the special aircraft jurisdiction of the United States Jurisdictional factors : - a United States national was aboard; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. §38 (fraud involving aircraft or space vehicle parts) Jurisdictional factors: - the offender was a United States national; - the offender was an entity organized under the laws of the United States; - United States national or entity owned aircraft or vehicle to which the part related; or - an act in furtherance of the offense was committed in the United States 18 U.S.C. § 175c (variola virus (small pox)) Jurisdictional factors : - the offender or victim was a United States national; - the offense occurred in or affected interstate or foreign commerce - the offense was committed against U.S. property; or - the offender aided or abetted the commission of an offense under the section for which there was extraterritorial jurisdiction Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 351 Offenses : - killing, kidnaping, attempting or conspiring to kill or kidnap, or assaulting a Member of Congress, a Supreme Court Justice, or senior executive branch official Jurisdictional factors : - "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C. 351(i) 18 U.S.C. § 877 (mailing threatening communications to the United States from foreign countries) 18 U.S.C. § 956 (conspiracy and overt act within the United States to commit murder, kidnaping, maiming or the destruction of certain property overseas) 18 U.S.C. § 1029 Offenses : - fraud related to access devices; or - attempting or conspiring to commit the offense Jurisdictional factors : - involves a device issued, managed or controlled by an entity within the jurisdiction of the United States and - item used in the offense or proceeds are transported or transmitted to or through the United States or deposited here, 18 U.S.C. 1029(h) 18 U.S.C. § 1119 (killing of American by an American in a foreign country) 18 U.S.C. § 1204 (parental kidnaping by retaining a child outside the United States) 18 U.S.C. § 1512 Offenses : - tampering with a federal witness or informant; or - attempting to tamper with a federal witness or informant Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C. 1512(g) 18 U.S.C. § 1513 Offenses : - retaliating against a federal witness or informant; or - attempting to retaliate against a federal witness or informant Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C. 1513(d) 18 U.S.C. § 1585 (service aboard a slave vessel by an American or American resident) 18 U.S.C. § 1586 (service aboard a vessel transporting slaves from one foreign country to another by an American or American resident) 18 U.S.C. § 1587 (captain of a slave vessel hovering off the coast of the United States) 18 U.S.C. § 1596 Offenses: - peonage (18 U.S.C. 1581) - enticement into slavery (18 U.S.C. 1583) - sale into involuntary servitude (18 U.S.C. 1584) - forced labor (18 U.S.C. 1589) - trafficking in re peonage, slavery, involuntary servitude, or forced labor (18 U.S.C. 1590) - sex trafficking (18 U.S.C. 1591) Jurisdictional factors: - the offender is a United States national - the offender is found in the United States 18 U.S.C. § 1651 (piracy upon the high seas where the offender is afterwards brought into or found in the United States) 18 U.S.C. § 1652 (Americans acting as privateers against the United States or Americans on the high seas) 18 U.S.C. § 1653 (acts of piracy upon the high seas committed against the United States or Americans by aliens) 18 U.S.C. § 1654 (Americans arming or serving on privateers outside the United States to be used against the United States or Americans) 18 U.S.C. § 1751 Offenses : - killing, kidnaping, attempting or conspiring to kill or kidnap, or assaulting the President, Vice President, or a senior White House official Jurisdictional factors : - "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C. 1751(k) 18 U.S.C. §§ 1831-1839 Offenses : - economic espionage; - theft of trade secrets Jurisdictional factors : - "[t]his chapter also applies to conduct occurring outside the United States if" (1) the offender was a United States national or entity organized under United States law; or (2) an act in furtherance was committed here, 18 U.S.C. 1837 18 U.S.C. § 1956 Offense : - money laundering Jurisdictional factors : "[t]here is extraterritorial jurisdiction over the conduct prohibited by this section if - the conduct is by a United States citizen or, in the case of a non-United States citizen, the conduct occurs in part in the United States; and - the transaction or series of related transactions involves funds... of a value exceeding $10,000," 18 U.S.C. §1956(f) 18 U.S.C. § 1957 Offense : - prohibited monetary transactions Jurisdictional factors : - the offense under this section takes place outside the United States, but the defendant is a United States person [other than a federal employee or contractor who is the victim of terrorism]," 18 U.S.C. 1957(d) 18 U.S.C. § 1992 (attacks on railroad and mass transit systems engaged in interstate or foreign commerce) 18 U.S.C. §§ 2151 - 2157 (sabotage)(definitions afford protection for armed forces of the United States and "any associate nation" and for things transported "either within the limits of the United States or upon the high seas or elsewhere," 18 U.S.C. §2151) 18 U.S.C. § 2260 (production of sexually explicit depictions of children outside the United States with the intent to import into the United States) 18 U.S.C. § 2285 (operation of submersible vessel or semi-submersible vessel without nationality) Jurisdictional factors : "[t]here is extraterritorial Federal jurisdiction over an offense under this section, including attempt or conspiracy to commit such an offense" 18 U.S.C. § 2290 Offenses : - destruction of vessels or maritime facilities (18 U.S.C. §2291); - attempting or conspiring to do so (18 U.S.C. §2291); or - imparting or conveying false information (18 U.S.C. §2292) Jurisdictional factors : - victim or offender was a U.S. national; - U.S. national was aboard victim vessel; - victim vessel was a U.S. vessel Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 2332 (killing, attempting or conspiring to kill, or assaulting Americans overseas) (prosecution upon Department of Justice certification of terrorist intent) 18 U.S.C. § 2332b Offenses : - terrorist acts transcending national boundaries; or - attempting or conspiring to do so Jurisdictional factors : - use of U.S. mail or other facility of United States foreign commerce; - affects foreign commerce of the United States; - victim was federal officer or employee or United States government; or - the offense was committed within the special maritime or territorial jurisdiction of the United States 18 U.S.C. § 2339B Offenses : - providing material support or resources to designated terrorist organizations by one "subject to the jurisdiction of the United States;" or - attempting or conspiring to do so Jurisdictional factors : - "[t]here is extraterritorial jurisdiction over an offense under this section," 18 U.S.C. §2339B(d) 18 U.S.C. § 2339D (receipt of military training from a foreign terrorist organization) Jurisdictional factors : - the offender was a United States national; - the offender was habitual resident of the United States; - the offender is present in the United States; - the offense was committed in part in the United States; - the offense occurred in or affected interstate or foreign commerce; or - the offender aided or abetted a violation of the section over which extraterritorial jurisdiction exists 18 U.S.C. § 2381 (treason) ("within the United States or elsewhere") 18 U.S.C. § 2423 (U.S. citizen or resident alien traveling overseas with the intent to commit illicit sexual activity or traveling overseas and thereafter engaging in illicit sexual activity) 18 U.S.C. § 2442 (recruitment or use of child soldiers) Jurisdictional factors: - the offender was a United States national - the offender was a stateless person habitually residing in the United States - the offender is present in the United States - the offense occurred in part in the United States 18 U.S.C. § 3271 (overseas transportation of illicit sexual purposes or overseas trafficking in persons—by those employed by or accompanying the United States) 21 U.S.C. §337a Offenses: -violations of the Federal Food, Drug, and Cosmetic Act Jurisdictional factors: - the offense involved an article intended for import into the United States - an act in furtherance of the offense was committed in the United States 21 U.S.C. § 959 Offenses : - manufacture, distribution or possession of illicit drugs for importation into the United States Jurisdictional factors : - "this section is intended to reach acts of manufacture or distribution committed outside the territorial jurisdiction of the United States ..." 21 U.S.C. §959(c) 21 U.S.C. § 960A (narco-terrorism) Jurisdictional factors : - the offense was a U.S. drug or terrorism offense; - the offender provided pecuniary value for terrorist offense to injure a U.S. national or damage U.S. property outside the United States; - the offense was committed in part in the United States and the offender is a U.S. national; or - the offense occurred in or affected interstate or foreign commerce 46 U.S.C. § § 70503 Offenses : - manufacture, distribution or possession of controlled substances on various vessels outside United States maritime jurisdiction Jurisdictional factors : - the vessel is a "vessel without nationality"; or - the vessel is of foreign registry or located within foreign territorial waters and the foreign nation has consented to application of the United States law 50 U.S.C. §§3121, 3124 Offense: - Unlawful disclosure of classified information Jurisdictional factor : - the offender is a U.S. citizen or permanent resident alien 18 U.S.C. § 32 (death resulting from destruction of aircraft or their facilities) Jurisdictional factors : - aircraft was in the special aircraft jurisdiction of the United States; - the victim or offender was a United States national; or - the offender is found in the United States Attempt/Conspiracy attempt and conspiracy are included 18 U.S.C. § 37 (death resulting from violence at international airports) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 38 (death resulting from fraud involving aircraft or space vehicle parts) Jurisdictional factors : - the victim or offender was an entity organized under United States law; - the victim or offender was a United States national; or - an act in furtherance of the offense was committed in the United States) 18 U.S.C. § 43 Offense (where death results) : - travel to disrupt an animal enterprise; - causing damages of over $10,000 to an animal enterprise; or - conspiring to cause damages of over $10,000 to an animal enterprise Jurisdictional factors : - the offense involved travel in the foreign commerce of the United States; or - the offense involved use of the mails or other facility in the foreign commerce of the United States 18 U.S.C. § 175 (death resulting from biological weapons offenses) Jurisdictional factors : - a victim was a United States national; or - the offender was a United States national 18 U.S.C. § 175c (variola virus (small pox)) Jurisdictional factors : - the offender or victim was a United States national; - the offense occurred in or affected interstate or foreign commerce; - the offense was committed against U.S. property; or - the offender aided or abetted the commission of an offense under the section for which there was extraterritorial jurisdiction 18 U.S.C. § 229 (death resulting from chemical weapons offenses) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - committed against United States property 18 U.S.C. § 351 (killing a Member of Congress, cabinet officer, or Supreme Court justice) Attempt/conspiracy attempt and conspiracy are included 18 U.S.C. § 831 Offenses : - unlawful possession of nuclear material where the offender causes the death of another; or - attempting or conspiring to do so Jurisdictional factors : - the offense is committed within the special aircraft or special maritime and territorial jurisdiction of the United States; - a United States national or an American legal entity was the victim of the offense; - the offender was a United States national or an American legal entity; - the offender is afterwards found in the United States; - the offense involved a transfer to or from the United States; or - the offense was a threat directed against the United States 18 U.S.C. § 956 (conspiracy and overt act within the United States to commit murder, kidnaping, maiming or the destruction of certain property overseas) 18 U.S.C. § 1091 (genocide) Jurisdictional factors : - the offender was a United States national - the offender is a stateless person habitually residing in the United States - the offender is present in the United States - the offense occurred in part in the United States 18 U.S.C. § 1111 (murder within the special maritime jurisdiction of the United States) 18 U.S.C. § 1112 (manslaughter within the special maritime jurisdiction of the United States) 18 U.S.C. § 1113 (attempted murder or manslaughter within the special maritime jurisdiction of the United States) 18 U.S.C. § 1116 (killing an internationally protected person) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1117 (conspiracy to kill an internationally protected person) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1119 (a United States national killing or attempting to kill a United States national outside the United States) 18 U.S.C. § 1201 (kidnaping where death results) Jurisdictional factors : - the victim is removed from the United States; - the offense occurs within the special aircraft or special maritime and territorial jurisdiction of the United States; - the victim is a federal officer or employee; or - the victim is an internationally protected person and + the victim was a United States national; + the offender was a United States national; or + the offender is afterwards found in the United States Attempt/conspiracy attempt and conspiracy are included 18 U.S.C. § 1203 (hostage taking where death results) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States Attempt/conspiracy attempt and conspiracy are included 1 8 U.S.C. § 1512 (tampering with a federal witness or informant where death results) Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C.1512(g) Attempt/conspiracy attempt is included 18 U.S.C. § 1513 (retaliating against a federal witness or informant) Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C.1513(d)) Attempt/conspiracy attempt is included 18 U.S.C. § 1652 (murder of an American by an American on the high seas in the name of a foreign state or person) 18 U.S.C. § 1751 (killing the President, Vice President, or a senior White House official) Jurisdictional factors : - "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C.1751(k) Attempt/conspiracy attempt and conspiracy are included 18 U.S.C. §§ 2241, 2245 (aggravated sexual abuse within the special maritime and territorial jurisdiction of the United States where death results) 18 U.S.C. §§ 2242, 2245 (sexual abuse within the special maritime and territorial jurisdiction of the United States where death results) 18 U.S.C. §§ 2243, 2245 (sexual abuse of a minor or ward within the special maritime and territorial jurisdiction of the United States where death results) 18 U.S.C. §§ 2244,2245 (abusive sexual contact within the special maritime and territorial jurisdiction of the United States where death results) 18 U.S.C. § 2280 (a killing resulting from violence against maritime navigation) Jurisdictional factors - aboard a ship of American registry; - committed by an American national aboard a ship of foreign registry or outside the U.S.; - victim was an American; - committed in the territorial waters of another country and the offender is subsequently found in the United States; or - committed in an effort to compel federal action or abstention 18 U.S.C. § 2281 (resulting from violence against fixed maritime platforms) Jurisdictional factors - aboard a platform on the United States continental shelf; - committed by an American national aboard a platform on the continental shelf of another nation - victim was an American; - committed aboard a platform on the continental shelf of another nation and the offender is subsequently found in the United States; or - committed in an effort to compel federal action or abstention 18 U.S.C. § 2283 (transportation of explosives, biological, chemical, radioactive or nuclear materials for terrorist purposes on the high seas or aboard a United States vessel or in United States waters) 18 U.S.C. § 2290 Offenses : - destruction of vessels or maritime facilities (18 U.S.C. §2291); or - attempting or conspiring to do so (18 U.S.C. §2291) Jurisdictional factors : - victim or offender was a United States national; - U.S. national was aboard victim vessel; or - victim vessel was a United States vessel Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 2332 (killing an American overseas) Jurisdictional factors - prosecution only on DoJ certification "to coerce, intimidate, or retaliate against a government or civilian population" Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 2332a (resulting from use of weapons of mass destruction) Jurisdictional factors - victim or offender is American; or - against federal property Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 2332f (resulting from bombing of public places, government facilities, public transportation systems or infrastructure facilities)(effective when the terrorist bombing treaty enters into force for the U.S.) Jurisdictional factors - victim or offender is American; - aboard aircraft operated by the United States; - aboard vessel of aircraft of United States registry; - offender is found in the United States; - committed to coerce United States action; or - against federal property Attempt/conspiracy includes attempts and conspiracies 18 U.S.C. § 2340A (resulting from torture committed outside the United States (physical or mental pain inflicted under color of law upon a prisoner)) Jurisdictional factors - American offender; or - offender subsequently found within the United States Attempt/conspiracy includes attempts 18 U.S.C. § 2441 (war crimes) Jurisdictional factors - victim or offender is an American; or - victim or offender is a member of United States armed forces 18 U.S.C. § 3261 (offenses committed by members of the United States armed forces or individuals accompanying or employed by the United States armed forces overseas) 49 U.S.C. § 46502 (air piracy where death results) 49 U.S.C. § 46506 (murder, manslaughter, or attempted murder or manslaughter within the special aircraft jurisdiction of the United States) 18 U.S.C. § 351 (kidnaping a Member of Congress, a Supreme Court Justice, or senior executive branch official) Jurisdictional factors : - "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C.351(i) Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 956 (conspiracy and overt act within the United States to commit murder, kidnaping, maiming or the destruction of certain property overseas) 18 U.S.C. § 1091 ( genocide) - forcibly transferring children of a national, ethnic, racial or religious group Jurisdictional factors : - the offender was a United States national - the offender is a stateless person habitually residing in the United States - the offender is present in the United States - the offense occurred in part in the United States 18 U.S.C. § 1201 (kidnaping) Jurisdictional factors : - the victim is removed from the United States; - the offense occurs within the special aircraft or special maritime and territorial jurisdiction of the United States; - the victim is a federal officer or employee; or - the victim is an internationally protected person and + the victim was a United States national; + the offender was a United States national; or + the offender is afterwards found in the United States 18 U.S.C. § 1203 (hostage taking) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 1204 (international parental kidnaping detaining a child outside of the United States in violation of parental custody rights) 18 U.S.C. § 3261 (offenses committed by members of the United States armed forces or individuals accompanying or employed by the United States armed forces overseas) 18 U.S.C. § 37 (violence at international airports) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States Attempt/conspiracy - includes attempts and conspiracies 18 U.S.C. § 112 (assaulting an internationally protected person) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 113 (assault within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 114 (maiming within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 351 (assaulting a Member of Congress, a Supreme Court Justice, or senior executive branch official; Jurisdictional factor : "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C.351(i) 18 U.S.C. § 831 Offenses : - unlawful use of nuclear material where the offender causes the serious injury to another; or - attempting or conspiring to do so Jurisdictional factors : - the offense is committed within the special aircraft or special maritime and territorial jurisdiction of the United States; - a United States national or an American legal entity was the victim of the offense; - the offender was a United States national or an American legal entity; - the offender is afterwards found in the United States; - the offense involved a transfer to or from the United States; or - the offense was a threat directed against the United States 18 U.S.C. § 956 (conspiracy and overt act within the United States to commit murder, kidnaping, maiming or the destruction of certain property overseas) 18 U.S.C. § 1091( genocide) - assaulting members of a national, ethnic, racial or religious group - forcibly transferring children of a national, ethnic, racial or religious group Jurisdictional factors : - the offender was a United States national - the offender is a stateless person habitually residing in the United States - the offender is present in the United States - the offense occurred in part in the United States 18 U.S.C. § 1512 (tampering with a federal witness or informant through the use of physical force) Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C.1512(g) Attempt/conspiracy attempt is included 18 U.S.C. § 1513 Offenses (causing physical injury) : - retaliating against a federal witness or informant; or - attempting to retaliate against a federal witness or informant Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C.1513(d)) 18 U.S.C. § 1655 (assaulting the commander of a vessel is piracy) 18 U.S.C. § 1751 (assaulting the President, Vice President, or a senior White House official; "[t]here is extraterritorial jurisdiction over an offense prohibited by this section," 18 U.S.C.1751(k)) 18 U.S.C. § 2191 (cruelty to seamen within the special maritime jurisdiction of the United States) 18 U.S.C. § 2194 (shanghaiing sailors for employment within the foreign commerce of the United States) 18 U.S.C. § 2241 (aggravated sexual abuse within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2242 (sexual abuse within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2243 (sexual abuse of a minor or ward within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2244 (abusive sexual contact within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2261A (stalking within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2280 Offenses : - violence committed against maritime navigation; or - attempting or conspiracy to commit violence against maritime navigation Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2281 Offenses: - violence committed against a maritime platform; or - attempting or conspiracy to commit violence against a maritime platform Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2332 (assaulting a United States national outside the United States) (prosecution upon Department of Justice certification of terrorist intent) 18 U.S.C. § 2332a Offenses : - using a weapon of mass destruction outside the United States resulting physical injury; or - attempting or conspiring to do so Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 2332b Offenses : - terrorist assaults transcending national boundaries; or - attempt or conspiracy Jurisdictional factors : - use of United States mail or other facility of United States foreign commerce; - affects foreign commerce of the United States; - victim was federal officer or employee or United States government; or - the offense was committed within the special maritime or territorial jurisdiction of the United States 18 U.S.C. § 2340A Offenses : - torture under color of law outside the United States; or - attempted torture Jurisdictional factors : - the offender was a United States national; or - the offender is present in the United States 18 U.S.C. § 3261 (offenses committed by members of the United States armed forces or individuals accompanying or employed by the United States armed forces overseas) 46 U.S.C. § 11501 (seaman's assault upon officers within the special maritime jurisdiction of the United States) 49 U.S.C. § 46504 (assaulting a flight crew member within the special aircraft jurisdiction of the United States) 49 U.S.C. § 46506 (assaults within the special aircraft jurisdiction of the United States) 18 U.S.C. § 32 (destruction of aircraft or their facilities) Jurisdictional factors : - aircraft was in the special aircraft jurisdiction of the United States; - the victim or offender was a United States national; or - the offender is found in the United States Attempt/Conspiracy attempt and conspiracy are included 18 U.S.C. § 33 (destruction of motor vehicles or their facilities used in United States foreign commerce) 18 U.S.C. § 37 (violence at international airports) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 81 (arson within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 229 (chemical weapons damage) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - committed against United States property 18 U.S.C. § 831 ( use nuclear material of damage or destroy) Jurisdictional factors : - committed within the special aircraft or special maritime and territorial jurisdiction of the United States - a United States national or an American legal entity was the victim of the offense; - the offender was a United States national or an American legal entity; - the offender is afterwards found in the United States; or - the offense involved a transfer to or from the United States 18 U.S.C. § 956 (conspiracy and overt act within the United States to commit murder, kidnaping, maiming or the destruction of certain property overseas) 18 U.S.C. § 1030 (computer abuse involving damage to federal or United States financial systems or systems used in the foreign commerce or communications of the United States) 18 U.S.C. § 1363 (destruction of property within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 2272 (destruction of a vessel within the maritime jurisdiction of the United States by its owner) 18 U.S.C. § 2273 (destruction of a vessel within the maritime jurisdiction of the United States by others) 18 U.S.C. § 2275 (burning or tampering with a vessel within the maritime jurisdiction of the United States) 18 U.S.C. § 2280 (destruction of maritime navigational facilities) Jurisdictional factors : - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2281 (damage to a maritime platform) Jurisdictional factors : - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2290 Offenses : - destruction of vessels or maritime facilities (18 U.S.C. 2291); or - attempting or conspiring to do so (18 U.S.C. 2291) Jurisdictional factors : - victim or offender was a United States national; - United States national was aboard victim vessel; - victim vessel was a United States vessel 18 U.S.C. § 2332a (using a weapon of mass destruction) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 2332f (effective upon the terrorist bombing convention entering into force for the U.S.) (bombing public places, government facilities, or public utilities outside the United States) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender is present in the United States; - the offense was committed on United States registered vessel or aircraft; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 3261 (offenses committed by members of the United States armed forces or individuals accompanying or employed by the United States armed forces overseas) 18 U.S.C. § 32 (threats to destroy foreign civil aircraft, or aircraft in the special aircraft jurisdiction of the United States, or aircraft or aircraft facilities in the special maritime and territorial jurisdiction of the United States) 18 U.S.C. § 112 (threatening internationally protected person) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 175 (threatening to develop, produce, stockpile, transfer, acquire, retain, or possess biological weapons or delivery systems, misuse of biological weapons; or threatening to assisting a foreign power to do so; "there is extraterritorial Federal jurisdiction over an offense under this section committed by or against a national of the United States," 18 U.S.C.175(a) 18 U.S.C. § 229 (threatening to use chemical weapons) Jurisdictional factors : - the victim or offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 831 (threaten to use nuclear material of injury or destroy) Jurisdictional factors : - committed within the special aircraft or special maritime and territorial jurisdiction of the United States; - a United States national or an American legal entity was the victim of the offense; - the offender was a United States national or an American legal entity; or - the offender is afterwards found in the United States; - the offense involved a transfer to or from the United States; or - the offense was a threat directed against the United States 18 U.S.C. § 875 (transmission of a threat in the foreign commerce of the United States) 18 U.S.C. § 877 (mailing a threat to kidnap or injure from a foreign country to the United States) 18 U.S.C. § 878 (threatening to kill, kidnap or assault an internationally protected person) Jurisdictional factors : - a victim was a United States national; - the offender was a United States national; or - the offender is afterwards found in the United States 18 U.S.C. § 1203 (threaten to kill or injure a hostage outside the United States) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 1512 (threatening a federal witness or informant) Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C.1512(g) 18 U.S.C. § 1513 (threatening to retaliate against a federal witness or informant) Jurisdictional factors : - "[t]here is extraterritorial Federal jurisdiction over an offense under this section," 18 U.S.C. §1513(d)) 18 U.S.C. § 2280 (threats of violence against maritime navigation) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2281 (threatens injury or destruction aboard a fixed maritime platform) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offender is afterwards found in the United States; or - the offense was intended to compel action or abstention by the United States 18 U.S.C. § 2290 Offenses : - destruction of vessels or maritime facilities (18 U.S.C. §2291); or - attempting or conspiring to do so (18 U.S.C. §2291) Jurisdictional factors : - victim or offender was a United States national; - United States national was aboard victim vessel; - victim vessel was a United States vessel 18 U.S.C. § 2332a (threatening to use a weapon of mass destruction) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; or - the offense was committed against federal property 18 U.S.C. § 2332f (effective upon the terrorist bombing convention entering into force for the U.S.) (threatening to bomb public places, government facilities, or public utilities outside the United States) Jurisdictional factors : - the victim was a United States national; - the offender was a United States national; - the offense was committed against federal property; - the offender is present in the United States; - the offense was committed on United States registered vessel or aircraft; or - the offense was intended to compel action or abstention by the United States 49 U.S.C. § 46507 (threats or scares concerning air piracy or bombing aircraft in the special aircraft jurisdiction of the United States) 18 U.S.C. §38 (fraud involving aircraft or space vehicle parts) Jurisdictional factors : - the victim or offender was an entity organized under United States law; - the victim or offender was a United States national; or - an act in furtherance of the offense was committed in the United States) 18 U.S.C. § 831 (theft of nuclear materials) Jurisdictional factors : - within the special aircraft or special maritime and territorial jurisdiction of the United States; - the victim was a United States national or an American legal entity; - the offender was a United States national or an American legal entity; - the offender is afterwards found in the United States; or - the offense involved a transfer to or from the United States 18 U.S.C. § 1025 (theft by false pretenses or fraud within the special maritime and territorial jurisdiction of the United States) 18 U.S.C. §§ 470-474 (counterfeiting United States obligations outside the United States) 18 U.S.C. § 2 (principals) 18 U.S.C. § 3 (accessories after the fact) 18 U.S.C. § 4 (misprision) 18 U.S.C. § 371 (conspiracy) 18 U.S.C. § 924(c), (j) (using or carrying a firearm during the course of a federal crime of violence or drug trafficking crime) 18 U.S.C. § 1952 (Travel Act) 18 U.S.C. §§ 1956-1957 (money laundering) 18 U.S.C. § 1959 (violence in aid of racketeering) 18 U.S.C. §§ 1961-1965 (RICO) 21 U.S.C. § 846 (conspiracy or attempt to violate the Controlled Substances Act) 21 U.S.C. § 963 (conspiracy or attempt to violate the Controlled Substances Import and Export Act) §1.03 Territorial Applicability (1) Except as otherwise provided in this Section, a person may be convicted under the law of this State of an offense committed by his own conduct or the conduct of another for which he is legally accountable if: (a) either the conduct that is an element of the offense or the result that is such an element occurs within this State; or (b) conduct occurring outside the State is sufficient under the law of this State to constitute an attempt to commit an offense within the State; or (c) conduct occurring outside the State is sufficient under the law of this State to constitute a conspiracy to commit an offense within the state and an overt act in furtherance of such conspiracy occurs within the state; or (d) conduct occurring within the State establishes complicity in the commission of, or an attempt, solicitation or conspiracy to commit , an offense in another jurisdiction that also is an offense under the law of this State; or (e) the offense consists of the omission to perform a legal duty imposed by the law of this State with respect to domicile, residence or a relationship to a person, thing or transaction in the State; or (f) the offense is based on a statute of this State that expressly prohibits conduct outside the State, when the conduct bears a reasonable relation to a legitimate interest of this State and the actor knows or should know that his conduct is likely to affect that interest. (2) Subsection (1)(a) does not apply when either causing a specified result or a purpose to cause or danger of causing such a result is an element of an offense and the result occurs or is designed or likely to occur only in another jurisdiction where the conduct charged would not constitute an offense, unless a legislative purpose plainly appears to declare the conduct criminal regardless of the place of the result. (3) Subsection (1)(a) does not apply when causing a particular result is an element of an offense and the result is caused by conduct occurring outside the State that would not constitute an offense if the result had occurred there, unless the actor purposely or knowingly caused the result within the State. (4) When the offense is homicide, either the death of the victim or the bodily impact causing death constitutes a result within the meaning of Subsection (a)(1), and if the body of a homicide victim is found within the State, it is presumed that such result occurred within the State. (5) This State includes the land and water and the air space above such land and water with respect to which the State has legislative jurisdiction. §401. Categories of Jurisdiction Under international law, a state is subject to limitations on (a) jurisdiction to prescribe, i.e., to make its law applicable to the activities, relations, or status of persons, or the interests of persons in things, whether by legislation, by executive act or order, by administrative rule or regulation, or by determination of a court; (b) jurisdiction to adjudicate, i.e., to subject persons or things to the process of its courts or administrative tribunals, whether in civil or in criminal proceedings, whether or not the state is a party to the proceedings; (c) jurisdiction to enforce, i.e., to induce or compel compliance or to punish noncompliance with its laws or regulations, whether through the courts or by use of executive, administrative, police, or other nonjudicial action. §402. Bases of Jurisdiction to Prescribe Subject to §403, a state has jurisdiction to prescribe law with respect to (1)(a) conduct that, wholly or in substantial part, takes place within its territory; (b) the status of persons, or interests in things, present within its territory; (c) conduct outside its territory that has or is intended to have substantial effect within its territory; (2) the activities, interests, status, or relations of its nationals outside as well as within its territory; and (3) certain conduct outside its territory by persons not its nationals that is directed against the security of the state or against a limited class of other state interests. §403. Limitations on Jurisdiction to Prescribe (1) Even when one of the bases for jurisdiction under §402 is present, a state may not exercise jurisdiction to prescribe law with respect to a person or activity having connections with another state when the exercise of such jurisdiction is unreasonable. (2) Whether exercise of jurisdiction over a person or activity is unreasonable is determined by evaluating all relevant factors, including, where appropriate: (a) the link of the activity to the territory of the regulating state, i.e., the extent to which the activity takes place within the territory, or has substantial, direct, and foreseeable effect upon or in the territory; (b) the connections, such as nationality, residence, or economic activity, between the regulating state and the person principally responsible for the activity to be regulated, or between that state and those whom the regulation is designed to protect; (c) the character of the activity to be regulated, the importance of regulation to the regulating state, the extent to which other states regulate such activities, and the degree to which the desirability of such regulation is generally accepted; (d) the existence of justified expectations that might be protected or hurt by the regulation; (e) the importance of the regulation to the international political, legal, or economic system; (f) the extent to which the regulation is consistent with the traditions of the international system; (g) the extent to which another state may have an interest in regulating the activity; and (h) the likelihood of conflict with regulation by another state. (3) When it would not be unreasonable for each of two states to exercise jurisdiction over a person or activity, but the prescriptions by the two states are in conflict, each state has an obligation to evaluate its own as well as the other state's interest in exercising jurisdiction, in light of all the relevant factors, Subsection (2); a state should defer to the other state if that state's interest is clearly greater. §404. Universal Jurisdiction to Define and Punish Certain Offenses A state has jurisdiction to define and prescribe punishment for certain Offenses recognized by the community of nations as of universal concern, such as piracy, slave trade, attacks on or hijacking of aircraft, genocide, war crimes, and perhaps certain acts of terrorism, even where none of the jurisdiction indicated in §402 is present. §421. Jurisdiction to Adjudicate (1) A state may exercise jurisdiction through its courts to adjudicate with respect to a person or thing if the relationship of the state to the person or thing is such as to make the exercise of jurisdiction reasonable. (2) In general, a state's exercise of jurisdiction to adjudicate with respect to a person or thing is reasonable if, at the time jurisdiction is asserted: (a) the person or thing is present in the territory of the state, other than transitorily; (b) the person, if a natural person, is domiciled in the state; (c) the person, if a natural person, is resident in the state; (d) the person, if a natural person, is a national of the state; (e) the person, if a corporation or comparable juridical person, is organized pursuant to the law of the state; (f) a ship, aircraft, or other vehicle to which the adjudication relates is registered under the laws of the state; (g) the person, whether natural or juridical, has consented to the exercise of jurisdiction; (h) the person, whether natural or juridical, regularly carries on business in the state; (i) the person, whether natural or juridical, had carried on activity in the state, but only in respect to such activity; (j) the person, whether natural or juridical, had carried on outside the state an activity having a substantial, direct, and foreseeable effect within the state, but only in respect to such activity; or (k) the thing that is the subject of adjudication is owned, possessed, or used in the state, but only in respect to a claim reasonably connected with that thing. (3) A defense of lack of jurisdiction is generally waived by any appearance by or on behalf of a person or thing (whether as plaintiff, defendant, or third party), if the appearance is for a purpose that does not include a challenge to the exercise of jurisdiction. §431. Jurisdiction to Enforce (1) A state may employ judicial or nonjudicial measures to induce or compel compliance or punish noncompliance with its laws or regulations, provided it has jurisdiction to prescribe in accordance with §§402 and 403. (2) Enforcement measures must be reasonably related to the laws or regulations to which they are directed; punishment for noncompliance must be preceded by an appropriate determination of violation and must be proportional to the gravity of the violation. (3) A state may employ enforcement measures against a person located outside the territory (a) if the person is given notice of the claims or charges against him that is reasonable in the circumstances; (b) if the person is given an opportunity to be heard, ordinarily in advance of enforcement, whether in person or by counsel or other representative; and (c) when enforcement is through the courts, if the state has jurisdiction to adjudicate. The term "special maritime and territorial jurisdiction of the United States", as used in this title, includes: (1) The high seas, any other waters within the admiralty and maritime jurisdiction of the United States and out of the jurisdiction of any particular State, and any vessel belonging in whole or in part to the United States or any citizen thereof, or to any corporation created by or under the laws of the United States, or of any State, Territory, District, or possession thereof, when such vessel is within the admiralty and maritime jurisdiction of the United States and out of the jurisdiction of any particular State. (2) Any vessel registered, licensed, or enrolled under the laws of the United States, and being on a voyage upon the waters of any of the Great Lakes, or any of the waters connecting them, or upon the Saint Lawrence River where the same constitutes the International Boundary Line. (3) Any lands reserved or acquired for the use of the United States, and under the exclusive or concurrent jurisdiction thereof, or any place purchased or otherwise acquired by the United States by consent of the legislature of the State in which the same shall be, for the erection of a fort, magazine, arsenal, dockyard, or other needful building. (4) Any island, rock, or key containing deposits of guano, which may, at the discretion of the President, be considered as appertaining to the United States. (5) Any aircraft belonging in whole or in part to the United States, or any citizen thereof, or to any corporation created by or under the laws of the United States, or any State, Territory, District, or possession thereof, while such aircraft is in flight over the high seas, or over any other waters within the admiralty and maritime jurisdiction of the United States and out of the jurisdiction of any particular State. (6) Any vehicle used or designed for flight or navigation in space and on the registry of the United States pursuant to the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, Including the Moon and Other Celestial Bodies and the Convention on Registration of Objects Launched into Outer Space, while that vehicle is in flight, which is from the moment when all external doors are closed on Earth following embarkation until the moment when one such door is opened on Earth for disembarkation or in the case of a forced landing, until the competent authorities take over the responsibility for the vehicle and for persons and property aboard. (7) Any place outside the jurisdiction of any nation with respect to an offense by or against a national of the United States. (8) To the extent permitted by international law, any foreign vessel during a voyage having a scheduled departure from or arrival in the United States with respect to an offense committed by or against a national of the United States. (9) With respect to Offenses committed by or against a national of the United States as that term is used in section 101 of the Immigration and Nationality Act— (A) the premises of United States diplomatic, consular, military or other United States Government missions or entities in foreign States, including the buildings, parts of buildings, and land appurtenant or ancillary thereto or used for purposes of those missions or entities, irrespective of ownership; and (B) residences in foreign States and the land appurtenant or ancillary thereto, irrespective of ownership, used for purposes of those missions or entities or used by United States personnel assigned to those missions or entities. Nothing in this paragraph s hall be deemed to supersede any treaty or international agreement with which this paragraph conflicts. This paragraph does not apply with respect to an offense committed by a person described in section 3261(a) of this title. (a) Whoever engages in conduct outside the United States that would constitute an offense punishable by imprisonment for more than 1 year if the conduct had been engaged in within the special maritime and territorial jurisdiction of the United States— (1) while employed by or accompanying the Armed Forces outside the United States; or (2) while a member of the Armed Forces subject to chapter 47 of title 10 (the Uniform Code of Military Justice), shall be punished as provided for that offense. (b) No prosecution may be commenced against a person under this section if a foreign government, in accordance with jurisdiction recognized by the United States, has prosecuted or is prosecuting such person for the conduct constituting such offense, except upon the approval of the Attorney General or the Deputy Attorney General (or a person acting in either such capacity), which function of approval may not be delegated. (c) Nothing in this chapter may be construed to deprive a court-martial, military commission, provost court, or other military tribunal of concurrent jurisdiction with respect to offenders or offenses that by statute or by the law of war may be tried by a court-martial, military commission, provost court, or other military tribunal. (d) No prosecution may be commenced against a member of the Armed Forces subject to chapter 47 of title 10 (the Uniform Code of Military Justice) under this section unless – (1) such member ceases to be subject to such chapter; or (2) an indictment or information charges that the member committed the offense with one or more other defendants, at least one of whom is not subject to such chapter. (a) Whoever, while employed by or accompanying the Federal Government outside the United States, engages in conduct outside the United States that would constitute an offense under chapter 77 or 117 of this title if the conduct had been engaged in within the United States or within the special maritime and territorial jurisdiction of the United States shall be punished as provided for that offense. (b) No prosecution may be commenced against a person under this section if a foreign government, in accordance with jurisdiction recognized by the United States, has prosecuted or is prosecuting such person for the conduct constituting such offense, except upon the approval of the Attorney General or the Deputy Attorney General (or a person acting in either such capacity), which function of approval may not be delegated. Books and Articles Michael Abbell, Extradition to and from the United States (2010) _____, Obtaining Evidence Abroad in Criminal Cases (2010) American Law Institute, Restatement of the Law Third: the Foreign Relations Law of the United States (1987 & 2015 Supp.) M. Cherif Bassiouni, International extradition: United States Law and Practice (6 th ed. 2014) Christopher L. Blakesley, A Conceptual Framework for Extradition and Jurisdiction Over Extraterritorial Crimes , 1984 Utah L. Rev. 685 Christopher L. Blakesley & Stigall, The Myopia of U.S. v. Martinelli: Extraterritorial Jurisdiction in the 21 st Century , 39 Geo. Wash. Int'l L. Rev. 1 (2007) Gary B. Born, Reappraisal of the Extraterritorial Reach of United States Law , 24 Law & Pol'y Int'l Bus. 1 (1992) Curtis A. Bradley, Universal Jurisdiction and United States Law , 2001 U. Chi. Legal F. 323 Lea Brilmayer & Charles Norchi, Federal Extraterritoriality and Fifth Amendment Due Process , 105 Harv. L. Rev. 1217 (1992) Jose A. Cabranes, Our Imperial Criminal Procedure: Problems in the Extraterritorial Application of U.S. Constitutional Law , 118 Yale L. J. 1660 (2009) Zachary D. Clopton, Bowman Lives: The Extraterritorial Application of U.S. Criminal Law After Morrison v. National Australia Bank , 67 NYU Ann. Surv. Am. L. 137 (2011) ______, Replacing the Presumption Against Extraterritoriality , 94 B.U. L. Rev. 1 (2014) Anthony J. Colangelo, Unified Approach to Extraterritoriality , 97 Va. L. Rev. 1019 (2011) ______, What is Extraterritorial Jurisdiction, 99 Cornell L. Rev. 1303 (2014) Jenny-Brooke Condon, Extraterritorial Interrogation: The Porous Border Between Torture and U.S. Criminal Trials , 60 Rutgers L. Rev. 647 (2008) [author name scrubbed], Substantive Due Process and U.S. Jurisdiction Over Foreign Nationals , 82 Fordham L. Rev. 2077 (2014) Brandon L. Garrett, Globalized Corporate Prosecutions , 97 Va. L. Rev. 1775 (2011) B.J. George, Jr., Extraterritorial Application of Penal Legislation , 64 Michigan Law Review 609 (1966) Joseph P. Griffin, Foreign Governmental Reactions to United States Assertions of Extraterritorial Jurisdiction , 6 Geo. Mason L. Rev. 505 (1998) Harvard Research in International Law, Jurisdiction With Respect to Crime , 72 Am. J. Int'l L. (Supp.) 485 (1935) David Keenan & Sabrina P. Shroff, Taking the Presumption Against Extraterritoriality Seriously in Criminal Cases After Morrison and Kiobel, 45 Loy. U. Chi. L.J. 71 (2013) Eugene Kontorovich, Beyond the Article I Horizon: Congress's Enumerated Powers and Universal Jurisdiction Over Drug Crimes , 93 Minn. L. Rev. 1191 (2009) ____, The "Define and Punish" Clause and the Limits of Universal Jurisdiction , 103 Nw. U. L. Rev. 149 (2009) Margaret K. Lewis, When Foreign is Criminal , 55 Va. J. Int'l L. 625 (2015) Jeffrey A. Meyer, Dual Illegality and Geoambiguous Law: A New Rule for Extraterritorial Application of U.S. Law , 95 Minn. L. Rev. 110 (2010) Austen Parrish, The Effects Test: Extraterritoriality's Fifth Business , 61 Vand. L. Rev. 1455 (2008) Paust, Non-Extraterritoriality of "Special Territorial Jurisdiction" of the United States: Forgotten History and the Errors of Erdos , 24 Yale Journal of International Law 305 (1999) Ellen S. Podgor, Globalization and the Federal Prosecution of White Collar Crime , 34 Am. Crim. L. Rev. 325 (1997) ___, International Computer Fraud: A Paradigm for Limiting National Jurisdiction, 35 U. Cal. Davis L. Rev. 267 (2002) Ellen S. Podgor & Daniel M. Filler, International Criminal Jurisdiction in the Twenty-First Century: Rediscovering United States v. Bowman , 44 San Diego L. Rev. 585 (2007) Kenneth C. Randall, Universal Jurisdiction Under International Law , 66 Tex. L. Rev. 785 (1988) Thomas G. Snow, The Investigation and Prosecution of White Collar Crime: International Challenges and the Legal Tools Available to Address Them , 11 Wm. & Mary Bill Rts. J. 209 (2002) Paul N. Stockton & Michele Golabek-Goldman, Prosecuting Cyberterrorists: Applying Traditional Frameworks to a Modern Threat , 25 Stan. L. & Pol'y Rev. 211 (2014) Frank Tuerkheimer, Globalization of United States Law Enforcement: Does the Constitution Come Along? 39 Hous. L. Rev. 307 (2002) United States Congress, Legislative Initiatives to Curb Domestic and International Terrorism; Hearings Before the Subcomm. on Security and Terrorism of the Senate Comm. on the Judiciary , 98 th Cong., 2d Sess. (1984) ___, Bills to Authorize Prosecution of Terrorists and Others Who Attack United States Government Employees and Citizens Abroad: Hearing Before the Subcomm. on Security and Terrorism of the Senate Comm. on the Judiciary , 99 th Cong., 1 st Sess. (1985) ___, Extraterritorial Jurisdiction Over Terrorists Acts Abroad: Hearings Before Subcomm. on Crime of House Comm. on Judiciary , 101 st Cong., 1 st Sess. (1989) Johan D. van der Vyver, Prosecuting Offenses Against the Law of Nations in the United States , 20 Emory Int'l L. Rev. 473 (2006) David P. Warner, Challenges to International Law Enforcement Cooperation for the United States in the Middle East and North Africa: Extradition and Its Alternatives , 50 Vill. L. Rev. 479 (2005) Geoffrey R. Watson, Offenders Abroad: The Case for Nationality-Based Criminal Jurisdiction , 17 Yale J. Int'l L. 41 (1992) ___, The Passive Personality Principle , 28 Texas International Law Journal 1 (1993) A. Mark Weisburd, Due Process Limits on Federal Extraterritorial Legislation? 35 Colum. J. Transnat'l L. 379 (1997) Richard B. Zabel, Extraterritoriality , 26 Harv. Int'l L. J. 569 (1985) Notes and Comments Defining and Punishing Abroad: Constitutional Limits on the Extraterritorial Reach of the Offenses Clause, 48 Duke Law Journal 1305 (1999) Ryan Walsh, Note , Extraterritorial Confusion: The Complex Relationship Between Bowman and Morrison and a Revised Approach to Extraterritoriality , 47 Val. U. L. Rev. 627 (2013) The Five Bases of Extraterritorial Jurisdiction and the Failure of the Presumption Against Extraterritoriality , 33 Hastings International & Comparative Law Review 177 (1997) S. Nathan Williams, Note, The Sometimes "Craven Watchdog": The Disparate Criminal-Civil Application of the Presumption Against Extraterritoriality , 63 Duke Law Jouran1381 (2014). | Criminal law is usually territorial. It is a matter of the law of the place where it occurs. Nevertheless, a number of American criminal laws apply extraterritorially outside of the United States. Application is generally a question of legislative intent, express or implied. There are two exceptions. First, the statute must come within Congress's constitutional authority to enact. Second, neither the statute nor its application may violate due process or any other constitutional prohibition. Claims of implied extraterritoriality must overcome additional obstacles. Federal laws are presumed to apply only within the United States, unless Congress clearly provides otherwise. Moreover, the courts will also presume that Congress intends its statutes to be applied in a manner that does not offend international law. Historically, in order to overcome these presumptions, the lower federal courts have read certain vintage Supreme Court cases broadly. The Supreme Court's recent pronouncements in Morrison v. National Australia Bank Ltd. and RJR Nabisco v. European Community, however, suggest a far more restrictive view. Although the crimes over which the United States has extraterritorial jurisdiction may be many, so are the obstacles to their enforcement. For both practical and diplomatic reasons, criminal investigations within another country require the acquiescence, consent, or preferably the assistance, of the authorities of the host country. The United States has mutual legal assistance treaties with several countries designed to formalize such cooperative law enforcement assistance. It has agreements for the same purpose in many other instances. Cooperation, however, may introduce new obstacles. Searches and interrogations carried out jointly with foreign officials, certainly if they involve Americans, must be conducted within the confines of the Fourth and Fifth Amendments. And the Sixth Amendment imposes limits upon the use in American criminal trials of depositions taken abroad. The nation's recently negotiated extradition treaties address some of the features of earlier agreements which complicate extradition for extraterritorial offenses, that is, dual criminality requirements; reluctance to recognize extraterritorial jurisdiction; and exemptions on the basis of nationality or political offenses. To further facilitate the prosecution of federal crimes with extraterritorial application Congress has enacted special venue, statute of limitations, and evidentiary statutes. To further cooperative efforts, it enacted the Foreign Evidence Request Efficiency Act, P.L. 111-79, which authorizes federal courts to issue search warrants, subpoenas, and other orders to facilitate criminal investigations in this country on behalf of foreign law enforcement officials. This report is available in an abridged version, stripped of its attachments, bibliography, footnotes, and most of its citations to authority, as CRS Report RS22497, Extraterritorial Application of American Criminal Law: An Abbreviated Sketch, by [author name scrubbed]. |
Since 1973, 84 Members of Congress—69 Representatives and 15 Senators—have died in office. When a sitting Member dies, the House and Senate carry out a number of actions based on chamber rules, statutes, and long-standing practices. Some congressional practices related to the death of a sitting Member predate the national legislature established by the Constitution. On October 23, 1775, the Continental Congress, sitting in Philadelphia, was informed that Peyton Randolph, a Delegate from Virginia and president of the Continental Congress, "suddenly departed this life" the day before, and resolved that its members would "attend his funeral as mourners, with a crape round their left arm," and "continue in Mourning for the space of one month." A committee of three Delegates was appointed to "superintend the funeral," and the Reverend Jacob Duché, rector of St. Peter's Episcopal and Christ Churches was requested to "prepare a proper discourse to be delivered at the funeral." During the First Congress (1789-1791), the first instances of the death of a sitting Senator and Representative occurred. Senator William Grayson of Virginia died on March 12, 1790. No direct mention of the event is recorded in the Senate Journal or the Annals of Congress . On June 1, 1790, the House was informed of the death of Representative Theodorick Bland of Virginia. The House ordered the Virginia delegation to "be a committee to superintend the funeral, and that the House attend the same." The next day, it was ordered that the House Members go into mourning for one month, "by the usual method of wearing crape around the left arm." In the 19 th century, Congress adopted the practice of paying some of the expenses of funeral services for sitting Members. Services were sometimes held in the House or Senate chamber. On February 27, 1838, for example, funeral services for Representative Jonathan Cilley of Maine were held in the Hall of the House, with the House and Senate in attendance. When services or interment were not held in Washington, DC, it was the practice of both chambers to appoint a committee of Members to escort the remains of a deceased colleague to their final destination. On June 28, 1847, the House and Senate each voted to accompany the remains of Senator John Fairfield of Maine "from his house to the depot, where they were to be delivered to" Representative Franklin Clark, who accompanied them to Maine. By the 41 st Congress (1869-1871), it had "for a long time been a custom to appoint a joint committee to attend the remains of a deceased Senator or Member to his home, as in the instance of Senator Daniel S. Morton, of Minnesota, on July 14, 1870." In contemporary times, chamber rules and statutes set out some of the congressional response to the death of a sitting Member, and former Members who served as Speaker. Evidence from the Senate Journal , House precedents, and other historical documents shows that some long-standing observances, such as adjourning briefly as a mark of respect to the deceased, appointing Member delegations to attend funerals of deceased colleagues, or paying the costs of a funeral from public funds, may be employed. Other customs, such as wearing crape, holding services in the House or Senate chambers, or appointing Members to escort the body back to the home state, have not been observed for at least several decades. In addition to some evolutionary changes in institutional patterns, it appears that contemporary congressional response is affected by a number of external factors including the following: circumstances of the Member's death; preferences of the deceased Member, or the Member's family, regarding funeral services; whether Congress is in session when the Member dies; pending congressional business at the time of the Member's death; and events external to Congress. Consequently, it appears that congressional response to the death of a sitting Member could be characterized as a set of actions that are determined in detail at or around the time of the death, in response to an array of factors. Generally, these actions fall into five categories: Floor Announcement or Acknowledgment; Resolution of Condolence; Funeral; Deceased Member's Office, Staff, and Survivor Benefits; and Publication of Memorials. Congressional recognition of the death of a sitting Member occurs principally on the floor of the chamber in which the deceased served. Specific actions are contingent on whether Congress is in session, the business pending before the chamber, and the circumstances of the Member's death. If the House is in session, the death of a sitting Member is typically announced on the floor. No specific protocol has been identified, but notices of death have typically been made by the Speaker, by a Member who indicates that they have been informed by House leaders of the death of a colleague, or by a Member from the decedent's state delegation. Depending on floor business, the House may continue with pending matters, suspend business for special order speeches and other memorials to the deceased Member, or immediately adjourn for the day in honor of the decedent. The death of Representative Julia May Carson of Indiana, who died on December 15, 2007, was acknowledged when the House met on December 17. In his opening prayer, the Reverend Daniel P. Coughlin, chaplain of the House, noted Representative Carson's demise. A short time later, Representative Dan Burton, dean of the Indiana delegation, was recognized to speak, and yielded to Representative Peter Visclosky of Indiana, who informed the House of Representative Carson's passing, and announced a special order for tributes to her. Following brief remarks by Representative Burton, Representative Visclosky asked for and was granted a moment of silence in Representative Carson's memory. Other contemporary examples of the House acknowledging the death of a sitting Member include the following: No formal announcement regarding the death of Representative Jo Ann Davis of Virginia, who died Saturday, October 6, 2007, was made in the House when the chamber next met on October 9, and no moment of silence was observed. During the prayer at the beginning of the session, the chaplain mentioned Representative Davis, and some Members commented through one minute speeches. A resolution of condolence was considered and adopted later in the day. Following the death of Representative Paul E. Gillmor of Ohio on September 5, 2007, Representative John Boehner, the Republican leader, received unanimous consent to speak out of order to inform the chamber. Later in the day, Representative Ralph Regula of Ohio rose to announce his intention to introduce a "resolution of bereavement" and asked that the House rise for a moment of silence. The death of Representative Juanita Millender-McDonald of California, on April 22, 2007, was announced the next day by Representative Pete Stark of California, who asked for a moment of silence. Following brief consideration of other matters, the House moved to consideration and adoption of a resolution of condolence before adjourning. An announcement of the death of Representative Charles W. Norwood Jr. of Georgia, who died on February 13, 2007, after a long illness, was made to the House in the middle of debate on H.Con.Res. 63 , regarding President George W. Bush's decision to send additional military personnel to Iraq. On February 13, debate on the concurrent resolution was briefly interrupted twice to acknowledge Representative Norwood's death. Representative Ileana Ros-Lehtinen of Florida, who was recognized to speak on the pending resolution, announced Representative Norwood's death. A short time later, Representative John Nathan Deal of Georgia came to the floor on behalf of the Georgia delegation to announce Representative Norwood's death and to ask for a moment of silence. Pursuant to House Rule XX, clause 5(d), the Speaker or Speaker pro tempore typically announces a revised whole number of the House in light of the passing of a Representative soon after the House acknowledges the Member's passing. When a Member of the House dies during an extended period of congressional recess or adjournment, it has been the practice of the House since at least 1826 to make an announcement on the next day the chamber convened. This approach was taken when Representative Floyd Spence of South Carolina died on August 16, 2001. When the House reconvened on September 5, Speaker Dennis Hastert addressed the House to announce Representative Spence's death, that a funeral had been held, that Representative John Spratt would later offer a resolution of condolence, and that a special order in tribute to Representative Spence would be held in the future. Representatives-elect who died between their election and the convening of Congress have been acknowledged by the House. In 1833, news of the death of Representative-elect Thomas D. Singleton of South Carolina, while traveling to take his seat in Washington, DC, was announced. Representative Henry L. Pinckney of South Carolina, noting that while Mr. Singleton had not appeared and qualified, "it was fitting, and according to the usages of the House, to pay him the usual observances of respect." Following the adoption of a resolution of condolence, Representative Pinckney "moved an adjournment of the House, saying that he believed such to be the custom in these cases." According to House precedents and more recent practice, recognizing deceased Representatives-elect in a manner similar to that of sitting Members also occurred in the 20 th century. On the first day of the 98 th Congress (1983-1984), the House took official notice of the death of Representative-elect Jack Swigert through an announcement of his passing by the Sergeant at Arms. Later in the day, the House adopted a resolution of condolence and appointed five Members to attend Mr. Swigert's funeral. In addition to a resolution of condolence, discussed below, there may be other tributes to the deceased Member offered on the floor of the House. These may include one minute speeches by individual Members, or special orders dedicated to the memory of the deceased Member. Either of these approaches would be subject to House rules regarding non-legislative debate in the House. When the Senate is in session, news of the passing of a sitting Senator is often widely known when the chamber meets. Consequently, a formal floor announcement is generally not made. The death of a sitting Senator is typically acknowledged on the Senate floor in prayers offered by the chaplain, through tributes offered by other Senators, and consideration of a resolution of condolence. The Senate may continue with other business, or adjourn after acknowledging a Senator's demise. When it does adjourn, the chamber typically does so as a mark of further respect to the late Senator. Exceptions to this practice arise when news of the death of a Senator reaches the Senate while it is meeting. In those circumstances, including the deaths of Senator Paul Coverdell of Georgia on July 18, 2000, and Senator Quentin Burdick of North Dakota on September 8, 1992, the majority leader made an announcement. Senator Craig Thomas of Wyoming died on June 4, 2007. No formal announcement of his passing was made in the Senate. When the Senate met the next day, the chaplain mentioned Senator Thomas in the opening prayer. Senator Mitch McConnell, the Republican leader, subsequently offered a tribute, followed by Majority Leader Harry Reid, who also offered a tribute, and who asked for unanimous consent to postpone previously scheduled Senate activity to later in the day so "people have the opportunity to come and speak about" Senator Thomas. Senator Reid then asked for a moment of silence in recognition of Senator Thomas. After several Senators offered tributes, the Senate resumed planned business before adopting a resolution of condolence and adjourning "as a mark of further respect to the memory of" Senator Thomas. Similar exercises were carried out to honor Senator Paul Wellstone of Minnesota, who died in an aircraft accident while campaigning for reelection on October 27, 2002. When the Senate met October 28, it observed a moment of silence, adopted a resolution of condolence, and adjourned as a further mark of respect to Senator Wellstone's memory. On November 12, several Senators offered tributes. Since 1807, Senators who have died during periods of recess or adjournment have been acknowledged when the Senate reconvened. The most recent sitting Senator to die during a recess was Senator Edward Moore (Ted) Kennedy of Massachusetts, who died on August 25, 2009, after an illness. When the Senate met on September 8, Senator Harry Reid of Nevada, the majority leader, asked for a moment of silence in honor of Senator Kennedy. Other Senators also offered tributes, and the Senate adopted a resolution of condolence. The Senate also set aside a period for memorial statements on September 10. The first resolution of mourning for a sitting Senator appears to have been adopted in 1806. Although the House had taken other, ad hoc actions in the early years of the nation, formal resolutions adopted in response to the death of a sitting Member date back at least to 1827. House precedents and the Senate Journal typically refer to resolutions designating the use of crape or other badges of mourning, and authorizing Members to attend funeral services. In the House it was typical to adjourn as a mark of respect for the deceased Member. House resolutions that included expressions of condolences to the family of the deceased Member appear to have been considered in some cases dating to 1864, before becoming more routine beginning around 1899. In current practice, the House considers a resolution expressing its condolences to the family of a deceased Member. If the House is in session, a resolution is typically introduced within a day of the Member's passing by the senior Member of the state delegation in which the deceased Member served. One hour of debate is allotted for consideration of the measure, equally divided between majority and minority, although in some cases, that time is not used if another memorial is planned under special orders at a later date. At the conclusion of debate the resolution of condolence is typically adopted by voice vote or unanimous consent. In the text of the resolution, the House notes the following: "The House has heard with profound sorrow of the death of the Honorable ________, a Representative/Delegate/Resident Commissioner from ______" the Clerk of the House communicates these Resolutions to the Senate and transmits a copy to the family of the deceased; and upon adjournment, the House "adjourn as a further mark of respect to the memory of the deceased." In addition, the House sometimes authorizes and directs the House Sergeant at Arms to "take such steps as may be necessary for carrying out the provisions of these resolutions and that the necessary expenses in connection therewith be paid out of the contingent fund of the House," or to appoint "a committee of such Members of the House as the Speaker may designate, together with such Members of the Senate as may be joined, be appointed to attend the funeral." When a Representative dies, the Senate sometimes adopts a resolution of condolence. Table 1 summarizes House and Senate resolutions adopted to mark the passing of a sitting Representative since 1973. In current practice, the Senate typically considers a resolution expressing its condolences to the family of a deceased Senator and to the citizens of the state the Senator represented. The measure may be introduced by the majority leader, the minority leader, or the surviving Senator from the state the deceased Senator represented. All living, sitting Senators are listed as cosponsors. There may follow a period of debate, particularly if other tributes have not already been offered or a future tribute is scheduled. At the conclusion of debate, the resolution of condolence is typically adopted by unanimous consent. In the text of the resolution, the Senate typically includes a preamble containing various milestones of the late Senator's public career, and resolves that "The United States Senate has heard with profound sorrow and deep regret the announcement of the death of the Honorable _____, a Senator from the State of _____"; "the Secretary of the Senate shall communicate this resolution to the House of Representatives and transmit an enrolled copy thereof to the family of Senator _____"; and "when the Senate adjourns today, it shall stand adjourned as a further mark of respect to the memory of Senator _____." In addition to observances of record, a deceased Senator's desk in the Senate chamber may be draped in black for a brief period. Additionally, upon the death of a sitting Senator, the majority leader and minority leader may permit a display of flowers to be placed upon the desk of a deceased Senator on the day set aside for eulogies. When a Senator dies, the House sometimes adopts a resolution of condolence. Table 2 summarizes Senate and House resolutions adopted to mark the passing of a sitting Senator since 1978. Since the earliest days of the republic, some of the expenses of holding funerals of sitting Members, or the procurement of cemetery monuments, have been defrayed in part from public funds. From 1789-1801, it appears that the travel allowances of deceased Members of the House were applied to funeral costs. When Delegate Narsworthy Hunter of Mississippi Territory died on March 11, 1802, a week after the Seventh Congress (1801-1803) convened, the practice of providing a funeral at public expense was first adopted by the House. On June 5, 1809, the Senate adopted a resolution "that a sum not exceeding one hundred and fifty dollars be applied out of the contingent fund for placing a neat slab or monument with a suitable inscription" over the tomb of Senator Francis Malbone of Rhode Island, who died on March 4. On June 15, 1809, the Senate authorized the secretary of the Senate to pay the expenses of Senator Malbone's funeral, upon allowance and certification "by the committee of arrangement." Paying for Member funerals with public funds has not been without controversy. In an 1820 remembrance of Delegate Hunter's funeral, Representative John Randolph of Virginia noted that since 1802, the practice of funding Member funerals had been "observed and abused." In 1848, the subject came up twice within a few weeks. Contrary to precedent, the tenor of those discussions was that it was unusual to pay the expenses of a Member's funeral except when it was held in Washington, DC, and that the cost of such ceremonies amounted to an average of $1,500. In 1895, the Senate considered S. 236, to provide for disposition of the remains of deceased Members of the House and Senate who died at the Capitol during sessions. Upon the death of a sitting Member in the District of Columbia, the measure would have provided for a committee of Members from the chamber in which the deceased served to prepare the body for transport to family or friends. The measure provided for a specially appointed sergeant at arms to accompany the body to its final destination. S. 236 would have authorized payment for the preparation and transport of a deceased Member and prohibited payment on any other related expenses. In introductory remarks, the bill's sponsor, Senator William Alfred Peffer of Kansas, noted that the costs associated with Member funerals were rising and that the services themselves were "not usually conducted reverently and with that outward deportment which ... ought to characterize the bearing of eminent persons who accompany the remains of a public man." S. 236 was reported by the Committee on Civil Service, but the Senate took no further action. Finally, some concern was expressed in 1906 after Representative Robert Adams Jr. of Pennsylvania committed suicide and left a letter for Speaker Joseph Cannon indicating that he would accept payment of his funeral expenses, but asked that the House not appoint a committee or hold memorial services. In contemporary practice, as described below, both chambers may pay for funeral services for Members who die in office. Further, if a deceased Member is buried in the so-called Congressional Cemetery in Washington, DC, the Sergeant at Arms of the House or Senate, as appropriate, is authorized to pay for a granite monument with suitable inscriptions for the grave site. Subject to any rules and regulations the Committee on House Administration may prescribe, the House Sergeant at Arms is authorized and directed to make necessary arrangements for any committee of Representatives and Senators appointed by their chambers to attend the funeral of a deceased Member of the House. An official congressional delegation does not attend if the family of the deceased Member arranges for private services. The Sergeant at Arms defrays the funeral expenses of the deceased Member and the expenses of duly appointed congressional participants, the widow or widower, and minor children incurred in attending the funeral rites and burial of the deceased Member. Published, publicly available House procedures for the remains of a sitting Member of the House to lie in state in the Capitol have not been identified. While the location of any funeral service is chosen by a deceased Senator's widow, widower, or heirs, the responsibility for official arrangements, including funeral or other services, and for any committee appointed to attend services, rests with the Senate Sergeant at Arms. Costs of arrangements made by the office of Sergeant at Arms for the transportation, preparation, and disposition of the remains are paid from the contingent fund of the Senate, subject to regulations of the Committee on Rules and Administration. If there is a request for the remains to lie in state in the Capitol Rotunda, the Senate Handbook indicates that a decision is made by the leadership of the Senate and the House, and the Architect of the Capitol. Since 1953, Congress has typically adopted a concurrent resolution authorizing the use of the Capitol Rotunda for services or for the remains of a government official or prominent citizen to lie in the Capitol. If Congress is not in session, the use of Capitol facilities has in the past been authorized by the Speaker of the House and the majority leader of the Senate. If the deceased does lie in state, the Senate Handbook notes that the Architect of the Capitol makes arrangements with the Department of Defense for an honor guard. If there is to be a ceremony at the Capitol, the Senate Sergeant at Arms makes the necessary arrangements. On the first business day after the death of a Member of the House, his or her office is renamed the Office of the ___ Congressional District of State/Territory. Pursuant to House Rule II, cl.2(i)(1), staff on payroll of the congressional office at the time of the Member's death remain employed by the House, and carry out their duties under the supervision of the Clerk of the House until a successor is elected. By law, any unpaid balance of salary or other sums due to a deceased Representative or Resident Commissioner are to be paid to their beneficiaries. In addition, it has been the typical practice of the House to provide a death gratuity, equal to the Member's annual salary, payable to the deceased Member's widow or widower, or children, either in the annual legislative branch appropriations act or a measure providing supplemental funds for the legislative branch. By statute, a death gratuity is considered a gift. Employees in the personal office of a deceased sitting Senator are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator's death, unless the Senator's term of office expires sooner. The Committee on Rules and Administration may extend this period in cases where it will take longer to close a deceased Senator's office. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. The Senate Financial Clerk provides information concerning allowances for the operation of the deceased Senator's office during the 60-day period. A deceased Senator is removed from the Senate payroll as of the date of death. The Employee Benefits Section of the Senate Disbursing Office ascertains any benefits due to a beneficiary previously identified by the Senator, or the widow or widower or other relevant survivors. The Senate Handbook indicates that "[i]n the next Appropriation Bill, an item will be inserted for a gratuity to be paid to the widow(er) or other next-of-kin, in the amount of one year's compensation." By statute, a death gratuity is considered a gift. At the conclusion of a Congress in which a sitting Member of the House, or former Member who served as Speaker, dies, the Government Printing Office (GPO), subject to the direction of the Joint Committee on Printing, compiles, prepares, and prints, with illustrations, a tribute book. The book contains the legislative proceedings of Congress, and the exercises at the general memorial services held in the House in tribute to the deceased Member or former Speaker, together with all relevant memorial addresses and eulogies published in the Congressional Record during the same session of Congress, and any other matter the Joint Committee considers relevant. Under the law, 50 copies, bound in full morocco, with gilt edges, and suitably lettered as may be requested, may be delivered to the family of the deceased. Further copies may be distributed to Members of Congress. The Senate may adopt a resolution ordering the printing of tributes to a deceased Senator be printed as a Senate document. Table 3 provides examples of Senate observances held to mark the passing of 28 Senators who died during their Senate service. Each Senator listed meets one or more of the following criteria: service as President Pro Tempore of the Senate at the time of their death; laid in state in the Rotunda of the United States Capitol; inclusion as one of the "Famous Nine" Senators designated by the Senate at various times, and who died in office; or 14 of the sitting Senators whose passing was observed with services on the Senate floor during the 20 th century. Table 3 also provides a selection of actions approved by Congress or adopted by the Senate to honor the deceased Senators. Observances held soon after a Senator's death were sometimes held pursuant to Senate resolution in the case of services in the Senate, and concurrent resolution or bicameral agreement in the case of lying in state in the Capitol Rotunda. In other instances, observances were held in the Senate or Capitol without formal legislative action. Regardless of the formal authorization processes, it is not possible to ascertain how those decisions were made; in each case, however, it is arguable that some of the Senators expressed advanced interest in various observances to mark their deaths, or their families or staff expressed interest or approval of Senate actions after their deaths. It appears likely that any future Senate observances could be based on the following: past Senate practices; the wishes a Senator expressed prior to his or her demise; family considerations; the intended locations of any observances; pending congressional business at the time of the Member's death; and events external to Congress. Where procedures for observances in the Capitol Rotunda appear to be well established, the Senate floor has not been used for observances related to the death of a sitting Senator in more than 50 years. Questions related to security, crowd control, and the preservation of furniture, artwork, and other fixtures may arise if proposed observances include exercises in the Senate chamber. In addition to any observances that might be held in Washington, DC, services may be held in the state a deceased Senator represented, and might include the following activities: public or private viewing or calling hours; lying in honor in the state capitol, land grant university, or significant federal facility created during the Senator's term of office; public or private funeral or memorial services; funeral procession; and interment or inurnment. As with Washington, DC-based observances, Senate participation will likely be determined in consultation with the family of the deceased. | Since 1973, 84 Members of Congress—69 Representatives and 15 Senators—have died in office. When a sitting Member dies, the House and Senate carry out a number of actions based on chamber rules, statutes, and long-standing practices. Some observances, such as adjourning briefly as a mark of respect to the deceased, appointing Member delegations to attend funerals of deceased colleagues, or paying the costs of a funeral from public funds, were initially observed in the earliest Congresses, or predate the national legislature established under the Constitution. It appears that contemporary congressional response to the death of a sitting Member is affected by a number of external factors including the following: circumstances of the Member's death, preferences of the deceased Member or the Member's family regarding funeral services, whether Congress is in session when the Member dies, pending congressional business at the time of the Member's death, and events external to Congress at the time. Congressional response to the death of a sitting Member could be characterized as a broad set of actions that are determined in detail at or around the time of the death, in response to a wide array of factors. Broadly, these actions fall into five categories, including announcement or acknowledgment on the House or Senate floor; consideration of resolutions of condolence; a funeral or other rites; issues related to the deceased Member's office, staff, and survivor benefits; and publication of memorials. This report, which will be updated as events warrant, is one of several CRS products focusing on various aspects of the operations and administration of Congress and the legislative branch. Others include CRS Report RL30064, Congressional Salaries and Allowances, by [author name scrubbed]; CRS Report R42072, Legislative Branch Agency Appointments: History, Processes, and Recent Proposals, by [author name scrubbed]; CRS Report RL34619, Use of the Capitol Rotunda, Capitol Grounds, and Emancipation Hall: Concurrent Resolutions, 101st to 112th Congress, by Matthew Eric Glassman and [author name scrubbed]; and CRS Report R42365, Representatives and Senators: Trends in Member Characteristics Since 1945, coordinated by [author name scrubbed]. |
Broadband—also referred to as high-speed Internet service—has been deployed in the United States since the late 1990s, primarily by private sector providers. These providers include telephone companies, cable companies, wireless providers, and other entities that provide commercial telecommunications services to residential, business, and institutional customers. While broadband deployment has been rapid and robust overall, there are parts of the nation where broadband is less deployed (primarily rural areas) and there remain regions and communities that are dissatisfied with the level of broadband service currently offered by private sector providers. These communities point to problems ranging from low download and upload speeds, obsolete technology, poor reliability, high prices, and/or a lack of choice in providers. With the Federal Communications Commission (FCC) moving to define the minimum speed of broadband at 25 Mbps, more communities may perceive a lack of adequate broadband service, especially those communities in rural areas. As a solution, some communities have turned to public entities as possible broadband providers. These communities anticipate that public entities may be able to provide municipal broadband at superior levels of speed, performance, and affordability than what is currently offered by private providers. Public entities that provide broadband service can be local governments or public utilities, for example, and may construct and manage broadband networks either solely or in partnership with private companies. There are a number of municipal broadband models that have been implemented across the nation. Since each community is different and each faces unique challenges, there is no one size that fits all. Municipal broadband (also sometimes referred to as "community broadband") is a somewhat amorphous term that can signify many different ways that a local government might participate—either directly or indirectly—in the provision of broadband service to the local community. Municipal broadband models can include public ownership, public-private partnership, and a cooperative model. With public ownership , the local government is the principal entity building, financing, and operating the broadband network. The network can be run by the local municipal electric utility (Chattanooga, TN, and Lafayette, LA, are examples), or it can be run by a city department such as the information technology (IT) department (as in Santa Monica, CA). There are also instances where a publicly owned and built network might be opened to private providers to provide retail Internet access or other services to the public. Public-private partnerships can come in many different forms, from public and private sector entities sharing capital and operations costs, to governments providing access to public rights-of-way or other city infrastructure (e.g., conduits, pole attachments) for privately funded and operated networks, to government-funded projects contracting with private providers to build, operate, and/or maintain the network. Partners can include private for-profit companies, local nonprofits, and even local residents. Finally, there is a cooperative model , which refers to electric and telephone cooperatives, many of which were originally created during rural electrification in the 1930s. These cooperatives, in rural areas, have begun in some instances to provide broadband service. Many of the cooperatives providing broadband service have received or are eligible for federal loan and grant support from the Rural Utilities Service (RUS) of the U.S. Department of Agriculture (USDA). There are also a few cooperatives that have been recently formed specifically for providing broadband service. These typically rely on support from local governments and include the East Central Vermont Community Fiber Network (ECFiber) and the WiredWest project in western Massachusetts. Aside from the models of how municipal broadband networks are governed, the nature of broadband service offered by municipal broadband networks can vary. Municipal networks may provide wholesale service ("middle-mile" infrastructure, where retail providers connect into the municipal network), "last mile" retail service directly to customers, or both; may provide service solely to anchor institutions or also include businesses and residences; may serve solely within municipal boundaries or may be extended to surrounding municipalities and counties; may provide data or data bundled with video and/or voice, or may include smart grid capacity; and while most recent and proposed municipal broadband projects utilize fiber infrastructure, other broadband technologies such as wireless or cable have also been deployed. Municipal broadband networks tend to be established in small and mid-sized communities, often located in rural areas. With some exceptions, municipal broadband networks are typically not located in major metropolitan areas, where many private providers already offer broadband service. The Institute for Local Self-Reliance (ILSR) lists 492 U.S. municipalities with broadband networks. The complete list is included in the appendix of the January 2015 White House report Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community Development and Highspeed Internet Access . This includes 89 communities with a publicly owned fiber to the home (FTTH) network reaching most or all of the community, 76 communities with a publicly owned cable network reaching most or all of the community, over 180 communities with some publicly owned fiber service available to parts of the community, over 110 communities with publicly owned dark fiber available, and over 40 communities in 13 states with a publicly owned network offering at least 1 gigabit services. The magazine Broadband Communities lists 143 public and public-private fiber to the premises (FTTP) network projects. This list identifies community fiber systems in 37 states and in American Samoa. The largest numbers of deployments are in Washington (13), Kentucky (11), Minnesota (10), Tennessee (8), Iowa (8), Illinois (7), and Florida (7). The virtues and drawbacks of municipal broadband have been vigorously debated by policymakers and other stakeholders. Advocates for municipal broadband include groups aligned with local communities, while opponents include private sector incumbent broadband providers and state governmental entities. The primary argument in favor of municipal broadband is rooted in the dissatisfaction of some communities with existing broadband service that is offered by private providers. Many local communities cite low speeds, high prices, a lack of competition, or even an absence of any broadband service in particularly sparsely populated areas, and argue that they should be able to provide this service to meet their citizens' needs and to support the community's economic development. Pro-municipal broadband arguments include Municipal broadband can enable small and mid-sized municipalities, often in rural areas, to offer higher download and upload speeds. This is especially important given that the FCC continues to identify a persistent "digital divide" between rural areas (where 53% of Americans do not have broadband speeds of at least 25 Mbps download/3 Mbps upload) and urban areas (where only 8% do not have access to those speeds). Overall, 16% of American households are in areas without a single provider of 25 Mbps/3 Mbps fixed services. Municipal networks can inject competition in markets where there may be a limited number of providers. According to the FCC, 45% of households have only a single provider of broadband offering 25 Mbps/3 Mbps. A lack of competition can lead to high prices, poor customer service, limited and restrictive service packages, and delayed or no investment in advanced technologies such as ultra-fast gigabit networks. A municipal broadband network, in some cases, can induce private providers to lower prices and increase speeds in order to compete. Municipal broadband can address unmet public interest needs. Private providers tend to favor middle- to upper-income households which will generate adequate revenue. Municipal broadband entities that are publicly owned may be more likely to offer broadband to low-income households at affordable prices. Municipal broadband follows the tradition of municipal utilities, which have been providing basic utilities such as water, natural gas, and electricity for many years. The main argument against municipal broadband (typically referred to by some opponents as "government-owned broadband") is that it is inappropriate for government-sponsored, -owned, or -supported networks to compete with private providers. Municipal networks have unfair inherent advantages over existing private networks, including preferential treatment with respect to rights of way and other local regulatory barriers, and financing by direct taxpayer subsidies or government bonds with below-market interest rates. This advantage can result in market-distorting effects that can unfairly skew the competitive playing field between private and public providers. Anti-municipal broadband arguments include Deploying broadband systems is inherently high-risk, because unlike basic utilities like water or electricity, there are typically competing providers and not all customers will necessarily sign up for service. Governments can be ill-equipped to plan, operate, and maintain efficient commercial broadband systems, and if they fail, the taxpayers will be liable for the cost of that failure. Taxpayer money should more appropriately be directed toward basic infrastructure needs—such as roads, bridges, and water systems—that are traditionally under the purview of government. In the United States, broadband is primarily provided by the private sector. Public money that is directed toward municipal broadband is money that is taken away from other, more critical infrastructure needs. According to the FCC, "private industry continues to invest billions of dollars to expand America's broadband networks." Because of the market-distorting effects of municipal broadband, continued private sector investment in broadband networks might be discouraged in some cases. The broadband market is subject to rapid technological change and intense competition. The bureaucracy of government is not well suited to making policy decisions in a dynamic and rapidly changing environment. This poses the risk of municipal broadband networks being reliant on soon-to-be obsolete technologies. While all agree that there is risk in municipal broadband, supporters and opponents argue over the significance of "successes" and "failures" among existing municipal broadband projects. With hundreds of municipal broadband projects to choose from, there will always be examples to fit whichever definition of "success" or "failure" that observers choose to apply. In general, municipal broadband supporters point to projects that have provided improved services, lower prices, increased competition, and an improved climate for private-sector investment in the local economy. Municipal broadband opponents cite examples where government-owned networks have not been profitable, have discouraged private competition, and have been subject to managerial inefficiency or technological obsolescence. In some cases, both proponents and opponents of municipal broadband have cited the same municipal broadband project to bolster their arguments. For example, in 2005, the community of Lafayette, LA, voted to build a municipal fiber network called LUS Fiber. LUS Fiber, financed by bond revenues, was built in 2008 and connected to its first customers in 2009. According to the White House report Community-Based Broadband Solutions: The Benefits of Competition and Choice for Community Development and Highspeed Internet Acces s , LUS Fiber's network has increased customer savings and strengthened local anchor institutions: As competing firms adjusted their plans to account for LUS Fiber's market entry, residents who weren't customers of the network started to see lower prices. Cox Communications, a major regional provider which had raised rates six times in four years, kept its rates stable from 2004 to 2007 to account for LUS's possible market entry. Still, LUS's prices have been consistently lower than those offered by Cox. Terry Huval, the director of LUS, estimates that the community saved $4 million from these deferred rate increases. Using estimates of Cox's average competing discounts and LUS Fiber's lower rates, LUS projects the fiber system will create total savings of between $90 and $100 million over its first 10 years. The fiber network has brought in companies eager to obtain fast service at lower prices. Pixel Magic brought 100 to 200 jobs when it built an office in Lafayette to accomplish work on the movie "Secretariat." The high speed capability of the broadband network was a big factor in their eventual decision to maintain their office in Louisiana permanently. The tech startup firm Skyscraper Holding moved from Los Angeles to Lafayette to obtain 100 Mb/s speeds at a fraction of the cost the company was charged on the west coast. Municipal broadband opponents have a different take on LUS Fiber, stating the network is 30% short of its revenue projection as set out in its business plan, more than $160 million in debt, and struggling to compete with cable, telephone, wireless, and satellite service providers in terms of price, performance, and service options. The think tank R Street noted that LUS Fiber received a warning from city auditors about low revenues and stated: Lafayette's auditors voiced similar concerns in their reports the last two years. In 2012, they punctuated it with a calculation that the $140-million system was costing the city $45,000 a day. Now, after six years of operation, prospects aren't much better. The city's financial reports, provided by a source in Lafayette, show that for the fiscal year ended Oct. 31, 2013, LUS Fiber reported $23 million in operating revenues, compared to $36.7 million that was forecast in its feasibility study. The system incurred a $2.5 million operating loss for the year. According to the original plan, this was to be the point where the operation swung to a profit of $902,000. The most staggering number, however, is LUS Fiber's deficit, which stood at $47 million at the end of October, up from $37.1 million the year before. The FCC, an independent federal agency charged with regulating interstate and international communications, has taken an active role in promoting the deployment of broadband services and broadband infrastructure. The FCC has adopted numerous proceedings to facilitate access to and the adoption of advanced services including the following: the transition of the Universal Service Fund from a mechanism that supports voice service to one that supports the deployment and adoption of both fixed and mobile broadband; the modernization of the Schools and Libraries Program to incorporate high speed broadband and Wi-Fi connections; and the expansion of the Lifeline Program to provide support for broadband as well as voice services, to name a few. Then-FCC Chairman Wheeler also stated on numerous occasions his support for the development of community-based broadband service options and expressed his opinion that the FCC has the authority to preempt state laws that ban competition from community broadband. On July 24, 2014, two local municipally owned broadband providers, the City of Wilson (Wilson), a North Carolina municipal corporation, and the Electric Power Board of Chattanooga (EPB), an independent board of the City of Chattanooga, TN, separately petitioned the FCC to preempt certain provisions of their respective states' laws which they claimed restricted the further deployment of their networks. Both Wilson and EPB operate electric utilities that also offer gigabit speed broadband networks that provide data, video, and voice services. Wilson provides electric service in six counties in eastern North Carolina and broadband service solely in Wilson County. Wilson claims that despite "... numerous requests for these services ... in the other five counties.... " and a willingness to expand broadband services to these counties, it cannot, due to what it stated are overly burdensome provisions in state law that in effect have "... the purpose and effect of prohibiting it from doing so." As in the case of Wilson, EPB states that it regularly receives requests from citizens and businesses, located outside of EPB's electric service territory, to provide advanced telecommunications services (e.g., broadband Internet access and services). EPB states that it is willing to provide these services and expand its service footprint, but is restricted by Tennessee state law that permits authorized municipal electric systems to provide Internet service (as well as cable service and video), but only within the boundaries of their (electric) service areas. Both petitioners allege that existing provisions in their respective states' laws restricted their ability to expand their broadband services to surrounding areas where customers have expressed interest in these services and both request that the FCC use its authority pursuant to Section 706 of the Telecommunications Act of 1996 to preempt these laws. The FCC's Wireline Competition Bureau released a public notice on July 28, 2014, establishing a pleading cycle for the petitions setting comment and reply dates of August 29, 2014, and September 29, 2014, respectively. After consideration of record the FCC, in a February 26, 2015, action, granted the petitions to preempt state laws in North Carolina and Tennessee that restricted the expansion of community broadband services. In a Memorandum Opinion and Order (Order), which became effective upon its release on March 12, 2015, the FCC stated that selected provisions of the laws in North Carolina and Tennessee are barriers to broadband deployment, investment, and competition, and conflict with the FCC's mandate to promote these goals. The FCC relied upon its authority under Section 706 of the 1996 Telecommunications Act (Section 706), which directs the FCC to "... encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans ... by utilizing ... measures that promote competition in the local telecommunications market, or other regulating methods that remove barriers to infrastructure investment." According to the Order the FCC concludes that "... preemption meets the standard for action under Section 706 because it will remove barriers to overall broadband infrastructure investment and promote overall competition in the telecommunications market in Tennessee and North Carolina." Furthermore, the Order stated that "... preemption of these restrictions will expand broadband investment and deployment, increase competition, and serve the public interest, as Section 706 intended." The FCC preempted the geographic restrictions of both the Tennessee and North Carolina laws stating that they are barriers to broadband infrastructure investment and competition and preempted additional provisions of the North Carolina law containing other limitations, stating that the cumulative effect of those provisions collectively amounts to a barrier to broadband investment and competition. These barriers are in clear conflict, the Order states, with Section 706, which directs the FCC to take action to remove such barriers. More specifically the Order concludes that in the case of the EPB petition "the territorial restriction in Tennessee Code Section 601 is a barrier to broadband deployment and infrastructure investment and limits competition." With regard to the Wilson petition, the Order concludes that the geographic restrictions and other, but not all of the remaining provisions of North Carolina law cited in the petition, when considered holistically, represent a barrier to broadband infrastructure investment or thwart competition. Therefore the Wilson petition is granted in part to the extent discussed in the Order and otherwise denied. The FCC stated that while it believes it cannot preempt state laws that outright ban municipal broadband networks, it can intervene (under the authority contained in Section 706) if a state allows municipal broadband networks, but imposes restrictions that create barriers to a timely and reasonable deployment of advanced telecommunications services to all Americans. That is, the FCC cannot require a state to allow municipal broadband networks, but it can preempt laws that impose restrictions on an existing network if they are creating barriers to deployment of such networks. While the Order states that this ruling only applies to provisions of the laws of the two states (North Carolina and Tennessee) of the two petitioners, the FCC noted that "... the Commission [FCC] will not hesitate to preempt similar statutory provisions in factual situations where they function as barriers to broadband investment and competition." Whether the FCC does, or does not, have the legal authority under Section 706 to preempt state laws that restrict municipal broadband deployment remains controversial. While the majority of the FCC commissioners (Chairman Wheeler and Commissioners Clyburn and Rosenworcel) voted in favor of this decision, it was not unanimous. Both Commissioner Pai and Commissioner O'Rielly dissented, stating that the FCC lacked the authority to grant the petitions. Both the state of Tennessee and the state of North Carolina filed lawsuits (petitions for review) challenging the FCC's authority to preempt these restrictions. The state of Tennessee filed its petition on March 20, 2015, with the U.S. Court of Appeals 6 th Circuit, Cincinnati. The state of North Carolina filed its petition on May 11, 2015, with the U.S. Court of Appeals 4 th Circuit, Richmond. These petitions were consolidated on August 3, 2015, in the U.S. Court of Appeals 6 th Circuit, Cincinnati. The U.S. Court of Appeals, in an August 10, 2016, decision reversed the FCC's Order. According to the court, "The FCC order essentially serves to re-allocate decision-making power between the states and their municipalities. This preemption by the FCC of the allocation of power between a state and its subdivisions requires at least a clear statement in the authorizing federal legislation. The FCC relies upon sec. 706 of the Telecommunications Act of 1996 for the authority to preempt in this case, but that statute falls far short of such a clear statement. The preemption order must accordingly be reversed." The FCC chose not to appeal the ruling. In January 2015, President Obama announced steps "to help more Americans, in more communities around the country, get access to fast and affordable broadband." In addition to supporting the FCC Order (discussed above), the Administration plan contained initiatives directly relevant to municipal broadband, including the following. Establishment of the Broadband Opportunity Council . On March 23, 2015, the President signed a Presidential Memorandum, "Expanding Broadband Deployment and Adoption by Addressing Regulatory Barriers and Encouraging Investment and Training." The memorandum established an interagency Broadband Opportunity Council chaired by the Department of Commerce (DOC) and the USDA, and consisting of 25 other member agencies. The Council's objectives were to engage with industry and other stakeholders to understand ways the government can better support the needs of communities seeking to expand broadband access and adoption; identify regulatory barriers unduly impeding broadband deployment, adoption, or competition; survey and report back on existing programs that currently support or could be modified to support broadband competition, deployment, or adoption; and take all necessary actions to remove these barriers and realign existing programs to increase broadband competition, deployment, and adoption. On September 21, 2015, the Administration released the Broadband Opportunity Council Report and Recommendations . In its report, the Council issued nine recommendations encompassing 36 immediate actions that federal agencies committed to undertake. In January 2017, NTIA released the Broadband Opportunity Council Agencies' Progress Report , which provided a snapshot of agency progress towards meeting the recommendations and action items. BroadbandUSA. Based on the expertise acquired from administering the American Recovery and Reinvestment Act of 2009 (ARRA, P.L. 111-5 ) broadband stimulus program (specifically the Broadband Technology Opportunities Program), the National Telecommunications and Information Administration (NTIA) established an information and best-practices resource available to communities seeking to develop broadband public-private partnerships. BroadbandUSA offers online and in-person technical assistance to communities; hosts a series of regional workshops around the country; and publishes guides and tools intended to help communities address problems in broadband infrastructure planning, financing, construction, and operations across many types of business models. BroadbandUSA is also developing a Community Connectivity Initiative, an online tool that provides a planning and assessment framework that can be used by local communities seeking to accelerate broadband access. The federal government has also affected municipal broadband through broadband funding programs. While municipal broadband projects are locally directed and funded, the federal government has supported these efforts by helping to finance some of the middle-mile fiber networks that municipal networks can interconnect with. A major funding vehicle for middle-mile fiber networks was the $7 billion broadband stimulus program established by the ARRA. ARRA Awards were made in FY2009 and FY2010, and projects are completed or in the final stages of completion. Going forward, the ARRA broadband programs have concluded and no more funding will be awarded. Currently, there are three ongoing programs at the RUS that provide funding for broadband infrastructure (although at funding levels significantly less than what was provided in the ARRA broadband programs). These are Farm Bill Broadband Loans and Loan Guarantees ($20.6 million loan level in FY2016), Telecommunications Infrastructure Loans and Loan Guarantees ($690 million loan level yearly), and Community Connect Grants ($10.4 million in FY2016). While local governmental entities are eligible to apply for these programs, funding has tended to go to private providers. The other major existing federal vehicle for funding broadband infrastructure is the Connect America Fund (CAF). While RUS grants and loans are used as up-front capital to invest in broadband infrastructure, the CAF provides ongoing subsidies to keep the operation of broadband networks in high-cost areas economically viable for providers. Four bills ( S. 240 , S. 597 , H.R. 1106 , and H.R. 6013 ) were introduced, and one draft measure (H.R.__) was released, in the 114 th Congress that addressed the municipal broadband debate. Provisions in these measures range from those that restrict states and localities from enacting laws that prohibit public (municipal) broadband ( S. 240 , H.R. 6013 ) to those that prevent the FCC from preempting current or future state and local laws that prohibit municipal broadband ( S. 597 , H.R. 1106 ) and in the case of the discussion draft (H.R. __), preempt the FCC and/or any state regulatory authority from using Section 706 as a source of authority to preempt state laws (e.g., those that prohibit municipally owned broadband networks). None of these measures were enacted. The Community Broadband Act of 2015 ( S. 240 ), introduced by Senator Booker on January 22, 2015, seeks to remove state barriers for constructing municipal broadband networks and encourages public-private partnerships. S. 240 provides that no state or local statute may prohibit, or have the effect of prohibiting or substantially prohibiting, any public entities from providing either telecommunications services (e.g., telephone services) or advanced telecommunications capability or services (e.g., broadband Internet access services). With respect to the private provider that a municipality regulates, S. 240 requires a public provider not to discriminate in favor of its own public network with respect to how it applies municipal ordinances, rules, policies, and fees related to requirements such as rights of way and permitting. S. 240 encourages public-private partnerships and requires extensive public notice of proposed municipal broadband projects, including an opportunity for private providers to bid on that proposed project. The anti-discrimination and public notice requirements in the bill would not apply where a public provider does not provide telecommunications or broadband services to the public "or to such classes of users as to make the capability or services effectively available to the public," or during an emergency. S. 240 prohibits the use of federal funds to assist a public provider in reviving or renewing a project that has failed due to bankruptcy or termination. The bill was referred to the Senate Committee on Commerce, Science, and Transportation. The Community Broadband Act of 2016 ( H.R. 6013 ), introduced on September 13, 2016, by Representative Eshoo, is similar to S. 240 in that it prohibits states from enacting laws or regulations that prohibit public providers (e.g., states, localities or municipalities) from providing "advanced telecommunications capability" or services utilizing that capability and contains public provider antidiscrimination safeguards. The State's Rights Municipal Broadband Act of 2015 ( S. 597 and H.R. 1106 ), introduced on February 26, 2015, by Senator Tillis and Representative Blackburn, respectively, states that the FCC cannot preempt states with municipal broadband laws already in place, or any other states that subsequently adopt such municipal broadband laws. The bill also includes a Sense of Congress stating that the FCC does not have the legal authority under Section 706 to prohibit states from implementing any law of such state with respect to the provision of broadband Internet access service (e.g., municipal broadband restrictions). The bills were referred to the Senate Committee on Commerce, Science, and Transportation and the House Subcommittee on Communications and Technology, respectively. Draft legislation released on January 16, 2015, by Republican leaders of the House Energy and Commerce Committee and the Senate Committee on Commerce, Science, and Transportation includes a provision that prohibits the FCC, or any state commission with regulatory authority over telecommunications services, from relying on Section 706 as a grant of authority. If enacted this would be in direct conflict with the FCC's final Order, which rests on its Section 706 authority to preempt selected provisions of North Carolina and Tennessee law that restrict municipal broadband deployment. Since the private sector began deploying broadband infrastructure in the late 1990s, Congress and the FCC have sought to enact policies and programs that address the directive of Section 706 to "encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans." With respect to municipal broadband, the issue for Congress is whether locally owned and/or supported networks should be encouraged or restricted. The debate is complicated by the diversity of municipal broadband projects. Each community and project is unique and subject to different factors that can lead to its ultimate success or failure. Abundant examples of successes and failures are available to support arguments made by both supporters and opponents alike. In addressing municipal broadband, Congress and the FCC have sought to balance two competing public policy interests. On the one hand, with hundreds of municipal broadband projects underway in communities across the country, with other communities exploring various kinds of municipal networks that might offer higher speeds at affordable prices, and with 20 state laws that ban or restrict municipal broadband projects, many have argued that state restrictions be overridden either by congressional legislation or by FCC rule. Ultimately, as discussed above, on March 12, 2015, the FCC released an order lifting restrictions on municipal broadband networks in Wilson, NC, and Chattanooga, TN. On the other hand, counterbalancing arguments point to the primacy of private sector providers in deploying the nation's broadband. Municipal broadband opponents argue that public entities are ill-equipped to efficiently develop, operate, and maintain commercial broadband networks, and that municipally owned and supported broadband networks constitute unfair competition to private sector providers, and may ultimately impede private investment in broadband infrastructure. One way that Congress has addressed the debate is through its oversight and authorization of the FCC. Committees with jurisdiction over telecommunications policy—such as the House Energy and Commerce Committee and the Senate Commerce, Science and Transportation Committee—are considering measures reflecting both sides of the issue: from preventing the FCC from overruling state municipal broadband restrictions on the one hand, to overriding those state-imposed restrictions on the other. Congress can also have an impact through the appropriations process. For example, in the 113 th Congress, H.R. 5016 (Financial Services and General Government Appropriations Act, 2015), as passed by the House on July 16, 2014, would have provided that none of the funds made available in the FY2015 FCC appropriation could be used to prevent 20 states from implementing their own laws with respect to the provision of broadband by the state or a municipality or other political subdivision of the state. Another way Congress could support municipal broadband is through funding broadband infrastructure, although funding initiatives are often balanced against fiscal considerations and against concerns over whether federally funded networks unfairly compete against private sector broadband deployment. Ultimately, whether municipal broadband should be encouraged or restricted is one of many policies that Congress continues to consider for promoting broadband deployment. These include loans and grants for broadband infrastructure deployment; universal service reform; tax incentives to encourage private sector deployment; regulatory and deregulatory measures; and spectrum policy to spur roll-out of wireless broadband services. Some of these policies may be considered in the context of efforts to rewrite the Communications Act of 1934. To the extent that Congress may consider the various options for promoting broadband, a central issue is how to strike a balance between providing government support for broadband in areas where the private sector may not be providing acceptable levels of broadband service, while at the same time minimizing any deleterious effects that government intervention in the marketplace may have on competition and private sector investment. | Since the late 1990s, broadband Internet service has been deployed in the United States, primarily by private sector providers. While broadband deployment has been rapid and robust overall, there remain communities that are dissatisfied with their broadband service. Some of these communities have turned to public entities as possible broadband providers, with the expectation that municipal broadband networks (also referred to as "community broadband") can deliver superior levels of speed, performance, and/or affordability than what is currently offered by private providers. Public entities that provide broadband service can be local governments or public utilities, for example, and may construct and manage broadband networks either solely or in partnership with private companies. There are a number of municipal broadband models that have been implemented across the nation. Since each community is different and each faces unique challenges, there is no one size that fits all. Municipal broadband is controversial, because it involves governmental entities entering a commercial telecommunications marketplace that had previously been the exclusive domain of private sector providers. Supporters of municipal broadband argue that in view of substandard broadband service, communities and local governments should be able to provide this service to meet their citizens' needs and to support the community's economic development. Municipal broadband opponents argue that public entities are ill-equipped to efficiently develop, operate, and maintain commercial broadband networks, and that municipally owned and supported broadband networks constitute unfair competition to private sector providers, which may ultimately impede private investment in broadband infrastructure. With under 500 municipalities across the nation embarking on some form of municipal broadband, 20 states have passed laws placing restrictions (or in some cases, bans) on local broadband networks. The issue for Congress is whether municipal broadband should be promoted or discouraged, and more specifically, whether those state restrictions on municipal broadband should be overridden or affirmed. On March 12, 2015, the Federal Communications Commission (FCC) released a Memorandum Opinion and Order granting the petitions filed by two municipal broadband providers in Wilson, NC, and Chattanooga, TN, to preempt state laws in their respective states that restricted the expansion of community broadband services. The Order and the decision by the FCC to rely on Section 706 of the 1996 Telecommunications Act for its authority remain controversial. Both states filed petitions for review consolidated in the U.S. Court of Appeals, 6th Circuit, Cincinnati, challenging the FCC's authority to preempt these restrictions. The court, in an August 10, 2016, decision, reversed the FCC's Order. Four bills (S. 240, S. 597, H.R. 1106, and H.R. 6013) were introduced and one draft measure was released in the 114th Congress addressing the municipal broadband debate, but none of these measures were enacted. The role of municipal broadband and the appropriate role of the states and the FCC to address the relationship between the public and private sector is just one facet in the overall debate regarding broadband deployment. Whether municipal broadband should be encouraged or restricted is one of the many policies that Congress continues to consider. |
Both the House and Senate have internal rules encouraging the separation of money and policy decisions. These rules stem from the principle that the process through which the activities of government are chosen should be distinct from the process through which those activities are funded. For activities funded through the annual appropriations process (referred to as discretionary spending), Congress differentiates between authorizations and the appropriations. Authorizations comprise substantive law establishing government entities, activities, or programs, while appropriations provide budget authority to fund government agencies or programs by allowing them to obligate funds. Under the rules of the House and Senate, legislative provisions and appropriations for purposes not authorized by law typically may not be included in appropriations measures. These rules were formally established in both chambers during the mid-1800s to address concerns with delays in enacting appropriations due to the inclusion of extraneous legislative matters that tended to provoke controversy. As currently provided in House Rule XXI, the House bars legislative provisions from being reported in general appropriations bills; amendments to general appropriations bills containing language that would add to or alter existing law are also prohibited. Clause 5 of House Rule XXII also prohibits the inclusion of legislative language in conference reports that accompany appropriations acts. Senate Rule XVI additionally restricts legislative language not contained within existing law from being added via amendment to a general appropriations bill, unless it is determined to be germane to a legislative provision previously added by the House. These rules are enforced on the House and Senate floor through points of order, but if legislative provisions are enacted as a part of an appropriations measure, they have the full force of the law. Although House and Senate rules restrict legislating on appropriations, policy matters may be included through limitation provisions. Limitations within appropriations measures are provisions that negatively restrict the amount, purpose, or availability of funds without changing existing law. The effect of these provisions is to limit the actions for which funds may be used through the capping or outright denial of funds for specific purposes. Proper limitations are distinct from legislative provisions because they do not have the effect of either making new law or changing existing law. As a result, limitation provisions, which define the purposes for which budget authority may not be used without also affecting a recipient's discretion under other laws, have frequently been included within the text of appropriations bills reported by the committee or added by amendments on the floor. The allowability of limitations under the rules of the House and Senate is based upon the principle that although Congress may authorize an activity, it is under no obligation to fund that activity. Congress can therefore choose to specify those purposes for which funds are not to be used, even if that purpose has been previously authorized. The distinction between legislative provisions and funding limitations has been developed and refined over time based on various rulings that establish what types of provisions are allowable. Early debates over the permissibility of limitation provisions centered on the question of "[whether] the proposed limitation might be construed by the executive or administrative officer as a modification of statute [or] a change in existing law." So, although a House floor amendment to the FY1910 fortifications appropriations bill stipulating "that all material purchased under the foregoing provision of this act shall be of American manufacture" was ruled by the chair to be out of order, that same amendment, rephrased by unanimous consent as, " Provided , That no money appropriated by this act shall be expended except for goods of American manufacture," was allowed because it no longer contained an affirmative direction to the recipient of the funds. In more recent years, as the precedents regarding limitations have become more nuanced, parliamentary determinations of legislative language have stemmed from a number of principles related to the imposition of new duties upon the recipient of funds, changes in agency discretion, or whether the provision mandates action contrary to law. The goal of this report is to clarify aspects of the legislative process concerning the inclusion of limitations in appropriations measures under the rules of the House and Senate. This report begins by explaining the contrasting procedural contexts that influence the consideration of limitation provisions in appropriations measures on the House and Senate floor. Next, it defines the two forms of limitations that have been allowed under House and Senate precedents, with examples of previous purposes that have been allowed. This report then proceeds to identify the variety of substantive challenges that exist in structuring a limitation provision so that it does not constitute legislative language and thereby violate House and Senate rules. Finally, this report concludes by discussing the effect of points of order during floor consideration and the burden of proof that exists for proponents of limitation provisions to successfully overcome procedural objections. Although many of the examples of both proper and improper limitations used in this report are from older precedents, they nevertheless remain applicable to House and Senate rules in this area. Precedents regarding limitations are also considerably more numerous in the House than the Senate. One reason for this is that, unlike the House, the Senate has no specific rules governing the consideration of limitations beyond those that prohibit legislative language in appropriations acts. In addition, the Senate occasionally allows legislative language to be inserted in an appropriations act if it is determined by a majority of Senators to be germane to legislative language already included by the House in the bill. The Senate has previously relied, in at least once instance, on House precedents for defining an acceptable limitation, which resulted in the chair upholding a point of order against a limitation as being legislative in nature. Additionally, the parliamentarian's discussion of what constitutes a proper limitation contained in Riddick ' s Senate Procedure occasionally uses House precedents to clarify the types of provisions that have been allowed as limitations. This report will therefore rely primarily on precedents from the House to help define and illustrate proper limitation provisions. Areas where the House and Senate diverge in their understanding of, or approach to, what constitutes a limitation will be noted as they occur. This report should be read with several caveats in mind. First, it does not take account of every ruling that has been made and does not address every contingency that might arise. Second, unanimous consent agreements in the Senate and special rules in the House can be used to set aside each chamber's respective rules and customary procedures relating to both limitations and legislation on appropriations measures. Third, the House and Senate parliamentarians are the advisers to the presiding officers on what constitutes a proper limitation within the appropriations context. Although this report may provide useful background information, it should not be considered a substitute for consultation with the parliamentarian and his or her associates on specific procedural problems and opportunities. The rules of the House and Senate with respect to limitations are enforced during floor consideration of general appropriations measures. Although these rules generally encourage the separation between policy and money decisions in the area of appropriations, the procedural approach of each chamber differs in three significant ways with respect to the consideration of limitations and the exclusion of legislative provisions. The first area of contrast is the extent to which legislative provisions are allowed as committee or floor amendments. The second area of contrast is whether chamber rules designate a separate set of procedures for the consideration of limitation amendments. The third area of contrast relates to the allowability of legislative provisions within conference reports. In the House, the annual appropriations bills are originated by the Committee on Appropriations. House Rule XIII, clause 5 provides for consideration of appropriations measures, allowing an appropriations bill to be brought directly to the floor once it has been reported by the Appropriations Committee. For at least the last two decades, however, most appropriations measures have been brought to the floor pursuant to a special rule that waives all points of order (with some exceptions). These measures are then considered in the Committee of the Whole under the five-minute rule for amendment, unless otherwise specified by a special rule or unanimous consent. Clause 2 of House Rule XXI provides some restrictions on the content of appropriations measures and amendments to appropriations measures that are enforced during floor consideration. With respect to legislative provisions, clause 2(b) of this rule bars the reporting of legislative provisions (except for the purpose of rescission or retrenchment) in a general appropriations bill, making such provisions subject to a point of order during floor consideration. Under clause 2(c), amendments to general appropriations bills that contain legislative language are also not in order. Effectively, this means that legislative language contained in a general appropriations bill that is considered on the floor can be stricken by a point of order without causing the bill to be recommitted. In addition, an amendment containing legislative language, even if it is structured as a limitation, is not allowed during floor consideration. A point of order may be raised against such an amendment and, if sustained, the amendment would fall. These points of order, however, are not self-enforcing and must be made by a Member during floor consideration to trigger a ruling from the chair. Clauses 2(c) and 2(d) of Rule XXI also stipulate a separate set of procedures for the consideration of limitation amendments. During consideration in the Committee of the Whole, the bill is read by paragraph and amendments may be offered to the paragraph currently under consideration, unless specified otherwise by a special rule or by unanimous consent. Limitations that are not contained in existing law, however, are not in order while the bill is being read for amendment. Once all sections of the bill have been read, an amendment containing a new limitation can be offered, but the majority leader (or a designee) may preempt this by offering a motion to rise and report, which has precedence over motions to amend the bill. If successful, the motion to rise and report ends further consideration of amendments because it causes the Committee of the Whole to cease consideration of the bill and report its work to the House. The effect of this rule is that the offering and consideration of limitation amendments are restricted if the motion to rise and report is successful. Special rules governing the consideration of appropriations measures also have a potential effect on limitation amendments. Such special rules can waive points of order against provisions contained in the bill or any potential floor amendments based upon clause 2(c) and 2(d) of Rule XXI. Open rules, which generally allow amendments to be offered during floor consideration in the Committee of the Whole, effectively permit any limitation conforming to the rules of the House to be offered once the bill has been read for amendment. Limitation amendments can also be included in the amendments made in order by a structured rule, which would allow only specified amendments to be offered. Finally, "self-executing" provisions within special rules can provide for the adoption of a limitation amendment automatically upon the passage of a special rule; provisions integrated in this way are not subject to points of order. With respect to conference reports, clause 5(b) of Rule XXII additionally prohibits House conferees from agreeing to Senate amendments that constitute legislation on appropriations in violation of clause 2 of Rule XXI. Unless special rules waive points of order stemming from clause 5(b) of Rule XXII, conference reports containing legislative language would be subject to points of order on the House floor. Senate Rule XVI contains general provisions dealing with legislation on appropriations but gives no specific direction regarding limitations, other than that they cannot be subject to a contingency. Although points of order generally lie against legislative language contained within general appropriations measures, these types of provisions are allowed as amendments when they are determined to be germane to legislative language passed by the House and already contained within the appropriations bill. If a germaneness defense is raised before the chair rules on the original point of order, the presiding officer instead makes an initial determination as to whether there exists "any House language which is arguabl[y] legislative to which the amendment at issue conceivably could be germane." If the bill is determined to contain such language, the question is put to the Senate for an immediate vote. If a majority of the Senators vote affirmatively that the amendment is germane, the point of order falls and the amendment containing legislation is eligible for floor consideration. Because a successful germaneness defense based upon House legislative language is not difficult to accomplish, the effect of this rule can be that the distinction between a proper limitation and a legislative provision is not one that the Senate needs to make under some circumstances. The Senate approach to limitations during floor consideration of appropriations measures also contrasts with that of the House in that there are no procedures specific to the offering or consideration of limitation amendments on the floor. Like other amendments, limitation amendments may be offered at any point, and to any section of the bill, during the consideration of appropriations measures when amendments are in order, unless a specific procedural arrangement, such as a unanimous consent agreement, precludes it. In the Senate, there is no rule barring legislative language in conference reports, and the inclusion of such language is not a valid basis for a point of order. There are two forms in which limitations are regularly proposed. The first form places a total ban on the use of funds for a certain purpose by stipulating that none of the funds in the account or bill can be used for such purpose. This type of limitation has been allowed under House and Senate rules, even when the funds have been authorized by law for that particular activity. The second form, sometimes referred to as a "not to exceed" limitation, provides that the use of funds is not to exceed a specific amount or percentage of total funds. According to House Practice , "A negative restriction on the use of funds above a certain amount in an appropriation bill is in order as a limitation. As long as a limitation on the use of funds restricts the expenditure of federal funds carried in the bill without changing existing law, the limitation is in order." Although the rules of the House and Senate encourage money and policy decisions to remain separate, proper limitations in appropriations measures can affect policy by stipulating for what purposes federal funds cannot be used or by placing a maximum limit on spending in certain areas. Limitations have been previously allowed that prohibit funding for specific activities, a class of recipients, and earmarks. "Not to exceed" limitations that establish funding ceilings for certain activities or total funding amounts have also previously been determined by the presiding officer to be in order, as have limitations that restrict the availability of funds for transfer. Limitations that prohibit federal funding for certain activities and restrict the types of recipients that can be eligible to receive federal government funds have previously been allowed under House and Senate rules. Although an appropriations provision that directs an agency to create or change a rule is legislative, it has been previously ruled in order to prohibit funding for the promulgation of a specific rule, as long as such rule is precisely described in the text of the limitation. The example below was a House floor amendment to the FY1944 Independent Offices Appropriations Act. No part of this appropriation shall be used to promulgate or enforce any rule or regulation known as the proposed rule or regulation F-9 and F-10, and providing in substance (1) the engineers' reports shall be mandatory, (2) require the disclosure of the cost of purchase prices, and (3) an abridgement of the right to appoint an agent, all with reference to the sale of oil and gas royalties and lease under the jurisdiction of the Oil and Gas Division of the Securities and Exchange Commission. Similarly, a provision may be ruled in order if it is to prevent funds from being spent to carry out a regulation. For example, the below House amendment to the FY1980 Treasury, Postal Service, and General Government Appropriations Act prohibited funds from being spent to carry out an IRS tax proceeding. None of the funds appropriated by this title may be used to carry out the proposed revenue procedure 4830-01-M of the Internal Revenue Service entitled "Proposed Revenue Procedure on Private Tax-Exempt Schools" (44 F.R. 9451 through 9455, February 13, 1979, F.R. Document 79-4801), or the proposed revenue procedure 4830-01 of the Internal Revenue Service entitled "Proposed Revenue Procedure on Private Tax-Exempt Schools" (43 F.R. 37296 through 37298, August 22, 1978, F.R. Document 78-23515); or parts thereof… Besides prohibiting funds for agency rulemaking, limitations have also been used to prevent funds from being spent on other types of specified activities. The example below was a House amendment to the FY1974 Department of Housing and Urban Development Space, Science, and Veterans Appropriations Act, which prevented funding for any stage of development or construction of a particular piece of technology. Provided , That none of the funds appropriated in this Act shall be used to further in any way the research, development or construction of any reusable space transportation system or space shuttle or facilities therefore. Another example of a limitation that prohibited funding for a certain activity was the below House amendment to the FY1981 Treasury and Postal Service Appropriations Act, which sought to prevent federal funds from being spent on any health plan for federal employees that included abortion coverage after a certain deadline. No funds appropriated by this Act shall be available to pay for an abortion or the administrative expenses in connection with any health plan under the Federal Employees Health Benefit Program which provides any benefits or coverage for abortions under such negotiated plans after the last day of the contracts currently in force. An 1896 House precedent on limitations stipulates, "While it is not in order to legislate as to qualifications of the recipients of an appropriation, the House may specify that no part of the appropriation shall go to recipients lacking certain qualifications." Although it has not been in order for these types of limitations to create new law or contradict current law, the ability to prohibit funds for certain types of individuals or recipients has been previously used in a variety of ways. The example below was a Senate amendment to the FY1955 State, Judiciary, and Commerce Appropriations Act. No part of any appropriation contained in this act shall be used to pay the salary or wages of any officer or employee of the Bureau of Inspections, Consular and Security Affairs of the Department of State who, for the purpose of the act of August 2, 1939, as amended (5 U.S.C. 1181), shall not be included within the construction of the term "officer" or "employee." The ability to prohibit funds for certain recipients has also been interpreted to allow limitations that prohibit funds for recipients that have certain characteristics. For example, the below House amendment to the FY1973 Labor, and Health, Education, and Welfare Appropriations Act proscribed funds for government suppliers that exceed certain compensation limitations for their own employees. No part of the funds appropriated by this Act shall be used to purchase goods or services from a supplier which compensates any officer or employee at a rate in excess of level II of the Executive Schedule under section 5313 of title 5, United States Code. Finally, limitations on certain recipients have also been used to restrict funds for the payment of salaries of government and nongovernment employees that undertake certain actions. The below example was a House amendment to the FY1943 Legislative Branch Appropriations Act. Provided further, That no part of this appropriation shall be used to pay the salary of any person who shall perform any service or authorize any expenditure in connection with the printing and binding of part 2 of the annual report of the Secretary of Agriculture (known as the Year Book of Agriculture) for 1942. Limitations have been used in attempts to cancel congressionally directed spending items (generally referred to as earmarks) within an appropriations act or the accompanying report language. For example, during the 109 th Congress, the Appropriations Committee report for the FY2007 Agriculture appropriations bill contained a provision that stipulated, "The Committee provides $229,000 for dairy education in Iowa." In response to this, an amendment was offered on the floor of the House that proposed to insert at the end of the bill the provision, "None of the funds made available by this Act may be used to fund dairy education in Iowa." Had this amendment become law as part of the appropriations act, it would have prevented the $229,000 in funds set aside in the committee report from being spent on that particular activity, without lowering the overall level of funding in the act or account itself. Limitation provisions have, however, been drafted to reduce the level of funds within the bill as well. For example, the Senate committee report that accompanied the FY2007 Agriculture appropriations bill contained a provision stating, "The Committee recommends $100,000 to establish a farm-raised catfish grading system." In response, an amendment was filed, but not offered, during Senate floor consideration that proposed to insert the language, "Notwithstanding any other provision of this Act, none of the funds appropriated or otherwise made available in this Act may be available for a catfish grading system, and the total amount made available in this Act is reduced by $100,000." Had this entire amendment been adopted, it would have simultaneously prevented the expenditure of funds set aside in the committee report for that particular activity and lowered the amount of budget authority in the act by $100,000. It has generally been in order to restrict the availability of funds with a "not to exceed" limitation. These types of limitations have been used to cap funds for certain accounts, items, activities, titles, or agencies or to place ceilings on total expenditures. Limitations have been used to restrict the availability of funds in a bill to not more than a total amount for a certain purpose. The example below, which is a House amendment to an Interior appropriations bill for FY1943, sought to limit the amount of funds in the bill that could be spent on a specific set of activities related to the reproduction and procurement of certain types of journal articles. Notwithstanding any other provisions carried in this bill for printing and binding the total amount to be expended for printing, binding, duplicating, mimeographing, lithographing, or reproduction in any form or by any other device, and including the purchase of reprints of scientific and technical articles published in periodicals and journals shall not exceed for every such purpose included in this bill the sum of $450,000, and that the amounts estimated therefore and not expended within this limitation shall be recovered into the Treasury of the United States. Limitations have also been used to place ceilings on the amount of funds that can be spent on items or services obtained in a certain manner or from a specific source. The example below is a House amendment to a FY1972 Defense appropriations bill, which sought to limit the amount of funds that could be spent on a service obtained in a specific location. Of the funds made available by this Act for the alteration, overhaul and repair of naval vessels, not more than $646,704,000 shall be available for the performance of such works in Navy shipyards. Finally, this type of limitation has been used to stipulate the maximum amount of funds that can be spent on a purpose specifically authorized by law, even if that amount is lower than the level of funds previously authorized. For example, the House amendment below to the FY1938 Agriculture appropriations bill identified an amount of budget authority not to be exceeded for the procurement of passenger-carrying vehicles stipulated by the Federal Highway Act. That not to exceed $45,000 of the funds provided for carrying out the provisions of the Federal Highway Act of November 9, 1921 (U.S.C., title 23, secs. 21 and 23), shall be available for the purchase of motor-propelled passenger-carrying vehicles necessary for carrying out the provisions of said act, including the replacement of not to exceed one such vehicle for use in the administrative work of the Bureau of Public Roads in the District of Columbia. Limitations have also been used to place a ceiling on the total dollar amount that can be expended under the budget authority provided by a particular appropriations act. The example below was a House amendment to the FY1954 Mutual Security Administration appropriations bill. Money appropriated in this bill shall be available for expenditure in the fiscal year ending June 30, 1954, only to the extent that expenditures thereof shall not result in total aggregate net expenditures of all agencies provided for herein beyond the total of $5,500,000,000. A limitation provision may also place a ceiling on the total amount made available as a percentage of the amount appropriated by an appropriations act. The below example of this type of limitation was a Senate amendment to the FY1950 Treasury and Post Office Appropriations Act. Provided further , That not to exceed 95 percent of the aggregate of the funds provided by appropriations made by this act for the fiscal year ending June 30, 1950 shall be expended or obligated by the department, agency or corporation to which such appropriations are made. "Not to exceed" limitations have also been used to restrict transfer authority. This is illustrated below by a House amendment to the FY1951 Labor and Federal Security Agency appropriations bill. Not to exceed 5 percent of any appropriation in this title may be transferred to any other such appropriation, but no such appropriation shall be increased by more than 5 percent by any such transfer… More general bans on transfers have also been accomplished by limitation provisions. The example below of this type of limitation was a House amendment to the FY1974 Treasury, Postal Service, and General Government Appropriations Act. Provided further , That none of the funds available under this heading shall be available for transfer to any other account nor for the funding of any activities other than those specifically authorized under this heading. The precedents of the House and Senate distinguish between the limitations and legislative provisions based upon both structure and substance. For a limitation to be allowed under the House and Senate rules, it must first be phrased as a negative prohibition and not as an affirmative direction. Second, it can only prohibit funding for activities, not the activities themselves. The below House amendment to the FY1965 Defense Appropriations Act is an example of a proper limitation in these respects, and was determined by the chair to be in order. None of the funds appropriated herein shall be available for paying the cost of a conventional powerplant for CVA-67. However, even though a limitation may be disqualified because of improper structure, the more salient standard by which its admissibility is evaluated is its substance. This is because, even with proper structure, a limitation can still be legislative in effect and therefore be prohibited under the rules. A number of precedents have identified certain principles by which a provision can be evaluated as to whether it is legislative, and therefore not allowed under the rules, or merely affects an agency's funding and is therefore a proper limitation. In total, these attempts can be distilled down to several broad concepts involving the scope of the provision, whether it waives current law and agency discretion, whether it imposes new duties upon a government official or agency, and whether the funding is provided based upon a contingency. In addition, whether or not the recipient of the funds can be considered "federal" and, in the House, if the subject matter of the limitation involves taxes or tariffs, are also factors that can have an impact on its admissibility. A proper limitation under the rules must only apply to the funds contained in the pending measure and only operate for the duration of the period for which the appropriation is available for obligation. If the scope of a limitation provision extends outside of the bill, it is categorically legislative in nature because it would have the effect of changing existing law. Limitations cannot apply to other appropriations measures. During consideration of a FY1972 supplemental appropriations bill in the House, the amendment below was the subject of a point of order. Provided , That none of the funds available for administrative or nonadministrative expenses of the Federal Home Loan Bank Board shall be used to finance the relocation of all or any part of the Federal Home Loan Bank from Greensboro, North Carolina, nor for the supervision, direction or operation of any district bank for the fourth district other than at such location. The point of order against this amendment was ultimately sustained because it sought to restrict funds contained in any appropriations bill that provided funds for the Federal Home Loan Bank Board, not only the pending measure. Limitations in appropriations bills also may not extend outside the scope of the bill to limit an authorization act or non-appropriated funding. When the FY1971 Foreign Assistance Appropriations Act was considered in the House, the amendment below was objected to as being legislative in nature. No economic assistance shall be furnished under the Foreign Assistance Act of 1961, as amended, to any country which sells, furnishes, or permits any ships under its economic assistance to Cuba, so long as it is governed by the Castro regime, or to North Vietnam. The chair sustained the point of order because this provision could have been construed as a limitation on the Foreign Assistance Act and not merely the funds provided in the foreign assistance appropriations bill. A limitation is also not allowed if it applies either to funds already appropriated or to funds in future fiscal years. The example below was a House amendment to the FY1920 Army appropriations bill. That no part of any of the appropriations made herein nor any of the unexpended balances of appropriations heretofore made for the support and maintenance of the Army or the Military Establishment shall be expended for the purchase of real estate. This amendment was determined by the chair to be legislative because it retroactively applied to funds from previous fiscal years. A similar violation of the scope principle occurred during the House consideration of the FY1937 Interior appropriations bill with the amendment below. That hereafter, no part of any appropriation for these Indian schools shall be available for the salary of any person teaching or advocating the legislative program of the American Liberty League. The point of order on this amendment was sustained by the chair for two reasons. First, the word "hereafter" would make the provision permanent legislation because it would have applied to funds after the current fiscal year. Second, the amendment's scope included "any appropriation," not simply the funds contained in the bill itself. Limitations cannot waive actions that are mandated by law, and provisions structured like limitations containing funding prohibitions notwithstanding existing law are often suspect. The amendment below, which was offered during House consideration of the FY1938 District of Columbia Appropriations Act, is an example of such a provision. Provided , that this appropriation shall not be available for the payment of advertising in newspapers published outside of the District of Columbia, notwithstanding the requirement for such advertising provided by existing law. This amendment was determined to be out of order by the chair, because the effect of the provision would have been provide a waiver for an activity required by existing law. Although a limitation can impose a restriction on funds for part of the purpose for which they have been authorized, it cannot change the degree of authority or discretion that an agency possesses under current law. According to House Practice , "(A) point of order lies against language enlarging or granting new discretionary authority, as well as language curtailing executive discretion." This concept is additionally explained in the passage below from Deschler's Precedents : If the authorizing law permits the official to pursue courses A, B, C, and D, and the appropriations measure provides funds permitting the official to pursue A, B, and C, the measure is a proper limitation…. But if the appropriation has the effect of permitting or requiring the official to pursue courses A, B, and E, then the measure has changed existing law… Limitations cannot expand the discretion previously provided in law to an official or agency to include actions not currently authorized, even if those actions are not explicitly prohibited by existing law. For example, the amendment below was offered during House consideration of the FY1950 Military Establishment Appropriations Act. No part of the appropriations made in this act shall be available…and no moneys herein appropriated for the Naval Establishment or made available therefore shall be used or expended under contracts hereafter made for the repair, purchase, or acquirement, by or from any private contractor, of any naval vessel, machinery, article, or articles that at the time of the proposed repair, purchase, or acquirement can be repaired, manufactured, or produced in each or any of the Government naval shipyards or arsenals of the United States, when time and facilities permit and when in the judgment of the Secretary, such repair, purchase, acquirement, or production would not involve an appreciable increase in cost to the Government, except when the repair, purchase, or acquirement, by or from any private contractor, would, in the opinion of the Secretary, be advantageous to the national defense. The point of order against this amendment was sustained because it would have provided the Secretary with authority not granted in current law to determine if repair, purchase, or production with a private contractor would be advantageous to national defense. Generally, while a proper limitation may impose some incidental duties on the government agency in the implementation of the restriction, a proper limitation cannot require a determination be made, or action taken, that is not required of the agency in existing law. This distinction is explained further in the passage below from Deschler's Precedents. Of course, the application of any limitation on an appropriation bill places some minimal extra duties on federal officials, who, if nothing else, must determine whether a particular use of funds falls within that prohibited by the limitation. But when an amendment, while curtailing certain uses of funds carried in the bill, explicitly places new duties on officers of the government or implicitly requires them to make investigations, compile evidence, or make judgments and determinations not otherwise required of them by law, then it assumes the character of legislation and is subject to a point of order ruling. Minor duties required of the official or agency to carry out the limitation are permissible, as long as they do not rise to the level of new duties outlined in the paragraph above. The below House amendment to the FY1960 Defense appropriations bill is an example of a proper limitation in this respect. None of the funds contained in this Title may be used to enter into a contract with any person, organization, company or concern which provides compensation to a retired or inactive military or naval general officer who has been an active member of the military forces of the United States within 5 years of the date of enactment of this act. The point of order on this amendment was overruled because the duties that it sought to impose upon the executive branch in determining which of its contractors provide compensation to certain retired or inactive members of the military were determined by the chair to be incidental. In addition to imposing incidental duties, the implementation of a limitation can be dependent upon the performance of substantive duties that are already required by existing law. The below House amendment to a FY1980 supplemental appropriations bill provides two examples of this type of limitation. Provided further , That none of the funds appropriated in this paragraph and made available on October 1, 1980 shall be used to pay trade readjustment benefits under part I of subchapter B of chapter 2 of Title I of the Trade Act of 1974 for any week to any individual who is entitled to unemployment insurance benefits for such week; Provided further , That none of the funds appropriated in this paragraph and made available on October 1, 1980 shall be used to pay trade readjustment benefits under part I of subchapter B of chapter 2 of title II of the Trade Act of 1974 to any individual in an amount for any week in excess of the weekly unemployment insurance benefits which he received or which he would have received if he applied for such insurance… The point of order was overruled because the determinations that would need to be made by the agency to comply with this provision would be the same as those required by existing law. Limitation provisions that require new determinations to be made by an agency or official not required by existing law are not proper limitations. An example of such a provision is the below House amendment to the FY1974 Departments of Labor and Health, Education, and Welfare Appropriations Act. Provided further, That none of the funds contained herein shall be available to make any payment to a local educational agency under the Act of September 30, 1950, which is attributable to children described in section 3(b) of the title 1 whose parents are employed on Federal property outside the school district of such agency. The chair sustained the point of order because it would have required a distinction be made between children whose parents work within certain school districts and children whose parents work outside such school districts. This would have required a new determination not required by current law to be made by the agency as to who comprised this new class of eligible program recipients. Limitation provisions that require the agency to perform new duties not required by existing law are also not allowed. The House amendment below to the FY1982 Labor and Health and Human Services appropriations bill is an example of this. That none of the funds appropriated under this paragraph shall be used to fund any grant to any business, union, trade association, or other grantee which is not properly reviewed under the peer review procedures used in fiscal year 1980. Furthermore, none of the funds appropriated under this paragraph shall be used to provide grants to any business, union, trade association or other grantee that does not have an established and effective program for educating employers or employees about occupational hazards and disease. The point of order against this amendment was sustained because it would have required the agency to establish a new procedure for determining what programs are "established and effective." Limitations subject to contingencies not existing in current law are generally not in order. In the Senate, Rule XVI, paragraphs 2 and 4, stipulate that limitations subject to contingencies not found in existing law are not in order in either committee or floor amendments to an appropriations bill. In the House, while no rule explicitly prohibits limitations based on contingencies, a precedent from 1904 stipulates that "the language of limitation prescribing the conditions under which the appropriation may be used may not be such as, when fairly construed, would change existing law." A later precedent gives additional guidance that, "whenever a limitation is accompanied by the words 'unless,' 'except,' 'until,' 'if,' 'however,' there is grounds to view the so-called limitation with suspicion, and in case of doubt as to its ultimate effect, the doubt should be resolved on the conservative side." A significant reason why limitations subject to contingencies not existing in current law are typically not allowed is that they tend to have the effect of either altering agency discretion or imposing new duties that must be performed to receive the funds. In addition, limitations based on contingencies that require the recipient to act in violation of existing law to receive funds are essentially legislative. A limitation cannot require as a condition of receiving funds that an official or agency exercise new discretion not granted in existing law. An example of this is the below House amendment to a FY1909 Post Office appropriations bill. Provided , that no part of this appropriation of $90,000 shall be expended for straps unless letter carriers are permitted to use other straps than those supplied by the Government if they prefer them, and buy and pay for them out of their own money and at no expense to the government. The chair sustained the point of order because it would have effectively provided the postmaster general with the ability to allow letter carriers to choose their straps, which was not discretion granted to the postmaster by existing law. Limitations also cannot make the performance of an action not currently required by law a condition on the use of funds. The below House amendment to the FY1920 Army appropriations bill is an example of such a provision. Provided , That no part of any appropriation herein shall be used unless all former civilian flying instructors who were dismissed on or about December 31, 1918 shall be reinstated on application to their former positions as from the date of such dismissal up to and including June 30, 1919. The point of order on this amendment was sustained by the chair because it would have infringed on agency discretion provided in law regarding the hiring of flight instructors. A limitation that makes funds contingent upon an official or agency making a new determination not required by current law is not allowable. An example of this is the below House amendment to the FY1938 Agriculture Appropriations Act. Provided further , That no part of the money herein appropriated shall be paid to any State unless and until, to the satisfaction of the Secretary of Agriculture, such State shall have provided by law or regulation modern means and devices to safeguard against accidents and the loss of life on highway projects within such state. The chair sustained the point of order against this amendment because it would have conditioned the funds in the bill upon a determination of the Secretary as to what would be "modern means and devices," which was a determination not required in existing law. A limitation also cannot subject funds to a contingency that would require an official or agency to perform new duties not mandated in current law. The below House amendment to a FY1959 supplemental appropriations act is an example of this type of provision. That no part of any appropriation made in this Act shall be used for land acquisition for any access road to the public airport in the vicinity of the District of Columbia authorized by the Act of September 7, 1950, until after the Administrator of the Federal Aviation Agency shall have consulted with the Board of Supervisors of Fairfax County, Virginia, on the location of such road and shall have had public hearings at a convenient location, or have afforded the opportunity for such hearings, for the purpose of enabling persons through or contiguous to whose property will pass, to express any objections they may have to the proposed location of such road. The point of order against this amendment was sustained by the chair because it would have required the agency administrator to consult with the board of supervisors or hold hearings to receive funds, which was an action not mandated by existing law. Another example of an improper limitation based upon the performance of new duties is the House amendment below to the FY1942 Interior appropriations bill. Provided , That no part of the appropriation herein made shall be available until the agency charged with the administration of the funds shall be satisfied, and shall so certify to the Secretary of the Treasury that no person employed upon the work provided has been required as a condition precedent to employment to join or not to join or to pay any sum to any organization. The point of order was sustained by the chair because it would have effectively created a new requirement not in existing law that the agency certify conditions related to employment to receive funds. Finally, a limitation based on a contingency cannot mandate action in violation of existing law as a condition of receiving funds. An example of such a limitation is the below House amendment to the FY1968 Labor and Health, Education, and Welfare Appropriations Act. Provided , That no part of this appropriation shall be made available to any local educational agency in any State from funds appropriated to carry out such title II for the fiscal year 1969 until there has been made available from this appropriation to each local educational agency in the State in whose schools the number of children counted under section 103(a)2 of such title II exceeds 25 per centum of the total enrollment in such schools an amount at least equal to it for the fiscal year 1968 from funds appropriated to carry out such title… The point of order against this amendment was sustained by the chair because it would have required the utilization of an apportionment formula as a condition of receiving funds that was contrary to the formula mandated by existing law. Although the precedents cited above consistently indicate that a proper limitation cannot impose new duties upon federal officials, they are less clear with respect to nonfederal officials. In many precedents regarding limitations that involve a mixture of state and federal officials, the focus of the parliamentary ruling is only on whether a new duty contained within the limitation is imposed on any federal officials. The House amendment below to the FY1950 Interior appropriations bill is an example of this ambiguity. None of the funds herein appropriated may be used for the purchase of material for the beginning of any new construction of electrical generating equipment, transmission lines, or related facilities in any State unless approved by the governor, by the board, or commission of the respective States having jurisdiction over such matters. The point of order against this amendment was sustained because it would have interfered with the discretion of the federal officials involved in the decision-making process with regard to projects that are part of a federal program. No mention in the ruling was made, however, of the effect of this limitation on state officials. A further example of a limitation involving both federal and nonfederal officials is also illustrative of the type of ruling that often occurs in these instances. During House consideration of the FY1978 Labor, and Health, Education, and Welfare appropriations bill, the below amendment was offered. None of the funds appropriated under this Act shall be used to pay for abortions or to promote or encourage abortions, except where a physician has certified the abortion is necessary to save the life of the mother. The chair sustained the point of order against this amendment because some of the physicians affected by this provision would have been federal officials. There was no discussion in the ruling as to whether the imposition of the new duty to certify abortions on nonfederal physicians only would have been allowed. House Practice provides some guidance when it states that, "Under the modern practice, it is not in order to make the availability of funds in a general appropriation bill contingent upon a substantive determinations by a state or local government official or agency that is not otherwise required by existing law." Moreover, it is in order to deny funds to a nonfederal recipient that is not in compliance with federal law; even when this denial is based upon a contingency, it does not categorically cause such a provision to be considered legislative. An additional issue that has been addressed in some rulings involving new duties and federal versus nonfederal recipients is whether the amendment violates current law with respect to the division between local, state, and federal officials or agencies in the administration of federal funds. The ruling of the chair on the below House amendment to the FY1972 Agriculture and Environmental and Consumer Protection Appropriations Act is illustrative of this type of rationale. No part of the funds appropriated by this act shall be used for engineering or construction of any stream channelization measure under any program administered by the Secretary of Agriculture unless (1) such channelization is in a project a part of which was in the project construction stage before July 1, 1971; or (2) the Governor of the State in which the channelization is to be located certifies to the Secretary of Agriculture, after consideration of the environmental effects of such channelization, that such channelization is in the public interest. The point of order against this amendment was sustained because the chair determined that it would confer new authority on a state official and would therefore be legislative. House rules regarding legislation containing a tax or tariff measure also affect the substance of limitations that are allowed. Added in the 98 th Congress, clause 5(a) of House Rule XXI stipulates that legislation containing a tax or tariff measure that has not been reported by a committee with jurisdiction over such matters, or an amendment that contains a tax or tariff measure offered thereto, is subject to a point of order. An early ruling on the subject concerned a limitation contained within the text of the Treasury, Postal Service, and General Government Appropriations Act reported out of committee. None of the funds appropriated in this Act may be used by the United States Customs Service in the enforcement of any provision of law to the extent that such a provision would permit agricultural products to enter the United States from Caribbean basin countries (as defined in the Caribbean Basin Economic Recovery Act) duty free. In this case, the chair upheld the point of order because the effect of this provision would be to cause additional duties on imports that were not required by existing law. A later ruling clarified that a limitation otherwise in order under paragraph 2(c) of Rule XXI can still be construed as a "tax or tariff measure" where it can be conclusively shown that the imposition of the restriction on IRS funding for the fiscal year will effectively and inevitably either preclude the IRS from collecting revenues otherwise due and owing under provisions of the Internal Revenue Code or require collection of revenue not legally due and owing. The addition of subsection (b) to clause 5 of Rule XXI at the beginning of the 108 th Congress explicitly included limitation amendments on general appropriations bills that affect the administration of a tax or tariff under the purview of this clause. That same year, a point of order under this new rule was made against an amendment to the FY2004 Transportation and Treasury Appropriations Act. None of the funds appropriated by this act may be used to assess or collect any tax liability attributable to the inclusion in gross income of amounts paid (from funds referred to in subsection (b)) to any person as assistance on account of any property or business damaged by, and for economic revitalization directly related to, the terrorist attacks on the United States that occurred on September 11, 2001. In interpreting the new rule, the chair determined that this amendment would impose a limitation on funds that would prevent the collection of revenue otherwise legally due and therefore upheld the point of order. When a point of order is raised against a limitation provision contained within an appropriations bill or amendment, the burden of proof is on its proponent to demonstrate that it is a valid limitation that does not effectively change agency discretion or impose new duties in order for it to be allowed. In some circumstances, if a provision or amendment containing a limitation is determined by the presiding officer to be legislative, it can potentially be revised to comply with chamber rules, unless prevented by a special rule or unanimous consent agreement. In the House, in the event of an objection, the proponent of a limitation amendment is responsible for demonstrating that it is not legislative in nature. For example, the House amendment below to the FY1981 Defense Appropriations Act was objected to during consideration on the grounds that it imposed new duties on the Secretary of Defense. Provided further , That no funds herein appropriated shall be used for the payment of a price differential on contracts hereafter made for the purpose of relieving economic dislocations other than contracts made by the Defense Logistics Agency and such other contracts of the Department of Defense as may be determined by the Secretary of Defense pursuant to existing laws and regulations as not to be inappropriate therefore by reason of national security considerations. The proponent of the amendment argued that this new provision would not require any new duties of the Secretary but was unable to cite any existing laws or regulations that required the Secretary to make such substantive determinations related to national security and the payment of price differentials. In the absence of the amendment's proponent being able to cite provisions of existing law that required the Secretary to make such determinations, the chair sustained the point of order. Likewise, if a limitation provision is challenged as being legislative in nature, evidence that the provision requires determinations already mandated by existing law can be a compelling reason for a point of order to be overruled. In the example below, a provision contained in the FY1977 Labor and Health, Education, and Welfare Appropriations Act reported from the committee, an objection was raised based upon the assertion that it creates a new duty for school administrators. None of the funds contained in this Act shall be used to require, directly or indirectly, the transportation of any student to a school other than the school which is nearest the student's home, and which offers the courses of study pursued by such student, in order to comply with title VI of the Civil Rights Act of 1964. In defending this provision, the appropriations committee chair argued that the requirement that the student be bussed only to the school closest to the student's home placed no new duties on the school administrator because the Equal Educational Opportunity Act of 1974 ( P.L. 93-380 ) already required that the school administrator make such a determination regarding the existence and location of comparable schools closest to student's homes. The committee chair also provided evidence that the Equal Educational Opportunity Act required that the school administrator make determinations regarding the appropriate grade level and type of education for each student. The presiding officer subsequently overruled the point of order. In the face of a point of order, the proponent of a limitation may also be called upon to provide evidence that the provision does not interfere with discretion guaranteed under existing law to the official or agency. The below House amendment to the FY1921 Agriculture appropriations bill was challenged on the grounds that it would impermissibly narrow the discretion of the Secretary of Agriculture. Provided further , That no part of any appropriation in this act for the Forest Service shall be expended on any national forest in which the fees charged for grazing shall be at a rate less than 300 per cent of the existing rate. In this case, the point of order against the provision was sustained based on evidence provided by a member who objected that the Supreme Court had held that the Secretary of the Agriculture has discretion to make rules and regulations for the preservation of the forests and to set the amount of user fees to be assessed. If the chair sustains a point of order against an amendment as being legislative in nature, a member may be able to offer a new (redrafted) amendment that is compliant with House rules, if not prevented by a special rule or unanimous consent agreement. An additional option, in some circumstances, is that the amendment's sponsor asks unanimous consent to modify such amendment during debate. Although obtaining unanimous consent for such a request may be difficult, if granted, it could allow the proponent an opportunity to revise the amendment so that it would conform to House rules. In the Senate, paragraph 6 of Rule XVI mandates that points of order against restrictions on the expenditure of funds be "construed strictly and, in the case of doubt, in favor of the point of order." This creates a procedural context similar to that of the House, where the presiding officer is constrained to uphold a point of order against a limitation in the absence of evidence that demonstrates that it is proper and not legislative. If the amendment's sponsor wishes to modify his or her amendment, this must occur before action has occurred or the presiding officer has ruled. A member could also offer a new (redrafted) amendment that was compliant with Senate rules, as long as there was no unanimous consent agreement governing consideration of the pending measure that precluded such action. | Both the House and Senate have internal rules encouraging the separation of money and policy decisions. These rules bar legislative provisions from being included in general appropriations measures under most circumstances. Limitations within appropriations measures are provisions that negatively restrict the amount, purpose, or availability of funds without changing existing law. The effect of these provisions is to limit the actions for which funds may be used through the capping or outright denial of funds. Limitations are distinct from legislative provisions, which have the effect of either making new law or changing existing law. This distinction has been developed and refined over time based on various rulings establishing what type of language is allowable. The procedural contexts within the House and Senate for the consideration of limitations on the floor differ in three significant ways. First, although legislative provisions are generally not allowed under the rules of the House, the rules of the Senate do allow exceptions under some circumstances. Second, House Rule XXI designates a particular process for the consideration of limitation amendments, but the Senate has no specific procedures relating to such provisions. Third, although House Rule XXII bans legislative language within conference reports, Senate rules contain no such prohibition. There are two forms in which limitations regularly occur. The first form places a total ban on the use of funds by stipulating that none of the funds in the account or bill can be used for a certain purpose. The second form, sometimes referred to as a "not to exceed" limitation, provides that the use of funds is not to exceed a specific amount or percentage of total funds for a certain account, item, activity, agency, or bill but does not change existing law. Limitations that prohibit the use of funds for certain purposes have been used to prevent federal funding for specific activities, a class of recipients, or to prohibit funding for earmarks. "Not to exceed" limitations have been used to establish funding ceilings for certain activities or total funding amounts. Both types of limitations also have been used to restrict the availability of funds for transfer. Limitations and legislative provisions are distinguished both by structure and substance. With respect to structure, a limitation must be phrased as a negative funding prohibition. For substance, a limitation must not effectively waive current law, alter agency discretion, impose new duties upon the official or agency, or provide funding based upon a contingency. Additionally, whether the recipient of the funds can be considered "federal" and, in the House, if the subject matter of the limitation involves taxes or tariffs, can determine the admissibility of this type of provision. When a limitation provision has been the subject of a point of order, the burden of proof is on its proponent to demonstrate that the restrictions exist within current law or that the new provision does not effectively change agency discretion or impose new duties. |
The federal government has statutory obligations to regulate interstate commerce and securethe United States against terrorism. Therefore, Congress has a strong interest in federal regulationsand programs related to hazardous chemicals security. Since September 11, 2001, legislators,government agencies, and industry have been working to prevent terrorist attacks involvinghazardous chemicals. Their goal is to ensure the continued availability of such chemicals forcommercial use while reducing the risk of their exploitation by terrorists. Large quantities of hazardous chemicals are found in commercial facilities, marinetransportation, rail transportation, and highway trucking. (1) To date, Congressional attention has focused largely on the securityof hazardous chemicals transported by rail or tanker trucks, or stored at commercial facilities nearpopulated areas. As the nation's rail, truck, and chemical facility policies mature, Congress isreviewing federal policies related to marine transportation of hazardous chemical cargo. (2) In the 109th Congress, forexample, H.R. 2651 would establish or increase penalties for criminal or terrorist activities aroundports and marine vessels. S. 1052 includes provisions to increase general port security, includingports in foreign countries. In response to the overall security environment, Congress is likely to seeka broader understanding of hazardous chemical marine shipments and efforts to secure them. This report provides an overview of hazardous chemicals marine transportation in the UnitedStates. The report discusses the general risks from such marine transportation in the homelandsecurity context. It focuses on many of the hazardous chemicals with the greatest potential to affectthe public in a terrorist attack and the marine vessels that carry such chemicals. It summarizesfederal statistics on the hazardous chemical marine shipments in U.S. waters, including shipmentvolumes by type of chemical and port location. It provides a brief overview of relevant U.S.maritime security regulation. It raises security policy issues associated with these shipments,including risk uncertainties, security resources, and security effectiveness. The report concludes witha discussion of marine chemicals security as part of the nation's overall chemical security strategy. This report addresses marine shipments of a limited set of acutely hazardous chemicalcargoes that, if released, could potentially pose a catastrophic hazard to the general public. (Thespecific cargoes are defined in subsequent sections). The report does not examine other potentialmaritime security hazards such as petroleum products, biological agents, or container bombs, whichmay also be of interest to policymakers. (3) It focuses on threats to the general public from chemical releaseduring marine transport. It does not address marine attacks targeting economic activity or theenvironment. Due to the sensitive nature of the topic and legal limitations on the publication ofcertain proprietary shipping data, the report does not provide detailed statistics for the specifichazardous chemicals or ports of interest. Marine shipments of hazardous chemical cargo are potentially attractive terrorist targetsbecause these chemicals are acutely toxic or highly combustible, and are shipped in large volumes. They may represent a serious threat to human life and physical infrastructure if intentionally releasednear populated areas. Hazardous chemical marine vessels are also part of two "criticalinfrastructures" identified by the Bush Administration--the chemicals and transportationsectors. (4) For thesereasons, the protection of hazardous chemical shipments passing through U.S. waterways and portsis an important component of U.S. homeland security strategy. Although security experts widely acknowledge that marine shipments of hazardous chemicalsmay be attractive terrorist targets, no marine vessel carrying hazardous chemicals has been used byterrorists in an attack on civilians. Nonetheless, marine accidents involving such shipments in theU.S. and abroad have demonstrated their potential to impact nearby communities. Foreign terroristsalso have successfully attacked other types of marine vessels overseas. As discussed later in thereport, intelligence suggests that terrorists may have both the interest and capability to executehazardous chemical shipping attacks in the United States. Major accidents involving the marine transportation of hazardous chemicals are uncommon. (5) However,those that have occurred include some of the deadliest industrial accidents ever recorded. In 1917,for example, the explosion of the Mont-Blanc, carrying a cargo of explosives in the port of Halifax,killed over 1,900 people and seriously injured over 4,000 others. (6) The 1947 explosion of twocargo ships carrying ammonium nitrate and sulfur in Texas City, Texas destroyed the port, killingnearly 600 people and injuring another 3,500. (7) Due to improved safety practices and vessel construction, a marine accident as destructiveas the Texas City disaster has not occurred in the ensuing 60 years. However, serious incidentsinvolving chemical marine shipments have forced the evacuation of threatened coastal populations. These incidents include a 1985 fire aboard the Ariadne carrying 100 containers of toxic chemicalsin the port of Mogadishu, Somalia (8) ; a 1987 accident aboard the Cason carrying 1,200 tons offlammable, toxic, and corrosive chemicals near Cape Finisterre, Spain (9) ; and a 1999 fire aboard the Multitank Ascania carrying a cargo of vinyl acetate off the coast of Scotland. (10) These incidents did notresult in serious casualties among neighboring communities, but emergency responders had a highdegree of concern for public safety as indicated by the associated evacuations. Although terrorists have never used a marine cargo vessel to launch a chemical attack on thegeneral public, both international combatants and domestic terrorists tried to use explosives torelease chemicals from land based manufacturing and storage facilities during the 1990s. Most ofthese attempts were in foreign war zones such as Croatia. They included attacks on a plantproducing fertilizer, carbon black, and light fraction petroleum products; other plants producingpesticides; and a pharmaceutical factory using ammonia, chlorine, and other hazardous chemicals.All of these facilities were close to population centers. In the United States, there were at least twoinstances during the late 1990s when criminals attempted to release chemicals from similar facilities.One incident involved a large propane storage facility in California, and the other a gas refinery inTexas. (11) Terrorists have directly targeted marine vessels, mainly to destroy the vessel or cargo. InJune 2002, Moroccan authorities foiled an Al-Qaeda plot to attack U.S. and British warships, andpossibly commercial vessels, in the Straits of Gibraltar. (12) In October 2002, the oil tanker Limburg was successfullyattacked off the Yemeni coast by a bomb-laden fishing boat. (13) Foreign governmentshave reportedly expressed concerns about terrorist groups commandeering a hazardous chemicalvessel and "crashing it into a port." (14) In the United States, the Department of Homeland Security (DHS) has been consistentlyconcerned about the security of chemicals infrastructure, including chemical tanker ships. (15) The Homeland SecurityCouncil included terrorist attacks on ships carrying flammable and toxic chemical cargoes in a U.S.port among the hazard scenarios it developed as the basis for U.S. homeland security nationalpreparedness standards. (16) The President's National Strategy states that "much of the portsystem represents a significant protection challenge, particularly in the case of high consequencecargo." (17) One type of hazardous marine cargo--liquefied natural gas (LNG)--has received particularpublic attention. The DHS reportedly included LNG tankers among a list of potential terrorist targetsin a security alert late in 2003. (18) The DHS also stated that "the risks associated with LNGshipments are real, and they can never be entirely eliminated." (19) A 2004 report by SandiaNational Laboratories considered potential terrorist attacks on LNG tankers "credible andpossible." (20) TheSandia report identified LNG tankers as vulnerable to ramming, pre-placed explosives, insidertakeover, hijacking, or external terrorist actions (such as a Limburg -type attack, a missile attack, oran airplane attack). (21) Homeland Security Presidential Directive 7 (HSPD-7) directs federal homeland securityactivities to focus on terrorist attacks that could cause "catastrophic health effects or mass casualtiescomparable to those from the use of a weapon of mass destruction." (22) For purposes of thisreport, hazardous chemical cargo is chemicals carried aboard a commercial marine vessel that, ifaccidentally released or combusted, could, under certain circumstances, pose a catastrophic hazardto the general public. Typically, such hazards could include poisoning, asphyxiation, chemicalburns, or thermal burns. In some cases, a single chemical could present a combination of thesehazards. Numerous federal standards identify potentially hazardous chemicals. With respect topublic security, relevant standards are promulgated by the Department of Transportation (DOT), theCoast Guard, and the Environmental Protection Agency (EPA). The DOT regulates the transportation of all hazardous materials under the HazardousMaterials Transportation Act of 1975 ( P.L. 93-633 ) and subsequent amendments. The act empowersthe Secretary of Transportation to designate as "hazardous" any particular quantity or form ofmaterial that "may pose an unreasonable risk to health, safety and property when transported incommerce." The DOT defines and classifies hazardous materials in 49 C.F.R. § 172.101. TheDOT's list includes thousands of materials--including toxic, radioactive, corrosive, explosive, andflammable materials--which could potentially be shipped. The DOT groups individual materials bytype of hazard (e.g., inhalation poisoning) but not necessarily by relative degree of hazard. The DOTdoes provide a ranking of relative hazard by general class or division in 49 C.F.R. § 173.2a. Thisranking is summarized in Appendix 1 . In addition to its general hazardous material safety regulations, the DOT requires shippersof certain "highly hazardous" cargo to develop security plans in 49 C.F.R. § 172.8. (23) Under these provisions(subject to various conditions), the DOT defines highly hazardous cargo to include: radioactive material (Class 7); over 55 pounds of explosives (Division 1.1, 1.2, or 1.3); over 1.06 quarts per package of material poisonous byinhalation; 3,500 gallons or more of bulk hazardous liquids orgases; 468 cubic feet or more of bulk hazardous solids; 5,000 pounds or more of packaged hazardous material; agents regulated by the Centers for Disease Control and Prevention; certain hazardous materials that require placarding under other provisions in49 C.F.R. § 172. Note that the DOT's definition of "highly hazardous" materials extends to most of the materials in49 C.F.R. § 172.101 when they are present above the prescribed quantities. The Coast Guard regulates the safety and security of marine vessels and is responsible forenforcing all applicable federal hazardous material laws in U.S. waters. Coast Guard regulationsidentify hazardous cargo in several sections of the federal code. Under the Port and WaterwaysSafety Act of 1972 (P.L. 92-340), the Coast Guard defines "certain dangerous cargoes" in 33 C.F.R.§ 160.204. The definition of "certain dangerous cargoes" refers to the DOT list mentioned above, and specifically names certain liquefied gas and bulk liquid cargoes. In 46 C.F.R., the Coast Guardprescribes special requirements for vessels carrying certain hazardous materials, identified asfollows: Bulk solid hazardous materials (46 C.F.R. § 148). Bulk liquid hazardous materials carried in barges (46 C.F.R. §151). Bulk liquid, liquified gas, or compressed gas hazardous materials carried byship (46 C.F.R. § 153). Incompatible chemicals where multiple chemicals may be carried together inparcel tankers or on container ships (46 C.F.R. § 150). The Coast Guard also identifies hazardous marine cargoes through regulation of waterfront facilitieshandling these cargoes in 33 C.F.R. Parts 126, 127, and 154. Collectively, hundreds of differenthazardous materials are included on the Coast Guard's lists. While Coast Guard regulations identifyparticular hazardous materials potentially carried in marine vessels, they do not necessarily identifythe relative degree of hazard among these materials. The EPA regulates stationary facilities handling potentially hazardous substances under theClean Air Act (CAA), Section 112(r)(7). In 1990, Congress passed P.L. 101-549 , which amendedthe CAA, Section 112, to require facilities possessing more than specified threshold quantities ofcertain hazardous substances to file risk management plans (RMPs). These RMPs summarize thepotential threat from sudden, large releases of those substances. These plans must also include theresults of off-site consequence analysis for a worst-case accident and plans to prevent releases andmitigate any damage. The Clean Air Act Amendments defined "hazardous substances" to include 14 listedsubstances (including chlorine and ammonia) and at least 100 additional chemicals to be designatedby the EPA. The amendments directed EPA to designate chemicals posing the greatest risks tohuman health or to the environment, based on three criteria: the severity of potential acute adversehealth effects, the likelihood of accidental releases, and the potential magnitude of human exposure. The EPA promulgated a list of 77 acutely toxic substances, 63 flammable gases and volatileflammable liquids, and "high explosive substances" (found in 40 C.F.R. § 68). As a result of a legalsettlement, the EPA deleted high explosives from the list in 1998. The list was further amended in2000 to exclude flammable substances when used as a fuel, or held for sale as a fuel at a retailfacility. The current EPA/RMP list is shown in Appendix 2 . (24) The vast majority of hazardous materials on the DOT lists do not likely represent a"catastrophic" health hazard to the general public, because the materials involved are not shippedor stored in sufficient quantity, or because their physical properties limit their potential off-siteimpacts. Likewise, most of the hazardous materials listed by the Coast Guard in 33 C.F.R. and 46C.F.R. do not represent catastrophic health hazards. Accordingly, the EPA list may moreappropriately identify those chemicals considered to have the greatest potential consequences to thegeneral public. Since the chemicals in EPA's list are considered among the most hazardous on land,it follows that many of them may be similarly hazardous if transported on water. This report uses the EPA/RMP chemicals as the basis for marine cargo hazard analysis. Nearly all of the EPA's listed hazardous substances under the CAA Section 112(r) are found in theDOT and Coast Guard hazardous materials lists, so the findings in this report should be applicableto the DOT or Coast Guards lists as well. (The EPA/RMP chemicals are cross-referenced to theDOT categories in Appendix 2 .) Two notable classes of hazardous material identified by DOT noton the EPA/RMP list are radioactive materials and explosives. Army Corps of Engineers marinecommerce statistics for 2003 (discussed later in this report) show that explosives and radioactivematerials would account for less than 0.3% of U.S. hazardous marine cargo if added to theEPA/RMP hazardous materials list. (25) Excluding these two classes is unlikely to affect the policyconclusions in this report. As noted above, the EPA/RMP chemicals are broadly classified as acutely toxic or flammable(or both). The degree of toxicity or flammability of specific chemicals within the EPA/RMP listvaries with their chemical properties. The following example chemicals illustrate such variations: Ammonia. Ammonia is an acutely toxic,potentially explosive, liquefied gas primarily used in the manufacture of fertilizers and as a fertilizeritself. It has many other uses as well; for example, as a chemical production component, as sourceof protein in livestock feeds, and in metal treatment operations. (26) Ammonia can reachharmful concentrations in the air very quickly on loss of containment. It can causing severe skinirritation, and if inhaled, can cause respiratory irritation, eye corrosion, and fatal fluid buildup in thelungs. (27) Methane. Methane (natural gas) is used as aheating fuel and industrial feedstock for a range of chemical processes. Methane is not inherentlytoxic, although high vapor concentrations may cause asphyxiation by displacing breathable air. Cryogenic methane (liquefied natural gas, or LNG) may freeze body parts with which it comes intocontact. Methane is extremely flammable when mixed with air and may be explosive when suchmixtures are in confined spaces. (28) Methyloxirane. Methyloxirane is used tomanufacture polyurethane foam (for furniture and cars), solvents (in paints, cleaners, and waxes),polyster resins, and other industrial products. Methyloxirane is a toxic liquid and a fire hazard.Human exposure may irritate the eyes, skin, and respiratory tract. Methyloxirane vapor is extremelyflammable when mixed with air and reacts explosively with chlorine, ammonia, strong oxidants, andacids. (29) As the examples above demonstrate, an uncontrolled release of a specific chemical on theEPA/RMP list could have varying effects on an exposed population. Evaluating the particulareffects of such releases material by material is beyond the scope of this report, nor is it necessary fora general discussion of hazardous marine cargo policy. The important point is that the EPAconsiders all the RMP chemicals, when present above their individual threshold quantities, to besufficiently hazardous to the general public to warrant special regulatory treatment (i.e., off-siteconsequence analysis). Recognizing that certain shipments of specific cargoes may be morehazardous than others, this report assume that they are all hazardous enough to warrant publicconcern as potential terrorist targets. The EPA/RMP list of hazardous chemicals was developed for facilities on land. Due to theirchemical properties, the health hazard associated with these chemicals may be significantly differentif released over water. Certain EPA/RMP chemicals dissolve in water (e.g, propylene oxide) or sinkin water (e.g., tetramethyllead), potentially reducing the hazard they pose to the general public in amarine incident. Other chemicals (e.g., ammonia) dissolve in water, but evaporate quickly as well. Still others (e.g., cryogenic methane) float and evaporate faster on water than on land, creating alarger hazard zone more quickly in a marine release than a land release for the same quantity ofchemical. (30) Becauseland release and water release characteristics of specific EPA/RMP chemicals may differ, onlylimited conclusions may be drawn from a study of EPA/RMP hazards in marine shipments. Furtherresearch and analysis are required for a better understanding of the relative marine hazards ofspecific chemicals. The Army Corps of Engineers (ACE) maintains statistics of marine commerce in U.S. waters. These statistics may be used to estimate the marine shipping volumes of EPA/RMP chemicals. (See Appendix 3 for a description of the ACE database and its limitations.) According to the ACEstatistics, a subset of the EPA/RMP chemicals are transported through U.S. waters in significantquantities. Table 1 summarizes the total U.S. waterborne shipments of these chemicals by theDOT's general hazard category. As the table shows, over 48 million tons of EPA/RMP chemicalspassed through U.S. waters in 2003, the most recent year for which data are available. Thesehazardous chemicals accounted for 2% of total U.S. waterborne cargo tonnage. Table 1: 2003 U.S. Waterborne Tonnage of EPA/RMPHazardous Cargo Sources: 49 C.F.R. § 173.2a; Army Corps of Engineers; EPA; CRS analysis. Note that DOTDivisions are subcategories within a Class. It may be appropriate to consider both size and number of shipments in an analysis of marinecargo terrorism hazards. The hazardous materials on the EPA/RMP list are included primarilybecause their chemical properties make them hazardous to human health. To be a potentiallycatastrophic threat to the general public, however, these materials must be present in large enoughvolumes to impact nearby populations in the event of a maritime release. Accordingly, the overallvolume of a hazardous material in a marine shipment becomes an important consideration whenevaluating potential public impacts of terrorist attack. Additionally, a larger number of shipmentscould potentially equate to a larger overall terrorist risk because terrorists could have moreopportunities for a successful attack, among other reasons. Over 100,000 marine shipments of EPA/RMP hazardous cargo passed through U.S.waterways in 2003. Figure 1 summarizes the total number of shipments and average cargo tons pershipment in 2003 for the EPA/RMP hazardous chemicals as estimated by the ACE. (31) Because cargo vessels mayload or unload partial cargoes at multiple locations over the course of a single shipment, the tonnageof cargo actually carried aboard a vessel at any time may vary. Note that the data in Figure 1 areplotted on a logarithmic scale for clarity of presentation. Figure 1: 2003 Marine Shipments of EPA/RMP Hazardous Chemicals The EPA regulations specify minimum threshold quantities for risk planning between 500and 20,000 pounds for the EPA/RMP chemicals. The dashed line in Figure 1 represents the 20,000pound (10 ton) upper threshold above which off-site consequence plans are required for facilities onland. According to the ACE data, the average shipment volume for the hazardous chemicals in Figure 1 generally exceed the EPA/RMP 20,000 pound threshold. (32) Based on these statistics,the average waterborne shipment of most of the EPA/RMP hazardous chemicals would be ofsufficient volume to require an off-site risk management plan under the EPA's rules if the samequantity of chemical was stored on land. It is also interesting to note that each category of chemicalsin Figure 1 was typically shipped between several hundred and several thousand times in 2003. "Low frequency" and "high frequency" hazardous cargoes are not easily distinguished. Many types of marine vessels may transport hazardous cargo in bulk. These vessels havedistinct construction and operating characteristics depending upon the quantities and physicalproperties of the cargoes they are designed to carry. Cargo vessel characteristics are an importantsecurity consideration. They determine, in part, the physical vulnerability of such vessels to accidentor deliberate attack, as well as the potential consequences of an accident or attack. As Figure 2 shows, over 67% of EPA/RMP hazardous marine cargo in 2003 was shipped in tankers (liquefiedgas or chemical parcel), or self-propelled liquid chemical barges. An additional 29% was shippedin non-self-propelled liquid chemical barges. Container ships, dry cargo barges, and other vesselscarried 4% of such cargo. This section will review the characteristics of each of these vesselcategories. Figure 2: Marine Shipments of EPA/RMP Chemicals by VesselType Liquefied gas tankers are oceangoing ships designed to carry one or more types of liquefiedgas cargo--gas which has been cooled, pressurized, or both, below its boiling point so it can beshipped as a liquid. Such liquefied gas cargoes include butane and propane (both referred to asliquefied petroleum gases, or LPG), liquefied natural gas (LNG), butadiene, propylene, ethylene,vinyl chloride, methyl chloride, ammonia and propylene oxide. These are all chemicals on theEPA/RMP list. Liquefied gas tankers consist of several large and separate onboard tanks which may bepressurized, refrigerated, and insulated to accommodate different cargo needs ( Figure 3 ).International shipping codes impose extensive standards for the construction and operation of thesevessels. (33) Their cargotanks must be built to withstand high pressures or low temperatures, as necessary. Therefore, thesetanks are robust and resistant to impact damage, or flexible and able to distort without failure. Thevessels are also "double-hulled," with cargo tanks located above a double bottom and inboard of theouter hull, independent of the tankers' outer hull structures. Consequently, liquefied gas tankerspossess a level of structural integrity greater than that found in most other classes of ship, whichmakes them highly resistant to grounding and collision damage. (34) LNG tankers carry onlyLNG. Other liquefied gas tankers may simultaneously carry a combination of different cargoes, suchas butane and propylene, in different storage tanks. (35) Such combination cargoes create potentially uniquemulti-chemical hazards. Figure 3: Typical Liquefied Natural Gas Tanker Source: Yuasa, K., Uwatok, K., and Ishimaru, J. "Key Technologies of Mitsubishi LNG Carriers:Present and Future." Mitsubishi Heavy Industries, Ltd. Technical Review . Vol.38 No.2. June. 2001. Liquefied gas carriers vary greatly in capacity. Fully pressurized ships may carry up to 4,300m 3 of cargo, although most can carry no more than 2,500 m 3 of cargo. (36) LNG tankers, on the otherhand, have capacities of 25,000 m 3 to 147,000 m 3 , with ships of 200,000 m 3 capacity planned fornew construction. (37) (A cargo capacity of 200,000 m 3 , is equivalent to approximately 82,000 tons of LNG.) At the upperend of this range, LNG tankers are among the largest cargo vessels in the world. Chemical parcel tankers are versatile vessels designed to carry a wide range of liquid andchemical cargoes, including EPA/RMP hazardous chemicals. Externally, they appear similar topetroleum product tankers, but typically can carry 10 to 60 separate cargo tanks to simultaneouslyaccommodate multiple cargoes or "parcels." They range in total cargo capacity from approximately3,000 to 50,000 tons, although most are well under 50,000 tons. (38) Figure 4 is an illustrationof a chemical parcel tanker with a cutaway view showing individual cargo tanks. Figure 4: Typical Chemical Parcel Tanker Source: Intl. Assoc. of Independent Tanker Owners. "Features of a Modern Chemical ParcelTanker." The Tanker Newsletter . Oslo, Norway. Issue No. 4. April 2000. Chemical parcel tankers, like gas carriers, are governed by international constructionstandards. (39) They mayhave cargo tanks lined with stainless steel or specialized coatings, such as epoxy, zinc silicate, orpolyurethane, to ensure compatibility with a range of chemicals. The tankers have double bottomsor hulls, and maintain spaces between tank walls to prevent incompatible cargoes from coming intocontact with each other. (40) Like LPG tankers, chemical parcel tankers may carry multiplechemical cargoes of different hazardous chemicals at one time. Liquid chemical barges are shallow draft vessels designed to carry bulk liquid chemicals,primarily in coastal regions and through inland waterways. Liquid chemical barges are similar toparcel tankers in that they may contain multiple separate cargo tanks lined with stainless steel orother special coatings. Such barges range in size from 700 tons to 3,500 tons of total cargocapacity. (41) Largerbarges transporting hazardous chemicals are typically double-hulled and self-propelled ( Figure 5 ),although smaller chemical barges may be unpowered, relying upon tugboats or towboats formovement. Unpowered chemical barges on inland waterways are approximately 52 to 54 feet wideand up to 300 feet long. (42) Inland barges usually travel river systems in groups of two toeight barges per towboat, although "linehaul" tows may consist of more than 20 barges, picking upand dropping off barges at various points along a given route. (43) Such inland barges maybe refrigerated, employing two insulated cargo tanks, each approximately 18 feet in diameter and upto 240 feet long, and each capable of carrying 1,250 to 1,500 tons of ammonia, propylene, or otherrefrigerated chemical product. (44) Pressurized cargo tanks are also available for pressurized liquidcargoes. Figure 5: Typical Self-Propelled Liquid Chemical Barge Source: Royal Vopak. "Photo Gallery: Barging." Internet page. Rotterdam, Netherlands. July 20,2005. http://photoshop.vopak.com/pictureGallery/page_showPictures.php?category=barging Hazardous chemicals may be transported on conventional container ships in multi-modal tankcontainers, drums, portable tanks, or other cargo consignments. Roll-on/roll-off vessels may carrysuch chemicals in tanker trucks or in conventional tractor-trailers with internally packagedcargo. (45) Given the sizeof modern container ships, large quantities of a variety of hazardous chemicals may be present in acontainer ship at any time. The Jolly Rubino , for example, was reported to be carrying 3 containersof vinyl acetate, an EPA/RMP chemical, and 18 containers of other DOT toxic chemicals when itcaught fire off South Africa in 2002. (46) Hazardous chemicals must be shipped in designated cargo areasaboard these vessels. In addition to container ships, hazardous chemicals may also be shipped aboardgeneral cargo ships, container barges, ferries (in road vehicles), and other vessels. The public hazards associated with EPA/RMP hazardous cargo in a given setting areproportional to volume. Accordingly, it is informative to compare the volumes of hazardouschemicals present on marine vessels to volumes of the same chemicals in other modes oftransportation and in stationary storage facilities on land. Marine vessels, rail tank cars, and highway tanker trucks are all bulk transportation modesfor EPA/RMP hazardous chemicals. In many cases, a given shipment of hazardous cargo may bemoved sequentially by all three modes to its final destination. The maximum range in cargo capacityof rail tank cars is approximately 50 to 90 tons, depending upon the chemicals carried. (47) Containerized tankscarried on flatbed railcars may carry up to 70 tons per tank. (48) Note that rail shipmentsmay carry multiple tank cars and hazardous cargoes simultaneously. Highway tanker trucks alsocarry many EPA/RMP hazardous cargoes, such as anhydrous ammonia, chlorine, and LPG. Standardcargo capacity for these tanker trucks ranges from approximately 15 to 30 tons, depending upon thetype of cargo. (49) Table 2: Cargo Tank Capacity for EPA/RMP TransportModes Source: CRS Table 2 summarizes the typical range of cargo tank capacity for the principal marine, rail,and highway tankers that transport EPA/RMP chemicals as discussed above. Note that multipletanks are usually found on liquefied gas tankers, chemical parcel tankers, and liquid cargo barges. As the table shows, marine cargo tank capacity generally exceeds the capacity of a single rail orhighway tanker truck by one or more orders of magnitude. (This is generally true for other types ofcargo as well.) Because marine tankers often carry partial cargoes, and because barge and railshipments may involve multiple barges or rail tank cars, comparing actual volumes shipped acrossthese modes is more difficult than comparing tank capacity. Based on the average marine shipmentvolumes reported in Figure 1 and the rail and highway tank capacities in Table 2 , it appears thatmany marine shipments of EPA/RMP hazardous material are larger than an individual shipment ofthe same material on land. The EPA maintains a database of on-site chemical storage volumes for all facilities requiredto file risk management plans under the Clean Air Act, Section 112(r). Under the act, these facilitiesmust report the amount of chemical held on hand as well as the amount held in a single process. These filings may be used to estimate the maximum and average quantity of a given EPA/RMPchemical across all facilities required to file risk management plans (with off-site consequenceanalysis data). Note that these facilities are the subset of all chemical facilities with the higheston-site quantities of the EPA/RMP chemicals in a single storage location. CRS compared average and maximum marine shipping volumes from the ACE database toaverage and maximum land storage volumes from the EPA database for nine EPA/RMP chemicals: acrylonitrile, anhydrous ammonia, chlorine, ethylene, methyloxirane, oxirane, propene, sulfurdioxide, and vinyl chloride. (50) These chemicals represent high, medium, and low volumeshipments of both toxic and flammable chemicals. The results of this comparison are summarizedin Table 3 . (Because detailed shipping and storage information for specific chemicals is proprietary,the table does not name the chemicals; they are not presented in alphabetical order.) Table 3: Marine and Chemical Facility Volumes of NineEPA/RMP Chemicals Sources: Army Corps of Engineers, EPA, CRS analysis. As the table shows, for the chemicals shipped in higher volumes (#1- #4), the average marineshipments were generally larger than the average volumes stored at EPA/RMP chemical plants. Thisfinding is consistent with the practice of shipping higher volume cargo in larger vessels. The tablealso shows that the largest marine shipments were substantially smaller than the largest volumesstored at chemical plants, except for chemical #3. Marine shipments of EPA/RMP hazardous chemicals either originate or terminate in U.S.ports. In some cases, port facilities serve as transportation hubs for temporary storage and transferof hazardous cargo to rail tank cars or truck tankers. In other cases, port facilities may be industrialplants that receive hazardous marine cargo directly for use in industrial processes, such aspetrochemical refining, water treatment, and fertilizer production. Some port facilities producehazardous cargo. Transportation and industrial facilities are more prevalent in some ports thanothers, so total marine shipments of EPA/RMP chemicals may vary significantly from port to port. Likewise, shipments of specific EPA/RMP chemicals vary across ports. Because security hazardsmay be related to both the volume and specific type of EPA/RMP cargo moving through a givenport, it may be helpful to examine the relative concentration of EPA/RMP hazardous marineshipments through U.S. ports. There are more than 360 commercial ports in the United States containing approximately3,200 cargo and passenger handling facilities. (51) According to ACE statistics, EPA/RMP hazardous chemicalswere shipped through 113 of these ports in 2003. Of these 113 ports, the top 30 handledapproximately 95% of EPA/RMP hazardous cargo tonnage. For purposes of policy discussion,these 30 ports are listed in Table 4 in alphabetical order, along with the two categories of hazardousmarine cargo shipped in greatest tonnage through each port. Note that additional EPA/RMPhazardous cargoes not listed in Table 4 may also be shipped in large volumes through a given port. For example, 22 EPA/RMP chemicals were shipped through the port of Baton Rouge in quantitiesexceeding 2,500 tons in 2003. Furthermore, volumes of a given type of cargo (e.g., LPG) in one portbear no relation to volumes of the same type of cargo in any other port. Marine shipments ofEPA/RMP hazardous chemicals in the remaining 83 ports that handle such cargo may be no less asecurity concern than shipments in the top 30 ports. An attack on a single hazardous cargo vesselmay have serious public consequences independent of other shipments through a given port. As Table 4 shows, the top 30 hazardous chemical ports are found in 15 states. Over half ofthese ports are in the Gulf of Mexico--in Texas (9 ports), Louisiana (5 ports), Alabama (1 port),Florida (1 port), and Mississippi (1 port). All of the top 30 ports in Table 4 are classified by theACE as coastal, except for Huntington, WV, which is located on the Ohio River. (52) No Great Lakes ports areon the list. The mix of principal EPA/RMP hazardous chemicals varies considerably from port toport. The chemicals listed most frequently among the top two hazardous cargoes shipped throughthese ports are LPG (13 ports) and ammonia (12 ports). LPG (typically propane) is an extremelyflammable and potentially explosive gas, heavier than air, and shipped under pressure in liquefiedform. (53) Thecharacteristics of ammonia, a toxic gas, were summarized earlier in this report (page 8). Table 4: Top 30 Ports Handling EPA/RMP Hazardous Cargo in2003 (in Alphabetical Order ) Sources: Army Corps of Engineers, EPA, CRS analysis. The list of ports in Table 4 is derived solely from estimates of EPA/RMP hazardous cargovolumes, which are only one of many factors that may affect the terrorism risk in U.S. ports. Otherkey factors include: DOT hazardous cargo shipments (e.g., gasoline,explosives); non-chemical cargo shipping hazards (e.g., dirtybombs); marine passenger traffic (e.g., ferries, cruise ships); hazardous materials sites or critical infrastructure onland; proximity to populations on land; physical configuration of the ports; threat intelligence and vulnerability assessments. The Department of Homeland Security (DHS) does consider these other factors in its PortSecurity Grant Program, which provides competitive security enhancement grants to U.S. ports underthe DHS Appropriations Act of 2005 ( P.L.108-334 ). For the FY2005 program, DHS evaluated the129 largest U.S. ports using its risk-based formula to identify 66 ports eligible to apply for thegrants. (54) Table 4 shows that 24 of the top 30 hazardous material ports are among the 66 ports eligible to apply forDHS port security grants. The Coast Guard is the lead federal agency assigned to promote U.S. maritime security,including vessel and port security. Among other duties, the Coast Guard tracks, boards, and inspectscommercial ships approaching U.S. waters. A senior Coast Guard officer in each port oversees thesecurity and safety of vessels, waterways, and many shore facilities in the geographic area. In pursuit of its mission to protect life, property, and the marine environment, the CoastGuard has a history of special concern for ships and barges carrying hazardous cargo. Coast Guardsafety and environmental protection regulations have long specified how vessels carrying such cargomust be constructed and operated, how hazardous cargo should be transferred at waterfront facilities,and what procedures should be used to respond to accidental cargo releases. (55) Compliance with thesesafety regulations could help mitigate the damage from a terrorist attack, for instance, by minimizingthe amount of cargo released, and might also help deter an attack. Prior to 9/11, however, the CoastGuard had only limited regulations directed specifically at terrorism; existing marine anti-terrorismlaw was primarily concerned with cruise ships. (56) The Coast Guard's maritime security regulation has since beenexpanded. Since the 9/11 attacks, the Coast Guard has begun to distinguish more clearly between safetymeasures designed to prevent accidents and security measures designed to prevent sabotage orsubversive acts. The Coast Guard's area maritime security committees, which are led by localcaptains of the port, and include chemical sector representatives, have assessed specific portvulnerabilities and created plans to address those vulnerabilities. (57) These plans evaluate theoverall susceptibility of marine targets, their use to transport terrorists or terror materials, and theiruse as potential weapons. The plans also address how federal, state, and local resources will bedeployed to prevent terrorist attacks. While the vulnerability assessments focus on vessels andfacilities under Coast Guard jurisdiction, some scenarios involve other vital port infrastructure likebridges, channels, and tunnels. (58) The Coast Guard has used these assessments in augmentingsecurity of key marine assets and in developing the agency's new maritime security standards underthe Maritime Transportation Security Act of 2002 (MTSA, P.L. 107-295 ). (59) The Coast Guard also has led in the creation of the International Ship and Port FacilitySecurity Code (ISPS Code) promulgated by the International Maritime Organization, a UnitedNations organization that establishes standards for the safe and secure operation of ships andports. (60) The ISPSCode, which went into effect on July 1, 2004, largely parallels the MTSA requirements. The ISPSCode requires that every ship and certain port facilities around the world draw up a security plan tobe approved by their national government. These security plans must indicate the operational andphysical security measures to be taken under three tiered threat levels (normal, medium, and high). Every ship and port must also designate a security officer to ensure that the ISPS Code isimplemented; must deploy required security equipment (e.g., vessel tracking devices); must monitorand control access of people and cargo at the port and aboard the vessel; and must ensure thatsecurity communications are readily available. According to the Coast Guard, by July 1, 2004, theservice reviewed and approved the security plans of over 9,000 vessels under the provisions of theMTSA and ISPS Code. The Coast Guard also completed on-site inspections of thousands of thesevessels six months thereafter to ensure the plans were being implemented as approved. In additionto these vessel inspections, the Coast Guard has completed security assessments of the nation's 55"most economically and militarily strategic" ports. (61) In addition to enforcing MTSA regulations and the ISPS Code, the Coast Guard has takenspecific measures to help prevent a terrorist attack against hazardous chemicals vessels and otherhigh consequence shipping. The Coast Guard has evaluated the vulnerability of marine tankers toseveral different types of attack, such as "a boat loaded with explosives" or "being commandeeredand intentionally damaged." (62) The agency is also conducting a special assessment of inlandbarges carrying certain dangerous cargoes to evaluate their vulnerabilities and analyze potential blastconsequences. (63) TheCoast Guard requires all U.S. bound vessels and inland barges carrying hazardous chemicals toreport information about the vessel, crew, cargo, and voyage four days prior to the ship's arrival ordeparture. Based on this information and other intelligence, the Coast Guard determines thepotential security risk that a vessel may pose, whether it may enter U.S. waters, and what actions theagency will take to ensure secure transit. The Coast Guard may board a vessel before or duringentrance to a harbor and may post armed sea-marshals on the bridge or at the engine room to preventunauthorized access during harbor transit. Ships carrying hazardous cargo may be escorted by CoastGuard patrol boats that enforce a moving security zone around the vessel while it transits a harbor( Figure 6 ) and while moored at a waterfront terminal. (64) While moored, vessels carrying hazardous cargo may be requiredto provide their own roving patrols on deck and at the terminal. During periods of high threat levels,or in certain sensitive areas of a harbor, non-commercial traffic may be banned. The Coast Guardalso maintains 13 Maritime Safety and Security Teams nationwide which can perform securityoperations at any given port area(s) when needed. The Coast Guard is trying to better distinguish suspicious from legitimate harbor activity inan effort the service refers to as "maritime domain awareness." Consistent with the ISPS Code andMTSA, cargo and passenger vessels calling at U.S. ports are required to be outfitted with AutomaticIdentification System (AIS) transponders which allow shore-side facilities and other ships to trackvessel movement. (Smaller craft, such as fishing and recreational boats, are not required to installAIS transponders). (65) The Coast Guard has installed AIS receivers at ten port areas to date, and plans to install receiversat all remaining U.S. ports. The Coast Guard is also developing "joint harbor operations centers"(JHOCs) in U.S. harbors in a model simialr to air traffic control towers at airports. JHOCs wouldhave various equipment to track and monitor vessel traffic in a harbor, such as AIS, radar, voicecommunications with ships via radio, closed-circuit television, and personnel with binoculars. Theywould also have access to intelligence databases and be staffed with other federal security agenciesand local law enforcement in order to better coordinate a response should a threat materialize. Through its "Waterways Watch" program, the Coast Guard is enlisting the eyes and ears of therecreational boating public on how to identify and report suspicious activity. The Coast Guard isworking with the Transportation Security Administration to develop a more secure merchant marinercredential and a credentialing card for landside workers, such as longshoremen and truckdrivers. (66) Figure 6: Coast Guard Patrol Boats Escorting a Chemicals Barge Source : U.S. Coast Guard, 8th Dist. "Photography: Marine Safety." Internet page. Feb 14, 2005. http://www.piersystem.com/external/index.cfm?cid=425&fuseaction=EXTERNAL.press&doctypeID=4758 . The National Oceanic and Atmospheric Administration (NOAA) maintains hazardousmaterial emergency response-related capabilities which may be used by the Coast Guard and otheragencies to plan for, or quickly respond to, an accident or attack on a hazardous chemical vessel. These capabilities include the CAMEO program, an integrated set of chemical dispersion softwaremodels jointly developed by NOAA and EPA for first responders and emergency planners. TheCAMEO program includes a database with response recommendations for over 6,000 chemicals, anelectronic mapping program, and a model that predicts the movement of chemical gases in theatmosphere. (67) NOAAhas also linked its three operational air dispersion models to improve its support to emergencyplanners and first responders. According the agency, NOAA partnered in 2002 with the Coast Guardand the Office of Naval Intelligence "in conducting risk assessments on 50 of the most hazardouschemicals stored at or shipped in bulk through U.S. ports." (68) CRS is not aware of anypublicly available information related to these risk assessments. NOAA, along with the DHS, is alsocurrently helping to coordinate federal chemicals emergency response through the InteragencyModeling and Atmospheric Assessment Center, which provides custom products and a single pointof contact for all-hazards dispersion modeling predictions and assessments. (69) Industry groups also have taken steps to promote the security of hazardous marine cargo. When evaluating hazardous materials regulations, the Coast Guard receives input from the ChemicalTransportation Advisory Committee (CTAC). CTAC is an advisory group made up of membersselected from the following sectors associated with marine transportation of hazardous materials:chemical manufacturing, vessel design and construction, occupational safety and health, marineenvironmental protection, and the marine transportation of chemicals. In October 2002, CTACformed a Subcommittee on Hazardous Cargo Transportation Security for the purpose of assessingvulnerability, promoting industry security awareness, and consequence management. The AmericanWaterways Operators (AWO), a trade association of barge operators, in consultation with the CoastGuard and Army Corps of Engineers, created a model vessel security plan to thwart potential terroristattacks on the inland waterway system. The plan includes an appendix which lists cargoes AWOhas deemed "high consequence." (70) The Chemical Distribution Institute (CDI) is a non-profitorganization financed by the chemical industry which serves as an industry "self-policing"mechanism. CDI inspects and issues audit reports on the world's fleet of chemical and LPG tankers,tank storage terminals, and container ships carrying hazardous cargo. (71) Separately, the AmericanChemistry Council has also issued transportation security guidelines for the chemical industry. (72) Securing hazardous chemicals against terrorist attack is a priority in U.S. homeland securitypolicy. Given the large quantities of such chemicals found aboard marine vessels on U.S. waterwaysand in U.S. ports, it is apparent that maritime security of chemical cargo is necessarily included inthis priority. Although Congress and the Coast Guard have put in place new maritime securitymeasures since 9/11, several policy issues related to hazardous marine cargo may warrant furtherCongressional attention. The most significant concerns are risk uncertainty, resource availability,and security effectiveness, although other issues have also emerged in recent policy discussions. Terrorism risk is generally defined as the product of threat, vulnerability, and consequence. Significant uncertainties exist across all three of these factors as they relate to hazardous marinecargo. The potential threat posed by terrorists targeting ships in U.S. waters, for example, has beenthe subject of debate since 9/11. Although experts acknowledge the general threat information putforth by government agencies, some believe that public concern about specific threats to hazardouschemicals shipping is overstated and should not impede maritime trade. (73) Others assert that terroristshave demonstrated both the desire and capability to attack such shipping with the intention ofharming the general population. (74) The basis of such conclusions is open to question, however, dueto the inherent uncertainty of threat intelligence and the shifting goals and methods of potentialattackers. As the Federal Energy Regulatory Commission has remarked, "unlike accidental causes,historical experience provides little guidance in estimating the probability of a terrorist attack." (75) Vulnerability and consequence analysis of marine chemical hazards also may face importantuncertainties. The Coast Guard reports having approved mandatory security vulnerabilityassessments and security plans for thousands of vessels as required under the MTSA and ISPS codes. NOAA reports having established a partnership with the Coast Guard to conduct hazardous chemicalrisk assessments at U.S. ports. Notwithstanding these Coast Guard activities, some analysts suggestthat the potential vulnerabilities and consequences of a terrorist attack on (or with) a hazardousmarine cargo vessel are not well understood. Recent public controversy about terrorist risks to LNGshipping, for example, has been largely driven by conflicting vulnerability and consequence studiesfrom a variety of government and private sector groups. (76) The security sensitivity of such assessments and planscomplicates efforts to evaluate them. Little public information is available, for example, on thephysical vulnerabilities of different types of marine vessels to terrorist attacks with weapons orimprovised explosives, although the Cole and Limburg attacks suggest that such vulnerabilities exist. Furthermore, while there is a body of public marine research related to accidental release ofhazardous chemicals, little appears directly related to intentional release, which may havesubstantially different characteristics. Vessel vulnerability assessments and security plans are centralto U.S. maritime security strategy, but their value and effectiveness for hazardous chemicals carriersmay be limited if operators lack a full understanding of vulnerability and consequence, especiallyfor attacks affecting the general public. It may be impossible for federal officials to determine with precision the risk of terror attackson hazardous marine cargoes. Nonetheless, any reduction in risk uncertainty would aid inprioritizing maritime security activities. For example, the Coast Guard may be able to focus its portsecurity efforts through ensuring timely reception of the most relevant intelligence information fromfederal intelligence agencies. Security experts may further reduce risk uncertainty through researchand analysis of vessel vulnerabilities and chemical attack consequences. Such analyses may benefitfrom the use of standard models and methodologies, such as those maintained by NOAA, those usedby EPA for chemical plant releases on land, or the model developed for LNG tankers in conjunctionwith recent marine terminal siting applications. (77) A federal role may be important when performing such securityanalysis to help ensure methodological consistency across chemicals, vessel types, locations, andagencies. The costs associated with hazardous marine cargo security and the potential diversion ofCoast Guard and other government agency resources from other activities have been a concern topolicy makers. (78) According to Coast Guard officials, the service's maritime security expenditures are not allincremental, since they are part of the Coast Guard's general mission to protect the nation's watersand coasts. Nonetheless, Coast Guard staff have acknowledged that resources dedicated to securingmarine shipments of hazardous cargo might be otherwise deployed for boating safety, search andrescue, drug interdiction, or other missions. (79) A recent Government Accountability Office (GAO) studyreported that security activities grew from 4 percent to 34 percent of the Coast Guard's total annualresource hours in the two years following 9/11. (80) President Bush requested $8.1 billion for the Coast Guard in FY2006. Of this total, thePresident requested $2.2 billion for port, waterway, and coastal security, which is a 6% increase overthe FY2005 enacted amount. Hazardous marine cargo security is funded from the Coast Guard'sgeneral maritime security budget, so it is not a line item in the FY2006 DHS budget request. However, the Coast Guard's FY2006 budget does seek an additional $11 million in general maritimesecurity funding over FY2005 levels. These resources are for new small response boats andassociated crew to increase the Coast Guard's operational presence and response posture, enforcesecurity zones, and escort high interest vessels. (81) The budget also includes $5.7 million to implement a nationwidevessel monitoring system and $87.4 million to increase surveillance of vessels by aircraft. State and local agencies are also seeking more funding to offset the costs of hazardous marinecargo security. These funding concerns are most clearly illustrated in the case of LNG tankers,which may cost the public up to $80,000 to secure each time they deliver a shipment. (82) State and local police andemergency services agencies pay a significant share of these costs. They believe LNG security costsmay force them to divert limited local resources from other important public services. (83) Acknowledging suchconcerns, federal officials have recommended that new LNG terminal operators pay the costs of anyadditional maritime security or safety needed for their facilities. (84) The Energy Policy Actof 2005 requires private and public sector cost-sharing for LNG tanker security (Sec. 311d). Nonetheless, because the accounting of security costs is ambiguous and tied to uncertain sources offederal funding, such as DHS port security grants, some government officials continue to voiceconcern over LNG security costs. (85) Furthermore, some LNG companies have resisted suggestionsthat they pay more for public security, reasoning that the federal, state, and local taxes they payshould cover public law enforcement and emergency services. (86) Others have expressed awillingness to pay for "excess" security only if it exceeds the level of security service ordinarilycommensurate with corporate tax payments. (87) The security costs associated with LNG shipments may not be indicative of the costs tosecure other EPA/RMP hazardous marine cargo. New security technology, more specific threatintelligence, and changing threat assessments may all help to lower hazardous marine cargo securitycosts in the future. Nonetheless, the costs to public agencies to secure hazardous marine cargo fromterrorist attack appears significant and may warrant a review of associated cost-sharing mechanisms. As this report notes, the Coast Guard has in place a range of security measures to protecthazardous chemicals shipping. Nonetheless, the effectiveness of these measures is regarded as anopen issue. Given the current understanding of general marine threats, some question whether theCoast Guard efficiently deploys the security resources it has. (88) Others question whetheradequate measures are in place to evaluate the Coast Guard's security activities. For example, theGAO has concluded: Although there is widespread agreement that actionstaken so far have led to a heightened awareness of the need for [maritime] security and an enhancedability to identify and respond to many security threats, assessing the degree of progress in makingthe nation more secure is difficult. Thus far, seaport security actions ... lack performance measuresto define what these activities are intended to achieve and measure progress toward these goals. (89) Addressing hazardous cargo, some specifically question whether Coast Guard security activities adequately address relative terrorism risks within and across ports based on quantitativerisk analysis. Within a given port, for example, there may be a greater or lesser risk from terroristattacks on ammonia tankers than from dirty bombs hidden aboard container ships. The Coast Guardstates that its internal maritime security plan identifies "high risk cargos" and conducts operationsto address those risks. (90) Nonetheless, given the terrorism risk uncertainties associated with hazardous chemical vessels andthe competing demands for Coast Guard resources, some question whether the level of Coast Guardsecurity for hazardous chemicals vessels appropriately reflects their relative risk. (91) Because Coast Guard portcaptains have considerable discretion in the deployment of security resources within their ports,some observers also question whether similar chemical shipments posing similar terrorism hazardsreceive different levels of protection from one port to another. While differences in protection maybe appropriate in some instances, such a situation could lead to excessive security of hazardousmarine cargoes in some ports and inadequate security in others. In its oversight of the Coast Guard'ssecurity activities, Congress may take steps to assess the effectiveness of the agency's hazardousmarine cargo activities in the context of its larger maritime security responsibilities. Emergency response to marine chemical attacks is another concern among security analysts. The Homeland Security Council's national planing scenario involving chemical cargo ships assumes350 deaths and 1,000 hospitalizations resulting from an attack. (92) Others have suggestedhigher casualties for specific types of chemical tanker attacks in shipping channels near denselypopulated areas. If a terrorist attack succeeded in injuring or killing such large numbers of people,it might overwhelm federal and local emergency agencies and medical facilities. An attack involvingone or more toxic chemicals might further complicate emergency response by imposing specialdemands on emergency response teams and requiring specialized medical treatment for poisoningand burns. Salvage of a vessel damaged or sunk in such an attack could be an additional problem,due to the chemical hazard and other limitations among U.S. marine salvage companies. (93) Because of the hazardous cargo terrorism risk, it may be judged to be prudent for emergencyand medical authorities near potentially affected waterways to develop specific prospective measuresto deal releases of chemical cargoes most relevant to their region. Federal or private sectorassistance in the form of funding or expertise might be utilized to support such efforts, especially forcommunities with insufficient capabilities to develop emergency response plans. The DOT'sHazardous Materials Emergency Preparedness Fund (created in the Transportation Equity Act of2005, Sec. 7114d), and the DHS's Homeland Security Grant Program are two potential source offunding for marine chemicals emergency response plans, but Congress may opt to considerothers. (94) Theemergency response plan and cost-sharing provisions for coastal LNG terminals and tankers in TheEnergy Policy Act of 2005 (Sec. 311d) may be an alternative legislative model for such planning. This report shows that marine shipments of EPA/RMP hazardous chemicals are comparablein volume to quantities stored at large chemical plants, and are typically many times larger thanshipments in individual rail or highway tankers. Marine vessels carrying hazardous chemicals oftenpass near populated areas along U.S. waterways and through the largest and most commerciallyimportant U.S. ports. Available studies and anecdotal evidence suggest that these shipments maybe attractive terrorist targets and, if successfully attacked or used as a weapon, could causecatastrophic injuries among the general public. Both government and industry have taken numerous steps to try to improve maritime securityof hazardous chemical cargo. The MTSA gives the Coast Guard clear and far-ranging authority overthe security of hazardous marine shipping. In its efforts to fulfill this legislative mandate, the CoastGuard is continuing to evolve its security activities. As oversight of the federal role in marinechemicals security continues, Congress may raise questions concerning terrorism risk uncertaintyand efforts by federal agencies and the private sector to rigorously evaluate that risk. Congressionalpolicy makers may also analyze whether the Coast Guard, other government agencies, and theprivate sector have sufficient resources to secure hazardous chemical cargo commensurate with thatrisk and whether current security measures will be effective against a terrorist attack. Since a marineattack is possible even under tight security, evaluating the emergency response capabilities of coastalcommunities exposed to chemical shipping hazards may be of interest as well. In addition to these specific issues, Congress may assess how the various elements of U.S.hazardous chemicals marine security fit together in the nation's overall strategy to protect the publicfrom hazardous chemicals and cargo. Bulk quantities of hazardous chemicals are found in marinevessels, in rail and highway tankers, and in chemical facilities on land. As noted earlier in thisreport, the same physical shipment of a chemical may pass sequentially through all these sectors. Balancing the nation's chemicals security resources across these sectors is a policy challenge becausemarine transportation, land transportation, and chemical facilities fall under different homelandsecurity authorities and regulations. Limited vulnerability and consequence information, especiallyfor marine transportation, complicates this problem by making it difficult to compare terrorism riskscenarios across sectors, even for the same chemical hazard. Without such a comprehensiveperspective on hazardous chemical risks, security analysts may have difficulty identifying whichchemicals assets to protect and how well to protect them with the limited security resourcesavailable. Likewise, diverting marine resources away from safety to enhance security might furtherreduce terror risk, but increase overall risk, if safety programs become less effective as a result. Reviewing how these security priorities and activities fit together to achieve common goals couldbe an oversight challenge for Congress. Source: 49 C.F.R. § 173.2a. Note that DOT Divisions are subcategories within a Class. Sources: 40 C.F.R. § 68, 49 C.F.R. § 173.2a The Army Corps of Engineers (ACE) collects, processes, and archivesdetailed marine commerce statistics through its Waterborne Commerce StatisticsCenter (WCSC). These statistics are used by the ACE primarily to plan new capitalprojects and manage existing projects. The ACE maintains separate domestic andforeign commerce databases. The domestic database records domestic and foreignvessel trips and tonnages by commodity for U.S. ports and waterways. The foreigndatabase records waterborne commerce between the U.S. and foreign countries byU.S. port, foreign port, foreign country, commodity group, and tonnage. Vessel typesinclude dry cargo ships and tankers; barges (loaded and empty); fishing vessels;towboats (with or without barges in tow); tugboats; crew boats and supply boats tooffshore locations; and newly constructed vessels from the shipyards to the point ofdelivery. Vessels remaining idle during a monthly reporting period are also reported.Under federal law, vessel operators must report domestic waterborne commercialmovements to the ACE. (95) The ACE waterborne commerce databases were not developed to support thetype of chemical-specific analysis presented in this report. However, they may beused for that purpose subject to certain significant limitations and caveats . At therequest of CRS, the ACE provided its best estimates of EPA/RMP cargo statisticsderived from the available data. Based on a review of more limited shipping andhazardous chemicals data from other sources, CRS believes the ACE estimates aresufficiently accurate to warrant inclusion in this report. However, the values reportedhere should be viewed strictly as estimates, with the following key caveats . Cargo Classification. The ACEdatabases identify cargos using two sets of standardized commodity codes--aninternal WCSC code, and the United Nations (UN) international standard code. Insome cases, these commodity codes do not consistently or uniquely correspond to theindividual hazardous chemicals in the EPA/RMP list, which are identified by theirChemical Abstract Service (CAS) registry numbers as assigned by the AmericanChemical Society. Such inconsistencies arise either from commodity aggregation ordifferences in definition. CRS has attempted to identify and correct for theseinconsistencies to the extent possible through comparison of WCSC and UN codes,and consultation with classification experts. For example, the WCSC systemclassifies LNG and LPG under the same 5-digit code (34000). Using LNG trade datafrom the Department of Energy, CRS was able to separate the LNG and LPGvolumes for this report. Nonetheless, shipment estimates reported for a number ofother EPA/RMP chemicals likely include some volume of other chemicals not on theEPA/RMP list. Alternatively, shipments of certain EPA/RMP chemicals may beincluded in the shipment totals for a similar EPA/RMP chemical. (96) Cargo Volumes. As noted earlierin this report, chemicals cargo vessels may load or unload partial cargoes at multiplelocations over the course of a single shipment. The ACE data report the movementof cargo at each of these loading and unloading points, but cannot report the totaltonnage of cargo actually carried aboard a vessel at any time. Data Quality. The ACEwaterborne commerce databases contain millions of records. Like any database ofthis size, errors in data classification, entry, and processing may appear in summarystatistics. Furthermore, CRS's data request involved new and complex queries of theACE databases. The ACE employs a rigorous internal review process for dataanalysis and reporting to minimize the infiltration of such errors into its analyticproducts. Nonetheless, CRS identified inconsistencies in the ACE estimates whichthe ACE was able to correct. It is possible, however, that additional, dataquality-related errors have escaped both the notice of the ACE and CRS. The ACE waterborne commerce databases contain detailed commercialinformation about private companies. This report includes only summary estimatesof chemicals shipping data and does not associate shipping data for any specificchemical with any named vessel or operating company. ACE data at the level ofindividual shipments, vessels, or operators is considered privileged information notfor public release under 18 U.S.C. § 93.905. CRS products are not prepared forgeneral public distribution. | Since the terror attacks of September 11, 2001, the nation has been working to improve thesecurity of hazardous chemicals transportation. Marine shipments of hazardous chemical cargo maybe attractive terrorist targets because of their large volume and inherent toxicity or flammability. Anecdotal evidence and international events suggest that terrorists may have both the desire andcapability to attack such shipments in U.S. waters. Building on existing legislation, Congress isanalyzing the security of hazardous chemical marine shipments and deciding whether to strengthenrelated federal security efforts. H.R. 2651, for example, would increase penalties for criminal orterrorist activities around ports and marine vessels. S. 1052 includes provisions to increase generalport security, including foreign port security. Drawing on marine commerce data from the Army Corps of Engineers (ACE), CRS hasanalyzed marine shipments of acutely toxic or combustible chemicals as defined underEnvironmental Protection Agency (EPA) regulations. According to this analysis, over 100,000marine shipments (54 million tons) of chemicals potentially capable of causing mass casualties(injuries or deaths) among the general public passed through U.S. waters in 2003. These chemicalshipments accounted for 2% of U.S. marine cargo tonnage and were shipped through 113 U.S. ports. The top 30 ports handled 95% of this hazardous chemical tonnage. Most marine shipments ofhazardous chemicals are much larger than such shipments on land; they would be of sufficientvolume, on average, to require an off-site risk management plan under EPA rules if the samequantity of chemical was stored at a chemical plant. The Maritime Transportation Security Act (MTSA, P.L. 107-295 ) and the International Shipand Port Facility Security Code give the Coast Guard far-ranging authority over the security ofhazardous marine shipping. The agency has developed port security plans addressing how to deployfederal, state, and local resources to prevent terrorist attacks. Under the MTSA, the Coast Guard hasassessed the overall vulnerability of marine vessels, their potential to transport terrorists or terrormaterials, and their use as potential weapons. The Coast Guard has employed these assessments toaugment marine assets security and develop new maritime security standards. As federal oversight of hazardous chemical marine security continues to evolve, Congressmay raise questions concerning terrorism risk uncertainty and efforts by federal agencies and theprivate sector to rigorously evaluate that risk. Congress may assess whether responsible federalagencies and private sector entities have in place sufficient resources and effective measures tosecure hazardous chemical marine cargo from terrorist attack. Congress may also evaluate theemergency response capabilities of coastal communities exposed to chemical shipping hazards. Determining how hazardous chemical marine security fits together with other homeland securitypriorities to achieve common security goals could be an oversight challenge for the 109th Congress. This report will be updated as events warrant. |
The location and permitting of facilities used to transmit electricity to residential and commercial customers have been the province of the states (with limited exceptions) for virtually the entire history of the electricity industry. State and local governments are well positioned to weigh the local factors that go into siting decisions, including environmental and scenery concerns, zoning issues, development plans, and safety concerns. Because the grid formerly consisted of many localized transmission and distribution networks, federal interest in siting of the transmission system was limited. Although the federal government has increasingly exercised its authority over transmission reliability, it has, for the most part, left transmission siting decisions to states. However, as concerns over grid congestion and its impact on reliability have grown, the federal government has carved out a role in transmission siting as a "backstop" siting authority in designated transmission corridors. Although this new role has met some resistance from those who oppose expanding federal authority over siting, other policymakers and commentators have advocated an increased federal role in order to encourage development of renewable energy, which is often located in remote areas that are not easily connected with the interstate grid. The courts have also thwarted the federal government's efforts to create transmission corridors. In 2011, the Ninth Circuit vacated the Department of Energy's congestion study underlying the designation of national interest electric transmission corridors, and as a result, there are presently no such corridors in effect. Moreover, the Fourth Circuit reversed FERC's interpretation of its siting authority with respect to electric transmission facility applications that have been rejected by a state agency. The increased federal role in transmission siting decisions raises a number of legal and policy issues. Foremost among these are the concerns over loss of local and regional input and control that often accompany an expansion of federal power into a process traditionally reserved for the states. Indeed, the Federal Power Act specifically reserves certain aspects of governance over the electricity industry to the states, and efforts to expand the federal role in the past have met with resistance from state public utility commissions and advocates of federalism. This report provides a review of the history of transmission siting; a summary and analysis federal authority to designate transmission corridors and provide backstop siting authority for transmission facilities in those corridors; a discussion of the legal issues associated with this expansion of federal authority and any future expansions of federal transmission siting authority; and a look at recent developments concerning transmission siting on federal lands. In order to understand the issues that arise from federal involvement in electricity transmission siting decisions, it is necessary to briefly review the history of the power industry and the development of the transmission grid. Transmission lines connect power generation facilities to distribution systems that make final delivery of electricity to commercial and residential customers. For most of the 20 th century, these lines were generally constructed and operated by "vertically integrated" electric utilities; that is, state-authorized and state-regulated monopolies that owned power generation plants, transmission facilities, and local distribution systems, and ultimately sold electricity to retail customers. While these transmission lines were almost exclusively intrastate in nature at first, the transmission system expanded rapidly to include interstate transmission lines. The Federal Power Act (FPA), first enacted in 1920 as the Federal Water Power Act and amended to include interstate electricity transmission in 1935, granted the Federal Power Commission jurisdiction over wholesale electric power transactions and the interstate transmission of electric power. The states, for the most part, retained jurisdiction over the siting of generation and transmission facilities as well as the pricing of most retail electric power transactions. Over the next several decades, this mostly local electric power system began to interconnect into larger regional grids. Interconnections were motivated by the reliability benefits of connecting a utility to its neighbors, opportunities for power sales, and joint ownership of increasingly large and expensive power plants. The development of higher voltage transmission lines—which made it possible to transmit electricity long distances with relatively small losses—also spurred interconnection. Throughout this expansion, the states continued to be the sole authority for most decisions about where to site electric power transmission facilities. Federal transmission systems, such as the Tennessee Valley Authority and some municipal and cooperative utility systems, were able to site transmission lines independent of state authority. However, the vast majority of transmission facilities were constructed by investor-owned utilities under state jurisdiction. Difficulty in constructing new transmission led Congress to include federal transmission siting authority as part of the Energy Policy Act of 2005 (EPAct). One section of EPAct authorized the Department of Energy (DOE) to designate "National Interest Electric Transmission Corridors" based on DOE's findings after conducting a study of congestion as directed by EPAct. EPAct authorized FERC to permit the construction and operation of electricity transmission facilities within the boundaries of the National Interest Electric Transmission Corridors. This authority may not be exercised by FERC unless the state where the facility would be sited lacks the authority to issue the permit, the applicant does not qualify for the permit in the state, or the state has "withheld approval" of the permit for more than one year. The federal transmission siting authority created in EPAct is a "backstop" authority that is exercised only if the state cannot authorize the facility or if it has "withheld approval." This authority, which is discussed in detail infra , was adopted after the blackouts in August of 2003 that interrupted service, in some cases for days, to many customers across the northeastern United States and in Canada. EPAct directed the Secretary of Energy to designate the corridors only in areas in which it finds "electric energy transmission capacity constraints or congestion that adversely affects consumers." In addition, FERC was authorized to permit transmission facilities only upon a finding that the proposed construction or modifications would "significantly reduce transmission congestion in interstate commerce and protects or benefits consumers." Recent events, however, have led some legislators and commentators to push to expand the federal role in transmission siting. Some have advocated an expanded federal role as a means to encourage development of green energy technology. Others have suggested that a recent ruling by the U.S. Court of Appeals for the Fourth Circuit interpreting the transmission siting section of EPAct has limited federal siting authority too severely, and that legislation is needed to expand FERC's siting authority to guard against future congestion problems. These concerns, and some of the proposals that address them, are explored further below. Congressional authority for legislation affecting the transmission of electric power, including the siting of transmission facilities, would likely be dependent upon Congress's constitutional authority to "regulate commerce ... among the several states." This constitutional authority to legislate pursuant to the power to regulate interstate commerce has expanded significantly in the last 75 years. The plain meaning of this language might indicate a limited power to regulate commercial trade between persons in one state and persons outside of that state. During the early 1900s, the Supreme Court was confronted with statutes which went beyond regulation of trade and addressed other related economic activities. At that time, the Court struck down a series of federal statutes which attempted to extend commerce regulation to activities such as "production," "manufacturing," or "mining." Starting in 1937, however, with the decision in NLRB v. Jones & Laughlin Steel Corporation , the Supreme Court held that Congress has the ability to protect interstate commerce from burdens and obstructions which "affect" commercial transactions. Subsequent Supreme Court decisions found that Congress had considerable discretion in regulating activities which "affect" interstate commerce, as long as the legislation was "reasonably" related to achieving its goals of regulating interstate commerce. Thus the Court found that in some cases, events of purely local commerce (such as local working conditions) might, because of market forces, negatively affect interstate commerce, and thus would be susceptible to federal regulation. The Court has also held that an activity which in itself does not affect interstate commerce could be regulated if all such activities taken together did affect interstate commerce. In the 1995 case of United States v. Lopez , however, the Supreme Court identified three categories of laws which are authorized by the Commerce Clause: (1) laws which regulate channels of commerce; (2) laws which regulate instrumentalities of commerce; and (3) laws which regulate economic activities which affect commerce. Within the third category of activities which affect commerce, the Lopez Court determined that the power to regulate commerce applies to intrastate activities only when they "substantially" affect commerce. Given the Court's broad application of these three acceptable categories of legislation, it seems likely that congressional action expanding the federal role in siting of electric transmission facilities would be found to fall into at least one of the categories. Although an argument can be made that the contemplated legislation could fall under any of the three categories, it seems particularly likely that legislation impacting the interstate electricity grid could be considered to be affecting an "instrumentality" of interstate commerce. The interstate electricity grid has characteristics similar to other interstate systems previously found to be instrumentalities of commerce, such as the railroads, the mail delivery, or the telephone network. In order to rely upon this prong of the "interstate commerce" test, there likely would need to be a demonstration that the legislation in question is intended to provide for the safety, efficiency, and accessibility of the electricity grid. Such a demonstration seems plausible with respect to legislation that could enhance the reliability of electricity service by easing the regulatory path to obtaining a permit for construction of transmission facilities. Also, the broadest of the three categories, legislation "affecting" interstate commerce, may be applicable to legislation. As noted supra , even local activity can be legislated under this category if the legislation "exerts a substantial economic effect on interstate commerce." There is an argument that the ability to site electric power transmission facilities in accordance with national interest and with less pressure from local interests would exert such a substantial economic effect on interstate commerce. Such an argument would likely be bolstered by any information that may be available about the aggregate effect of transmission siting denials by state regulatory agencies on the reliability and efficiency of the interstate grid. In those instances in which the courts have evaluated legislation impacting the electricity industry in areas previously considered the province of state regulatory agencies, the courts have found such legislation to be within Congress's Commerce Clause authority. One relevant Supreme Court decision on this issue is FERC v. Mississippi . In that case, the Court heard challenges to provisions in the Public Utility Regulatory Policies Act of 1978 (PURPA) that directed state utility commissions to consider adoption of certain retail rate designs and regulatory standards affecting retail rates, and to implement rules designed to encourage development of certain kinds of generation facilities, known as "qualifying facilities." The State of Mississippi alleged that these PURPA requirements for state action exceeded congressional power under the Commerce Clause. The Court rejected the state's challenge, deferring to the congressional findings that "the protection of the public health, safety and welfare, the preservation of national security, and the proper exercise of congressional authority under the Constitution to regulate interstate commerce require," ... a program for increased conservation of electric energy, increased efficiency in the use of facilities and resources by electricity utilities, and equitable retail rates for electricity consumers ... The Court noted that in accordance with Commerce Clause precedent, it was tasked only with determining if the congressional findings had a rational basis. Citing committee hearings and their findings, the Court found that the congressional findings were supported. In fact, the Court went further, noting that it "agree[s] with appellants that it is difficult to conceive of a more basic element of interstate commerce than electric energy, a product that is used in virtually every home and every commercial or manufacturing facility. No state relies solely on its own resources in this respect." The Court reached a similar conclusion with respect to the electricity transmission in New York v. U.S . In that case, the Court reviewed FERC Order No. 888, in which FERC mandated that utilities offer access to their electricity transmission facilities to other companies generating electric power. This open access transmission mandate included a requirement for open access for retail electricity transmission. According to FERC, it was "irrelevant to the Commission's jurisdiction whether the customer receiving the unbundled transmission service in interstate commerce is a wholesale or retail customer." This exercise of FERC's jurisdiction was challenged as beyond the scope of the FPA, which grants FERC jurisdiction over "the transmission of electric energy in interstate commerce and the sale of such energy at wholesale." The petitioners claimed that FERC's jurisdiction should be limited to wholesale transmissions pursuant to the FPA. The Court rejected these challenges, finding that "[t]he unbundled retail transmissions targeted by FERC are indeed transmissions 'of electric energy in interstate commerce,' because of the nature of the interstate grid." It is important to note that the Court's analysis focused on the meaning of "interstate commerce" as the term is used in the FPA, and not the Constitution. However, the Court's findings may be a useful predictive tool in determining how the Court might view a congressional exercise of the Commerce power in the electricity marketplace. Interpreting the impact of the decision, one observer said that "[i]n practical terms, this means the federal government could assert jurisdiction all the way to a consumer's toaster if it so chose, excepting such exclusively intrastate matters as the siting of power plants." This precedent seems to reflect a consistent determination by the Court that legislation that impacts electricity transmission, even if the direct impact of the legislation is local, necessarily affects interstate commerce. The Court has, on multiple occasions, acknowledged that the changing and evolving electricity grid has resulted in an interdependent interstate system. Any legislation that impacts that system or the commodity that it transmits would likely be considered legislation pursuant to Congress's authority to regulate interstate commerce. As discussed supra , decisions about where to site electricity transmission facilities have historically been made almost exclusively by state regulatory agencies. In 2005, EPAct established for the first time a significant federal role in transmission siting decisions. Section 1221 of EPAct established what is commonly called a "backstop" siting authority for FERC. It authorized FERC to issue permits for the construction or modification of transmission facilities in certain circumstances in areas designated by the Secretary of Energy as "National Interest Electric Transmission Corridors." EPAct directed the Secretary of Energy to "conduct a study of electric transmission and congestion" and subsequently "issue a report, based on the study, which may designate any geographic area experiencing electric energy transmission capacity constraints or congestion that adversely affects consumers as a national interest electric transmission corridor." In making this determination, EPAct provided that the Secretary might consider whether (A) the economic vitality and development of the corridor, or the end markets served by the corridor, may be constrained by lack of adequate or reasonably priced electricity; (B)(i) economic growth in the corridor, or the end markets served by the corridor, may be jeopardized by reliance on limited sources of energy; and (ii) a diversification of supply is warranted; (C) the energy independence of the United States would be served by the designation; (D) the designation would be in the interest of national energy policy; and (E) the designation would enhance national defense and homeland security. The establishment of these National Interest Electric Transmission Corridors paves the way for the first significant federal role in electric transmission facility siting. EPAct gives FERC the authority to issue permits for the construction or modification of electric transmission facilities that are located in a National Interest Electric Transmission Corridor. The permit application must also satisfy the following criteria to be eligible for FERC authorization: (1) (A) a State in which the transmission facilities are to be constructed or modified does not have authority to: (i) approve the siting of the facilities; or (ii) consider the interstate benefits expected to be achieved by the proposed construction or modification of transmission facilities in the State; (B) the applicant for a permit is a transmitting utility under this Act but does not qualify to apply for a permit or siting approval for the proposed project in a State because the applicant does not serve end-use customers in the State; or (C) a State commission or other entity that has authority to approve the siting of the facilities has—(i) withheld approval for more than 1 year after the filing of an application seeking approval pursuant to applicable law or 1 year after the designation of the relevant national interest electric transmission corridor, whichever is later; or (ii) conditioned its approval in such a manner that the proposed construction or modification will not significantly reduce transmission congestion in interstate commerce or is not economically feasible; (2) the facilities to be authorized by the permit will be used for the transmission of electric energy in interstate commerce; (3) the proposed construction or modification is consistent with the public interest; (4) the proposed construction or modification will significantly reduce transmission congestion in interstate commerce and protects or benefits consumers (5) the proposed construction or modification is consistent with sound national energy policy and will enhance energy independence; and (6) the proposed modification will maximize, to the extent reasonable and economical, the transmission capabilities of existing towers or structures. The American Recovery and Reinvestment Act of 2009 (ARRA) later modified DOE's mission for NIETCs, directing DOE to include areas where renewable energy may be hampered by lack of access to the grid. In most instances, FERC's authority would arise only on those projects for which the state has "withheld approval for more than one year," because the other categories listed above in subsection (1) are rarely applicable. Thus, the FERC transmission siting authority under EPAct functions as a backstop authority, allowing FERC to permit transmission facilities only when there is no state authority to do so, or when the relevant state agency has "withheld approval for more than one year." An important step in creating a process to administer the national interest electric transmission corridors was a FERC rulemaking proceeding intended to outline the process for application for a federal transmission facility construction and operation permit in the corridors. FERC initiated the rulemaking on June 16, 2006, and issued a final rule on November 16, 2006, that established the applicable regulations. For the most part, the rule was not controversial, simply establishing filing requirements and procedures for parties seeking to construct electric transmission facilities in the national interest electric transmission corridors that the Department of Energy would later establish. However, there was one controversial interpretation of Section 1221 of EPAct. As mentioned supra , Section 1221 limited federal electric transmission facility permit applications to, among other criteria, projects for which the state has "withheld approval for more than one year." There is no dispute that this criterion includes projects for which the state regulatory agency has failed to take any action on a properly submitted application. However, it is less clear if a project for which a permit is rejected or denied by the state regulatory agency would be considered a project for which the state has "withheld approval for more than one year." That is to say, does saying "no" to a project amount to withholding approval of a project? In Order No. 689, FERC found that rejection was equivalent to "withholding approval," that therefore a project would be eligible for a federal permit if the state agency had rejected an application, so long as more than a year had passed since the permit request was submitted. FERC found that [t]he statute does not explicitly define the full range of State actions that are deemed to be withholding approval. Nonetheless, to promote regulatory certainty, we believe it is our responsibility to interpret the statutory language in this proceeding and to give all parties notice of such interpretation. To this end, we believe that a reasonable interpretation of the language in the context of the legislation supports a finding that withholding approval includes denial of an application. Because the statutory language was not clear on this point, and because FERC's decision resulted in an expansion of FERC permitting authority, the decision was a topic of considerable debate. One of the FERC commissioners, Suedeen Kelly, felt so strongly that this interpretation of EPAct was incorrect that she dissented in part from the Order, stating that she "believe[s] the majority's interpretation flies in the face of the plain language of the statute, the purposes of the statute, well established principles of statutory interpretation and supporting case law, and inappropriately preempts the States in the process." Commissioner Kelly argued that [t]he authority to lawfully deny a permit is critically important to the States for ensuring that the interests of local communities and their citizens are protected. What the Commission does today is a significant inroad into traditional state transmission siting authority. It gives states two options: either issue a permit, or we'll do it for them. Obviously this is no choice. This is preemption. Courts "have long presumed that Congress does not cavalierly pre-empt" state law. Indeed, courts should not find federal pre-emption "in the absence of persuasive reasons—either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained." In short, courts must start with the "basic assumption that Congress did not intend to displace state law." There is no evidence to counter this "presumption against pre-emption." To the contrary, I find it inconceivable that Congress would have specifically listed ... a number of circumstances that will trigger Commission jurisdiction, yet fail to include on that list denial of a permit. If Congress had intended to take away the States' authority to lawfully deny a permit, surely it would have said so in unmistakable terms. FERC received a number of requests for rehearing of Order No. 689, many of which challenged FERC's interpretation of the "withholding approval" language from Section 1221 of EPAct. FERC, however, denied rehearing of the Order in Order No. 689-A, finding that the word "withheld," as used in this EPAct, is "inclusive, comprising 'denying' approval as well as 'refraining' or 'holding back' from granting approval." FERC concluded that "the most common sense reading of 'withheld approval for more than one year' encompasses any action—whether it is a failure to act or an outright denial—that results in an applicant not having received state approval at the end of one year." Commissioner Kelly continued to dissent from this finding, citing for the most part her reasoning from her previous dissent as reasoning for her continued rejection of the majority's interpretation of the statutory language. In Piedmont Environmental Council v. FERC , several organizations petitioned the U.S. Court of Appeals for the Fourth Circuit for review of Order No. 689 and Order No. 689-A. The petitioners challenged FERC's interpretation of the language in EPAct regarding FERC's transmission siting authority in circumstances where a state has "withheld approval for more than 1 year." The petitioners alleged that FERC had improperly classified a denial of an application as "withholding approval." The court agreed and reversed FERC's interpretation of the EPAct language, remanding the case back to the agency. The court held that FERC's interpretation was contrary to the plain meaning of the statutory language. The court found that the statutory phrase "without approval for more than one year," when read as a whole, "means that action has been held back continuously over a period of time (over one year)." The court stated that "[t]he continuous act of withholding approval for more than a year cannot include the finite act of denying an application within the one-year deadline. The denial of an application is a final act that stops the running of time during which approval was withheld on a pending application." The decision was appealed to the U.S. Supreme Court, and the Court denied certiorari in January of 2010. FERC has not taken any action to amend its interpretation of EPAct in the wake of the Fourth Circuit's decision in Piedmont Environmental Council v. FERC . That decision impacts the approval of permits only in states within the Fourth Circuit. Accordingly, FERC's interpretation of the phrase "withheld approval for more than 1 year" in Order No. 689 and Order No. 689-A is reversed in Maryland, Virginia, West Virginia, North Carolina, and South Carolina; in other states, FERC could theoretically approve a permit for an electric transmission facility when a state has denied a permit application. In any case, as discussed infra , FERC does not presently have the authority to issue any permits under EPAct, because there are currently no National Interest Electric Transmission Corridors in effect. Not surprisingly, the federal permitting authority in an area previously reserved for state regulatory agencies has been the source of further controversy. Another controversial action after the legislation was enacted was the Department of Energy's creation of the Mid-Atlantic Area and Southwest Area National Interest Electric Transmission Corridors. Some commentators began protesting the designation soon after the Department of Energy issued its draft proposal for the corridors in May 2007. One of the more common criticisms was that the corridors were drawn too broadly, resulting in too significant a role for the federal government in what had been local decisions. The Mid-Atlantic Corridor, for example, covers the entire states of New Jersey and Delaware and large parts of New York, Pennsylvania, Maryland, Virginia, and West Virginia. It even reaches into parts of Ohio. Despite these concerns, the Department of Energy approved these corridors in October 2007. However, in February 2011, the Ninth Circuit vacated the Congestion Study that led to the designation of the two National Interest Electric Transmission Corridors, and, as a result, there are no National Interest Electric Transmission Corridors presently in existence. In California Wilderness Coalition v. U.S. Department of Energy, 13 petitions alleged that the Department of Energy failed to consult with affected states in undertaking its Congestion Study as required by EPAct. The Ninth Circuit found that the Department's actions, which included giving an opportunity for comments on the ongoing study and the designation of the National Interest Electric Transmission Corridors, did not amount to consultation, because Congress intended for the Department to confer with the affected states. Additionally, the court determined that the Department's failure to provide affected states with certain modeling data interfered with their own ability to consult with the government, and that these failures to consult did not constitute a harmless error. While the scope of the federal government's ability to site electricity transmission facilities under Section 1221 of EPAct was being debated in the FERC rulemaking proceedings and before the U.S. Court of Appeals for the Fourth Circuit, a number of prominent policymakers have opined on expanding the federal role beyond the "backstop" authority contemplated in EPAct. Some of these policymakers advocated further expanding the federal role in order to ease grid congestion, address reliability concerns, and encourage development of "clean" energy resources. One of the most prominent commentators on transmission siting policy has been former FERC Chair Joseph Kelliher. Kelliher served as a FERC commissioner for five years and as FERC chair for three years. In a letter written to Senator Bingaman dated January of 2009, Kelliher, in the midst of his departure as FERC chair, wrote that Congress should grant FERC "exclusive and preemptive federal siting for transmission facilities used in interstate commerce." Kelliher stressed the importance of expanding transmission facilities in order to address reliability concerns, encourage competitive wholesale markets, and respond to climate change concerns (by allowing "green" energy sources increased access to the grid). Kelliher was critical of the existing framework for electric transmission facility siting, including the EPAct transmission corridor scheme, saying that it "promises years of litigation, while diffusing responsibility for siting electric transmission facilities." FERC chair, Jon Wellinghoff, has also voiced his opinion that the federal government should have a more prominent and active role in electricity transmission facility siting. In March 2009 testimony before the Senate Committee on Energy and Natural Resources, Wellinghoff testified that in order to meet certain renewable goals outlined by the Obama administration, "there must be a mechanism to invoke federal authority to site the transmission facilities necessary to interconnect renewable power to the electric transmission grid and move that power to customer load." Wellinghoff highlighted FERC's expertise in making siting decisions, pointing specifically to FERC's long-standing authority to authorize construction of natural gas pipelines. Wellinghoff noted that FERC "has developed comprehensive, efficient processes that provide for public notice and extensive public participation, including participation by affected states." Wellinghoff suggested that Congress give FERC a similar role in electric transmission facility siting, concluding that "[w]ithout broader Federal siting authority to accommodate high levels of renewable electric energy—authority similar to that which exists for interstate natural gas pipelines ... it is unlikely that the Nation will be able to achieve energy security and economic stability." These commentators and others who share their views face opposition from representatives of state regulatory agencies. The National Association of Regulatory Utility Commissioners (NARUC) issued a resolution in March 2009 arguing that Congress should limit FERC's siting authority under any new legislation. The resolution recommended that any legislation allow for primary siting jurisdiction by the states and that FERC not have any additional authority over intrastate transmission lines. To the extent that Congress might grant FERC additional siting authority, NARUC recommended that such authorization of interstate transmission require an agreement concerning regulatory structure be in place to govern cost allocation among the states where the facilities are to be sited. While the federal government's role in the transmission siting process on private land has been limited as discussed in this report, the federal government will likely have a more extensive role in siting transmission facilities on federal lands. Under Section 216(h) of the Federal Power Act, DOE is authorized to act as "lead agency for purposes of coordinating all applicable Federal authorizations and related environmental reviews of [electricity transmission facilities]." This authority was granted as part of EPAct 2005's provisions addressing transmission siting. DOE delegated this authority to FERC for transmission facilities on federal lands located in National Interest Electric Transmission Corridors. For other transmission facilities on federal lands, DOE retains the lead agency authority. On October 23, 2009, nine agencies, including DOE, issued a Memorandum of Understanding Regarding Coordination in Federal Agency Review of Electric Transmission Facilities on Federal Land (MOU). The goal of the MOU, according to its terms, is to improve "coordination among project applicants, federal agencies, and states and tribes involved in the permitting process." The MOU also notes that the agreement will provide "a single point of contact ... for coordinating all federal authorizations required to site electric transmission facilities on federal lands." That point of contact is DOE. According to the terms of the MOU, DOE will designate a lead agency for all proposed transmission projects for which all or part of the proposed transmission line crosses into areas administered by more than one agency. The lead agency's duties as set forth in the MOU include coordination of pre-application activities, consultation among relevant agencies, establishing a schedule for the project, conducting environmental review in accordance with the requirements of the National Environmental Policy Act, maintaining an administrative record and making data available electronically, and establishing necessary procedures to implement responsibilities. Traditionally, the federal government has had a limited role in electric facility transmission siting, as siting decisions have in large part been made by state agencies. However, in recent years there has been a push to expand the federal role in transmission siting. The Energy Policy Act of 2005 created a "backstop" siting authority for FERC in certain instances where grid congestion was a concern. Recently there have been suggestions and legislative proposals that would further expand the federal role in electric facility transmission siting. Legal precedent suggests that federal involvement with transmission siting would likely pass constitutional muster, assuming a connection to interstate commerce is shown. However, federal courts of appeals have impeded the government's attempts to create transmission corridors and issue electric transmission facility permits in the absence of state approval. | The location and permitting of electricity transmission lines and facilities have traditionally been the exclusive province of the states, with only limited exceptions. However, the inability to get transmission lines built due to local interests, as well as competition in generation, has resulted in calls for an increased role for the federal government in transmission siting. The Energy Policy Act of 2005 (EPAct; P.L. 109-58) established a role for the Department of Energy (DOE) and the Federal Energy Regulatory Commission (FERC) in transmission siting. The act directed DOE to create "transmission corridors" in locations with adequate transmission capacity. The act also granted FERC secondary authority over transmission siting in the corridors. This new federal role in a decision-making process that had previously been the province of state governments was predictably met with resistance from those seeking to protect local and regional interests. Although the process of creating "transmission corridors" and increasing the federal role in transmission siting has moved forward, the Ninth Circuit recently vacated the congestion study that led to the designation of two such corridors. Nonetheless, there have been calls for further expansion of the federal role in transmission siting by some policymakers and commentators. This report looks at the history of transmission siting and the reason for an increased federal role in siting decisions, explains the new federal role in transmission siting pursuant to EPAct, and discusses legal issues related to this and any potential future expansions of the federal role. |
The United States is one of the world's largest producers and exporters of major field crops including wheat, rice, coarse grains (corn, barley, sorghum, and oats), oilseeds (soybeans, peanuts, canola, sunflowers, and other minor oilseeds), and cotton. Unexpected changes in the outlook for production of a major U.S. crop can lead to sharp movements in both domestic and global market prices. If sustained, large price volatility can lead to significant resource adjustments in the agricultural sector and possibly to large changes in outlays under U.S. farm support programs. The potential for market disruptions and financial loss led to the creation of a statistical bureau within the U.S. Department of Agriculture (USDA) in 1863, just a year after USDA was established. This statistical bureau eventually became the National Agricultural Statistics Service (NASS). NASS and its USDA precursors were created to provide independent, objective, reliable, timely, and accurate market information for the agriculture industry. This report provides an overview of NASS. First, it reviews the origins, legislative authority, and funding for NASS. Then, the report describes the survey methodology used by NASS to generate crop production forecasts and estimates for U.S. crops at both the state and national level. Third, this report describes the systematic evolution that occurs over the course of a growing season for both the survey methodology and the annual sequence of NASS reports that are used to convey the crop production forecasts to the U.S. agricultural sector. Fourth, this report describes how NASS survey methodology is extended to collect county-level crop area and yield estimates. This fourth section also includes a discussion of emergent issues related to low producer response rates to NASS surveys and the subsequent discrepancies in neighboring county yield estimates and farm program payments. Finally, the report discusses how evidence on market price reaction to USDA crop production forecasts indicates that there is no visible pattern of bias or error. NASS conducts a series of surveys throughout the year to assess farmer planting decisions and production outcomes. The resulting NASS crop production and stock estimates underlie USDA and private analysis that affects markets throughout the year. They provide a benchmark in the marketplace because of their comprehensive nature, objectivity, and timeliness. For example, NASS estimates provide the foundation for USDA's global commodity supply and demand balance sheets published in the monthly World Agricultural Supply and Demand Estimates ( WASDE ) report. The public benefits of NASS data are notable, and the literature on those benefits was recently reviewed by the Council on Food, Agricultural and Resource Economics, which highlighted how public information on market prices and quantities helps improve market efficiency. NASS data are considered crucial to both policymakers in government and those making marketing and investment decisions, as well as to the design and implementation of U.S. farm support programs. The reliability and accuracy of USDA's crop supply and demand estimates play a prominent role in the smooth function of agricultural commodity supply chains, including forward contracting, stock management, and commodity futures exchanges. This reliability helps to ensure a more informed and stable marketplace. The quality of NASS crop acreage and production estimates depends on a high level of participation by agricultural producers. In recent years declining grower response rates to NASS surveys have diminished the statistical reliability of NASS estimates. In particular, low response rates to NASS surveys in some counties have led to unexpected and inconsistent farm program payment rates under the new county-based revenue support program—Agricultural Risk Coverage (ARC-CO)—established under the 2014 farm bill ( P.L. 113-79 ). This issue is discussed in more detail in the section " Increasing Nonresponse Degrades County Yield Calculations " of this report. These discrepancies have generated considerable concern about whether the new revenue program is working as intended or whether this is simply a data problem that needs to be addressed. Barring any near-term fix by USDA, lawmakers could elect to address county-to-county payment disparities in the context of the next farm bill. NASS's mission statement states that the agency "provides timely, accurate, and useful statistics in service to agriculture." In fulfillment of this mission, NASS collects and publishes current national, state, and county agricultural statistics. NASS is also responsible for administration of the Census of Agriculture, which occurs every five years and provides comprehensive data on the U.S. agricultural economy. NASS is one of four agencies—along with the Agricultural Research Service, the National Institute of Food and Agriculture, and the Economic Research Service—in USDA's agricultural research, education, and extension mission area. NASS is headquartered in Washington, DC, but maintains a network of 12 regional offices, including a National Operations Center in St. Louis, MO, and 50 state field offices through cooperative agreements with state departments of agriculture or universities. NASS survey data are used to produce forecasts of area, yield, production, value, and stocks for major crop and livestock products, as well as for estimates of the historical number of farms and land in farms, land rental rates and values, farm labor usage, fertilizer and chemical usage, computer usage and ownership on farms, and farm production expenditures. In addition to the several hundred nationally focused statistical reports from its headquarters each year, NASS state statistical offices issue some 9,000 reports and news releases annually that highlight or expand on information from the national reports. In addition, NASS conducts and releases the Census of Agriculture every five years. In support of this work, NASS maintains a fairly comprehensive working list of farms and ranches in the United States, one of its unique federal roles. NASS also performs important reimbursable agricultural survey work for other federal agencies, state governments, and producer organizations and provides technical assistance for agricultural statistics programs in developing countries. Among its activities, NASS's NOC houses the National Operations Division (NOD). NOD is responsible for several critical survey support activities, including maintenance of the list sampling frame, interviewer training for both field and telephone enumerators, centralized data collection via telephone interviewing (NOD has 154 calling seats and conducted over 1.1 million telephone calls in 2015), and processing of the paper-based survey questionnaires that are completed and returned by mail from farmers and ranchers. In 2015, the Forms Processing Group at NOD handled over 436,000 forms. It also processes a significant portion of the Objective Yield Samples collected by field personnel from winter wheat, corn, soybean, and cotton field plots. NASS operations are guided by an Advisory Committee on Agriculture Statistics. The purpose of the committee is to advise the Secretary of Agriculture on the scope, timing, content, etc., of the periodic censuses and surveys of agriculture, other related surveys, and the types of information to obtain from respondents concerning agriculture. The committee also prepares recommendations regarding the content of agriculture reports and presents the views and needs for data of major suppliers and users of agriculture statistics. In addition to guidance from the committee, NASS is subject to USDA's Information Quality Guidelines that apply to any information disseminated by NASS. The guidelines emphasize the confidentiality of respondents and objectivity of analysis. Annually, NASS—in coordination with the World Agricultural Outlook Board (WAOB), ERS, Agricultural Marketing Service (AMS), Foreign Agricultural Service (FAS), and the U.S. Census Bureau—hosts a meeting of key data users. The annual Data Users Meeting provides an open forum for data users—both government and nongovernment—to ask questions and provide feedback about the entire USDA statistics program, including data products from NASS. At the 2016 meeting held in Chicago on October 18, the Farm Service Agency (FSA) participated for the first time and addressed questions about NASS county-level data availability, particularly in relation to the issues that emerged with regard to payments under the ARC county-level program. This issue is discussed in more detail in the section " County-Level Crop Production Estimates " of this report. NASS's responsibilities are authorized under the Agricultural Marketing Act of 1946 (7 U.S.C. 1621-1627) and the Census of Agriculture Act of 1997 ( P.L. 105-113 ; 7 U.S.C. 2204g). Under this broad authority and the discretion of the Secretary, NASS exists and performs its data collection and dissemination functions in support of the U.S. agricultural sector. In particular, because of its transparent and objective methodology, NASS data contribute to the orderly association among the consumption, supply, marketing, and input sectors of agriculture. Over the years, various other laws have designated specific authority to the Secretary for data collection and publication regarding particular commodities and reports. These include laws concerning the collection of agricultural production and price data for apples (7 U.S.C. 411b), cotton (7 U.S.C. 476), peanuts (7 U.S.C. 951), commodity reports (7 U.S.C. 1421d), distribution and marketing of agricultural products (7 U.S.C. 1626), mandatory reporting for dairy products (7 U.S.C. 1637b), and data on the environment and water quality (7 U.S.C. 136i-2). Additional laws cover confidentiality of information and data security, research and international programs (7 U.S.C. 3291), cooperative agreements (7 U.S.C. 3318 and 7 U.S.C. 2242a), public printing and documents (44 U.S.C. 1302), and penalties for disclosure and false reports (19 U.S.C. 1905). The COA originated as part of the 1820 national decennial census, when U.S. marshals began to ask how many people within each household were engaged in agricultural pursuits. The Census of Agriculture Act of 1997 ( P.L. 105-113 ; 7 U.S.C. 2204g) transferred responsibility for the COA and other special studies from the Department of Commerce to NASS. Despite the shift in funding, the Census Bureau continues to design the questionnaires, mail questionnaires, manage returns, and process the data for USDA. The COA is conducted every five years and provides comprehensive information about the nation's agriculture down to the county level, including data on the number of farms, land use, production expenses, value of land and buildings, farm size and characteristics of farm operators, market value of agricultural production sold, acreage of major crops, inventory of livestock and poultry, and farm irrigation practices. The COA ensures that the "list frame" used for sampling records for various surveys is current. Annually, NASS publishes about 400 national agricultural statistical reports and thousands of additional state agricultural statistical reports covering more than 120 crops and 45 livestock items. NASS statistical data include forecasts of state and national agricultural production for an extensive number of agricultural products, including major field crops, small grains and pulses, minor oilseeds, fruits and vegetables, tree nut crops, several additional horticultural products (such as hops, flowers, and mushrooms), and dairy and livestock and poultry products. NASS also produces forecasts and estimates of county production for major program crops. (See the box "Forecasts versus Estimates" on page 8 for a distinction between estimates and forecasts.) NASS lends technical expertise and conducts surveys for other federal agencies, state governments, and private organizations on a reimbursable basis. Through the reimbursable program, NASS provides support and assistance with questionnaire and sample design, data collection and editing, analysis of survey results, and training. NASS also provides technical consultation, support, and assistance for international programs under participating agency service agreements and to foreign countries desiring to enhance their statistical programs. With respect to this type of "shared" work, USDA states the following: Providing such assistance benefits the United States as well by helping other countries improve their agricultural statistics systems, USDA improves its ability to assess world food and fiber production. In today's global economy, timely and accurate supply statistics for fair and efficient price discovery in the global market are critical. Establishing strong working relationships with other agricultural statisticians around the world allows NASS staff to gather and develop new ideas for improving the U.S. agricultural statistics system, while exposure to other cultures and work situations enhances NASS employees' abilities to solve problems. Personal information collected by NASS is protected from legal subpoena and Freedom of Information Act requests. NASS releases only aggregate totals and averages—never individual farm-level reports. Furthermore, every person working for or in cooperation with NASS—from the agency administrator to the person collecting the information—signs a confidentiality form that states that no confidential information will be compromised. This includes sworn agents who are authorized by NASS to provide data collection support or statistical research. Any offender is subject to a jail term (five years), a fine ($250,000), or both. NASS spending is controlled by annual appropriations acts. In FY2016, Congress appropriated $177 million for NASS operations, including $126.2 million (75%) for annual agricultural estimates and $42.2 million (25%) for the COA ( Figure 1 ). Through its network of state offices, NASS carries out many of its surveys with the support of state departments of agriculture, land-grant universities, and agricultural industries. This cooperation allows NASS to supplement its own survey activities with the collection of detailed data on commodities important to local economies, county estimates, and other items not covered by federal funds. The National Association of State Departments of Agriculture (NASDA) provides grassroots support for NASS by employing part-time field and office enumerators to collect survey data by telephone or in person. This partnership allows the NASDA staff to focus on data collection while NASS staff concentrates on survey integrity and data analysis. All NASDA employees are sworn to the same confidentiality pledge as NASS employees. NASS independently prepares U.S. crop production and inventory estimates in accordance with a transparent, scientific survey methodology. NASS survey results are released via a series of periodic reports ( Table 2 ) that are produced on a preannounced schedule to inform commodity market participants, ensure stable market processes, and contribute to an efficient investment environment for the U.S. agricultural sector. NASS survey methodology combines both producer surveys and field observations to gather data for making acreage estimates and yield forecasts. NASS combines a comprehensive area frame representing the entire U.S. land mass with a list frame of producers under a multiple-frame methodology to improve the completeness and accuracy of its forecasts. This statistical framework surveys large and small farms in an area-weighted probability sample. NASS uses a system of sample surveys to make statistical inferences (forecasts and estimates) for the total U.S. farm producer population. Every sample survey requires the availability of a sampling frame that defines the population and identifies the members that are available to be sampled. The basic requirements of an effective sampling frame are that its sample units (when aggregated) contain the entire population, that individual sample units do not overlap, and that the probability of selection is known. The NASS sample survey design uses two different sampling frames—an area frame and a list frame—which are combined into a multiple-frame sample to produce inferences. The area frame is essentially the entire land mass of the United States. Thus, it ensures complete coverage of the U.S. farm population. As a result, every piece of land (or segment, as described below) has a known chance to be selected. Constructing the area frame was a major undertaking that included a combination of aerial photography and satellite remote sensing imagery verified by onsite visits. The advantage of an area frame is that, once established, it does not change rapidly over time, although it can become less efficient as the characteristics of the farming population change. A frame is generally used for 15 to 20 years, and when it becomes outdated, a new frame is constructed to replace it. Each year, three to four states are selected to receive a new frame. The list frame is a fairly comprehensive list of known farm operators, ranchers, and agribusinesses. It includes the names, addresses, and relevant control data (e.g., crop area, production, or stocks, or head of livestock) that identify the relative size of the operation—which is critical in determining the probability of selection into the sample. A basic disadvantage of a list frame is that it is nearly impossible to maintain a list that covers the entire farm population or is completely up to date, and attempting to do so is costly. However, a list frame permits the use of data collection by mail, email, or telephone, and it allows for use of more efficient sampling methods than are available for the area frame, especially for items grown on a small percentage of farms or where there is extreme variability in the size of operation. Multiple-frame sampling is a survey technique that uses list and area frames in combination to gain the advantages of both. The list frame is extremely efficient for large operations and operations that produce rare items. The area frame ensures complete coverage and can be used to estimate the incompleteness of the list frame. Data from the area and list samples are combined using multiple-frame statistical methodology developed jointly by NASS and Iowa State University, which ensures that all land areas in the United States can be accounted for only once. NASS produces an annual calendar in December of every year showing the date and hour of the coming year's NASS crop production and associated acreage report releases. Table 2 shows the crop production report schedule for a typical crop year. The reports are released electronically from USDA headquarters in Washington, DC. State statistical offices further facilitate transmission of the reports through local news releases and reports. NASS provides production forecasts and estimates for most crops based primarily on data collected from farm operations via grower survey responses. Additional yield information is collected for five major crops—corn, soybeans, cotton, winter wheat, and potatoes—from direct field observations (referred to as objective yield surveys) conducted by trained enumerators in the primary producing states for each crop ( Figure 2 ). Crop progress and growing conditions are also reported by NASS during the growing season based on the opinion of experts residing within the major growing zones supplemented by remote sensing technology that provides evidence on both cultivated area and plant growth ( Table 3 ). NASS production forecasts for major crops have two components—harvested acres and yield per acre ( Figure 3 ). Forecasts for these two measures vary with each crop's seasonal growth pattern. The three largest summer crops in terms of area and output are corn, soybeans, and cotton, which are spring-planted and fall-harvested. The wheat crop has both fall-planted (winter wheat) and spring-planted (spring wheat) components. The wheat harvest begins in late May in southern states and works its way north to finish in the Dakotas in September. NASS conducts three principal acreage surveys for summer-grown crops during the year—a spring preliminary forecast in March ( Planting Intentions report), an initial estimate of planted acreage and forecast of harvested acreage in June ( Acreage report), and a final survey undertaken in early December ( Figure 3 ) and published in the January Crop Production Annual Summary . Because of their importance to the overall NASS survey design, these three acreage surveys for summer crops are discussed in more detail in Appendix C . In terms of the calendar year, the three principal acreage surveys are preceded by the Winter Wheat Seedings report, which is released in early January and forecasts the acreage for the previously fall-seeded small grains—winter wheat and rye crops—to be harvested in spring ( Table 2 ). NASS also releases forecasts for yield and production in its monthly Crop Production report. For winter wheat yield and production, forecasts are published in the Crop Production reports for May through August; for spring wheat and other small grains—barley, oats, rye, durum, and spring wheat—in July through August; and for summer crops—corn, cotton, hay, oilseeds, peanuts, rice, sorghum, sugar cane, and sugar beets—in August through November. Year-end estimates of acreage, yield, and production for barley, durum, oats, rye, and wheat are published in the Small Grains Annual Summary , released at the end of September. For all remaining summer crops, year-end estimates are published in the January Crop Production Annual Summary . Final estimates reported in the Crop Production Annual Summary may be revised the following year if new information becomes available that would justify a change. For example, considerable data are available from other organizations—both private and public—that may be used to evaluate the accuracy of NASS production estimates and to help determine the final estimates. These sources of information generally become available after the crop harvest, often after the preliminary production estimates are determined: FSA program data . Farm operators that participate in USDA farm programs routinely report their planted and harvested acreage and yield data to their local FSA offices in compliance with program requirements for determining both payment eligibility and payment amounts. Aggregated FSA program data provide a benchmark for evaluating the historical consistency of NASS survey data and for verifying current-year estimates. Market u tilization d ata . A wide range of information about commodity imports, exports, food and industrial use, soybean crush, and cotton ginning becomes available to USDA during the year from different industry sources. This information is evaluated monthly for reliability and consistency, under the guidance and chairmanship of WAOB, within one of nine Interagency Commodity Estimates Committees (ICECs). Once validated, the data are used in a U.S. commodity balance sheet that starts with carryover stocks from the previous year and the current production estimate to give a measure of total supply. The subtraction of the utilization data at the end of the marketing year from the total supply established at the beginning of the crop year should correspond closely with the ending stocks. Based on the work of the ICEC committees, both the domestic and international commodity balance sheets are published by the WAOB in a monthly WASDE report. If there is a large unexplained difference or residual, the previous year's acreage, yield, and production survey and stocks data are reviewed to determine where revisions within the range of the survey sampling errors can be made to minimize the residual in the balance sheet. USDA Census of Agriculture d ata . In addition, the final crop production estimates are reviewed after data for USDA's five-year Census of Agriculture become available. No further revisions are made once the survey data are synchronized to the census data. NASS also conducts quarterly surveys of grain and soybeans stored both on and off farms. The quarterly Grain Stocks report (released in January, March, June, and September) includes estimates of stocks of all wheat, durum wheat, corn, sorghum, oats, barley, soybeans, flaxseed, canola, rapeseed, rye, sunflower, safflower, and mustard seed for the nation and by state and position (on-farm or off-farm storage). In addition, it provides estimates of the number and capacity of off-farm storage facilities and the capacity of on-farm storage facilities. Similarly, the quarterly Rice Stocks report presents the most current estimates of rough and milled rice stocks by position (on and off farms), as well as stocks by length of grain classes for the nation and for the six major producing states (Arkansas, California, Louisiana, Mississippi, Missouri, and Texas). The critical role that NASS data reports play in promoting a smooth and efficient marketing process for U.S. agriculture make NASS's successful functioning a concern of Congress. Any interruption or deviation from the transparent and timely delivery of objective, trustworthy market data could increase costs to all market participants as well as taxpayers that underwrite the U.S. farm support programs. There are three issues of potential concern to Congress: 1. A trend has emerged since the early 1990s of declining survey response by farmer participants. Such a decline, if sufficiently severe, could jeopardize the integrity of NASS estimates. 2. Increasing nonresponse at the county level degrades the viability of county yield calculations or, in some cases, prevents a calculation from being made. 3. NASS estimates must be as objective as possible so as not to adversely influence the market's function. These issues are addressed in greater detail below. NASS targets an 80% response rate in all its surveys. After achieving response rates of 80% to 85% in the early 1990s, rates have declined to the 60% range, with a notable drop-off in response occurring since 2010 ( Figure 4 ). Some economists worry that the acceleration in the decline since 2010 could suggest a long-term permanent change. This is of concern to USDA and policymakers because NASS survey data play a critical role in the proper functioning of several USDA farm programs, particularly those programs that are based on reliable county-level yield estimates. For example, NASS county yield estimates are used to determine county-level payments under the ARC-CO program administered by the FSA. The quality of the information and analysis provided from NASS data depends on a high level of producer participation in these surveys. As the number of respondents falls, the statistical reliability of estimates and forecasts and the value of NASS estimates for a host of other purposes declines. Survey nonresponse may occur for a variety of reasons: a farmer may simply refuse to answer, a farmer may not know or not remember, a farmer may not be accessible during the period of data collection, or a farmer may inadvertently or incorrectly be excluded from the sample. There is also concern that the increasing difficulty in accessing households may be related to new telephone technologies like caller ID and the replacement of land lines with cell phones. Survey nonresponse, if systemic, can introduce a bias in the data and undermine the accuracy of survey estimates. Systemic nonresponse occurs when sampled farms that choose to not respond to the survey have certain characteristics in common that may be important to the survey. For example, if higher-yielding farms tend to not respond to the survey more than lower-yielding farms, then the data resulting from the abridged sample may produce a lower average yield estimate that is unrepresentative of the farm population that the survey is trying to measure. The extent of the bias depends on the number of nonrespondents relative to the total sample and the degree to which the nonrespondents differ from the respondents. The potential bias related to nonresponse becomes increasingly important for more localized estimates. For example, NASS estimates remain most accurate at the national level, but low response rates become increasingly important for estimates at the state and especially county levels. This is described in more detail in the section " Increasing Nonresponse Degrades County Yield Calculations " of this report. NASS tries to minimize nonresponse by working with various agricultural commodity and farm groups, as well as its own public relations and educational materials, to publicize the importance of the survey. In addition, NASS includes specific components to its enumerator training that are designed to address nonresponse. Finally, NASS conducts follow-up attempts to contact nonrespondents. In order to achieve the highest possible response rates, NASS surveys are conducted first by Internet and mail contact and then followed up with telephone and personal interviews. The cost of these contacts increases substantially at each stage: $2 per respondent for the Internet survey, $4 for mail, $12 for telephone, and more than $50 per respondent for personal interview. So the more responses obtained at the earliest stages of the survey, the more cost effective the collection of the needed data. NASS has strategies to address nonresponse in survey data. Increasing the sample size might help to increase the number of responses, but the additional cost may be prohibitive, and if the reasons behind the low response rate are systemic, larger sample sizes will not necessarily counteract lower response rates. In some cases, NASS estimates are "reweighted" to reflect the nonresponse rates. This procedure assumes that the nonrespondents within each sample stratum are like the respondents. Another procedure is to draw a sample of the nonrespondents and make a special effort to obtain the required information from them. Then nonresponse bias can be measured, and the overall estimate can be adjusted accordingly. When only a few items are missing from an entire questionnaire, it may be possible to impute, or estimate, these data from other available information. NASS statisticians evaluate the particular circumstances during the questionnaire edit phase and adopt their adjustment strategy accordingly to preserve the integrity of the data. In recent years, NASS county-level area and yield estimates have grown in importance. In particular, USDA's FSA uses NASS county-level yield estimates for calculating producer payments under the county-level ARC-CO program established under the 2014 farm bill (the Agricultural Act of 2014; P.L. 113-79 ). Other users include the Risk Management Agency (RMA), which uses county estimate data to determine when crop loss insurance payments are made to farmers under certain types of policies. RMA also uses the data directly and indirectly in its actuarial process. The FSA also uses the estimates in its formulas for posted county prices and disaster assistance programs. Other government agencies, universities, and research organizations use county estimate data to determine many production and economic values on a small area basis. In response to the growing demand for county-level data, NASS conducts a County Agricultural Production Survey (CAPS). The CAPS is designed to increase the usable sample size to a level adequate for county-level estimation. In particular, CAPS provides data needed to estimate acreage and production of selected crops and inventories of major livestock species at the county level for state and federal programs. The CAPS is conducted in 44 states. All counties in these states must be represented in the sample. The commodities covered by the survey are specific to each state. A federal county estimates program is jointly defined by NASS, RMA, and FSA. Individual states will add commodities to the program to cover special needs of local cooperators. The CAPS is conducted annually at the end of the harvest season. Some states conduct two surveys, one in late summer for the early harvested crops (small grains) and another in late fall for row crops, hay, and livestock. Most states conduct only one late fall survey. The target population is all farms and ranches in each state. Operations already participating in other NASS acreage and livestock surveys are excused from the CAPS. However, their responses to these other surveys are merged into the county summaries. Special sampling considerations are employed to ensure that all counties and rarer commodities are adequately represented. Also, farms that have not responded to a survey for several years may be added to the sample for the purpose of refreshing sampling information. Each state develops its own data collection strategy. Most states conduct a mail survey with second mailings or a telephone follow-up to ensure adequate coverage for each county. Response targets are set for each county and the follow-up strategy is defined accordingly. The number of reports returned is monitored, and a nonresponse follow-up strategy is mapped out to achieve response targets. Summaries compute the measures needed to allocate previously released state totals to regions and counties. State estimates for commodities are made from acreage and livestock surveys conducted under more rigid controls. In October 2015, when FSA announced the first ARC-CO payments under the 2014 farm bill (for the 2014 crop year), wide discrepancies in county yields and payments to farmers in nearby counties were noticed. This problem was particularly acute (but not unique) for county-level ARC-CO corn payments in North Dakota. Farmers in two counties, LaMoure and Logan, received no payments, while farmers in neighboring counties received payments ranging from $20 to $60 per acre. Similar county-wide disparities appeared again for the 2015 crop year ARC-CO payments. The ARC-CO program is a revenue guarantee triggered by crop revenue losses at the county level. Payments are made whenever the actual county revenue drops below an ARC county revenue guarantee. The ARC revenue guarantee is calculated as 86% of the product of the recent historical five-year Olympic average (removing the high and low observations) county yield and the five-year Olympic average national farm price. The actual county revenue is calculated as the product of the national season average farm price for a crop and its county average yield. The cause of the discrepancies in ARC-CO payments among counties appears to be related directly to FSA's use of a "cascading policy" for determining what county yield estimate is used in the payment calculation. Under its current policy, FSA requires that the NASS yield estimate be used. However, NASS can only publish a county yield estimate if at least 30 producer yield surveys are returned for that county or at least three responses are received from producers representing a minimum of 25% of the total county acreage. If NASS does not get enough responses to publish an estimate, then it uses the county's yield estimate from RMA's crop insurance data base. RMA uses actual reported yield data from producers that participate in crop insurance to calculate a county yield estimate. However, RMA yields may differ from NASS estimates since not all farms may participate in crop insurance. Furthermore, for a variety of reasons, RMA yield data tend to be higher than NASS yield data. Whatever the reason for the difference, the substitution of RMA yield data in lieu of NASS yield data tends to inflate the calculated "actual" county revenue for the crop year and, thus, produce a lower ARC-CO payment. In the event that neither NASS nor RMA yield data are available, then the FSA state committee will determine the county yield using "best available data." This may involve NASS or RMA yield data for a neighboring county or a higher aggregated level, such as the NASS district yield or 70% of the crop insurance transitional yield. As yield estimates become increasingly disconnected from the target county, the odds tend to increase that an ARC-CO payment will not be triggered when the county would otherwise qualify for payments. Even a relatively small change in the yield estimate for a county can have a substantial effect on the payment rate. For example, a 5% decline in the current county yield estimate can result in a tripling of the payment rate, whereas a 5% increase results in zero payments ( Table 4 ). Commodity groups have argued that FSA is under no legal requirement to use RMA yield data when NASS data are unavailable. These groups have proposed several alternatives, including using NASS data from neighboring counties instead of own-county RMA yields or using RMA data exclusively for all counties nationwide as a "fairness" gesture, since crop insurance data are more widely available at the county level. Similarly, during the 114 th Congress, Senator Hoeven of North Dakota proposed an amendment (§751) to the 2017 agriculture appropriations bill ( S. 2956 ) to create a new $5 million nationwide pilot program to address county yield discrepancies. Specifically, under the proposed pilot program, if an FSA office finds a disparity between yield calculations in comparable counties, it will have an opportunity to remedy the inaccuracy by using an alternate calculation method. USDA appears to be under no legislative requirement or guidance for this cascade policy. Regarding the choice of county yield data used in calculating the farm year's actual crop revenue, the 2014 farm bill conveys implementation authority to the Secretary of Agriculture in Section 1117(b)(A), where the formula is to use "the actual average county yield per planted acre for the covered commodity, as determined by the Secretary." According to the American Soybean Association (ASA), FSA decided not to change its policy for the current farm bill period (2014-2018) because it thought that such a change could create winners and losers or possibly increase the cost of the program. Moreover, ASA asserts that FSA has expressed concern that making a change in the middle of the current farm bill could bring unwanted attention to both NASS and RMA. This issue may be part of the debate surrounding the ARC-CO program in particular—and farm revenue support programs in general—during the next farm bill debate. The farm community has frequently expressed concerns that large grain and commercial food companies and hedge funds have inordinate market power and access to the hallways of Congress and thus can potentially influence USDA reports in such a manner as to profit from them at the expense of the "small farmer." As a result, USDA and NASS expressly operate in a very public fashion to discourage such criticisms. Every March, NASS publishes Price Reactions After USDA Crop Reports , which evaluates market reactions to NASS crop production forecasts by measuring the market price changes for corn, soybeans, wheat, and upland cotton both one day and one week after the NASS reports are released. The price reactions are done for those NASS reports that occur during the critical growing and harvesting months. This includes the months when crop production estimates are first made and then again when they are finalized (in the Crop Production Annual Summary released in January following the harvest) by USDA. The prices used by NASS to assess the market reaction for corn, soybeans, wheat, and cotton represent sales from producers to first buyers at major markets as reported by AMS. The price reaction data provide a measure of both the objectivity of USDA data (i.e., the presence or absence of any visible bias) and the degree to which the market was "surprised" by the NASS crop production data. It is important to note that NASS Crop Production reports are released simultaneously with USDA's WASDE report. Thus, substantial market information concerning both supply and demand for major commodity markets is made available at the same time as NASS estimates of U.S. crop production. This implies that NASS reports are not necessarily solely responsible for any changes to the price level for commodities in the short term following the data release. The price level for any commodity can potentially be affected by other information available to the market at that time but is ultimately determined by supply and demand. An examination of the market reaction to NASS crop production forecasts for the four largest crops—corn, soybeans, wheat, and upland cotton—confirms that there is no visible pattern of bias or error in the forecasting results. Summary statistics ( Table 5 ) suggest that positive and negative price reactions are nearly equal in absolute number and average magnitudes of change in either direction. A visual inspection of the monthly price reaction data charted over the time period from 1987 to 2015 for corn ( Figure E-1 and Figure E-2 ) and wheat ( Figure E-7 ) and 1989 to 2015 for soybeans ( Figure E-3 and Figure E-4 ) and upland cotton ( Figure E-5 and Figure E-6 ) similarly shows a random pattern of reactions. However, the variability of price reactions appears to have grown substantially since 2000. A similar but more thorough study examined NASS production forecasts for corn and soybeans over the 1970-2005 period. The study charted (1) the annual change in forecasts of harvested area, yield, and production; (2) the month-to-month variations in forecast changes; (3) the relationship between the forecast and the actual production outcomes; (4) the pattern of forecast errors; (5) comparisons of USDA versus private sector production forecast errors; and (6) the price reaction of contract prices on futures exchanges. The authors concluded that the objectivity and consistency of NASS forecasting procedures and methodology was confirmed by the data. There appeared to be no trend in the size or direction of forecast errors over time, except that NASS production forecast errors were largest in August (when the greatest amount of yield uncertainty was at play) and smaller in subsequent forecasts as the yield uncertainty was reduced until the final harvest. Appendix A. Historical Origins of NASS President Lincoln established the U.S. Department of Agriculture in 1862. The precursor of NASS—the Division of Statistics—was established within USDA a year later in 1863. One of the key missions of the Division of Statistics was to provide information on commodity and agricultural markets to improve their operating efficiency and provide a fair and equitable environment for price discovery in the marketplace. The Administration argued that without federal provision of objective, transparent data on U.S. and world markets to all participants on an equal basis, powerful interests with deep resources could get access to this critical information and either manipulate these markets or simply profit from it at the cost of individual farmers and ranchers. An initial duty of the Division of Statistics was to prepare monthly reports on the condition of U.S. crops. In 1866, it began to publish annual statistics on production of major crops, livestock numbers, and annual farm prices. In 1882, state statistical agents were hired on a part-time basis. In 1898 additional state agents were hired to provide better coordination and greater coverage. By 1905, USDA had state-level statistical agents in 43 states. A scandal involving advance knowledge of USDA's crop forecasts by a New York cotton speculator occurred in 1905 and led to the establishment of the Crop Reporting Board (now called the Agricultural Statistics Board [ASB]). The Crop Reporting Board consisted of several statisticians who provided an independent review of the survey data forwarded from NASS's regional offices. In addition, a secure system of data collection and release—referred to as the "lockup" system—was established to prevent early release or advance knowledge of USDA's crop forecasts. Field offices forward their estimates to NASS headquarters, where they are combined under the secure lockup system and released at preannounced scheduled times to the press and public by the ASB. In 1961, under a USDA-wide reorganization, NASS's immediate precursor—the Statistical Reporting Service (SRS)—was established. In 1986, the SRS was renamed as NASS and the Crop Reporting Board was renamed as the ASB. Over the years NASS's reporting program of agricultural estimates has responded to an increased demand for agricultural production and market information with more frequent and detailed reports, including weekly reports on crop progress during the growing season, monthly reports on farm prices received and cattle on feed, and quarterly reports of hogs. Appendix B. Details on NASS Sampling Method Sampling from the Area Frame Sampling from the area frame is a multistep process. First, all land in each state is classified into land use categories by intensity of cultivation—referred to as stratification—using a variety of map products, satellite imagery, and computer software packages. These land use classifications range from intensively cultivated areas to marginally cultivated grazing areas to urban areas. Most states use six general land-use strata: intensive agriculture, extensive agriculture, cities and towns, rangeland, non-agriculture, and water. Then, the land in each land use category is divided into smaller segments ranging from about 1 square mile in cultivated areas to 0.1 square mile in urban areas. This segmentation allows intensively cultivated land segments to be selected with a greater frequency than those in less intensively cultivated areas. Segments representing cultivated areas are selected at a rate of about 1 out of 125. Sample segments in land use classifications with decreasing amounts of cultivated land are selected into the survey sample at rates ranging from 1 out of 250 to 1 out of 500. Sampling from the List Frame Before sampling from the list frame, each farm is classified by various characteristics such as the number of acres by crop. Large farms, as determined by the relevant control data, are sampled at high rates. For example, Illinois farms on the list with over 5,500 acres of cropland, or grain storage capacity exceeding 500,000 bushels, are selected with certainty, as are Iowa farms with over 5,000 acres of cropland. Smaller farms are selected at rates of 1 out of 25 to 50. Table B-1 provides a comparison of samples from the list and area frames used for NASS crop reports on corn and soybean production during 2016. Appendix C. Planted and Harvested Area Surveys Every year NASS conducts three major acreage surveys that correspond with the crop reporting schedule briefly outlined above and shown in Table 2 . In late March, the Planting Intentions report gives a first look at the crops that farmers intend to plant in the spring. This is followed in late June by the Acreage report, which includes both estimates of spring-planted acreages and forecasts of harvested acreages. An end-of-year acreage and production survey conducted in early December, after most of the field crops have been harvested, contributes to final year-end estimates for planted and harvested acres. March Prospective Plantings Survey The spring planting intentions contained in the Prospective Plantings report are based primarily on a survey—conducted during the first two weeks of March—of the current field crop planting intentions for about 83,000 randomly selected farm operators. The acreage estimates are intended to reflect grower planting intentions as of the survey period and give the first indication of potential crop plantings for the year. Each state NASS field office reviews the survey data for "reasonableness and consistency" with historical estimates, and the results are submitted to the statisticians of NASS's ASB for an independent review. The published acreage estimates are based on survey data, but some judgment may be used based on the historical relationship of official estimates to the survey data. Actual spring plantings may vary from intentions in accordance with changes in weather or market conditions between early March and the actual planting period of April to June. June Acreage Survey The largest single survey NASS conducts each year is the June Agricultural Survey. During the first two weeks in June, about 2,400 interviewers contact over 125,000 farmers, either by telephone or in person, to obtain information on crop acreages, grain stocks, and livestock inventories. This pool of sampled farmers is drawn from two sources—about 70,000 farms from the list frame and every farm with land inside of one of the approximately 11,000 area segments that are selected nationwide from the area frame. Data from the two surveys (list and area frame) are combined in such a way as to account for all acreage but to avoid double-counting of acreage. The sample of farm operators surveyed as part of the area frame varies from year to year as the segments selected vary, but it may represent as many as 50,000 farm operators that are additional to the list frame sample. NASS interviewers use maps and aerial photos showing the exact location and boundaries of each sample area segment to locate and interview every operator with land inside the segment boundaries to identify crops planted in each field and obtain livestock inventory information and quantities of grain in storage. Telephone interviewers collect most of the data from this pooled sample, asking producers to report the acreage, by crop, that has either been planted or that they intend to plant and the acreage they expect to harvest as grain. The ASB reviews survey data at the state and national level in the same way described for the March survey data. Data from this survey are used to estimate, among other things, total acres planted to corn, soybeans, and other crops regardless of the intended uses. Also, preliminary projections of acres to be harvested for grain or soybeans, including seed, are made using these data. The winter wheat planted and harvested acreage released in earlier NASS reports is subject to revisions in the June Acreage report. Midyear estimates of harvested acreage for the earliest harvested crops, such as the small grains, are based on reported area for harvest from the June survey. For the later harvested crops, such as corn and soybeans, initial projections make normal allowances for abandonment and acres used for other purposes to derive a harvested area projection from the planted area estimate. The June Agricultural Survey is subsampled for surveys in July, September, December, and March for the basic livestock inventory, crop production, and quarterly stocks estimates. Final December Survey for Acreage and Yields A final survey—drawn from the current field crop planting intentions for about 83,000 randomly selected farm operators—is conducted during the first two weeks of December. These data provide season final estimates for planted and harvested area, yield per harvested acre, and production for summer crops and an initial estimate of winter wheat acres planted that fall. The December survey results for winter wheat plantings are reported in the Winter Wheat Seedings report, released in early January of the following year. The final estimates for area and yield for all other crops are reported in the Crop Production Annual Summary that is also released in early January of the following year. Appendix D. Crop Yield Methodology NASS uses two basic methods to forecast crop yield: 1. Grower-reported yields ask growers what their yields were for each crop as part of the monthly agricultural yield survey, and 2. O bjective-yield measurement s take scientific field measurements of fruit count and weight to estimate yield. Yield data from these two sources flows in to NASS headquarters as part of the monthly surveys. At NASS, the statisticians of the ASB convene to review regional yield indicators and determine an official yield forecast. Each member reviews all the data and brings his or her perspective to the collective review where the ASB reaches a consensus on the national yield forecast. Grower-Reported Yields A subsample of farmers who respond to the list portion of the June Agricultural Survey is selected to provide monthly crop yield projections through the remainder of the growing season. This provides a way to screen farmers so that only those currently growing the commodities of interest are contacted during the monthly surveys. This subsample may be supplemented with other known growers randomly selected from the list frame when monthly district level production forecasts are required for some states. The sampled farmers are asked what they expect their crops to yield before harvest, and in a later survey they are asked what their actual yields were after harvest. All yield data for an individual report are weighted by the farm's crop acres for harvest. Objective-Yield Surveys Under this second method, specially trained enumerators conduct direct field observations during the principal growing season for major crops. Objective yield surveys are conducted for five crops—corn, soybean, cotton, winter wheat, and potatoes. Sample fields are selected from those farm operations identified in the area-frame sample portion of the June Agricultural Survey but focus on each commodity's major producing states—that is, those states that contribute most heavily to total U.S. production ( Figure 2 ). These surveys provide information for making forecasts and estimates of crop yields based on counts, measurements, and weights obtained from small plots in a random sample of fields. Observations within each selected field are made in two randomly located plots. Plots include two or three adjacent rows of predetermined length. Measurements are made to determine row spacing so that conversions to yield per acre can be made. The enumerators objectively measure yields by counting the crop's fruit in the field and assessing the fruit's weight and yield. Plant characteristics used as gross-yield prediction variables change as the crop maturity progresses. Figure D-1 shows the forecast variables used to predict the two gross yield components for each crop—the fruit count and the weight per fruit. While the plant is in its early growth stages, plant counts may be the only data available for forecasting the number of mature fruit, and they are supplemented with historical averages of weight per fruit. Later, as the crop matures, actual fruit samples can be taken and lab measurements used to estimate the fruit's weight and yield per acre. The same sample plots are revisited each month during the growing season until the crop is mature and can be harvested. At harvest the final fruit counts and weights are obtained. The potential accuracy of each month's forecast for the major field crops is dependent on both the crop maturity at the time of the forecast and future weather. When maturity lags normal patterns, for example, the numbers of pods and ears are based on the numbers of plants and fruiting positions rather than actual number of fruit. Thus, when maturity lags, the forecasts become more variable because the expected number of fruit can differ from the final. However, the primary source of forecast error occurs when final end of season fruit weights differ from the historical average, because fruit weight cannot be fully determined until the crop matures. After the entire field has been harvested, the sample field is revisited and two more plots are laid out. These sample plots are gleaned to estimate the harvest loss. Also, once the harvest is complete, the farmers who operate the sample fields are recontacted to obtain final harvested acres and yields for all of the sample fields. Harvested yield can be thought of as the gross yield minus harvest loss. Counts, measurements, and other observations from each sample plot are put into statistical models based on historical data to predict the final number of fruit and final weight per fruit. A forecast of gross yield is calculated by multiplying these two components together and dividing by land area. Gross yield overstates the production that is actually harvested and marketed. Harvesting loss must be deducted to compute net yield. Initially, an adjustment is made for expected harvest losses based on past averages. Once the harvest is complete, the grain left on the ground in the sample plots is picked up (gleaned) and weighed to provide an estimate of the harvest loss. Appendix E. Monthly Price Reaction Charts for Corn, Soybeans, Upland Cotton, and Wheat | The National Agricultural Statistics Service (NASS) of the U.S. Department of Agriculture (USDA) estimates agricultural production (including area and yield) and stocks for more than 120 crops and 45 livestock items. Traditionally NASS estimates have focused on state and national data, but in recent years county-level estimates have gained in importance. NASS crop production estimates are crucial to people in the U.S. agricultural sector involved in making marketing and investment decisions, policymakers who design farm support programs, USDA agents who implement those programs, and producers who benefit from those programs. NASS conducts hundreds of surveys every year and prepares reports covering many aspects of U.S. agriculture. For example, NASS survey data are used to produce forecasts of area, yield, production, value, and stocks for major crop and livestock products, as well as for estimates of the historical number of farms and land in farms, land rental rates and values, farm labor usage, fertilizer and chemical usage, computer usage and ownership on farms, and farm production expenditures. NASS also undertakes a National Census of Agriculture every five years that provides comprehensive information about the nation's agriculture down to the county level. The census includes data on the number of farms, land use, production expenses, value of land and buildings, farm size and characteristics of farm operators, market value of agricultural production sold, acreage of major crops, inventory of livestock and poultry, and farm irrigation practices. NASS spending is controlled by annual appropriations acts. In FY2016, Congress appropriated $177 million for NASS operations, including $126.2 million (75% of its budget) for annual agricultural estimates and $42.2 million (25%) for the Census of Agriculture. The critical role that NASS data plays in promoting a smooth and efficient marketing process for U.S. agriculture makes NASS's successful function a concern of Congress. In particular, three issues related to NASS's survey methodology and crop estimates are of potential concern to Congress. First, a trend has emerged since the early 1990s of declining NASS survey response by farmer participants. For most crops, NASS production estimates are based on data collected from farm operations via grower survey responses. The quality of NASS crop acreage and production estimates depends on a high level of participation by agricultural producers. As the number of respondents falls, the statistical reliability of estimates and forecasts declines and the value of NASS estimates for a host of other purposes declines as well. The second issue derives primarily from the first in that the declining survey response impacts more localized or regional estimates first, particularly county-level estimates and those programs that are based on county-level data. In particular, insufficient response rates in some counties have led to unexpectedly wide discrepancies across counties in farm program payment rates under the county-based revenue support program—Agricultural Risk Coverage (ARC-CO)—established under the 2014 farm bill (P.L. 113-79). These discrepancies have generated concern about whether the new revenue program is working as intended or whether this is simply a data problem that needs to be addressed. Barring any near-term fix by USDA, lawmakers may elect to address county-to-county payment disparities in the context of the next farm bill. Third, market participants and policymakers alike are concerned that NASS estimates be unbiased and objective so as not to influence market prices or volatility. Analysis of NASS data suggests that it is both objective and trustworthy; however, variability of data as measured by market price reactions to NASS estimates appears to have increased in recent years. |
Recent congressional interest in U.S. energy policy has focused in part on ways through which the United States could secure more economical and reliable petroleum resources both domestically and internationally. Many forecasters identify petroleum products refined from Canadian oil sands as one possible solution. Canadian oil sands account for about 54% of Canada's total crude oil production, and that number is expected to rise from its current level of 1.9 million barrels per day (mbd) in 2013 to 4.8 mbd by 2030. Further, the infrastructure to produce, upgrade, refine, and transport the resource from Canadian oil sands reserves to the United States is in place, and additional infrastructure projects—such as the Keystone XL pipeline—have been proposed. Increased production from Canadian oil sands, however, is not without controversy, as many have expressed concern over the potential environmental impacts. These impacts may include increased water and natural gas use, disturbance of mined land, effects on wildlife and water quality, trans-boundary air pollution, and emissions of greenhouse gases (GHG) during extraction and processing. A number of key studies in recent literature have expressed findings that GHG emissions per unit of energy produced from Canadian oil sands crudes are higher than those of other crudes imported, refined, and consumed in the United States. While GHG emissions and other air quality issues originating in the upstream sectors of Canada's petroleum industry may not directly impact U.S. National Emissions Inventories or U.S. GHG reporting per se, many environmental stakeholders and policy makers have noted that the increased use of more emission-intensive resources in the United States may have negative consequences for both U.S. and global energy and environmental policy. The U.S. Department of State (DOS), in response to comments on the 2010 Draft Supplementary Environmental Impact Statement (2010 Draft EIS) for the Keystone XL pipeline project (which would connect oil sands production facilities in the Western Canadian Sedimentary Basin with refinery facilities in the United States), commissioned a contractor to analyze the life-cycle GHG emissions associated with these resources in comparison to other reference crudes. DOS presented this analysis in the 2011 Final Environmental Impact Statement (2011 Final EIS) released on August 26, 2011, as a "matter of policy," but noted that neither the National Environmental Policy Act (NEPA) nor DOS regulations (22 C.F.R. 161.12) nor Executive Orders 13337 and 12114 (Environmental Effects Abroad of Major Federal Activities) legally require that an EIS include an assessment of environmental activities outside the United States. The initial permit for the Keystone XL Project was denied due to insufficient time to prepare a rigorous, thorough, and transparent review of the pipeline's proposed routes through Nebraska. In May 2012, Keystone filed a new permit application for a revised route, implementing a new national interest determination. In accordance with this process, DOS released a revised Draft Supplementary EIS (Draft EIS) for the revised project on March 1, 2013, and a revised Final Supplementary EIS (Final EIS) on January 31, 2014, including an assessment of the indirect cumulative impacts and life-cycle GHG emissions of Canadian oil sands crudes. While DOS commissioned a different contractor to assist with the EIS, the data used to determine the GHG life-cycle emissions associated with the resource, as well as the market analysis used for supply and demand projections, remained largely unchanged. Hence, the 2014 Final EIS made similar findings to the 2011 Final EIS, including the following: 1. Canadian oil sands crudes "are more GHG-intensive than the other heavy crudes they would replace or displace in U.S. refineries, and emit an estimated 17% more GHGs on a life-cycle basis than the average barrel of crude oil refined in the United States in 2005," and 2. "Approval or denial of any one crude oil transport project, including the proposed Project, is unlikely to significantly impact the rate of extraction in the oil sands or the continued demand for heavy crude oil at refineries in the United States." Opponents of the pipeline, however, are critical of this impact assessment. They contend that the lack of transport infrastructure and the price discount it occasions has already affected production of the oil sands and, if continued, would further depress investment and development in the region. This report presents a summary of life-cycle emissions assessments of Canadian oil sands crudes and provides an analysis of their respective findings. The first section of the report, " Life-Cycle Assessment Methodology ," discusses the basic methodology of life-cycle assessments and examines the choice of boundaries, design features, and input assumptions. The second section of the report, " Results of Selected Life-Cycle Emissions Assessments ," compares several of the publicly available assessments of life-cycle GHG emissions data for Canadian oil sands crudes against each other, against those of other global reference crudes, and against those of other fossil fuel resources. The report concludes with a discussion of some tools for policy makers who are interested in using these assessments to investigate the potential impacts of U.S. energy policy choices on the environment. For a specific analysis of the GHG emissions attributable to the proposed Keystone XL pipeline, see CRS Report R43415, Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement , by [author name scrubbed] . Life-cycle assessment (LCA) is an analytic method used for evaluating and comparing the environmental impacts of various products (in this case, the climate change implications of hydrocarbon resources). LCAs can be used in this way to identify, quantify, and track emissions of carbon dioxide and other GHG emissions arising from the development of these hydrocarbon resources, and to express them in a single, universal metric of carbon dioxide equivalent (CO 2 e) GHG emissions per unit of fuel or fuel use. This figure is commonly referred to as the "emissions intensity" of the fuel. The results of an LCA can be used to evaluate the GHG emissions intensity of various stages of the fuel's life cycle, as well as to compare the emissions intensity of one type of fuel or method of production to another. GHG emissions profiles modeled by most LCAs are based on a set of boundaries commonly referred to as "cradle-to-grave," or, in the case of transportation fuels such as petroleum, "Well-to-Wheels" (WTW). WTW assessments for petroleum-based transportation fuels focus on the emissions associated with the entire life cycle of the fuel, from extraction, transport, and refining of crude oil; to the distribution of refined product (e.g., gasoline, diesel, jet fuel) to retail markets; to the combustion of the fuel in end-use vehicles. Other LCAs (e.g., Well-to-Tank [WTT] or Well-to-Refinery Gate [WTR]) establish different (i.e., more specific) life-cycle boundaries to evaluate emissions (see Figure 1 ). Inclusion of the final combustion phase allows for the most complete picture of petroleum's impact on GHG emissions, as this phase can contribute up to 70%-80% of WTW emissions. However, other LCAs can be used to highlight the differences in emissions associated with particular stages as well as experiment with certain boundary assumptions. The choice of boundaries is an important component to any LCA and can lead to vastly differing reported results. Because of the complex life cycle of hydrocarbon fuels and the large number of analytical design features that are needed to model their emissions, LCAs must negotiate many variables and uncertainties in available data. Key factors that influence the results of an LCA include (1) composition of the resource that is modeled, (2) extraction process of the resource that is modeled, (3) design factors chosen for the assessment, and (4) assumptions made in the input data for the assessment. Some of these factors with respect to Canadian oil sands crudes are as follows: Crude Oil T ypes . Oil sands are a type of unconventional petroleum deposit. They are commonly formations of loose sand or consolidated sandstone containing naturally occurring mixtures of sand, clay, and water, as well as a dense and extremely viscous form of petroleum technically referred to as bitumen. Most LCAs do not include an assessment of raw bitumen, because it is near solid at ambient temperature and cannot be transported in pipelines or processed in conventional refineries. Thus, bitumen is often diluted with liquid hydrocarbons or converted into a synthetic light crude oil to produce the resource known as "oil sands-derived crude" or simply "oil sands crude." Several kinds of crude-like products can be generated from bitumen, and their properties differ in some respects from conventional light crude. They include the following: Upgraded Bitumen, or Synthetic Crude O il (SCO) . SCO is produced from bitumen through an upgrading process that turns the very heavy hydrocarbons into lighter fractions. Since the upgrading process begins at the production facility for SCO, the allocation of GHG emissions is weighted more heavily upstream than other crude types. Diluted B itumen ( D ilbit) . Dilbit is bitumen mixed with diluents—typically natural gas liquids such as condensate—to create a lighter, less viscous, and more easily transportable product. Mixing bitumen with less carbon-intensive diluents lessens the GHG emissions impact per barrel of dilbit in relation to bitumen or SCO. Some refineries need modifications to process large quantities of dilbit feedstock, since it requires more heavy oil conversion capacity than conventional crudes. Increased processing in refineries shifts GHG emissions downstream, potentially intensifying the downstream GHG emission impact of dilbit in relation to SCO or other crudes (e.g., if dilbit is transported from Canada to the United States via a pipeline, the need for increased refining downstream would shift the potential for emissions to the United States). Synthetic B itumen ( S ynbit) . Synbit is typically a combination of bitumen and SCO. The properties of each kind of synbit blend vary significantly, but blending the lighter SCO with the heavier bitumen results in a product that more closely resembles conventional crude oil. Refining emissions from synbit occur both upstream and downstream, depending upon a variety of factors. Extraction P rocess . Two types of methods for extracting bitumen from the reservoir are currently used in the Canadian oil sands. They include the following: Mining . Oil sands deposits that are less than approximately 75 meters below the surface can readily be removed using conventional strip-mining methods. An estimated 20% of currently recoverable reserves are close enough to be mined. The strip-mining process includes removal of the overburden (i.e., primary soils and vegetation), excavation of the resource, and transportation to a processing facility. Higher intensities of GHG emissions may result from increased land use changes during strip-mining. Mining accounts for slightly more than 50% of current production, and is expected to remain between 40% and 50% through 2030. Currently, a significant portion of mined bitumen is upgraded to SCO. In S itu . Oil sands deposits that are deeper than approximately 75 meters are recovered using in situ methods. Most in situ recovery methods currently in operation involve injecting steam into an oil sands reservoir to heat—and thus decrease the viscosity of—the bitumen, enabling it to flow out of the reservoir to collection wells. Steam is injected using cyclic steam stimulation (CSS), where the same well cycles both the steam and the bitumen, or by steam-assisted gravity drainage (SAGD), where a top well is used for steam injection and the bottom well is used for bitumen recovery. Because significant amounts of energy are currently required to create steam, in situ methods are generally more GHG-intensive than conventional mining (excluding land use impacts). With more than 80% of recoverable reserves situated too deep for conventional mining techniques, it is assumed that the industry will eventually move toward an increased use of the in situ extraction process in some form. Study Design F actors . Design factors relate to how the GHG comparison is structured in each study and which parameters are included. These factors may include overall purpose and goal of the study, time frame for the inputs and the results, life-cycle boundaries that are established for comparison, units and metrics used for comparison, GHG global-warming potential used for comparison, treatment of co-products during refining (e.g., asphalt, petroleum coke, liquid gases, lubricants), treatment of secondary emission flows (e.g., capital infrastructure, land-use changes), treatment of power co-generation at the facilities, and treatment of flaring, venting, and fugitive emissions. Input Assumptions . Input assumptions can impact life-cycle results at each stage of the assessment. Studies often use simplified assumptions to model GHG emissions due to limited data availability and the complexity of and variability in the practices used to extract, process, refine, and transport crude oil, diluted crude, or refined product. Key input assumptions for Canadian oil sands crudes may include percentage contribution of each type of crude and each type of extraction process in the final transported product; type of upgrading or refining processes; amount of petroleum coke produced, stored, combusted, or sold; ratios for bitumen-to-diluents, steam-to-oil, gas-to-oil, water-to-oil; and energy efficiencies for steam generation and other production processes. Greenhouse gases, primarily in the form of carbon dioxide and methane, are emitted during a variety of stages in oil sands production (see text box below). A number of published and publicly available studies have attempted to assess the life-cycle GHG emissions data for Canadian oil sands crudes. This report examines the life-cycle assessments analyzed by the U.S. Department of State (DOS)—in conjunction with the consultancy firm ICF International LLC (ICF)—in the Keystone XL Project's August 2011 Final Environmental Impact Statement (2011 Final EIS). The studies were selected by ICF using several criteria: (1) they evaluated Canadian oil sands crudes in comparison to other reference crude oils, (2) they focused on GHG emissions impacts throughout the entire crude oil life-cycle, (3) they were published within the past 10 years, and (4) they represented the perspectives of a range of stakeholders. The use of these studies was replicated in the 2014 Final Environmental Impact Statement (2014 Final EIS) conducted by DOS and the contractor Environmental Resources Management. Table 1 provides a list of the studies referenced by the DOS analysis. While the type, boundaries, and design features vary across all studies, DOS determined the data and results from AERI/Jacobs 2009, AERI/TIAX 2009, NETL 2008, and NETL 2009 to be sufficiently robust for inclusion in the 2011 Final EIS as well as the 2014 Final EIS. Reasons against the inclusion of the remaining studies are presented briefly in the table, and outlined in more detail in the EIS. The 2014 Final EIS mentioned several other studies published after the release of the 2011 Final EIS. These studies include Jacobs Consultancy, EU Pathway Study: L ife Cycle Assessment of Crude Oils in a European Context , 2012; IHS CERA, Oil Sands, Greenhouse Gases, and U.S. Oil Supply Getting the Numbers Right—2012 Update ; Adam Brandt, Upstream GHG Emissions from Canadian Oil Sands as a Feedstock for European Refineries , 2011; and Joule Bergerson et al., Life Cycle Greenhouse Gas Emissions of Current Oil Sands Technologies: Surface Mining and In Situ Applications , 2012. The Final EIS, however, retained a focus on the data and results from AERI/Jacobs 2009, AERI/TIAX 2009, NETL 2008, and NETL 2009. The primary studies—as well as the DOS/ICF meta-analysis—report the following findings: Comparisons across the published studies of GHG life-cycle emissions intensities for fuels derived from different sources are sensitive to each study's choice of boundaries and input parameters. As reported in the studies, Well-to-Wheels GHG emissions for the full range of Canadian oil sands crudes and production processes are valued between 101-120 gCO 2 e/MJ lower heating value (LHV) gasoline. As reported in NETL 2008, Well-to-Wheels GHG emissions for a select range of Canadian oil sands crudes and production processes are valued between 101-110 gCO 2 e/MJ LHV gasoline. As reported in NETL 2008, Well-to-Wheels GHG emissions for the weighted average of transportation fuels sold or distributed in the United States (in reference year 2005) are valued at 91 gCO 2 e/megajoule (MJ) LHV gasoline. As reported in NETL 2008, Canadian oil sands crudes emit an estimated 17% more GHGs on a life-cycle basis than the weighted average of transportation fuels sold or distributed in the United States (in reference year 2005). As reported in NETL 2008, discounting the final consumption phase of the life-cycle assessment (which can contribute up to 70%-80% of Well-to-Wheels emissions), Canadian oil sands emit an estimated 80% more GHGs on a Well-to-Tank (i.e., "production") basis than the weighted average of transportation fuels sold or distributed in the United States (in reference year 2005). These numbers serve as averages, and are intended to reflect the range of estimates from the primary studies. Conversely, individual estimates reported by each of the studies listed in Table 1 —both primary and secondary—for various Canadian oil sands crude types and production processes can be found in Figure 2 and Table 2 . Figure 2 illustrates the WTW GHG emissions estimates as reported by each of the studies for various Canadian oil sands crude types and production processes. Table 2 summarizes and compares each study's emissions estimates, data, and relevant input assumptions. Variability among the estimates is, in part, the result of each study's differing design and input assumptions. A discussion of these assumptions—and their estimated impacts on GHG emissions—follows in the next section. Several life-cycle GHG emissions assessments have been published since the release of the 2011 Final EIS. These studies include Jacobs 2012, IHS CERA 2012, Brandt 2011, and Bergerson 2012, among others. IHS CERA 2012 found that transportation fuels produced from oil sands crudes result in average WTW GHG emissions that are 14% higher than the average crude refined in the United States (results range from 5%-23% higher). Jacobs 2012 found that WTW GHG intensities of transportation fuels produced from oil sands crudes are within 7%-12% of the "upper range" of the WTW intensity of conventional crudes. Bergerson 2012 reported that "although a high degree of variability exists in Well-to-Wheels emissions due to differences in technologies employed, operating conditions, and product characteristics, the surface mining dilbit and the in situ SCO pathways have the lowest and highest emissions, 88 and 120 g CO2eq/MJ reformulated gasoline," and that the lower values for certain oil sands production activities "overlap with emissions in literature for conventional crude oil." Most published and publicly available studies on the life-cycle GHG emissions data for Canadian oil sands crudes identify two main factors contributing to the difference in emissions intensity relative to other reference crudes: 1. oil sands are heavier and more viscous than lighter crude oil types on average, and thus require more energy- and resource-intensive activities to extract; and 2. oil sands are chemically deficient in hydrogen, and have a higher carbon, sulfur, and heavy metal content than lighter crude oil types on average, and thus require more processing to yield consumable fuels by U.S. standards. While most studies agree that Canadian oil sands crudes are, on average, more GHG-intensive than the crudes they may displace in the U.S. refineries, the range of the reported increase varies among assessments. Key design and input assumptions can significantly influence results. These factors include, but are not limited to, the following: Metrics. Comparing results from various studies is complicated by each study's choice of functional units. While GHG emissions have been normalized by most studies and reported as CO 2 -equivalents, the units they are expressed "over" vary greatly. Some evaluate GHG emissions on the basis of a particular final fuel product (e.g., gasoline, diesel, or jet fuel). Others evaluate emissions by an averaged barrel of refined product. Some studies report emissions per unit of volume (e.g., millions of barrels [mbl]), and others by unit of energy produced (e.g., British Thermal Units [Btus] or megajoules [MJ]). For example, NETL 2008, Jacobs 2009, and TIEX 2009 use functional units for energy produced across the final products—MMBtus or MJs for gasoline, diesel, and/or jet fuel. IHS CERA 2010 expresses GHG emissions "per barrel of refined product produced"; while others, like Charpentier 2009 (not included in the reported findings), by "kilometers driven," among others. The choice affects how the results are presented and makes it challenging to compare across studies if the data or conversion values are not fully published or transparent. Extraction Process. GHG emissions vary by the type of extraction process used to recover bitumen. Due to the high energy demands of steam production, in situ methods are generally assumed to be more GHG-intensive than mining operations. However, not all studies assess the difference to be the same. IHS CERA 2010 estimates the increase of WTW GHG emissions from in situ extraction to be, on average, 7% greater than mining. NRDC 2010 estimates 9%. Specific estimates in Jacobs 2009 show a 4% increase (for SAGD dilbit over mining dilbit) and in NRCan 2008 an increase of 9% (for SAGD SCO over mining SCO). In Situ Steam-to-Oil (SOR) Ratio. The amount of steam injected into a reservoir during in situ processes to extract a unit volume of bitumen varies across reservoirs and across extraction facilities. The resulting energy consumption and GHG emissions estimates vary accordingly. Thus, the figure used in LCAs to express this ratio may significantly impact GHG estimates. NRCan 2008 reports SOR values from 2.5 to 5.0 across SAGD operations in Canadian oil sands. NRDC 2010 reports a range from 1.94 to 7.26. IHS CERA cites an industry average of 3. Charpentier 2009 demonstrates that GHG emissions at the production phase are very sensitive to SOR, estimating that every 0.5 increase in the ratio corresponds to an increase of 10 kgCO 2 e GHG emissions per barrel of bitumen produced. Upgrading Process. Bitumen needs pre-processing in order to lower its viscosity and remove impurities before it is fit for conventional refineries. This pre-processing is called "upgrading," the key components of which include (1) removal of water, sand, physical waste, and lighter products; (2) catalytic purification (i.e., the process of removing excess sulfur, oxygen, nitrogen, and metals); and (3) hydrogenation through either carbon rejection or catalytic hydrocracking (i.e., the process of removing or breaking down the heaviest fraction of the oil residuum by either vacuum distillation and precipitation or by adding hydrogen in a "hydrocracking process that breaks long-chain hydrocarbons into shorter, more useful ones). The residuum can be further refined in a "coking" process to produce gasoline, distillate, and petroleum coke. The resulting product is synthetic crude oil (SCO) and numerous co-products, including water, sand, waste, sulfur, oxygen, nitrogen, distillate, and petroleum coke, among others. Some of the co-products from the upgrading process contain carbon and other potential GHG emission sources. Thus, a consistent and comprehensive accounting of the GHG emission from all co-products would be necessary for a full life-cycle assessment of oil sands crudes—or any hydrocarbon—production. Treatment of Petroleum Coke. Petroleum coke (a source of excess carbon) is a co-product of bitumen production at both the upgrader and the refinery. Roughly 5%-10% of a barrel of crude ends up as coke; and the heavier the crude, the greater the percentage of coke. Bitumen refining can produce about 50% more coke than the average conventional crude. The treatment of coke is a primary driver behind the results of any WTW GHG oil sands crudes assessment. If coke is combusted (i.e., for process heat, electricity, or hydrogen production at the upgrader in lieu of natural gas combustion), WTW GHG emissions may increase anywhere from 14% (TIAX 2009) to 50% (McCulloch 2006) over lighter crudes. If it is stored, sold, and/or combusted elsewhere, its potential emissions may not be factored into the LCA. The main concern for modeling is ensuring that coke produced at the upgrader (for SCO) is treated consistently with coke produced at the refinery (for dilbit or other imported crudes). Based on the studies analyzed in this report, petroleum coke at the upgrader is either (1) consumed (for process heat, electricity, or hydrogen production); (2) stored; or (3) sold as a fuel for combustion. In contrast, the studies assume that petroleum coke produced at the refinery that is not consumed by the refinery itself is either (1) used to back out coal combustion for electricity generation; or (2) allocated outside of the LCA. These inconsistent methodologies make comparisons problematic. Coke produced at U.S. refineries has a low domestic demand, and is therefore often shipped to overseas markets for use as a replacement fuel for coal combustion or steel production (most studies include neither the overseas transportation nor the incremental combustion emissions of coke in WTW GHG emissions assessments). Cogeneration. Cogeneration facilities use both steam and electricity generated from the steam to achieve higher energy efficiencies. In situ extraction facilities often have steam requirements much greater than electricity requirements, thus leaving excess capacity for electricity generation that can be exported back into the grid for use elsewhere. Offset credits given to exported electricity in LCAs can have a substantial impact on WTW GHG emissions. Cogeneration assumptions vary across the studies of Canadian oil sands crudes in two ways: (1) whether cogeneration credits are included, and (2) if so, what source of electricity is offset (e.g., coal-fired generation, oil, or natural gas). Some estimates show that applying credits from oil sands facilities to offset coal-fired electricity generation could reduce WTW GHG emission to within the range of conventional crudes. Many studies currently do not consider offset credits because the practice is not in widespread use among producers. Upgrading and Refinery Emissions. Because SCO delivered to a refinery has already been processed at the upgrader, the energy consumption at the refinery—and therefore the GHG emissions at the refinery—may be lower than the refinery emissions of dilbit or other crudes. Accounting for the reduced emissions from SCO has a modest effect on WTW GHG emissions, as refinery emissions are commonly around 5%-15% of the total. Many studies do not mention this accounting, and it is unclear if the reductions for SCO at the refinery are incorporated into many of the LCAs. Diluents. Because the viscosity of raw bitumen is too high to be transported via pipeline, diluting bitumen with lighter hydrocarbons to assist in its transport has become a common industry practice. Accounting for the effects of diluting bitumen is an important component in emission estimates, because producing and refining the diluents into finished products may result in a lower WTW GHG emissions estimate per barrel of dilbit in comparison to a barrel of raw bitumen. LCAs that report emissions for dilbit on a per barrel of refined product basis are thus reporting the emissions from a combination of both oil sands bitumen and the supplemental hydrocarbons. Additionally, diluting raw bitumen with light hydrocarbons creates a crude product that is more difficult and energy-intensive to refine than other crude oils, thus producing less premium refined product per barrel after the refinery stage. The extent to which this difference in yield is accounted for across the various studies is unclear. The IHS CERA 2010 estimates for crude production of SAGD dilbit do not show an adjustment for the difference. TIAX 2009 and Jacobs 2009 both show slightly higher refinery emissions for dilbit compared to other crudes, but the reasons for the increase are not specified. Upstream Production Fuels. Some studies include the GHG emissions associated with the upstream production of purchased electricity that is imported to provide process heat and to power machinery throughout crude production. The upstream GHG emissions for natural gas fuel and electricity generation used in the production of oil sands crudes can be significant. Jacobs 2009 demonstrates that the GHG emissions associated with the upstream fuel cycle account for roughly 4%-5% of the total WTW GHG emissions for average Canadian oil sands crudes. IHS CERA 2010 indicates that although its study excludes upstream fuel and electricity GHG emissions, the inclusion of them would add 3% to WTW GHG emissions per barrel of refined product. Flared, Vented, and Fugitive Emissions. Emissions associated with flaring and venting can be a significant source of GHG emissions. The TIAX 2009 study indicates that including venting and flaring emissions associated with oil sands production (particularly for mining extraction techniques) may contribute up to 4% of total WTW GHG emissions. Further, methane emissions from fugitive leaks throughout the oil sands production process can potentially contribute up to 1% of GHG emissions. Methane emissions from oil sands mining and tailings ponds may have an even larger impact, contributing from 0% to 9% of total GHG emissions. TIAX 2009, McCulloch 2006, and NRCan 2008 state that they include emissions from these sources. IHS CERA 2010 excludes emissions from methane released from tailings ponds but recognizes there is considerable uncertainty and variance in quantifying these emissions. Other studies do not specify. Infrastructure/Construction Emissions. None of the existing studies include the GHG impacts associated with capital equipment and the construction of facilities, machinery, and infrastructure needed to produce oil sands. Charpentier 2009 discusses the need to more fully investigate and include these potentially significant supply chain infrastructure GHG emissions in future life-cycle studies of oil sands crudes. Local and Indirect Land-Use Change Emissions. Emissions associated with changes in biological carbon stocks from the removal of vegetation, trees, and soil during oil sands mining operations may be significant, albeit temporary in some cases, and highly dependent upon the reclamation activities employed after use. Yeh 2010 estimates that surface mining of oil sands results in a 0.9%-2.5% increase in the WTW emissions versus the baseline (2005 U.S. average). The range was dependent on the type of lands displaced, with the removal of peatland having the largest impact and certain in situ facilities having the least impact. None of the life-cycle studies reviewed, however, includes land-use change GHG emissions in the WTW life-cycle assessment. Some recent studies, including the 2014 Final EIS, have begun to assess the effects. To compare the life-cycle GHG emissions intensities from Canadian oil sands crudes against those of other crude oils imported into the United States, many of the published studies conduct reference assessments of other global resources. Figure 3 presents the results of one of the more comprehensive studies (NETL 2009), which compared Well-to-Wheels GHG emissions of reformulated gasoline across various crude oil feedstocks (a review of the NETL 2009 input assumptions is included in the figure's "Notes" section). NETL 2009 reported the following: Well-to-Wheels GHG emissions from gasoline produced from a weighted average of Canadian oil sands crudes imported to the United States are approximately 17% higher than those from gasoline derived from the weighted average of transportation fuels sold or distributed in the United States in the reference year 2005. This corresponds to an increase in Well-to-Tank (i.e., "production") GHG emissions of 80% over the weighted average of transportation fuels sold or distributed in the United States in the reference year 2005 (18 gCO 2 e/MJ). Compared to a few selected imports, Well-to-Wheels GHG emissions from gasoline produced from a weighted average of Canadian oil sands crudes are 19%, 12%, and 18% higher than the life-cycle emissions from Middle Eastern Sour, Mexican Maya, and Venezuelan Conventional crudes, respectively. This corresponds to an increase in Well-to-Tank (i.e., "production") GHG emissions of 102%, 53%, and 92% higher than the production emissions from Middle Eastern Sour, Mexican Maya, and Venezuelan Conventional crudes, respectively. Compared to selected energy- and resource-intensive crudes, Well-to-Wheels GHG emissions from gasoline produced from a weighted average of Canadian oil sands crudes are found to be "within range" of those produced from heavier crudes such as Venezuelan Bachaquero and Californian Kern River, as well as lighter crudes that are produced from operations that flare associated gas (e.g., Nigerian Bonny Light). Individual estimates of WTW GHG emissions from Canadian oil sands crudes from the primary studies listed in Table 1 range from 9% to 19% more GHG-intensive than Middle Eastern Sour, 5% to 13% more GHG-intensive than Mexican Maya, and 2% to 18% more GHG-intensive than various Venezuelan crudes (including both Venezuelan Conventional and Bachaquero). Similar to LCAs conducted on Canadian oil sands crudes, assessments of other global crude resources confront many variables and uncertainties in available data. Likewise, these assessments are bounded by specific design factors and input assumptions that can affect the quality of the results. Conditions that may impact the results include the following: Choice of Reference Crudes Studied. Crude oil resources around the world vary significantly in regard to resource quality and production methods. Thus, GHG emissions intensities may also vary significantly. The results of comparisons between Canadian oil sands crudes and other global crudes may depend on which crudes are used as a reference and/or which crudes are evaluated to determine a baseline. Some studies suggest that GHG emissions intensities of Canadian oil sands crudes should be measured against a global average in order to assess the full environmental impacts of the resource. Others believe they should be measured against an average of all crudes consumed in a given marketplace (e.g., a particular country or region, like the United States or the European Union). Still others argue that Canadian oil sands crudes should be measured against a representative basket of crudes they may displace in production (e.g., crudes potentially displaced by Canadian oil sands crudes at U.S. PADD III refineries; or, more specifically, only "heavy" crudes potentially displaced at U.S. PADD III refineries). Sensitivity to Water-Oil and Gas-Oil Ratios. Due to the complex nature of crude oil production systems and resource reservoirs, studies often use ratios to describe the fraction of the flow from a well that is oil, water, and gas. The use of ratios simplifies the relationship between energy use and GHG emissions and may fail to accurately report the variability across differing resources. Further, assumptions regarding venting or flaring of associated gas, and fugitive emissions from produced water, may further impact GHG emissions intensities. Transportation Emissions. Assumptions regarding how LCAs account for the contribution of transportation may impact WTW GHG emissions estimates to a small degree. These include the distance and mode of transportation from oil field to export terminal, and from producer to refiner, as well as the final transportation emissions of all co-products. Uncertainty Analysis. Accurately measuring GHG emissions intensities is highly uncertain. Few of the studies listed in Table 1 fully consider associated uncertainty, and none of them rigorously treat underlying uncertainties in data inputs and models. Most calculate averages from a wide range of values and develop point estimates without providing statistical bounds. These bounds may prove to be important if their ranges are shown to overlap with other results. Data Transparency. The quality of the data and the transparency in presentation vary considerably by study. Most studies do not provide complete transparency in their methodologies, assumptions, or data sources. This is partially a function of the difficulty in accessing necessary data elements from the field. Data on the Canadian oil sands are more robust than some global resources and less robust than others. Lack of transparency impedes the ability to make meaningful comparisons of the results for oil sands crudes and reference crudes. Figure 4 offers a comparison of the life-cycle GHG emissions intensities of petroleum products from Canadian oil sands crudes with estimates from other unconventional petroleum products, natural gas, and coal. These data are drawn from several different studies employing many different design features and input assumptions, not the least of which are different methods of combusting the final fuel products. Further, it should be noted that different and non-substitutable end uses for the fuel products (e.g., the different end uses for coal and petroleum combustion) make a full comparison of their emissions impacts problematic. The figure presents an average value for each fuel; the original source materials provide a full description of each study's design characteristics as well as a presentation of each estimate's uncertainty analysis. Life-cycle assessment has emerged as an influential methodology for collecting, analyzing, and comparing the GHG emissions and climate change implications of various hydrocarbon resources. However, because of the complex life cycle of hydrocarbon fuels and the large number of analytical design features that are needed to model their emissions, LCAs retain many uncertainties. These uncertainties often make comparing results across resources or production methods problematic. Hence, the usefulness of LCA as an analytical tool for policy makers may lie less in its capacity to generate comparative rankings, or "scores," between one source and another, and more in its ability to highlight "areas of concern," or "hot spots," in the production of a given hydrocarbon fuel. In this way, LCA can serve to direct policy makers' attention to those areas in resource development that present the greatest challenges to GHG emissions control, and hence, the biggest potential benefits if adequately managed. Table 3 summarizes the GHG emissions impacts of the various stages of Canadian oil sands production and presents examples of mitigation strategies that have been offered by industry, academia, and other stakeholders. | Canadian Oil Sands and Climate Change Recent congressional interest in U.S. energy policy has focused in part on ways through which the United States could secure more economical and reliable petroleum resources both domestically and internationally. Many forecasters identify petroleum products refined from Canadian oil sands as one possible solution. Increased production from Canadian oil sands, however, is not without controversy, as many have expressed concern over the potential environmental impacts. These impacts include emissions of greenhouse gases (GHG) during resource extraction and processing. A number of key studies in recent literature have expressed findings that GHG emissions per unit of energy produced from Canadian oil sands crudes are higher than those of other crudes imported, refined, and consumed in the United States. The studies identify two main reasons for the difference: (1) oil sands are heavier and more viscous than lighter crude oil types on average, and thus require more energy- and resource-intensive activities to extract; and (2) oil sands are chemically deficient in hydrogen, and have a higher carbon, sulfur, and heavy metal content than lighter crude oil types on average, and thus require more processing to yield consumable fuels by U.S. standards. Selected Findings from the Primary Published Studies CRS surveyed the published literature, including the U.S. State Department-commissioned studies for the Keystone XL pipeline project in both the 2011 Final Environmental Impact Statement and the 2014 Final Supplementary Environmental Impact Statement. The primary literature reveals the following: Canadian oil sands crudes are generally more GHG emission-intensive than other crudes they may displace in U.S. refineries, and emit an estimated 17% more GHGs on a life-cycle basis than the average barrel of crude oil refined in the United States; compared to selected imports, Well-to-Wheels GHG emissions for Canadian oil sands crudes range from 9% to 19% more emission-intensive than Middle Eastern Sour, 5% to 13% more emission-intensive than Mexican Maya, and 2% to 18% more emission-intensive than various Venezuelan crudes; compared to selected energy- and resource-intensive crudes, Well-to-Wheels GHG emissions for Canadian oil sands crudes are within range of heavier crudes such as Venezuelan Bachaquero and Californian Kern River, as well as lighter crudes that are produced from operations that flare associated gas (e.g., Nigerian Bonny Light); discounting the final consumption phase of the life-cycle assessment (which can contribute up to 70%-80% of Well-to-Wheels emissions), Well-to-Tank (i.e., "production") GHG emissions for Canadian oil sands crudes are 9%-102% higher than for selected imports; the estimated effect of the Keystone XL pipeline on global GHG emissions remains uncertain, as some speculate that its construction would encourage an expansion of oil sands investment and development, while others suggest that the project would not substantially influence either the rate or magnitude of oil extraction activities in Canada or the overall volume of crude oil transported to and refined in the United States. Scope and Purpose of This Report Congressional interest in the GHG emissions attributable to Canadian oil sands crudes has encompassed both a broad understanding of the resource as well as a specific assessment of the proposed Keystone XL pipeline. This report focuses on the broader resource. It discusses the methodology of life-cycle assessment and compares several of the publicly available studies of GHG emissions data for Canadian oil sands crudes against each other and against those of other global reference crudes. For a detailed analysis of the GHG emissions attributable to the proposed Keystone XL pipeline, and the findings from the State Department's Final Environmental Impact Statement, see CRS Report R43415, Keystone XL: Greenhouse Gas Emissions Assessments in the Final Environmental Impact Statement. |
Both NATO and the European Community (EC), now the European Union (EU), had their origins in post-World War II efforts to bring stability to Europe. NATO's original purpose was to provide collective defense through a mutual security guarantee for the United States and its European allies to counterbalance potential threats from the Soviet Union. The European Community's purpose was to provide political stability to its members through securing democracy and free markets. Congress and successive Administrations have strongly supported both NATO and the EC/EU, based on the belief that stability in Europe has engendered the growth of democracy, reliable military allies, and strong trading partners. In the second session of the 110 th Congress, Members will likely exhibit an interest in NATO's effort to develop more mobile combat forces, enhance the alliance's role in Afghanistan, examine the appropriateness of a possible missile defense system for Europe, and enlargement of the alliance. As in the previous several years, the evolution of the NATO-EU relationship is also likely to attract congressional attention. Evolution of NATO and the EC/EU after the collapse of the Soviet Union in 1991 has brought with it some friction between the United States and several of its allies over the security responsibilities of the two organizations. These differences center around threat assessment, defense institutions, and military capabilities. European NATO allies that were also members of the EC/EU have sought from 1990 to build a security apparatus able to respond to developments believed to threaten specifically the interests of Europe. In 1990, after Iraq's invasion of Kuwait, some European governments—led by France—concluded that they lacked the military capabilities to respond beyond the North Atlantic Treaty area to distant threats. In consultation with the United States, they sought to establish the European Security and Defense Identity (ESDI) within NATO, in which they would consult among themselves and with NATO over response to a threat. Both the first Bush Administration and the Clinton Administration asked that ESDI not duplicate NATO structures, such as headquarters and a planning staff, but rather "borrow" NATO structures for planning and carrying out operations. Initial reluctance of the Clinton Administration to involve the United States in the emerging conflicts accompanying the break up of Yugoslavia led some allies to redouble their efforts to enhance their political consultation, unity, and military capabilities. They saw a threat in the form of large refugee flows, autocratic regimes, and the spread of nationalist ideas emanating from the conflict-ridden Balkans. In 1994-1996, NATO endorsed steps to build an ESDI that was "separable but not separate" from NATO to give the European allies the ability to act in crises where NATO as a whole was not engaged. In 1998-1999, the EU largely adopted ESDI as its own and began to transform it into a European Security and Defense Policy (ESDP), given greater definition by more detailed arrangements for the Europeans to borrow NATO assets for the "Petersberg tasks" (crisis management, peace operations, search and rescue, and humanitarian assistance). Britain, in a major policy reversal, joined France in moving forward discussions of these new arrangements within the EU. ESDP's principal differences with ESDI were in the effort to secure more independence from NATO tutelage and guidance in the event that the United States expressed reluctance to become involved in a crisis, a renewed discussion of more carefully outlined EU decision-making structures, and consideration of forces appropriate for potential crises. The Kosovo conflict of 1999 further spurred this effort, when most EU members of NATO conceded that they still lacked adequately mobile and sustainable forces for crisis management. All EU members express a wish to see a strong U.S.-led NATO. However, there are disputes with the United States over how or whether to involve international institutions, such as the UN, in international crises. There are also disagreements over the weight given to political versus military instruments in resolving these crises. These disputes have fueled European desires to develop a more independent ESDP. The United States maintains that ESDP must be closely tied to NATO, given the large number of states that belong to both NATO and the EU (see membership chart in Appendix ) and limited European defense resources. Congress is actively engaged in the evolving NATO-EU relationship. While Congress has supported the greater political integration that marked the European Community's evolution into the European Union, many Members have called for improved European military capabilities to share the security burden, and to ensure that NATO's post-Cold War mission embraces combating terrorism and WMD proliferation. In 1998 and again in 2003 the Senate approved the addition of new members to the alliance as a means to build European stability through securing democratic governments and adding states that shared concerns over emerging threats. During the 1998 NATO enlargement debate, Senator Jon Kyl offered an amendment to the instrument of ratification that described terrorism and the proliferation of weapons of mass destruction (WMD) as new threats that NATO must counter. The Kyl amendment called on the European allies to develop capabilities "to project power... and provide a basis for ad hoc coalitions of willing partners...." Member states should "possess national military capabilities to rapidly deploy forces over long distances, sustain operations for extended periods of time, and operate jointly with the United States in high intensity conflict." The amendment passed by a wide margin. Its essence was apparent in NATO's Strategic Concept, the alliance's strategic guidelines, adopted at the Washington summit in April 1999, and in subsequent NATO agreements to redefine the alliance's mission and to improve capabilities. The issues raised in the 1990s debate over European security remain the essence of the debate today. What are the missions in security affairs of NATO and the European Union? What is the proper weight to be given to political and military instruments in defending Europe and the United States from terrorism and proliferation? What types of military forces are necessary for NATO's role in collective defense, and for the EU's role in crisis management? Are NATO and EU decision-making structures and procedures appropriate and compatible to ensure that there is an adequate and timely response to emerging threats? What should be the role of other international institutions in responding to these threats? Issues raised by these questions are the subject of this report. There is a consensus in NATO that terrorism and the proliferation of weapons of mass destruction are the principal threats facing the allies today. NATO's 1999 Strategic Concept states that the allied "defense posture must have the capability to address appropriately and effectively the risks" associated with the proliferation of nuclear, biological, and chemical weapons. The document also describes terrorism as a threat, but indicates that political and diplomatic means should be the main instruments against both terrorism and proliferation. The attacks of September 11, 2001, on the United States led to a refinement of the allied posture on these threats. In a May 2002 communiqué, NATO agreed that the allies must "be able to field forces that can move quickly to wherever they are needed, sustain operations over distance and time, and achieve their objectives." The communiqué marks the moment that NATO decided to assume responsibilities around the globe should an ally be threatened. In November 2002, at the Prague summit, the allies made a commitment to build the capabilities necessary to go out of area. They agreed to establish a NATO Response Force (NRF) of 20,000 troops for rapid "insertion" into a theater of operations. The NRF consists of highly trained combat units from member states, and could be used to fight terrorism. In addition, the allies agreed to a scaled-down list of new capabilities, called the Prague Capabilities Commitment (PCC), that declining European defense budgets might be able to sustain. Under the PCC, some allies have agreed to develop consortia to fund jointly such systems as strategic airlift and aerial refueling, meant to provide mobility for combat operations distant from Europe, or specialized "niche" capabilities, such as special forces or units to detect chemical or biological agents. Despite the transatlantic agreement on the new common threats, the NRF, and the PCC, there are significant differences between the United States and its allies over appropriate responses. Most allied governments contend that the Administration places excessive emphasis on military over political means to counter a threat, and that the allies have other domestic budget priorities (such as pension plans) that compete with allocations for defense. The allies' response to the Bush Administration's doctrine of "pre-emptive attack" in the face of an imminent threat captures elements of the transatlantic debate over response to the threat. The Administration's National Security Strategy (2002) notes that the United States reserves the right to take military action "to forestall or prevent... hostile acts" by an adversary. While most allies would concede such a right, some view the doctrine as an example of U.S. unilateralism at the moment of U.S. global military pre-eminence. In general, they believe that military action must be undertaken within a multilateral framework. The allied debate over pre-emptive attack was affected by the U.S. decision to terminate UN weapons inspections and to go to war against Iraq in March 2003, a conflict Administration officials indicate was undertaken to prevent the Hussein regime from developing and using weapons of mass destruction against the United States and other countries. The initial refusal by France, Germany, and Belgium to approve NATO military assistance to Turkey in February 2003 in anticipation of a possible attack by Iraq sharply divided the alliance. Most allies said then, and maintain now, that a UN resolution is a requisite step, whenever possible, for NATO military action. The inability of the Bush Administration to locate WMD in Iraq led to renewed insistence among the European allies that their opposition was correct and that a UN imprimatur should be sought for NATO operations. Allied insistence on involvement of international institutions in "legitimizing" conflict has its origins in the aftermath of the 20 th century's two world wars. Europeans remain wary of arguments justifying the crossing of borders and resorting to military action. Establishment of the United Nations in 1946, under U.S. leadership, was one means to ensure that international diplomatic and public opinion could be brought to bear to enhance understanding of an impending danger and how to respond to it. The North Atlantic Treaty's (1949) reliance on the consensus method of decision-making was another. The allied debate over pre-emptive attack, out-of-area engagement, and "legitimization" of military operations was brought to a head by the Bush Administration's frustration with cumbersome alliance decision-making procedures. The Administration believes that NATO military actions should mostly be conducted by "coalitions of the willing." In this view, the allies, of which only a small number have deployable forces capable of high-intensity conflict, should use coalitions of member states that agree upon a threat and have the means to counter it. Most European allies believe that "coalitions of the willing" undermine the solidarity of the alliance and the consensus decision-making principle. Their support for the principle of consensus centers upon a desire to maintain political solidarity for controversial measures. In this view, the consent of 26 sovereign governments, each taking an independent decision to work with other governments, is a formidable expression of solidarity and in itself provides a measure of legitimization for an operation. Some allies believe that this view was given weight, for example, in NATO's decision to go to war against Serbia in 1999 when Russian resistance prevented passage of a UN Security Council resolution approving intervention on behalf of Kosovo. The Administration proposed a controversial ground-based missile defense system, to be placed in Poland and the Czech Republic, to defend against a possible missile attack by Iran. Questions immediately arose in Congress and Europe about the feasibility of the proposed system, as well as the nature of the perceived threat. Some allies believe that NATO should develop a new Strategic Concept, given the ongoing debate over the proper balance between the use of military and political tools to bring global stability. Some allies wish to see a brief document that clearly states NATO's purpose and its role in regional and global stabilization. The allies are likely to discuss the possibility of drafting a new Strategic Concept at NATO's Bucharest summit in April 2008. Most allies lack mobile forces that can be sustained distant from the European theater. In October 2003, former NATO Secretary General George Robertson said that "out of the 1.4 million soldiers under arms, the 18 non-U.S. allies have 55,000 deployed on multinational operations..., yet they feel overstretched. If operations such as the International Security Assistance Force in Afghanistan are to succeed, we must generate more usable soldiers and have the political will to deploy more of them in multinational operations." Former NATO Supreme Allied Commander (SACEUR) General James Jones told Congress in March 2004 that only 3%-4% of European forces were "expeditionarily deployable." The Bush Administration proposed both the NATO Response Force (NRF) and the Prague Capabilities Commitment in 2002 to help remedy this problem. The purpose of the initiatives has been to create forces that integrate, for example, aerial refuelers and airlift capacities to allow troops and equipment to be moved to a conflict. The allies believe that shared funding of some of these capabilities will moderate the costs to individual governments. At NATO's Riga summit in November 2006, the allies declared the NRF fully operational, perhaps prematurely. The NRF was to have 20,000 troops, on rotation, in high-readiness status. It can be packaged to respond to a range of crises, from humanitarian assistance after an earthquake, for example, to an insertion force for high-intensity combat. The NRF is to reach its destination within 7-30 days and sustain itself for a period of time. However, the alliance has had difficulty in filling out the NRF and planning for three rotations. Some allies are overstretched in security operations around the globe. Others express concern about the potentially high costs of participating in an ongoing NRF mission, and are asking that the allies consider a more equitable plan for sharing such costs; in the meantime, some governments are reluctant to contribute forces to the NRF. There is now a debate about the "evolution" of the role of the NRF. The United States and several other allies believe that the NRF should be used in current operations, such as in Afghanistan. Others, such as France and Germany, wish to preserve the original concept of an NRF by keeping it available as a quick-insertion force in a crisis, and as an apparatus to spur member governments to continue the transformation of their militaries to more mobile forces. General Jones pressed the idea that more NATO assets be funded jointly to ensure availability of needed equipment and forces. Today, NATO for the most part follows the concept of "costs lie where they fall," meaning that governments pay the costs for forces they send to an operation, such as in Kosovo in 1999. Such a practice translates into the larger countries with more military capabilities and political will bearing disproportionate costs in providing security for all. Otherwise, the concern is that NATO risks failing to develop appropriate forces, such as the NRF, as governments decline to contribute troops because they might be used for expensive operations. At the Riga summit, sixteen allies announced that they were pooling resources to purchase four Boeing C-17s in 2007, a step that will enhance NATO's capability to airlift troops and equipment to distant theaters. The Prague Capabilities Commitment (PCC) is a slimmed-down version of an earlier capabilities initiative and has eight capability goals targeting the allies' principal deficiencies. The list of PCC capabilities includes strategic lift (air and sea), aerial refueling, precision-guided munitions, secure communications, ground surveillance systems, and special forces. At the Istanbul summit in June 2004, NATO announced that a Chemical/Biological, Radiological, and nuclear defense battalion had become fully operational, fulfilling one of the capability goals. There has been some progress in purchase or leasing of sea lift, and the acquisition of precision-guided munitions is on schedule. While some U.S. officials say that the PCC is on schedule, others say that there remain serious shortfalls in aerial refuelers and air lift, where PCC goals are unlikely to be met in the foreseeable future. The allies designed the capabilities list to form an integrated set of systems; because allies are not acquiring some systems, other systems' effectiveness will be diminished. For example, improved lift capacity is necessary if equipment, munitions, and forces are to reach a theater of operations in a timely fashion. Some governments, such as the German government, have pleaded that competing budget necessities, such as pension programs, are forestalling plans to modernize their militaries. The German parliament has also reduced and capped defense expenditures for the next several years. At the 2006 NATO Riga summit, the allies issued a document called the "Comprehensive Political Guidance," signed by the members' 26 heads of state. In the coming years, the leaders called on all allies to develop forces of which 40% would be structured for deployment, and 8% for sustained operations at any given time. Some analysts worry that NATO and the EU might "compete" for the use of more mobile, high-readiness forces. The EU is developing its own rapid reaction forces for crisis management. Some of these units are "double hatted" for use either by the EU or by NATO. The EU also has embarked on an initiative to enhance its military capabilities and equipment procurement, including, for example, greater strategic lift and weapons for suppression of enemy air defenses. The issue of which organization, NATO or the EU, could use national forces if there were simultaneous crises has not been resolved. Some NATO officials believe that the EU places more restrictions on use of its forces than does NATO and that these restrictions are reflected in the training of those forces. In this view, NATO and the EU train their forces to different standards, and EU forces have a different "language" of command and operations; these hurdles must be cleared for forces trained for the EU to be useful to NATO. Former SACEUR General Jones was critical of NATO governments that commit forces to an allied mission, then impose restrictions on tasks those forces may undertake. Such "national caveats" have troubled operations in the Balkans, for example. In March 2004, when Albanians rioted against Serbs in Kosovo (see below), German troops refused orders to join other elements of KFOR in crowd control; only 6,000 of KFOR's 18,000 troops were eligible to use force against the rioting crowds. NATO is attempting to overcome this problem by providing more riot-control training for troops designated for assignment in Kosovo. In NATO's mission in Afghanistan, a number of governments have placed caveats on their forces. Some, for example, lack appropriate equipment and prohibit their aircraft from flying at night. Others restrict the movement and use of their forces. Germany, for example, largely restricts the use of its forces to northern Afghanistan, a relatively stable part of the country. Only in an urgent situation may they go to southern Afghanistan, an area increasingly unstable and the location of considerable fighting by U.S., British, Canadian, and Dutch forces against the Taliban. The allies lifted some, but not all, caveats in Afghanistan at the Riga summit. At the same time, national caveats are an expression of sovereignty by member governments and on occasion may be the price that must be paid to secure the participation of a government in a NATO mission. "National caveats" is a political term and not an official NATO description of restrictions on forces. The United States has taken the lead in criticizing governments that place caveats on their forces. However, some U.S. military officials say that some allies might also contend that the United States has its own caveats but that Washington chooses to call them by another name. For example, the United States, as do other governments, places restrictions on the range of actions that its forces may undertake in the Balkans and Afghanistan, but describes these restrictions as tactical rules of engagement. In general, however, U.S. military officials oppose national caveats because they complicate the force-planning process. With caveats in place, force planners must cajole member states to supply troops who have the authority and skills to accomplish a mission. These officials add that knowledgeable commanders on the ground know what forces under their command may or may not do and implement a mission accordingly. The NATO operation KFOR (Kosovo Force) has been in place since 1999. Under a U.N. imprimatur, KFOR is charge with maintaining a secure environment, supporting an international civilian administration, and controlling ethnic violence. Under U.N. auspices, a study was drafted that recommended "supervised independence," guided by the EU, a notion strongly opposed by Serbia and Russia, the latter having a potential veto of the plan in the Security Council. The United States and European governments may proceed to recognize Kosovo under the plan even if Russia does not approve it. NATO has confirmed that its forces, now numbering 16,500, will stay in place to ensure Kosovo's stability and viability. Kosovo may become a greater testing ground for NATO-EU cooperation. At the Riga summit, the allies stated that "contributing to peace and stability in Afghanistan is NATO's key priority," and that priority is likely to be reaffirmed at the Bucharest summit. There are two military operations in Afghanistan. NATO leads the International Security Assistance Force (ISAF); its mission is to stabilize and rebuild Afghanistan. The United States leads a separate, non-NATO mission, called Operation Enduring Freedom (OEF); its mission is to eliminate Taliban and Al Qaeda remnants, primarily active in the eastern part of the country. NATO governments have decided to bring these two missions closer together, although their commands and mission will remain separate. In 2006, ISAF brought all of Afghanistan under its control, under a U.N. resolution. ISAF now has approximately 41,000 troops; the forces are overwhelmingly from NATO's member states, above all from the United States, Germany, Canada, Britain, France, and the Netherlands. Increasingly, partner countries such as Australia and New Zealand, recognizing that stability in south Asia is in their interests, have been contributing troops. This development reflects an effort led by the United States to make NATO a global security organization, under the logic that terrorism and the proliferation of WMD is a threat to all societies. Since the spring of 2006, there has been a resurgence of the Taliban, particularly in the southern and eastern parts of the country. They are exploiting the weak governance of the Karzai government in Kabul, with which there is growing discontent by the population. Warlords are also re-exerting authority in parts of the country. ISAF has established Provincial Reconstruction Teams (PRTs), composed of soldiers and civil affairs officers, in parts of Afghanistan. The objective of the PRTs is to extend the authority of the central government, provide security, and undertake projects (such as infrastructure development) that would boost the Afghan economy. This effort has met with only mixed success, in part because allied governments have been slow to sponsor PRTs and to provide troops for them, in part because some allies lack deployable, sustainable forces. A key element lacking in some PRTs is quick-response combat and medical units that could assist PRTs that find themselves in danger. The allies are debating among themselves the next steps to stabilize Afghanistan. Some allies believe that NATO relies too heavily on combat power to stabilize the country, and that economic and political reconstruction must be given greater emphasis. The United States and several other allies respond that there can be no ongoing reconstruction without security. The United States, the Netherlands, Canada, and Britain bear the brunt of the fighting in the more unstable south and east. U.S. officials continue to cajole some allies to send more forces, or to allow their forces to move from the more stable north to the unstable south and east. The allies are struggling to combat Afghanistan's growing poppy crop, an insidious institution that feeds corruption and violence in the country. Afghanistan supplies over 90% of the world's opium, which accounts for an estimated 40% to 60% of the country's GDP. The crop therefore is a major factor in the economic life and stability of the country. The United States and the allies are debating means to eliminate opium production. There is an effort to develop alternative crops, a program that could take years to come to fruition. The Bush Administration has proposed an aerial spraying program to reduce the poppy crop, which both the Karzai government and the allies are resisting. The allies believe that the Afghan government must take the lead in reducing the poppy crop, as only Afghan leaders can have long-term credibility in the country. Afghanistan's weak institutions, including minimally functional military, police, and judicial systems, retard any significant progress, as does the virtual absence of a market infrastructure that could support a modernizing economy. The U.S. invasion of Iraq and subsequent efforts to stabilize that country have caused great controversy in the alliance. From at least early 2002, some allies, particularly France and Germany, were contending that the principal threats to the allies lay elsewhere, in the nuclear programs of Iran and North Korea, and from instability in Pakistan and Afghanistan. They contended that Iraq could be contained through sanctions and, after the fall of 2002, U.N. WMD inspections. Transatlantic differences over Iraq touched off a bitter dispute in NATO in February 2003, shortly before the war, when France, Germany, and Belgium blocked initial U.S. efforts to provide NATO defensive assistance to Turkey. They argued that such assistance would be tantamount to acknowledgment that war was necessary and imminent at a time when U.N. inspections were still underway. The Iraq conflict and ensuing failure to locate WMD sharpened a debate among the allies over an appropriate NATO role in Iraq, and Iraq's effect on allied interests. The Administration contends that stabilization of Iraq is in the interest of all allies. The insurgency and general disorder in much of Iraq has opened the door to a terrorist foothold in the country. Administration officials believe that anchoring democratic institutions in Iraq will have a positive, reverberative effect on Middle Eastern governments that have authoritarian traditions. The Bush Administration has gained a small measure of NATO involvement in Iraq. NATO has agreed to a training mission for Iraqi security forces. Many allies, led by France and Germany, recognize that an unstable Iraq is an unsettling force in the already volatile Middle East. However, they believe that the Arab-Israeli conflict must first be settled before there can be stability in the region, and that U.S. policy favors Israel excessively and is thus an impediment to peace. They are skeptical that an outside power like the United States can develop democracy in Iraq, a country that has sectarian and tribal divisions and no rooted legacy of representative government. Most allies have withdrawn their troops from the U.S.-led Multinational Force in Iraq. On March 29, 2004, seven countries (Bulgaria, Estonia, Latvia, Lithuania, Romania, Slovakia, and Slovenia) became members of NATO upon submission of their instruments of ratification in a ceremony in Washington, D.C. Albania, Croatia, and Macedonia are candidates for the next round of NATO enlargement. The alliance may invite one or more of these countries to join NATO at the 2008 summit in Bucharest. Some observers believe that Macedonia has made the most progress; its armed services are increasingly professional; corruption is being reduced; a market economy is taking hold; and general governance has improved. At the same time, Macedonia is a poor country with minimal military capability. Croatia has a more robust economy, but has struggled to find a secure majority of its population in favor of NATO membership. Albania remains a poor country with significant problems of governance and military capability. The Bush Administration has wished to place Georgia on a faster track to membership, a step resisted by most allies. Georgia has two border and ethnic conflicts, sometimes aggressively fueled by Russia, that have given the Tblisi government pronounced strategic problems. Moreover, some European governments do not wish to antagonize Russia by putting Georgia too rapidly on the road to membership. The Tblisi government has also shown signs of autocratic practices. The Administration wishes to put Georgia into the Membership Action Plan, a step that would make the country a candidate state, at the Bucharest summit. Some allies resist this idea, and wish to proceed slowly. Ukraine is likely on a slower track for membership than Georgia. Ukraine has a large Russian population and great economic potential that Russia does not wish to see wrested from its sphere; Russian elements of the population also generally oppose NATO membership. During the first session of the 110 th Congress, Members debated the possible benefits of enlargement. Representative Tanner and Senator Lugar sponsored legislation that endorsed the concept of enlargement and welcomed consideration of governments qualified for membership. The bill was signed into law in April 2007 as the NATO Freedom Consolidation Act of 2007 ( P.L. 110-17 ). The law authorizes security assistance for the three candidate states, and for Georgia and Ukraine. During the second session, hearings on the candidacies of Albania, Croatia, and Macedonia in both the House and Senate are likely. In 2007 the Bush Administration proposed to the Polish and Czech governments that elements of a U.S. ground-based missile defense system be placed on their soil for defense of Europe against a possible Iranian missile attack. The proposal was immediately controversial. Some NATO officials and officials in many NATO governments asked why the proposal had not first been vetted through the alliance; they said privately that the Administration was attempting to use two relatively compliant governments to further U.S. initiatives against Iran, which is pursuing an illegal uranium enrichment program, possibly to build nuclear weapons one day. The Russian government contended that it had not been consulted; in fact, the Administration had raised the idea of a missile defense system several times with Moscow in previous years. The Russians contended that the system could be used against Russia's own missiles, a step that could weaken the concept of deterrence. The system proposed by the Administration would place 10 missile interceptors in Poland and an associated radar system in the Czech Republic, to be in place by 2013. The system would cost an estimated $4.04 billion. Congress raised questions about the timing and feasibility of the system. Some Members believe that more mobile systems would be appropriate, and that the system proposed by the Administration would not cover all allied territory. The 110 th Congress blocked funding for site development in FY2008, but will allow the Pentagon to request reprogramming if an agreement for the system is reached with both Poland and the Czech Republic. Warsaw and Prague have raised questions about the proposal. Both governments reportedly believe that the system might make their countries a target in the event of a conflict. Poland is asking the United States to pay for an upgraded air defense system. Public opinion in both countries appears to oppose the system. The Bush Administration's effort to shift NATO's mission to combating terrorism and proliferation, with a strategic center of gravity in the Middle East, has led to uneasiness and a series of challenges by some allies. Although all allies view terrorism and proliferation as serious threats, and all have embraced the need for more "expeditionary" forces, several key allies nonetheless have questions about the Administration's leadership and its commitment to NATO. International political considerations play an important role in some allies' questioning of U.S. leadership. Most allies are members of the European Union. They place great importance on international institutions as a means of solving transnational problems, from economic dislocation to narcotics trafficking to prevention of conflict. The legacy of two world wars in Europe remains a central factor in shaping governments' policies; prevention of illegitimate violations of sovereignty was a principal reason for their support of the establishment of the UN, the EU, and NATO. This view lies behind the general European opposition to the Bush Administration's doctrine of "pre-emptive action." Some European observers today believe that there is an "absence of anything that could be called an international security architecture," in part because the United States, in this view, avoids reliance on the UN. U.S. global leadership was once "embedded in the international rule of law that constrained the powerful as well as the weak." However, in this view, the U.S. resort to force in Iraq, without clear support from the UN, has made the United States "a revolutionary hyperpower." Some U.S. officials counter that there is good cooperation with the allies on the use of law enforcement to combat terrorism, but that there are moments when the danger of impending catastrophic developments or an imminent attack justifies the use of force without "legitimization" through the often time-consuming process of obtaining a UN resolution. The Clinton Administration (and ultimately all the allies) reached this conclusion when it decided that NATO must act to prevent ethnic cleansing in Kosovo without explicit U.N. authorization in light of a threatened Russian veto, and the Bush Administration reached this conclusion when it went to war in Iraq in the belief that the Hussein regime possessed a WMD arsenal. As noted above, some allies contend that the United States is seeking to use NATO as a "toolbox." They object to former Defense Secretary Rumsfeld's repeated advocacy of "coalitions of the willing" to fight in conflicts as a means of using allied resources and supportive NATO governments to endorse U.S. interventions on foreign soil. They argue that the Administration's contention that "the mission drives the coalition" undermines allied solidarity; such a doctrine weakens the long-held view that all member states must believe that they have a stake in allied security operations. Some allies believe that the United States relies too heavily upon military power to resolve issues that may have a political solution. They place the issue of proliferation in this realm, and cite the long-term economic pressure of sanctions against Libya, followed by U.S. and British negotiations with Tripoli, as evidence that a patient policy based on political initiatives can be effective. At the same time, all allies underscore the importance of their strategic relationship with the United States. While the European Union, including its nascent defense entities, is of great value to them, they nonetheless contend that the transatlantic partnership remains vital to countering global threats. For decades, there has been discussion within the EU about creating a common security and defense policy. Previous EU efforts to forge a defense arm foundered on member states' national sovereignty concerns and fears that an EU defense capability would undermine NATO and the transatlantic relationship. However, U.S. hesitancy in the early 1990s to intervene in the Balkan conflicts, and former UK Prime Minister Tony Blair's desire to be a leader in Europe, prompted him in December 1998 to reverse Britain's long-standing opposition to an EU defense arm. Blair joined then-French President Jacques Chirac in pressing the EU to develop a defense identity outside of NATO. This new British engagement, along with deficiencies in European defense capabilities exposed by NATO's 1999 Kosovo air campaign, gave momentum to the EU's European Security and Defense Policy (ESDP). EU leaders hope ESDP will provide a military backbone for the Union's evolving Common Foreign and Security Policy (CFSP), a project aimed at furthering EU political integration and boosting the EU's weight in world affairs. They also hope that ESDP will give EU member states more options for dealing with future crises. The EU stresses that ESDP is not aimed at usurping NATO's collective defense role nor at weakening the transatlantic alliance. Most EU members, led by the UK, insist that ESDP be tied to NATO—as do U.S. policymakers—and that EU efforts to build more robust defense capabilities should reinforce those of the alliance. At the NATO Washington Summit in April 1999, NATO welcomed the EU's renewed commitment to strengthen its defense capabilities, and acknowledged the EU's resolve to develop an autonomous decision-making capacity for military actions "where the Alliance as a whole is not engaged." Nevertheless, France and some other countries have traditionally favored a more independent EU defense arm. Many French officials have long argued that the EU should seek to counterbalance the United States on the international stage and viewed ESDP as a vehicle for enhancing the EU's political credibility. More recently, however, new French President Nicolas Sarkozy has taken a more pragmatic approach on European security issues. Although a strong supporter of ESDP, Sarkozy also maintains that European security must have a U.S. component, as embodied in NATO. U.S. support for ESDP and for the use of NATO assets in EU-led operations has been conditioned since 1998 on three "redlines," known as the "three D's:" No decoupling from NATO. ESDP must complement NATO and not threaten the indivisibility of European and North American security. No duplication of NATO command structures or alliance-wide resources. No discrimination against European NATO countries that are not members of the EU. The non-EU NATO members were concerned about being excluded from formulating and participating in the EU's ESDP, especially if they were going to be asked to approve "lending" NATO assets to the EU. At its December 1999 Helsinki summit, the EU announced its "determination to develop an autonomous capacity to take decisions and, where NATO as a whole is not engaged, to launch and conduct EU-led military operations in response to international crises." At Helsinki, the EU decided to establish an institutional decision-making framework for ESDP and a 60,000-strong "Headline Goal" rapid reaction force to be fully operational by 2003. This force would be deployable within 60 days for at least a year and capable of undertaking the full range of "Petersberg tasks" (humanitarian assistance, search and rescue, peacekeeping, and peace enforcement), but it would not be a standing "EU army." Rather, troops and assets at appropriate readiness levels would be identified from existing national forces for use by the EU. In addition, EU leaders at Helsinki welcomed efforts to restructure European defense industries, which they viewed as key to ensuring a European industrial and technological base strong enough to support ESDP military requirements. The EU has also sought to bolster its civilian capacities for crisis management in the context of ESDP. In June 2000, the EU decided to establish a 5,000-strong civilian police force, and in June 2001, the EU set targets for developing deployable teams of experts in the rule of law, civilian administration, and civilian protection. In December 2004, EU leaders reached agreement on a Civilian Headline Goal for 2008, which aims to further improve the EU's civilian crisis management capabilities by enabling the EU to respond more rapidly to emerging crises. On the institutional side, the EU has created three new defense decision-making bodies to help direct and implement ESDP. These are: the Political and Security Committee (composed of senior national representatives); the Military Committee (composed of member states' Chiefs of Defense or their representatives in Brussels); and the Military Staff (consisting of about 130 military experts seconded from member states). The EU has also established cooperation mechanisms with NATO, intended to enable the EU to use NATO assets and meet U.S. concerns about ESDP. These include regular NATO-EU meetings at ambassadorial and ministerial level, as well as regular meetings between the EU and non-EU European NATO members. This framework allows for consultations to be intensified in the event of a crisis, and permits non-EU NATO members to contribute to EU-led operations. The EU also agreed to establish ad hoc "committees of contributors" for EU-led missions to give non-EU participants a role in operational decision-making. The NATO-EU link was formalized in December 2002, which paved the way for the implementation in March 2003 of the "Berlin Plus" arrangement. "Berlin Plus" allows the EU to borrow Alliance assets and capabilities for EU-led operations and thereby aims to prevent a needless duplication of NATO structures and a wasteful expenditure of scarce European defense funds. "Berlin Plus" gives the EU "assured access" to NATO operational planning capabilities and "presumed access" to NATO common assets for EU-led operations "in which the Alliance as a whole is not engaged." In December 2003, NATO and the EU reached an agreement on enhancing the EU's military planning capabilities and NATO-EU links. It entails: Establishing an EU planning cell at NATO headquarters (SHAPE) to help coordinate "Berlin Plus" missions, or those EU missions conducted using NATO assets. Adding a new, small cell with the capacity for operational planning to the existing EU Military Staff—which currently provides early warning and strategic planning—to conduct possible EU missions without recourse to NATO assets. Inviting NATO to station liaison officers at the EU Military Staff to help ensure transparency and close coordination between NATO and the EU. This NATO-EU agreement was controversial for some NATO advocates and U.S. officials, who worried that the small EU planning cell could grow over time into a larger staff and ultimately rival NATO structures. Washington ultimately approved the deal given that it considerably scaled back earlier proposals for a separate European military headquarters and planning staff. UK officials argued that if Washington or London blocked the initiative, the French and German governments in power at the time would likely have gone ahead with some sort of European headquarters outside of the EU structure, which would have been even more objectionable to NATO interests. British officials maintain that the new EU cell will "not be a standing headquarters" and that national headquarters will still remain the "main option" for running missions without NATO assets. Nevertheless, NATO-EU relations remain somewhat strained. More formal strategic discussions between NATO and the EU on issues such as terrorism or the Middle East have proven elusive due to the differences in membership in both organizations, the ongoing dispute over the divided island of Cyprus, and different U.S. and European views of NATO-EU relations. Turkey, a non-EU NATO member, has objected to Cyprus, which joined the EU in 2004, participating in NATO-EU ambassadorial meetings on the grounds that it is not a member of NATO's Partnership for Peace, and hence, does not have a security relationship with the alliance. As a result, discussions are limited to the joint NATO-EU operation in Bosnia (see below) and improving military capabilities. EU members such as France, Belgium, and Greece say they object to dialogue on other global security challenges in such NATO-EU meetings because not all EU member states are represented. Disputes between Turkey and the EU have also stymied NATO-EU cooperation on the ground in operations in Afghanistan (see below). Enhancing European military capabilities has been and remains a key challenge for the EU as it seeks to forge a credible ESDP. As noted above, the 1999 NATO war in Kosovo demonstrated serious deficiencies in European military assets and the widening technology gap with U.S. forces. European shortfalls in strategic airlift, precision-guided munitions, command and control systems, intelligence, aerial refueling, and suppression of enemy air defenses were among the most obvious. In setting out the parameters of the 60,000-strong "Headline Goal" rapid reaction force, EU leaders sought to establish goals that would require members to enhance force deployability and sustainability, and to reorient and ultimately increase defense spending to help fill equipment gaps. The most ambitious members envisioned the EU's rapid reaction force developing a combat capability equivalent, for example, to NATO's role in the Kosovo conflict. In 2000 and 2001, the EU held two military capability commitment conferences to define national contributions to the rapid reaction force and address the capability shortfalls. Member states pledged in excess of 60,000 troops drawn from their existing national forces, as well as up to 400 combat aircraft and 100 naval vessels as support elements. In 2001, the EU also initiated a European Capability Action Plan (ECAP) to devise strategies for remedying the capability gaps. In May 2003, the EU declared that the rapid reaction force possesses "operational capability across the full range of Petersberg tasks," but recognized that the force would still be "limited and constrained by recognized shortfalls" in certain defense capabilities. As a result, ESDP missions in the near to medium term will likely focus on lower-end Petersberg tasks rather than higher-end peace enforcement operations. EU officials maintain that enhancing European defense capabilities remains an ongoing, long-term project. Many military analysts assert that overall levels of European defense spending are insufficient to fund all ESDP requirements. European leaders are reluctant to ask legislatures and publics for more money for defense given competing domestic priorities and tight budgets. In light of the dim prospects for increased defense spending in the near term, EU officials emphasize that they do not need to match U.S. defense capabilities exactly—which they view as increasingly impossible—and stress they can fill critical gaps by spending existing defense resources more wisely. EU leaders point out that rationalizing member states' respective defense efforts and promoting multinational projects to reduce internal operating costs have been key goals of ECAP. Some options under consideration include leasing commercial assets (primarily for air transport); sharing or pooling of national assets among several member states; "niche" specialization, in which one or more member state would assume responsibility for providing a particular capability; and more joint procurement projects. In June 2004, EU leaders agreed to establish a European Defense Agency (EDA) devoted to improving European military capabilities and interoperability. A key focus of the EDA will be to help EU members stretch their scarce defense funds farther by increasing cooperation in the areas of weapons research, development, and procurement. In November 2005, EU defense ministers agreed on a voluntary "code of conduct" to encourage cross-border competition in the European defense equipment market. Traditionally, EU member states have tightly guarded their national defense markets; defense equipment contracts have been largely exempt on national security grounds from normal EU internal market rules that eliminate trade barriers. The EU hopes that more competition will lead to lower defense procurement costs, improved capabilities, and increase the competitiveness of the European defense market globally. The new code of conduct took effect in July 2006 for those countries that decided to take part. Critics, however, charge that promises to spend existing defense resources more wisely have not yet materialized in any substantial way. They doubt that EU member states will be willing to make the hard political choices that could ultimately produce more "bang for the euro" because these could infringe on national sovereignty. For example, they point out that "niche" specialization would require some member states to forego building certain national capabilities, while proposals to pool assets may require members to relinquish national controls. Some question how effective the EDA will be in promoting harmonization of equipment purchases given that many member states remain wedded to fulfilling national requirements and may be reluctant to expose their own defense industries to competition from other European weapons producers. Critics point out that the new agreed code of conduct to liberalize the European defense markets will be voluntary and, therefore, unenforceable. Many expect that some European defense ministries will also be slow to move away from their trusted national suppliers. Skeptics also criticize European leaders' continued devotion to the increasingly expensive but still non-existent Airbus's A400M military transport project, in which seven European allies are investing large portions of their procurement budgets. They argue that it would be cheaper and quicker for these countries to buy U.S.-built transporters such as the C-130 or C-17, but many European leaders resist this option because European defense industries create European jobs. At the June 2004 EU summit in Brussels, Belgium, EU leaders endorsed a new Headline Goal 2010 aimed at further developing European military capabilities. The Headline Goal 2010 is focused on improving the interoperability, deployability, and sustainability of member states' armed forces. A key element of the Headline Goal is the "battlegroups concept," which seeks to further enhance the EU's ability to respond rapidly to emerging crises and undertake the full spectrum of Petersberg tasks. Each battlegroup will consist of about 1,500 high-readiness troops capable of being deployed within 15 days, for up to four months, for either stand-alone missions or as a spearhead force to "prepare the ground" for a larger, follow-on peacekeeping operation. The conceptual model appears to be largely based on the French-led EU mission to the Congo in 2003 (see below), which paved the way for a U.N. peacekeeping force. In November 2004, at the EU's third military capability commitment conference, EU officials announced plans for the creation of 13 battlegroups, which may be formed by one or more member states and may also include non-EU members. The EU established an initial operating capacity of being able to field one battlegroup at a time for 2005 and 2006. As of January 2007, the EU announced that the battlegroups were "fully operational," meaning that the EU now has the capacity to field two battlegroup operations nearly simultaneously. The EU has not specified a geographic area in which these battlegroups might operate, but most observers believe that trouble spots in Africa or the Balkans are the most probable theaters for the battlegroups. Many European and American military experts view the EU's battlegroups as more sustainable and practical than the EU's 60,000-strong rapid reaction force. They hope that the emphasis on highly trained, rapidly deployable multinational formations indicate that the EU is growing more serious about enhancing its defense capabilities and seeking new ways to stretch existing defense resources farther. EU officials stress that the battlegroup concept is intended to complement rather than compete with the new NATO Response Force (NRF) and note that the EU and NATO have been discussing ways to ensure that the battlegroups and the NRF are mutually reinforcing. Some analysts predict that the NRF will likely undertake higher-intensity operations than the EU battlegroups in the near to medium term. Despite the capability challenges still facing European militaries, the EU has sought to keep up momentum for ESDP. The EU has launched several civilian and military missions in the Balkans, an area long assumed by EU observers to be the most likely destination of any EU-led operation. In January 2003, the EU's civilian crisis management force took over U.N. police operations in Bosnia as the first-ever ESDP mission. With "Berlin Plus" arrangements finalized, the EU launched in March 2003 its first military mission, Operation Concordia, that replaced the small NATO peacekeeping mission in Macedonia. Operation Concordia was supported by NATO headquarters (SHAPE) in Mons, Belgium and NATO operational reserves already located in Macedonia. In December 2004, the EU took over the NATO-led peacekeeping mission in Bosnia within the "Berlin Plus" framework. With an initial force strength of 6,500 troops, the EU-led Operation Althea was the largest ESDP military mission to date; in 2007, Althea was downsized to 2,500 troops. NATO retains a small headquarters presence in Sarajevo to assist with Bosnian defense reforms, counterterrorism efforts, and the apprehension of war criminals. The EU is also planning to lead in the near future an international civilian presence in Kosovo, which is expected to declare independence from Serbia in early 2008. The EU has also sought to play a role beyond the Balkans. From June to September 2003, the EU led an international peacekeeping force of 1,400 in the Democratic Republic of Congo that sought to stop rebel fighting and protect aid workers. The Congo mission was requested by the United Nations and headed by France in a "lead nation" capacity. This mission came as a surprise to many EU observers, NATO officials, and U.S. policymakers because it was geographically farther afield than they had thought the EU would venture, and because it was conducted without recourse to NATO assets. The Congo operation was planned by French military planners in national headquarters. Some NATO and U.S. officials were annoyed, asserting that the EU should have first formally asked NATO whether it wished to undertake the Congo operation. EU officials did consult with NATO about the mission, but maintain they were not obliged to ask NATO for its permission given that the EU was not requesting to use NATO assets. Over the last few years, the EU has deployed a number of small missions to the Congo to assist with police/security sector reforms and in support of the U.N. peacekeeping force. In June 2005, the EU and NATO agreed to coordinate efforts to airlift African Union peacekeepers to Sudan to help quell the ongoing violence in the Darfur region. In January 2008, the EU approved deploying a 3,700-strong peacekeeping force to Chad aimed at protecting the thousands of Sudanese refugees there; this mission is expected to begin in March 2008. In 2005, the EU for the first time launched several small civilian ESDP missions in Asia and the Middle East. In July 2005, the EU began a civilian rule of law mission to help train about 800 Iraqi police, judges, and administrators. Training is taking place primarily outside of Iraq because of ongoing security concerns. In September 2005, the EU established a civilian mission in Banda Aceh, Indonesia, to monitor implementation of the new peace agreement for the region; the EU-led mission in Banda Aceh concluded in December 2006 following local elections. In November 2005, the EU began deploying about 70 monitors to the Rafah border crossing point between the Gaza Strip and Egypt as part of an Israeli-Palestinian agreement on security controls for Gaza following Israel's withdrawal. Despite the closure of the Rafah checkpoint in June 2007 after the takeover of the Gaza Strip by the militant group Hamas, the EU decided to retain its mission there, albeit at a reduced operational level, in order to be able to resume it when security conditions allow. In January 2006, the EU also established a small training and advisory mission for Palestinian police forces. In June 2007, the EU launched a 200-strong police training mission in Afghanistan, partly in response to calls from NATO and the United States for assistance. The EU took over a smaller police training mission from Germany, and expanded its reach beyond Kabul. As noted above, however, EU officials complain that Turkey is blocking NATO-EU cooperation in Afghanistan, and denying the EU mission vital NATO intelligence and security back-up. Meanwhile, some U.S. officials assert that more EU trainers are needed in Afghanistan. In addition, the EU has become more involved in trying to promote security and stability in its "wider European neighborhood." In July 2004, for example, the EU set up a year-long civilian rule of law mission in Georgia to support the judicial reform process. In December 2005, the EU launched a border mission to Moldova and Ukraine, in response to a joint request from those countries, to assist them in countering weapons trafficking, organized crime, and corruption by providing advice and training to Moldovan and Ukrainian border and custom authorities. EU leaders view ESDP as one of the next great projects on the road to European integration, and will likely seek to enhance ESDP further over the next decade. As noted above, most EU members assert that EU efforts to boost defense capabilities should complement—not compete with—those of the alliance. Countries such as the UK, Italy, and Spain continue to hope that bringing more and better military hardware to the table will give the European allies a bigger role in alliance decision-making. Newer EU member states from central and eastern Europe, such as Poland and the three Baltic states, back ESDP but maintain that it must not weaken NATO or the transatlantic link. Germany, given its size and wealth, is considered critical to the success of ESDP, but has played a rather passive role in much of ESDP's development. Although always supportive of the initiative, Berlin was keen to tread carefully in light of U.S. concerns. In 2003, in the midst of the transatlantic dispute over Iraq, some observers noted that the then-German government of Chancellor Gerhard Schroeder appeared more receptive to French efforts to forge a European defense arm independent of NATO. They point to the April 2003 meeting of French, German, Belgian, and Luxembourg leaders to discuss creating a separate European military headquarters, planning staff, and armaments agency. Since then, however, Germany has backed away from this stance as it has sought to mend ties with the United States post-Iraq. And new German Chancellor Angela Merkel has made improving U.S.-German relations and the broader transatlantic partnership a cornerstone of her foreign policy agenda. As noted above, France has traditionally been intent on developing a more autonomous European defense identity. Under former President Jacques Chirac, France was at the forefront of efforts to build an EU security structure independent of NATO. Although new French President Sarkozy, like Chirac, views France's role in the EU as magnifying French influence and power worldwide, he has downplayed building up ESDP as a way to counterbalance the United States and as an alternative to NATO. Sarkozy has suggested that France may draw closer to NATO by rejoining NATO's integrated military command structure, and has supported improving NATO-EU cooperation. At the same time, Sarkozy has asserted that the EU should develop a full command and planning structure of its own. U.S. officials contend that such a structure would rival NATO's large planning cell and be a wasteful duplication of resources. Sarkozy counters that EU missions will only be more effective if the EU improves its planning capabilities further. The UK and several other EU countries, however, also remain opposed to Sarkozy's proposal. Following September 11, 2001, the EU struggled with whether to expand ESDP's purview to include combating external terrorist threats or other new challenges, such as countering the proliferation of weapons of mass destruction. In June 2002, EU leaders agreed that the Union should develop counter-terrorism force requirements, but stopped short of expanding the Petersberg tasks. Increasingly, however, EU member states appear to recognize that ESDP must have a role in addressing new challenges in order to remain relevant and to bolster the EU's new, broader security strategy developed by the EU's top foreign policy official, Javier Solana. The description of the Petersberg tasks in the text of the EU's newly-agreed reform treaty (the Lisbon Treaty) states that "all of these tasks may contribute to the fight against terrorism;" many analysts assert that this language would effectively expand the Petersberg tasks to include combating terrorism. In the wake of the March 11, 2004 terrorist bombings in Spain, EU leaders issued a new "Declaration on Combating Terrorism." Among other measures, it called for "work to be rapidly pursued to develop the contribution of ESDP to the fight against terrorism." In November 2004, EU officials outlined a more detailed plan to enhance EU military and civilian capabilities to prevent and protect both EU forces and civilian populations from terrorist attacks, and to improve EU abilities to manage the consequences of a terrorist attack. EU policymakers also noted that ESDP missions might include providing support to third countries in combating terrorism. At the same time, EU officials maintain that countering terrorism will not be ESDP's main focus, in part because they view the fight against terrorism largely as an issue for law enforcement and political action. Successive U.S. Administrations, backed by Congress, have supported the EU's ESDP project as a means to improve European defense capabilities, thereby enabling the allies to operate more effectively with U.S. forces and to shoulder a greater degree of the security burden. U.S. supporters argue that ESDP's military requirements are consistent with NATO efforts to enhance defense capabilities and interoperability among member states. They point out that the EU has made relatively quick progress on its ESDP agenda, and its missions in the Balkans and in the Congo demonstrate that the EU can contribute effectively to managing crises, both within and outside of Europe. As noted previously, U.S. policymakers and Members of Congress insist that EU efforts to build a defense arm be tied to NATO. Some U.S. officials remain concerned, however, that France and a few other EU members may continue to press for a more autonomous EU defense identity that could rival NATO structures and ultimately destroy the indivisibility of the transatlantic security guarantee. Others worry about the effects and implications of possible NATO-EU competition. For example, critics contend that NATO-EU rivalry needlessly delayed the mission launched in June 2005 to support the African Union in Sudan. They argue that the resulting deal, in which both NATO and the EU are running parallel airlift missions coordinated by an African Union-led cell in Ethiopia, is both duplicative and inefficient. Overall, critics of ESDP contend that it will mean less influence for the United States in Europe. They suggest that the possible development within NATO of an "EU caucus"—pre-negotiated, common EU positions—could complicate alliance decision-making and decrease Washington's leverage. As noted previously, EU plans for its rapid reaction force may depend on double- or triple-hatting forces already assigned to NATO or other multinational units, thus potentially depriving NATO of forces it might need if a larger crisis arose subsequent to an EU deployment. Others fear that the EU's success in establishing defense decision-making bodies has not been matched by capability improvements, potentially leading to a situation in which the EU gets bogged down in a conflict and requires the United States and NATO to bail it out. | Since the end of the Cold War, both NATO and the European Union (EU) have evolved along with Europe's changed strategic landscape. While NATO's collective defense guarantee remains at the core of the alliance, members have also sought to redefine its mission as new security challenges have emerged on Europe's periphery and beyond. At the same time, EU members have taken steps toward political integration with decisions to develop a common foreign policy and a defense arm to improve EU member states' abilities to manage security crises, such as those that engulfed the Balkans in the 1990s. The evolution of NATO and the EU, however, has generated some friction between the United States and several of its allies over the security responsibilities of the two organizations. U.S.-European differences center around threat assessment, defense institutions, and military capabilities. Successive U.S. administrations and the U.S. Congress have called for enhanced European defense capabilities to enable the allies to better share the security burden, and to ensure that NATO's post-Cold War mission embraces combating terrorism and countering the proliferation of weapons of mass destruction. U.S. policymakers, backed by Congress, support EU efforts to develop a European Security and Defense Policy (ESDP) provided that it remains tied to NATO and does not threaten the transatlantic relationship. Most EU member states support close NATO-EU links, but also view ESDP as a means to give themselves more options for dealing with future crises, especially in cases in which the United States may be reluctant to become involved. A minority of EU countries, spearheaded traditionally by France, continue to favor a more autonomous EU defense identity. This desire has been fueled further recently by disputes with the United States over how or whether to engage international institutions, such as the United Nations, on security matters and over the weight given to political versus military instruments in resolving international crises. This report addresses several questions central to the debate over European security and the future of the broader transatlantic relationship that may be of interest in the second session of the 110th Congress. These include what are the specific security missions of NATO and the European Union, and what is the appropriate relationship between the two organizations? What types of military forces are necessary for NATO's role in collective defense, and for the EU's role in crisis management? Are NATO and EU decision-making structures and procedures appropriate and compatible to ensure that there is an adequate and timely response to emerging threats? What is the proper balance between political and military tools for defending Europe and the United States from terrorism and weapons proliferation? What is the effect of enlargement on security and stability? This report will be updated as events warrant. For more information, see CRS Report RL33627, NATO in Afghanistan: A Test of the Transatlantic Alliance, by [author name scrubbed], and CRS Report RS21372, The European Union: Questions and Answers, by [author name scrubbed]. |
On May 24, 2010, the Supreme Court issued its decision in Lewis v. City of Chicago , a case involving questions regarding the timeliness of disparate impact discrimination claims filed under Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, national origin, sex, or religion. In Lewis , a group of aspiring black firefighters sued the City of Chicago over its repeated use of an employment test with racially disproportionate results to hire several new groups of firefighters over a six-year period. The city argued that the applicants, who filed their claim almost two years after the employment examination was administered, had exceeded the statutory deadline for filing claims under Title VII, while the applicants claimed that the city committed a fresh act of discrimination each time it relied upon the test to hire a new class of firefighters, thus repeatedly restarting the clock on the filing deadline. In a unanimous decision, the Supreme Court ruled in favor of the applicants for the firefighting positions, holding that such disparate impact claims may be brought each time an employer uses the results of a discriminatory test to hire. In 1995, over 26,000 applicants seeking to join the Chicago Fire Department took an employment examination administered by the city. Based on the scores of the examination, the city established three groups of applicants: those who were "well-qualified," "qualified," or "not qualified." On nine occasions, the city selected new hires from the pool of well-qualified candidates, although on the last occasion the city also hired applicants from the qualified group once it had exhausted the pool of well-qualified candidates. These nine hirings occurred over a six-year period. In 1997, a group of black applicants who scored in the qualified range filed a charge of discrimination with the Equal Employment Opportunity Commission (EEOC) claiming that the city's practice of initially hiring only from the well-qualified group, which was 75.8% white and only 11.5% black, had an unlawful disparate impact on the basis of race. Subsequently, they filed a Title VII suit in federal court, and the district court certified a class of more than 6,000 black applicants who had scored in the qualified range but had not been hired. Although the city stipulated that its classification of applicants as either well-qualified or qualified had had a disparate racial impact, it sought summary judgment on the ground that the applicants had failed to file their EEOC claim within the statutorily mandated deadline. The district court rejected this argument and later ruled in favor of the applicants, ordering the city to hire 132 members of the class and awarding back pay to the rest. The U.S. Court of Appeals for the Seventh Circuit reversed the district court's decision, holding that the applicants had failed to meet the statutory filing deadline because "[t]he hiring only of applicants classified 'well qualified' was the automatic consequence of the test scores rather than the product of a fresh act of discrimination." The Supreme Court granted review in order to determine "whether a plaintiff who does not file a timely charge challenging the adoption of a practice—here, an employer's decision to exclude employment applicants who did not achieve a certain score on an examination—may assert a disparate-impact claim in a timely charge challenging the employer's later application of that practice." Under Title VII, two different types of discrimination are prohibited. The first is disparate treatment, which involves intentional discrimination, such as treating an individual differently because of his or her race. The second type of prohibited discrimination—at issue in Lewis —is disparate impact, which involves a neutral employment practice that is not intended to discriminate but that nonetheless has a disproportionate effect on protected individuals. An employer may defend against a disparate impact claim by showing that the challenged practice is "job related for the position in question and consistent with business necessity," although a plaintiff may still succeed by demonstrating that the employer refused to adopt an available alternative employment practice that has less disparate impact and serves the employer's legitimate needs. Regardless of whether they allege disparate impact or disparate treatment, individuals who want to challenge an employment practice as unlawful are required to file a charge with the EEOC within a specified period—either 180 days or 300 days, depending on the state—"after the alleged unlawful employment practice occurred." The question that arose for the Supreme Court in Lewis was whether the city's subsequent use, rather than its initial adoption, of a discriminatorily tiered hiring system constituted an unlawful employment practice for purposes of starting the clock on the filing deadline. Ultimately, the Court ruled unanimously in favor of the applicants, holding that such disparate impact claims may be brought when a plaintiff challenges an employer's subsequent application of an earlier-adopted discriminatory practice. In its brief opinion, the Court relied on the text of Title VII to determine that the city's refusal to hire those applicants whose scores fell below the well-qualified range constituted an "employment practice," and thus concluded that the applicants could proceed with their suit because they had established a prima facie disparate impact claim by showing, as Title VII requires, that the employer "uses a particular employment practice that causes a disparate impact." In rejecting the city's contention that the only actionable discrimination occurred when it first established cutoff scores for the well-qualified and qualified groups of applicants, the Court distinguished its rulings in several earlier cases, including Ledbetter v. Goodyear Tire & Rubber Co. , a 2007 case in which the Court held that a plaintiff's Title VII claim was untimely, rejecting her argument that each paycheck she received reflected a lower salary due to past discrimination and thus constituted a new violation of the statute. According to the Court, its previous cases "establish only that a Title VII plaintiff must show a 'present violation' within the limitations period." In Ledbetter , which involved a disparate treatment claim and therefore required a showing of discriminatory intent, the plaintiff failed to demonstrate that such intentional discrimination had occurred within the filing period. In a disparate impact case such as Lewis , however, no such showing of discriminatory intent is required, and the Court therefore concluded that the applicants' claim was cognizable. Finally, the Court addressed the practical implications of its decision. According to the city, the Court's decision will cause numerous problems for employers, including new disparate impact lawsuits that challenge employment practices that have been used for years and difficulty defending against such suits after many years have passed. The Court noted, however, that a different reading of the statute would produce equally puzzling results: under the city's interpretation, "if an employer adopts an unlawful practice and no timely charge is brought, it can continue using the practice indefinitely, with impunity, despite ongoing disparate impact." Likewise, litigation could increase if employees who are afraid of missing the filing deadline decide to challenge new employment practices before it is clear whether such practices have a disparate impact. Ultimately, the Court noted that its task is not to address the practical implications of its decision but rather to give effect to the statute. In enacting Title VII, "Congress allowed claims to be brought against an employer who uses a practice that causes disparate impact, whatever the employer's motives and whether or not he has employed the same practice in the past. If the effect was unintended, it is a problem for Congress, not one that the federal courts can fix." | This report discusses Lewis v. City of Chicago, a recent case in which the Supreme Court considered questions regarding the timeliness of disparate impact discrimination claims filed under Title VII of the Civil Rights Act of 1964, which prohibits employment discrimination on the basis of race, color, national origin, sex, or religion. In Lewis, a group of aspiring black firefighters sued the City of Chicago over its repeated use of an employment test with racially disproportionate results to hire several new groups of firefighters over a six-year period. The city argued that the applicants, who filed their claim almost two years after the employment examination was administered, had exceeded the statutory deadline for filing claims under Title VII, while the applicants claimed that the city committed a fresh act of discrimination each time it relied upon the test to hire a new class of firefighters, thus repeatedly restarting the clock on the filing deadline. In a unanimous decision, the Supreme Court ruled in favor of the applicants for the firefighting positions, holding that such disparate impact claims may be brought each time an employer uses the results of a discriminatory test to hire. |
The Capital Investment Grant (CIG) program, often referred to as New Starts, provides federal funds to public transportation agencies on a competitive basis for the construction of new fixed-guideway transit systems and the expansion of existing systems (49 U.S.C. §5309). In federal law, "fixed guideway" is defined as "a public transportation facility: using and occupying a separate right-of-way for the exclusive use of public transportation; using rail; using a fixed catenary system; for a passenger ferry system; or for a bus rapid transit system" (49 U.S.C. §5302(7)). Public transportation, as defined in federal law, does not include transportation by school bus, intercity bus, or intercity passenger rail (Amtrak). Most CIG funding has gone for subway/elevated rail (heavy rail), light rail, or commuter rail projects. With federal support, a number of cities, such as Charlotte, Denver, Minneapolis, and Salt Lake City, have opened entirely new rail systems, and many other cities have added to existing systems. Rail transit route-mileage more than doubled between 1985 and 2012, with light rail mileage quadrupling, commuter rail mileage doubling, and subway mileage growing by 25%. Rail systems now provide about 45% of public transit trips, up from 31% in 1985. CIG has also been the main source of federal funding for bus rapid transit (BRT), which provides high-frequency service at widely spaced stops and may include such elements as transit stations, level-platform boarding, separate right-of-way, traffic signal priority, and special branding. Congress has authorized a category of less costly CIG projects known as Small Starts, which cost $300 million or less to build and require $100 million or less of CIG funding. Many bus rapid transit projects are inexpensive enough to qualify as Small Starts projects. A third type of CIG project, eligible for funding since FY2013, involves expanding an existing fixed-guideway corridor to increase capacity by 10% or more. This might entail major improvements to a subway or light rail line. These are termed Core Capacity projects. The CIG program is administered by the Federal Transit Administration (FTA) within the Department of Transportation (DOT). In December 2015, the program was reauthorized from FY2016 through FY2020 in the Fixing America's Surface Transportation (FAST) Act ( P.L. 114-94 ). This report explains how the CIG program is structured under the FAST Act, including program funding and procedures for project selection. It then discusses key policy issues. The Appendix provides a brief legislative history. The CIG program is one of six major funding programs administered by FTA, accounting for about 19% of FTA's budget ( Figure 1 ). The FAST Act authorized $2.3 billion per year from FY2016 through FY2020 for CIG. Unlike FTA's other major programs, funding for CIG comes from the general fund of the U.S. Treasury, not the mass transit account of the Highway Trust Fund. For this reason, CIG funding is subject to appropriation each year. Moreover, the CIG program allocates discretionary grants to local transit agencies, whereas the other major programs apportion funding by formula. CIG funding was fairly steady from FY2005 to FY2011, except that in FY2009 the regular appropriation was supplemented with $750 million from the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). For FY2012, Congress decided to fund BRT projects recommended by FTA for CIG funding from the Bus and Bus Facilities discretionary grant program instead. Funding levels have been rising, both in nominal and inflation-adjusted terms, since FY2014 ( Figure 2 ). Many CIG projects also are supported by other federal programs, such as FTA's Urbanized Area Formula program and the Federal Highway Administration (FHWA) Congestion Mitigation and Air Quality Improvement (CMAQ) program. Funding transferred from FHWA is known as "flex" funding. Funding amounts from these other programs tend to be relatively small. In an analysis of CIG projects from October 2004 through June 2012, the Government Accountability Office (GAO) found that almost 92% of federal funding for CIG projects came from the CIG program, 5% from FHWA flex funds, 1% from other FTA programs, and 2% from other federal sources. In Small Starts projects, 80% came from the CIG program, 14% from FHWA flex funds, and 7% from other FTA programs. Whatever the funding sources, the maximum federal share of a CIG project is 80%. However, a New Starts project may not receive more than 60% of its total cost from the CIG program. Core Capacity and Small Starts projects may receive up to 80% of total cost from the CIG program (49 U.S.C. §5309(l)). Limits on the federal share also are enacted in annual appropriations bills. For example, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), included a provision that "none of the funds made available in this Act shall be used to enter into a full funding grant agreement for a project with a New Starts share greater than 60 percent." Projects approved for CIG funding typically have had less than a 60% federal share, often much less. GAO found that the federal government paid 45% of the cost of New Starts projects, on average, with local sources paying 48% and state sources 7%. The average federal share in Small Starts projects, by contrast, was 67%, with 24% from local sources and 9% from state sources. The vast majority of state and local contributions came from public funds raised by taxes, bonds, and tolls. Only about 3% of the local funding of New Starts projects came from private investment or public-private partnerships (P3s), according to GAO. Four types of projects are eligible for CIG funding: New Starts p rojects , involving construction of an operable segment of a new fixed-guideway system or an extension of an existing system that costs $300 million or more and receives $100 million or more in CIG funding. New Starts include BRT projects in which the majority of the project operates in a separated right-of-way dedicated to public transportation during peak periods. Small Starts p rojects , defined as a new fixed guideway project or a corridor-based BRT project that costs less than $300 million and receives less than $100 million of CIG funding. A corridor-based BRT service is required to emulate rail service, but the buses do not need to run most of the way in a separated right-of-way dedicated to public transportation use. Core Capacity p rojects , involving expansion of an existing fixed-guideway corridor to increase capacity by 10% or more. These types of projects, aimed at eliminating what are sometimes called core capacity constraints, might include expanding stations to handle more cars, upgrading electrical systems to allow longer trains, and upgrading signaling systems to allow more trains per hour. Program of Interrelated p rojects , the simultaneous development of two or more New Starts, Small Starts, or Core Capacity projects, or a combination thereof. Federal funding for New Starts and Core Capacity projects is typically committed in a Full Funding Grant Agreement (FFGA), usually a multi-year agreement between the federal government and a transit agency. An FFGA establishes the terms and conditions for federal financial participation, including the maximum amount of federal funding being committed. To obtain an FFGA, a project must pass through an approval process specified in law ( Figure 3 ). The three major project phases for New Starts and Core Capacity projects are project development, engineering, and construction. To enter the project development phase, a transit agency or other applicant must apply to FTA and initiate the review process required by the National Environmental Policy Act of 1969 (NEPA; P.L. 91-190). Along with the NEPA work during project development, the project sponsor must develop the information needed by FTA to review the project's justification and local financial commitment. Generally, the applicant has two years to complete project development, although an extension can be granted in certain circumstances. FTA is required to use an expedited process to review a sponsor's technical capacity if the sponsor has successfully completed a New Starts or Core Capacity project in the recent past. FTA may also advance projects more quickly using special warrants for projects of which the federal share is $100 million or less, or 50% or less of the total project cost. According to FTA, special warrants are "ways in which projects may qualify for automatic ratings on the project justification criteria," thus not requiring further detailed analysis. In a rulemaking, FTA provided this cost-effectiveness example: if there is a certain level of transit ridership in the corridor today, and the proposed project falls within total cost and cost per mile parameters defined by FTA, then it would be ''warranted'' by FTA as cost-effective, it would receive an automatic medium rating on the cost-effectiveness criterion, and the project sponsor would not need to undertake or submit the results of certain analyses. According to the statute, a project can enter into the engineering phase once the NEPA process is concluded, the project is selected as the locally preferred alternative, the project is adopted into the metropolitan plan, and the project is justified on its merits, including an acceptable degree of local financial commitment (49 U.S.C. §5309(d)(2)). If the project is a Core Capacity project, it also has to be in a transit corridor that is over capacity or is projected to be at or over capacity within the next five years (49 U.S.C. §5309(e)(2)). Additional requirements for interrelated projects include the following: the projects must be logically connected; when evaluated as a whole, they must meet the requirements of the CIG program; and there must be a project implementation plan showing that construction of each project will start in a reasonable timeframe (49 U.S.C. §5309(i)(2)). The amount of CIG funding requested by the project sponsor, not the share, is fixed when the project is approved for entry into engineering. This means that if a project's cost increases after entry into engineering, the extra cost must be borne by the project sponsor from non-CIG funding sources. GAO found that several project sponsors believe this is too early in the process to set the federal funding commitment, and could slow a project's entry into engineering or funding shortfalls later on. Prior to the Moving Ahead for Progress in the 21 st Century Act (MAP-21; P.L. 112-141 ), enacted in 2012, a project's costs were fixed later in the process, just before the project was recommended for a grant agreement. After engineering work is completed, FTA determines whether to sign an FFGA allowing the project to enter construction. FTA retains some oversight of a project as it is constructed to ensure compliance with the terms of the FFGA. Moreover, FTA must request the funding that is to be provided under the terms of the FFGA for each approved project from Congress each fiscal year. In some cases, FTA may assure a project sponsor of its intention to obligate funds for a project through what is known as a Letter of Intent (49 U.S.C. §5309(k)(1)). FTA may also obligate some of the funding expected to be provided in an FFGA through an Early Systems Work Agreement (49 U.S.C. §5309(k)(3)). Although not a guarantee of full funding, an Early Systems Work Agreement provides funding so that work can begin before an FFGA is awarded. In guidance, FTA notes that although the statutory requirements for New Starts and Core Capacity projects are very similar, it treats Core Capacity projects "a bit differently because they are located in established, proven successful transit corridors." FTA may use more often "simple eligibility parameters, simplified evaluation measures, and expanded 'warrants' based on readily available, easily verifiable information whenever possible to make the process less burdensome for both FTA and Core Capacity project sponsors." For Small Starts projects, those requesting less than $100 million in federal assistance and costing less than $300 million in total, just two phases exist, project development and construction. As with New Starts projects, entry into project development only requires the project sponsor to apply to FTA and initiate the NEPA process. Consequently, for Small Starts only one formal decision is made by FTA, and that is whether to award funding and, hence, move the project into construction. Funding for a successful Small Starts project is provided in a Small Starts Construction Grant Agreement, typically fulfilling the federal government's funding commitment in a single year. In determining whether to approve a project's move from one step to the next in the New Starts and Core Capacity approval process, FTA computes an overall project rating by averaging the summary ratings of the project justification criteria and local financial commitment criteria ( Figure 4 ). In order to advance from project development to engineering and from engineering to construction, a New Starts or Core Capacity project must achieve an overall rating of at least medium on a five-point scale (low, medium-low, medium, medium-high, high) on each of the project justification and local financial commitment summary ratings. Small Starts projects are similarly rated, but do not need to achieve a minimum rating to be eligible for a grant. The justification criteria are the following: Mobility improvements , measured by the number of trips on the project, with trips by the transit-dependent population counting double. A high rating for both New Starts and Small Starts projects is awarded to those that generate 30 million linked trips or more annually. Environmental benefits , measured by the monetized value of benefits in air quality, greenhouse gas emissions, energy use, and safety in relation to the cost of the project. Benefits are calculated based on the estimated reduction in vehicle miles traveled resulting from the project. Congestion relief , measured by the number of new weekday linked transit trips resulting from implementation of the new project. This is calculated by comparing total weekday linked transit trips for the no-build alternative with total weekday linked transit trips with the new project in place. A high rating is awarded to New Starts and Small Starts projects that generate 18,000 new weekday trips. Economic development effects , measured by the likely effects of the project on development in the nearby area. The rating is based on FTA's qualitative analysis of supportive plans and policies. Land use (or capacity needs of the corridor for C ore C apacity projects ), based on station area population density, employment served, affordable housing in the corridor, and the amount and cost of downtown parking. The extent and quality of pedestrian infrastructure near stations also is used in the evaluation. For light rail and heavy rail Core Capacity projects, FTA uses the existing space per passenger during the peak hour in the corridor, which is a function of existing ridership and the number and size of trains in the peak period and direction. For commuter rail projects, the number of seats rather than the amount of space is used. Cost effectiveness , measured by the annual capital amortized over asset lifetimes and operating cost per trip. A high rating is awarded for projects where the cost per trip is less than $4 for a New Starts project and less than $1 for a Small Starts project. To be approved for federal funding, a CIG project must have an acceptable degree of local financial commitment. This includes financing that is stable, reliable, and timely; sufficient resources to maintain and operate both the existing public transportation system and the new addition; and contingency money to support cost overruns or funding shortfalls (49 U.S.C. §5309(f)(1)). The measures FTA uses for the evaluation of local financial commitment for New Starts projects are the following: Reliability/ financial c apacity , measured by the reasonableness of the capital and operating cost estimates and planning assumptions; and capital funding capacity to cover cost increases or funding shortfalls through debt issuance, cash reserves, or other committed funds. Current capital and operating condition , measured by the average age of the vehicle fleet, bond rating issued within the previous two years, current ratio of assets to liabilities, and recent service history. Commitment of f unds , measured by the share of funds committed or budgeted versus planned. Significant private contributions may increase the commitment-of-funds rating by one level. The summary rating of local financial commitment may be raised one level if the project is rated at least medium on local financial commitment and the CIG program funding share is less than 50%. The project justification and the local financial commitment are weighted equally in the overall project rating. Project justification is calculated based on an equal weighting of the six factors. Half of the local financial commitment is based on financial capacity and the reasonableness of the financial assumptions. The other half is based equally on current capital and operating condition of the project sponsor; and the commitment of funds. Once a New Starts or Core Capacity project has been rated at least medium on project justification and local financial commitment at the end of the engineering phase, and has complied with other federal requirements, it is typically recommended for funding. However, in any given year, FTA first funds commitments made in existing grant agreements. After that, within the context of the available funds, FTA considers project readiness in signing new agreements and allocating funds. The CIG program has not been without controversy. FTA contends the program "is needed because it allows transit agencies to undertake major capital projects that would otherwise be infeasible for local governments and transit agencies to finance alone." Supporters insist that growing demand for CIG funds is evidence of its success. Critics, however, have contended that CIG funding encourages communities to build expensive fixed-guideway infrastructure rather than invest lesser sums in improving bus service. New rail service can be detrimental to an existing bus network as service overall is realigned and resources are shifted toward operating and maintaining the new rail lines. Critics have also called for more flexibility in the use of federal transit funds for operations, as currently a large proportion of these funds, including CIG funds, may be used only for capital investment. No comprehensive benefit-cost studies of completed CIG projects have been conducted to evaluate the relative success of the CIG program as federal policy. Since 2005, federal law has required the completion of a "before and after" study of each funded CIG project to examine some of the expected versus actual costs and benefits. Some of the benefits that must be detailed include service provided and ridership. These studies do not provide enough evidence to determine the program's effectiveness and to evaluate the federal government's role in a broader context. In summarizing studies of rail transit systems in general, not CIG projects, one researcher has commented that "the dominant view of economists has been that rail transit investments generally have been ineffective and expensive, and the benefits do not justify the costs." However, some studies show significant differences in benefit/cost ratios among projects. According to one study, two of the systems with the largest net benefits include the subway systems in San Francisco and New York City, while the rail system in Buffalo and those operated by New Jersey Transit in Newark, Jersey City, and Trenton have some of the largest net losses. FTA, among others, has recommended significant increases in CIG funding to accommodate demand by project sponsors, especially because a new category of projects, Core Capacity projects, was made eligible for funding beginning in FY2013. FTA notes in its FY2017 budget submission that the number of projects in the CIG "pipeline" has grown from 37 in FY2012 to 63 in FY2016, with more Small Starts (from 9 to 32) and Core Capacity projects (from 0 to 7), and fewer New Starts projects (from 28 to 24). According to GAO, program stakeholders believe the increase is partly due to the fact that projects no longer have to be rated before entering project development (as they were prior to MAP-21, enacted in 2012), and also to greater participation by less experienced project sponsors seeking Small Starts grants. These trends have placed extra demands on FTA for technical assistance and evaluation. In addition, FTA has asked for an increase in funds to accelerate projects to "not only potentially lower financing costs incurred on these projects, but also allow FTA to better manage the overall program given the ever growing demand for funds." For FY2017, FTA's recommendation to Congress for CIG funding was $3.5 billion, well above the average of $2 billion per year appropriated from FY2012 through FY2016 and the $2.3 billion per year authorized by the FAST Act for FY2016 through FY2020. FTA proposes to increase CIG funding as part of a much larger budget for federal public transportation programs overall. It also proposed to shift the funding source of the CIG program from the general fund to the mass transit account of the Highway Trust Fund. Without any other changes, such as new revenue sources or changes in other public transportation programs, funding the CIG program in this way would exhaust funds in the mass transit account much sooner than currently forecast. The balance of the account is expected to approach zero in FY2021. An additional $2 billion to $3 billion in outlays per year for the CIG program beginning in FY2017 would accelerate the exhaustion of funds to FY2019, based on data from the Congressional Budget Office. One major criticism of the CIG program has been that it encourages large, costly rail projects over smaller, cheaper rail and BRT projects. Changes to the program over the past 20 years, such as the introduction of Small Starts projects, have shifted federal funding toward lower-cost projects, including streetcars. (See Appendix for more details of the legislative and regulatory changes in the CIG program.) FTA's FY2017 recommendations include funding for 6 BRT projects and 5 streetcar projects out of 31 projects. A decade earlier, FTA's recommendations included 1 BRT project and no streetcar projects out of 28 projects. Most projects in that year were light rail (16 projects), heavy rail (7), and commuter rail (4). With the addition of Core Capacity projects in MAP-21, another shift could occur, this time in favor of projects in established fixed-guideway corridors. At a 2013 hearing, the chair of the House Highways and Transit Subcommittee expressed concern that funding for Core Capacity projects "could come at the expense of funding opportunities for new public transit systems in the rest of the country." The Administrator of FTA at the time, Peter Rogoff, responded that many opportunities existed for new projects, large and small, in many different urban areas to receive Core Capacity funding, and that Core Capacity projects may provide some of the best chances for the CIG program to support increased ridership. Rogoff said Core Capacity projects would not crowd out other types of projects. Evidence on the effects of Core Capacity projects on the CIG programs is mixed. To date, four Core Capacity projects have entered into project development: a commuter rail project in San Francisco ($447 million requested in CIG funds), a heavy rail project in Chicago ($957 million), a heavy rail project in New York ($100 million), and a light rail project in Dallas ($59 million). None had a funding agreement with FTA as of March 31, 2016. Of these projects, three are projects from legacy systems. These three systems account for almost all of the Core Capacity projects funding requests, but a relatively small fraction of CIG funding available since FY2013. Within the overall evaluation framework set out in federal law, FTA has considerable discretion in determining how the evaluation factors are measured and weighted. These decisions can have significant influence on the types of projects that are evaluated favorably and recommended for funding. For that reason, there have been policy debates surrounding the evaluation methodology. For example, regulations formerly measured the cost effectiveness of projects by considering the project cost relative to users' time savings. In MAP-21, enacted in 2012, the criterion was changed to consider the annualized capital and operating and maintenance cost per trip. This change improved the ratings of projects that generally provide relatively short trips, such as streetcars, over those that provide relatively long trips, such as commuter rail. Because researchers have found that the primary objective of streetcar projects has been urban revitalization rather than transportation, and that the service they provide can compare unfavorably with bus service, critics have argued that the changes made in MAP-21 elevated projects that provide fewer transportation benefits. Research on the factors that contribute to the award of CIG funding has found that local financial capacity largely determines FTA's decisions. Project justification scores were important to meet the minimum threshold for funding consideration, but once the threshold was met the ability of local project sponsors to provide funding at the local level was the most important factor. A major concern with the CIG program over the years has been the complexity, length, and expense of the federal funding approval process. This requires the development of extensive data and the preparation of a large number of detailed reports and other documents, all of which are reviewed in depth by FTA in making project approval determinations. GAO has suggested that the evaluation process might be used as a model for other federal programs to ensure the effective use of federal funding. Nevertheless, concern has been raised that the requirements are overly time-consuming and costly. One transit agency estimated in 2007 that federal involvement through the CIG program added an extra one to two years to a project and 10% to 15% extra in project costs. Legislative changes in MAP-21 and the FAST Act have sought to speed the development of CIG projects. For example, MAP-21 simplified the project development process by reducing the number of steps for the more expensive projects from four to three, and for less expensive projects from three to two. Moreover, MAP-21 authorized the use of project justification warrants in certain cases "that allow a proposed project to automatically receive a satisfactory rating on a given criterion based on the project's characteristics or the characteristics of the project corridor." For example, for an eligible project that costs between $50 million and $100 million in a corridor that currently has 6,000 or more weekday transit trips, FTA will automatically give the project a medium rating for mobility, cost effectiveness, and congestion relief. The FAST Act created an Expedited Project Delivery for Capital Investment Grants Pilot Program to more quickly review up to eight projects involving P3s in which the federal grant is 25% or less of the project cost. No comprehensive evaluations have been conducted on whether the various changes in laws and regulations have resulted in projects progressing more quickly through the CIG pipeline. GAO reported in 2016 that it found limited data to assess the speed of project approvals. It should be noted that assessing the time it takes to complete projects can be very difficult. A 2009 GAO study of delivery times of projects supported by the CIG program also pointed to data problems even without trying to assess the length of the initial planning process. Federal law promotes the use of P3s in the construction of major capital transit projects, like those supported by the CIG program, in several ways. DOT is required to provide to transit agencies education on related laws and regulations and technical assistance on "practices and methods to best utilize private providers of public transportation" (49 U.S.C. §5315). As part of that mandate, in July 2014, DOT created the Build America Transportation Investment Center (BATIC), which has as part of its mission to "cultivate" P3s. DOT also offers several types of financing that support P3s, including loans and other types of credit assistance through the TIFIA (Transportation Infrastructure Finance and Innovation Act) program and the issuance of private activity bonds. The FAST Act, as noted above, created the Expedited Project Delivery for Capital Investment Grants Pilot Program for P3 projects. CIG project sponsors have suggested that FTA could help by providing more technical assistance for P3 projects in the form of project development checklists and training opportunities. Some of the main benefits of P3s are said to be private project financing, cost savings, quicker project completion, infrastructure and service quality improvements, and a transfer of some risks from the public to the private sector. For example, the risks being transferred to the private sector in the development of the Purple Line light rail project in Maryland by a P3 include design errors, problems with utility relocations, commodity and labor inflation during project construction, contractor-caused cost overruns and schedule delays, and performance of the system and vehicles. Risks being retained by the public sector include right-of-way acquisition and fare revenue and ridership. Some risks, such as geotechnical risks and inflation during the operating period, are being shared between the public and private sectors. Congress has previously sought to involve the private sector in CIG projects by creating the Public-Private Partnership Pilot Program (Penta-P) and simplifying the CIG project development process. To date, the major success of these efforts has been to involve the private sector in the designing and building of projects through design-build contracts, and also the operation and maintenance of constructed projects through design-build-operate-maintain contracts. One public transportation P3, the Eagle Project in Denver, has involved long-term private financing. Maryland's Purple Line also will include private financing when it goes to financial close, which is planned for mid-June 2016. In both cases, the public sector has agreed to make regular payments to the private partner so long as the rail project achieves availability and performance goals. A third transit project, the Las Vegas Monorail, was constructed as an almost purely private venture. The private sponsors assumed the risk that too few passengers would pay to ride the service. Due primarily to poor ridership, the Las Vegas Monorail Company was restructured in bankruptcy in 2010, although its service continued to operate. The reorganized company is now proposing to extend its 3.9-mile line. The CIG program evolved from Section 3 of the Urban Mass Transportation Act of 1964 (P.L. 88-365). In 1994, Section 3 became Section 5309 in a revision without substantive change to Title 49 of the United States Code . Beginning in the 1970s, as the commitment of, and demand for, federal funding began to grow, DOT issued a series of policy statements on the principles by which it would distribute discretionary money to so-called "new starts." These statements, issued in 1976, 1978, 1980, and 1984, introduced a series of principles that were later written into federal law, including long-range planning, alternatives analysis incorporating a baseline alternative, cost effectiveness, local financial commitment, multi-year contracts specifying the limits of federal participation, supportive local land use planning, and a ratings system. Congress inserted many of these principles into law in the Surface Transportation and Uniform Relocation Assistance Act of 1987 (STURAA; P.L. 100-17 ). STURAA established the criteria by which CIG projects would be judged in order to be eligible for federal funding, and also required DOT's recommendations for funding in the subsequent fiscal year to be detailed in an annual report to Congress. The criteria enacted in STURAA required a CIG project to be based on an alternatives analysis and preliminary engineering, to be cost-effective, and to be supported by an acceptable amount of local financial commitment that is stable and dependable. In the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA; P.L. 102-240 ), Congress added to the cost-effectiveness criterion the justifications of mobility improvements, environmental benefits, and operating efficiencies. ISTEA also added a list of lesser considerations such as congestion relief, energy consumption, transit supportive land use policies and future patterns, and economic development. A CIG project would still need to be based on alternatives analysis and preliminary engineering, and to have an acceptable amount of local financial commitment. The Transportation Equity Act for the 21 st Century (TEA-21; P.L. 105-178 ) left the existing law mostly unchanged, but added a few additional considerations such as the costs of sprawl and the technical capacity of a grantee (usually a transit agency) to undertake a project. TEA-21 required FTA to rate projects overall as "highly recommended," "recommended," or "not recommended." TEA-21 also made it a requirement that FTA formally approve a project to move from preliminary engineering into final design. FTA published its Final Rule in response to TEA-21 in 2000, and subsequently published several program guidance documents. The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA; P.L. 109-59 ) changed the three-point scale, introduced in TEA-21, to a five-point scale of high, medium-high, medium, medium-low, and low. It also elevated two factors—economic development effects and public transportation supportive land use policies and future patterns—from considerations to project justifications. SAFETEA also created the Small Starts program to allow smaller projects to pass through a simpler approval process. In SAFETEA, Small Starts were defined as projects costing less than $250 million and seeking $75 million or less in CIG funding. Beginning in FY2007, SAFETEA reserved $200 million per year of the overall CIG program authorization for Small Starts. Prior to the enactment of SAFETEA, FTA issued a "Dear Colleague" letter announcing that it would target funding to those projects that received a medium or better rating for cost effectiveness. According to FTA, this was in response to concerns expressed by Congress, GAO, and DOT's Inspector General about recommending funding for projects that received a medium-low on cost effectiveness. Following the passage of SAFETEA, in a Notice of Proposed Rulemaking (NPRM) on August 3, 2007, FTA proposed that a medium rating be required for FTA to recommend a project for funding, and for cost effectiveness to be weighted as 50% of the project justification measure. The other 50% would consist of land use and economic development combined into one criterion at a weight of 20%, mobility benefits (20%), environmental benefits (5%), and benefits to transit-dependent riders (5%). This proposal was not well received by the House Transportation and Infrastructure Committee, or by those responding to the notice. Some of the concerns were that, contravening the intent of SAFETEA, the rule would place too much emphasis on cost effectiveness and would not sufficiently weight the economic development effects of transit projects. This, critics contended, would favor projects designed for suburban commuters, such as commuter rail and BRT projects, over more centrally located transit projects such as streetcars. Because of these concerns, Congress included language in the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ) preventing FTA from implementing a final rule. In the SAFETEA-LU Technical Corrections Act of 2008 ( P.L. 110-244 ), Congress amended 49 U.S.C. §5309 to require that FTA "give comparable, but not necessarily equal, numerical weight to each project justification criteria in calculating the overall project rating." This was carried forward in MAP-21 (49 U.S.C. §5309(g)(2)(B)(ii) and 49 U.S.C. §5309(h)(6)). FTA withdrew the 2007 NPRM in February 2009, and then in July 2009 issued final guidance establishing cost effectiveness as 20% of the project justification rating. The other factors were economic development (20%), mobility improvements (20%), land use (20%), environmental benefits (10%), and operating efficiencies (10%). This was followed in January 2010 with an announcement that FTA was withdrawing the policy of recommending funding only for projects that received a medium cost-effectiveness rating or better in favor of recommending projects with an overall rating of medium or better (although projects must score a medium or better on both project justification and local financial commitment). At the same time, FTA announced that it intended to issue a new NPRM for changes to the evaluation for New Starts and Small Starts projects. In this regard, FTA issued an Advance Notice of Proposed Rulemaking on June 3, 2010, requesting comments on how to improve measurement of cost effectiveness, environmental benefits, and economic development. An NPRM was issued January 25, 2012, along with proposed New Starts/Small Starts policy guidance. A final rule was published January 9, 2013, along with revised proposed policy guidance. Before the changes in the proposed rulemaking were finalized, MAP-21 was enacted, making substantial changes to the CIG program. Project eligibility was changed by authorizing funding for substantial investments in existing fixed-guideway lines that increase the capacity of a corridor by at least 10%. These are termed "Core Capacity improvement projects." MAP-21 also authorized the evaluation and funding of a program of interrelated projects. As noted earlier, MAP-21 also simplified the New Starts process by reducing the number of major stages from four to three—termed project development, engineering, and construction. To enter the project development phase, the applicant now needed only to apply to FTA and initiate the review process required by the National Environmental Policy Act of 1969 (NEPA; P.L. 91-190). The act eliminated the duplicative alternatives analysis previously required to be conducted separately from the alternatives analysis required by NEPA. In general, alternatives analysis is an evaluation of different solutions to a transportation problem in a specific area or corridor and the choice of locally preferred alternative (49 C.F.R. §611.5; 40 C.F.R. §1502.14). MAP-21 made some changes to the project justification criteria. The act eliminated operating efficiencies and added congestion relief. MAP-21 also changed the definition of cost effectiveness from incremental travel time saved to cost per rider. This was expected to improve the rating of projects that generally provide shorter trips, such as streetcars. Some of the changes proposed by FTA in its January 2012 NPRM were incorporated into the law, such as a change in the way cost effectiveness is measured. Some other elements of the program subject to proposed new rules were changed by the law, and some changes in the law were not considered in the proposed new rules. For example, operating efficiencies was dropped from the list of project justifications and congestion relief added. The rulemaking and revised proposed policy guidance establish some significant changes in the evaluation of New Starts/Small Starts projects. According to the rulemaking, FTA wrote that it has two broad goals: to measure a broader range of benefits and to simplify the evaluation process. To accomplish the first goal, FTA stated that, for example, it will evaluate environmental benefits by measuring anticipated changes in air quality criteria pollutants, energy use, greenhouse gas emissions, and safety. Environmental benefits in the previous evaluation scheme were based solely on an area's air quality designation. To accomplish the second goal, FTA stated it will take a number of steps including simplifying measures, eliminating the baseline alternative requirement, and improving the ways in which data are submitted to FTA and evaluated. One of the simplified measures is to evaluate mobility improvements as the estimated total number of trips generated by the project, with an extra weight for trips by transit-dependent people. Prior to the rulemaking, five measures were used to estimate mobility improvements, including incremental travel time saved per passenger mile over the baseline alternative. This change, along with changes to the cost effectiveness measure required by law, was expected to improve the rating of projects that generally provide shorter trips, such as streetcars. On August 5, 2015, FTA announced the availability of final interim policy guidance on the CIG program. FTA noted that this final policy guidance was characterized as ''interim'' because it was planning to initiate rulemaking to amend 49 C.F.R. Part 611 to fully carry out the authorizing statute for the CIG program, 49 U.S.C. §5309, as amended by MAP-21. The final interim policy guidance addressed four topics not previously addressed in the regulations or policy guidance: (1) the measures and breakpoints for the congestion relief criterion applicable to New Starts and Small Starts projects; (2) the evaluation and rating process for Core Capacity Improvement projects, including the measures and breakpoints for all the project justification and local financial commitment criteria applicable to those projects; (3) the prerequisites for entry into each phase of the CIG process for each type of project in the CIG program, and the requirements for completing each phase of that process; and (4) ways in which certain New Starts, Small Starts, and Core Capacity Improvement projects can qualify for ''warrants'' entitling them to automatic ratings on some of the evaluation criteria. The FAST Act, enacted in December 2015, made more changes to the CIG program. The law changed the definition of a Small Starts project to one that involves $100 million or less of CIG funding (up from $75 million) and costs less than $300 million (up from $250 million). Also for Small Starts, the FAST Act changed the definition of a corridor-based BRT service to eliminate the requirement for it to provide frequent, bi-directional service for a substantial part of weekend days. It must now provide such service only on weekdays. The FAST Act added authority for the CIG program to fund projects that benefit both public transportation and intercity passenger rail (although the eligible costs must be attributable to the transit portions of the project). A New Starts project (costing $300 million or more and requesting $100 million or more) is now limited to a CIG program funding share of 60%. The law also created the Expedited Project Delivery for Capital Investment Grants Pilot Program. | The Capital Investment Grant (CIG) program, often called New Starts, is a discretionary funding program for the construction of new fixed-guideway public transportation systems and the expansion of existing systems. Eligible projects include transit rail, including subway/elevated rail (heavy rail), light rail, and commuter rail, as well as bus rapid transit (BRT) and ferries. The CIG program is one element of the federal public transportation program that is administered by the Federal Transit Administration (FTA) within the Department of Transportation (DOT). In December 2015, the CIG program was reauthorized from FY2016 through FY2020 as part of the Fixing America's Surface Transportation (FAST) Act (P.L. 114-94). Funding is authorized at $2.3 billion per year, or about 19% of the overall federal public transportation program budget. Unlike FTA's other major programs, funding for the CIG program comes from the general fund of the U.S. Treasury, not the mass transit account of the Highway Trust Fund. CIG funding, therefore, is subject to appropriation each year. The CIG program allocates discretionary grants, whereas the other major programs apportion funds by formula. There are four types of CIG projects: New Starts, an operable segment of a new fixed-guideway system or an extension of an existing system that costs $300 million or more and receives $100 million or more in CIG funding. Small Starts, a new fixed-guideway project or a corridor-based BRT that costs less than $300 million and receives less than $100 million of CIG funding. Core Capacity, expansion of an existing fixed-guideway corridor to increase capacity by 10% or more. Program of Interrelated Projects, the simultaneous development of two or more New Starts, Small Starts, or Core Capacity projects, or a combination thereof. The five key policy issues with the CIG program are the federal role in funding major transit projects, program funding, the types of projects supported, project delivery speed, and private involvement in project delivery. Although disagreements exist about federal involvement in major public transportation capital projects through the CIG program, and the appropriate level of CIG funding, no comprehensive benefit-cost studies are available on completed CIG projects to evaluate the relative success of the CIG program as federal policy. Legislative and regulatory changes to the CIG program over the past decade have led to federal support of more BRT and streetcar projects. Critics have questioned whether some of these projects, particularly streetcars, provide enough transportation benefits to justify the costs. Legislative changes have also sought to reduce the time it takes for projects to be developed and constructed. Little is known about whether these changes have been effective. Private involvement in CIG projects through public-private partnerships (P3s) has been encouraged in federal law for many years, including changes introduced in the FAST Act. To date, however, only a few public transportation P3s involving private-sector funding have been formed. |
In late October 2012, Hurricane Sandy developed into a large weather system affecting both coastal and interior portions of the East Coast, including major population centers like New York City and smaller centers like Atlantic City, NJ. In addition to the wind damage and electricity disruptions to 8 million customers in the Northeast, the storm's surge damaged public and private property and infrastructure in coastal and inlet areas, while the storm's precipitation swelled rivers and creeks. Although the storm was not notable for its wind intensity, the storm's significant size, its unusually low atmospheric pressure, and the astronomic high tide combined with other weather systems to amplify coastal, river, stream, and local flooding. This flooding disrupted transportation, business, and government operations and created public safety concerns that necessitated voluntary and emergency evacuations. The Federal Emergency Management Agency (FEMA) has extensive authorities to assist with emergency actions and recovery efforts from hurricane and flood damage. In implementing the federal response FEMA can assign missions to numerous other federal agencies. The U.S. Army Corps of Engineers (hereinafter referred to as the Corps) has been actively working on emergency engineering missions related to infrastructure using its power engineering and dewatering expertise. In addition to its FEMA assignments, the Corps has its own emergency response authority and a program to assist with repairs of eligible hurricane protection and flood control projects. While availability of funding is unlikely to interfere with near-term emergency response activities in the case of federal response and recovery programs without significant existing balances, federal funding for these programs may become an issue. This is the case for the Corps' flood and hurricane project repair program. As recovery proceeds, Congress may be faced with questions about the efficacy of current federal approaches and participation in hurricane protection (and the relationship of these issues to mandatory flood insurance) and a reevaluation of how federal programs and policies influence coastal development. As decision makers evaluate options for how to manage the Atlantic Coast's coastal flood hazard, it is important to distinguish between the frequency of a storm with particular characteristics and the frequency of a storm surge height or other coastal flood hazard for a specific location. That is, while probability of another storm just like Sandy is unlikely, the likelihood of coastal communities seeing storm surges and flooding hazards like those experiences with Hurricane Sandy is much higher. This report first provides a primer on federal flood policy. The remainder of the report describes the federal role in emergency flood response and post-disaster repair and rehabilitation of flood protection measures. This report will help answer the following questions: Which federal programs can assist with floodfighting? Which federal programs can assist with repairing damaged dunes, levees, and flood control works? What are the flood policy and funding issues that may arise during recovery from Hurricane Sandy? In the United States, flood-related responsibilities are shared: local governments are responsible for land use and zoning decisions that shape floodplain and coastal development, while state and federal activities influence community and individual decisions on managing flood risk. State and local governments largely are responsible for making decisions (e.g., zoning decisions) that allow or prohibit development in flood-prone areas. Local and some state entities construct, operate, and maintain most flood control measures such as levees, floodwalls, coastal dunes, and seawalls. While local and state entities maintain primary flood responsibilities, the federal role is significant. The federal government constructs many levees, floodwalls, and coastal dunes in partnership with local project sponsors; local entities, however, are fully responsible for operation and maintenance. The federal government also supports hazard mitigation, offers flood and crop insurance, and provides emergency response and disaster aid for significant floods. Dams that can serve flood control purposes have a wider variation in their ownership and operational responsibilities, with the federal government having a primary role in many of the larger dams. The principal federal agency involved in federal flood management investments and activities and flood-fighting is the U.S. Army Corps of Engineers. The Federal Emergency Management Agency (FEMA) has primary responsibilities for federal hazard mitigation, the National Flood Insurance Program (NFIP), and disaster assistance. In addition to the Corps floodfighting authorities, the Corps has a program to repair damaged levees, dams, berms, and other flood control works. Post-Sandy demand for such repairs is likely to be extensive. A near-term issue for actions under the Corps authorities is that their funding is often appropriated through emergency supplementals. Other federal agencies also are involved with flood-related activities, such as the U.S. Department of Agriculture's Natural Resources Conservation Service (NRCS), the Department of the Interior's Bureau of Reclamation, the Tennessee Valley Authority, and the International Boundary and Water Commission. Also, crop insurance and agricultural disaster assistance for flood damages is administered by the U.S. Department of Agriculture. Other agencies, such as the U.S. Geological Survey and the National Weather Service, provide data used in assessing flood risk. Since Hurricane Katrina in 2005 and compounded by concerns over the federal debt, interest has increased in reducing the federal flood response's reliance on emergency supplementals, reevaluating the roles and divisions of flood responsibilities, addressing gaps in investments and poorly addressed flood risk, and improving the incentives influencing decisions in flood-prone areas. In July 2012, the 112 th Congress enacted, as part of MAP-21 ( P.L. 112-141 ), an extension and a number of modifications to FEMA's National Flood Insurance Program through September 30, 2017. Beyond the NFIP reauthorization, Congress has changed little in the federal flood policies and programs since 2005. Hurricane Sandy was a reminder that, although forecasting and emergency response have improved over time and investments have been made in flood and hurricane risk reduction measures, significant flood risk remains. Significant storms can cause flooding in areas that are outside the 100-year floodplain (i.e., the area with a 1% probability of flooding annually) or cause storm surges that have a low probability of occurring but cause extensive damages. Significant storms can produce flooding that exceeds the ability of levees, floodwalls, seawalls, and dunes to protect the lives and investments behind them. Hurricane Sandy, like Hurricane Katrina, demonstrated that not only property damage but also significant risks to life, economic disruption, and other social hardships occur during floodwaters and storm surge. Flood risk is a composite of three factors: threat of an event (e.g., probability of a 10-foot storm surge in New York City); vulnerability , which allows a threat to cause consequences (e.g., level of protection provided by levees and dams, their reliability, and location within a floodplain or on a coast); consequence of an event (e.g., property damage, loss of life, economic loss, environmental damage, reduced health and safety, and social disruption). Generally, flood risk grows with more development and population in flood-prone areas. A range of options are available for reducing this risk, but some level of flood risk will always remain. Ex-post analysis of Hurricane Sandy will help inform understanding of how the storm's surge and flood hazard compared to previous storms and how they compare to models of future conditions, including under climate change scenarios. Significant debate continues about whether hurricane threats to the United States are changing; treatment of this topic is beyond the scope of this report. The two principle agencies involved in flood control projects, repair of those projects, and flood fighting are FEMA and the Corps, as shown in Table 1 . The Corps performs considerable flood control construction and damage repair. In contrast, FEMA's role in flood control projects is more limited, but its role is significantly broader in coordinating overall federal activities that assist states, communities and individuals with emergency flood response and recovery. The Stafford Act (42 U.S.C. 5170b) authorizes FEMA to direct the Department of the Defense (including the Corps) and other federal agencies to use its resources to provide assistance in the event of a major disaster or emergency declaration by the President. When a disaster occurs and a state is granted federal disaster assistance under the Stafford Act, funding under the Public Assistance program may be available to reimburse communities for flood-fighting activities and emergency repairs made to eligible infrastructure. Generally, Public Assistance program funds are limited to restoring a structure to its pre-disaster condition; projects to construct new flood control measures or enhance existing measures are not eligible. Because of Hurricane Sandy's significant damage to hurricane protection projects that use dunes and other sand-based measures and other types of beach damage and shore erosion, FEMA's policies regarding which activities are eligible for some types of disaster and recovery assistance is receiving particular attention. In P.L. 84-99 (33 U.S.C. §701n), Congress gave the Corps emergency response authority that allows the agency to fight floods and other natural disasters. In this same law, Congress also gave the Corps the authority for a program to repair damaged flood control works. Both of these activities are discussed below in more detail. Limited appropriations for these Corps activities generally are included in the annual Energy and Water Development appropriations acts as part of the agency's civil works budget (e.g., $0 in FY2011 appropriations, $27 million in FY2012 appropriations) in the Corps' Flood Control and Coastal Emergencies (FCCE) account. Congress generally appropriates the majority of FCCE funds through emergency supplemental appropriations, ranging from significant funding following Katrina to no funds in some years. In the last decade, these activities have received $12 billion; the vast majority of these funds went to congressionally directed work on reengineering and reconfiguration of Hurricane Katrina-damaged floodwalls and levees in Southeast Louisiana. After flood disasters, it is often not only the Corps' FCCE account that receives supplemental funding; Congress also has appropriated funds for the agency's construction and operations and maintenance accounts to construct new works (e.g., new levee projects) or repair other works (e.g., navigation channels) after major flood disasters. In total, the Corps has received roughly $25 billion in supplemental funding since 2001. The reliance on significant supplemental funding for Corps work is raising questions about alternative ways to fund these activities and whether there are opportunities through the annual appropriations process. As previously noted, Congress gave the Corps specific emergency flood authorities in P.L. 84-99. Congress authorized the Corps to conduct disaster preparedness, advance measures, and emergency operations (disaster response and post-flood response), emergency dredging, and flood-related rescue operations. These activities are limited to actions to save lives and protect improved property (i.e., public facilities and services, and residential or commercial developments). Congress has also authorized the Corps to provide this emergency response assistance for up to 10 days following an emergency and before a presidential declaration of an emergency. The Corps is the principal agency that assists with repairs to damaged flood control works, like dams, levees, and dunes. These repair and rehabilitation activities are undertaken after the peak of a flood event has occurred and the extent of damage from the flood event can be determined. Through its Rehabilitation and Inspection Program (RIP), the Corps provides for rehabilitation of damage to flood control projects and federally constructed hurricane or shore protection projects and related inspections. The program's repair of damaged facilities following large flood events has historically been funded largely through emergency supplementals. For smaller RIP repairs, the Corps often attempts to fund repairs within its existing funding. For example, in December 2011, the program received $388 million for repairs mainly associated with 2011 Midwest flooding as part of the Disaster Relief Appropriations Act, 2012 ( P.L. 112-77 ), and in 2008, the program received $740 million largely for repairs in response to Midwest flooding through the Supplemental Appropriations Act, 2008 ( P.L. 110-252 ). At times, some eligible repairs have been delayed due to limitations on the availability of funds. To be eligible for rehabilitation assistance, the flood control project must be in active status with the RIP program at the time of the damage by wind, wave, or water action that is beyond ordinary. The following types of works are eligible for inclusion in RIP: non-federally or federally constructed, locally maintained levees and floodwalls; and federally authorized and constructed hurricane and shore protective measures (e.g., dunes, berms, and sacrificial beaches). For locally constructed projects, the cost to repair the damage is paid 80% by the Corps and 20% by the nonfederal entity. For federally constructed projects, the repair cost is entirely a federal responsibility (except for the costs of obtaining the sand or other material used in the repair). Many of the hurricane protection projects damage by Hurricane Sandy were federally constructed. For RIP assistance, the repair must have a favorable benefit-cost ratio; this calculation does not include recreation benefits, which may be significant for some coastal projects. Rehabilitation assistance is limited to repair or restoration of the project to its pre-disaster level of protection; no betterments or levee setbacks are allowed. Nonfederal entities are required to assume any rehabilitation cost of damage to an active project that is attributable to deficient maintenance. For hurricane storm damage reduction projects, actions eligible for RIP must address an issue critical to the functioning of the project. Depending on the condition of the measure and the timing, nourishment may be planned for immediately as part of a RIP effort or it may occur later as part of the regular nourishment of the project. A common issue that arises under RIP (as well as for FEMA mitigation programs discussed later) is interest in not only repairing levees but also improving them. Congress expressly restricted RIP funds to repair. The program is not designed to evaluate the federal interest in investments to further reduce the flood risk at a location. If federal participation is sought to increase protection, the typical route would be to pursue a study by the Corps to initiate a separate flood damage reduction project. Historically, Congress often has authorized Corps studies and at times construction projects for flood-damaged communities soon after significant storms; at times, these authorizations have been included in appropriations bills. Standard procedure, however, is for Congress to authorize Corps studies in a resolution of the authorizing committee or a Water Resources Development Act (WRDA). Since 2010, congressional action on committee resolutions for Corps studies, WRDA bills, and Corps appropriations have been complicated by earmark moratoriums. Developing and investing in flood-prone areas represents a tradeoff between the location's economic and other benefits and the exposure to a flood hazard. Hurricane Sandy in 2012, Midwest flooding in 2011 and 2008, Hurricane Ike in 2008, and Hurricanes Katrina and Rita renewed interest in the suite of tools available to improve flood resiliency. In addition to oversight and funding of emergency response activities, at issue for Congress is deciding on whether and how to enact and implement feasible and affordable flood policies and programs to reduce flood risk. The challenge is how to structure federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making. Tackling this challenge would require adjustments in the flood insurance program, disaster aid policies and practices, and programs for structural and nonstructural flood risk reduction measures and actions. | Hurricane Sandy was a reminder that the United States is vulnerable to significant weather hazards, and that infrequent but intense flood events can cause significant damage and disruption. In addition to wind damages and electricity disruptions, the storm's surge damaged property and infrastructure in coastal and inlet areas, while the storm's rains and snowmelt swelled rivers and creeks. These impacts contributed to public safety concerns and private and public property loss. Although the storm was not notable for its wind intensity, Sandy's significant size, its unusually low atmospheric pressure, and the astronomic high tide combined with other weather systems to amplify flooding consequences and economic and transportation disruptions. With events like Hurricane Sandy, common questions for Congress include: Which federal programs can assist with flood-fighting? Which federal programs can assist with repairing damaged dunes, levees, and other flood protection? What are the policy and funding issues that may arise during recovery? While state and local entities have significant flood-related responsibilities, federal resources are called in as these entities are overwhelmed and as presidential disasters are declared. Several agencies, including the Federal Emergency Management Agency (FEMA) and the U.S. Army Corps of Engineers, have authorities to respond to flood emergencies and to assist with recovery efforts. FEMA has primary responsibilities for federal flood insurance, disaster assistance, and hazard mitigation programs. In addition to its floodfighting authorities, the Corps has a program to repair damaged levees, dams, berms, and other flood control works. Post-Sandy demand for such repairs is likely to be extensive. For work performed under some of the Corps authorities, a near-term issue may be that Congress typically funds these actions using emergency supplementals. While current funding levels are not likely to interfere with emergency response activities, federal funds may become an issue in proceeding with post-disaster repair and recovery investments. After the emergency has passed and recovery has been initiated, local and federal decision makers will be faced with questions of how to rebuild and what types of flood protection investments to make. Federal policy makers will be faced with the recurring questions of whether current flood policies and projects are effective at reducing flood risk and are financially sustainable. Hurricane Sandy in 2012, Midwest flooding in 2011 and 2008, Hurricane Ike in 2008, and Hurricanes Katrina and Rita in 2005 renewed congressional interest in the suite of tools available to improve flood resiliency. A challenge is how to structure federal actions and programs so they provide incentives to reduce flood risk without unduly infringing on private property rights or usurping local decision making. Tackling this challenge would require adjustments to flood insurance, disaster aid policies and practices, and programs for structural and nonstructural flood risk reduction measures and actions. In July 2012, the 112th Congress enacted, as part of MAP-21 (P.L. 112-141), an extension and some revisions of FEMA's National Flood Insurance Program through September 30, 2017. Otherwise, legislative action in recent years has done little to alter the broad federal approach to the nation's flood risk management. |
In February 2012, the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight began a wide-ranging investigation of executive agencies' public communications activities. The subcommittee is seeking to determine whether any of the agency expenditures were wasteful or propagandistic. The subcommittee has asked 11 federal agencies to provide it with records of their public communications contracts since 2008. Since 2010, congressional committees have examined agency public communications at least twice before. In March 2011, the Senate Homeland Security and Governmental Affairs' Subcommittee on Contracting Oversight held a hearing on the General Services Administration's (GSA's) hiring of a private consulting firm. GSA sought assistance in rebutting criticisms that environmental contamination at one of its facilities had sickened and killed GSA employees. On August 16, 2010, the minority staff of the House Oversight and Government Reform Committee released a report faulting seven agencies for engaging in inappropriate public relations and propaganda activities. Among the incidents that drew criticism was a Department of Health and Human Services commercial that spoke well of the Patient Protection and Affordable Care Act ( P.L. 111-148 , as amended). As noted in a related CRS report, public communications activities of the Department of Education, Federal Communications Commission, Internal Revenue Service, and other federal agencies have drawn congressional scrutiny during the past decade. In part, Congress's interest in agency communications flows from its general duty to oversee the agencies it has created and ensure the appropriate use of the funds it appropriates. But there is a broader context: control. Congressional apprehension about agencies promoting policies and taking political sides is long-standing. This concern is rooted at least partially in the perspective that agencies should be apolitical and play little if any independent role in policy formulation. Thus, from this perspective, agencies have a duty to inform and educate the public, but they should not attempt to persuade it or to engage in political or policy advocacy or elections. Additionally, agencies have incentives to promote themselves to the public. The author of a 1939 study of government communications activities noted, "It has long been the habit of officials to place the best possible light upon their accomplishments." Agencies frequently seek operational autonomy, that is, they try to distance and insulate themselves from legislative direction. One means for an agency to do this is to develop positive relationships with the public or interest groups through public communications, thereby creating stakeholders who may pressure Congress. Collectively, then, the statutory restrictions on publicity experts, publicity and propaganda, and lobbying with appropriated funds are tools for congressional control. When enforced, these statutes can serve to counteract agencies' incentives to promote themselves or political causes with public revenue, and to remind agencies that the misuse of agency resources or funds invites a congressional response. Federal agencies often speak to the public because doing so generally is considered essential to the functioning of representative democracy. If government is to serve the people, then the people must be kept well-informed of the government's activities so that they may judge its work and alter its policies through elections or other means (e.g., advocacy). Thus, many, and perhaps most, federal agencies routinely communicate with the public in the course of their daily work. Agencies do so for many purposes, including informing the public of its rights and entitlements; telling the public of the agency's activities; inviting public comment on proposed rules; warning the public of perils; and discouraging harmful or dangerous behaviors. Congress also has established agencies whose primary purpose is to make information available to the public (e.g., the U.S. Government Printing Office (GPO)), and tasked others with carrying out media campaigns (e.g., the Office of National Drug Control Policy's National Youth Anti-Drug Media Campaign). It is unclear how much the executive branch, let alone the federal government as a whole, spends on communications each year. However, CRS has estimated that executive branch agencies spent nearly $945 million on contracts for advertising services in FY2010, a figure that does not include all agency public communications expenditures. The Department of Defense spent $545.4 million on advertisements in FY2010, much of it for the purpose of drawing recruits. Congress has established three executive branch-wide statutory restrictions on executive agency communications: A 1913 statute (P.L. 63-32; 38 Stat. 212; 5 U.S.C. 3107) declares, "Appropriated funds may not be used to pay a publicity expert unless specifically appropriated for that purpose." A 1919 statute (P.L. 66-5; 41 Stat. 68; 18 U.S.C. 1913) forbids agencies from spending appropriated funds to encourage the public to contact Members of Congress. This "grassroots lobbying" prohibition, as it is often called, forbids agencies from paying for "any personal service, advertisement, telegram, telephone, letter, printed or written matter, or other device, intended or designed to influence in any manner a Member of Congress." Annual appropriations acts often carry a prohibition that forbids the use of appropriated funds "for publicity or propaganda purposes within the United States not authorized by the Congress." These restrictions have appeared in appropriations laws for over a half century. The rationales advanced for each of these statutes have varied. The 1913 anti-publicity expert statute may have been motivated by concern over agencies spending funds to extol their achievements. Plainly, the annual appropriations restrictions aim to prevent agencies from propagandizing the public. The 1919 anti-lobbying statute, meanwhile, aims to protect the separation of powers by preventing executive agencies from pressuring legislators through the public. All three statutes also were justified as means for stopping agencies from wasting public funds. Historically, Congress has found enforcing the restrictions on government communications is inherently challenging for at least three reasons. First, no single federal agency is responsible for reviewing agencies' communications with the public and enforcing statutory restrictions. The Department of Justice is responsible for prosecutions under the aforementioned 1919 anti-lobbying law. However, the DOJ "has never prosecuted anyone" for violating this statute. Otherwise, oversight, investigation, and enforcement of appropriate practices regarding government advertising falls to agencies' inspectors general, the Government Accountability Office (GAO), and Congress, all of whom have numerous other responsibilities. Second, the enforcement of public communications restrictions is inevitably post hoc—it comes after an agency action. Each agency has the authority to communicate with the public; there is no central federal communications agency that reviews agency communications for legal propriety before they are released to the public. (Individual agencies, in contrast, limit their own employees' communications with the public. Agencies' public communications are the responsibility of press offices and public affairs officials.) This "fire alarm" approach to oversight tends to mean in practice that authorities (Congress, GAO, inspectors general, etc.) only learn of possible transgressions when alerted by someone else (e.g., the media or a whistle-blower). Third, the brevity of the current statutes has left agencies and oversight authorities with the responsibility for interpreting the extent of the statutes' coverage. Annual appropriations restrictions, for example, speak of "publicity or propaganda purposes" but do not define these terms. The 1913 anti-publicity expert statute does not define who is a "publicity expert." The GAO, however, has developed a body of opinions that attempt to define the scope of these terms. Thus GAO construes "publicity and propaganda" to cover agency communications that are self-aggrandizing, designed to aid a political party, or that fail to disclose that they were produced by the government ("covert propaganda"). But GAO's determinations are not authoritative. The Department of Justice (DOJ) has contested GAO's conclusions in some instances and directed executive agencies not to heed GAO's opinion. Over the past two decades, federal agencies have adopted new electronic communication technologies. These "new media" technologies include e-mail, websites, weblogs (or blogs), text messaging, and social media, such as Facebook and Twitter. Federal agencies are increasingly using new media technologies to communicate with the public. At present, there are more than 1,504 federal government domains (e.g., Data.gov), and thousands of websites on these domains. As of June 2011, the GAO found that 23 of 24 of the federal agencies it surveyed had a presence on Facebook, Twitter, and YouTube. All 15 of the President's Cabinet agencies have at least one Twitter account. Some agencies are especially heavy users of these new communications technologies. For example, the National Archives and Records Administration (NARA) utilizes blogs, Facebook pages, Twitter accounts, and Flickr photography pages, and it has a YouTube video channel. Additionally, a survey of 3,000 federal managers found that approximately a quarter of them used Facebook for work purposes. In part, the incorporation of these technologies into agency communications is in keeping with past adoptions of emergent communications technologies in the hopes of improving agency operations. Additionally, the Administration of President Barack H. Obama has strongly encouraged agencies to use the most recent new media communications technologies. The President issued a memorandum on his first day in office declaring, [e]xecutive departments and agencies should harness new technologies to put information about their operations and decisions online and readily available to the public. Executive departments and agencies should also solicit public feedback to identify information of greatest use to the public. This "Open Government Initiative" was operationalized by a subsequent memorandum, and the Office of Management and Budget (OMB) provided agencies guidance on using new media to make government more transparent, participatory, and collaborative. President Obama appointed a deputy chief technology officer to head the "open government initiative" and a federal chief information officer, both of whom advocated expanding agency use of Internet technologies. Different agencies have used different new media to communicate with the public for different reasons and purposes. Several recent examples include the following: The U.S. Army uses websites (e.g., ArmyStrongStories.com) and Facebook (Facebook.com/goarmy) to reach potential recruits. Lieutenant General Benjamin C. Freakley, who led the Army Accessions Command which previously was in charge of troop recruitment, reportedly stated, "We're working hard to increase our social media" because "we fully recognize that young people TiVo over commercials or are multitasking on their smartphones when the commercials come on." Department of Energy Secretary Steven Chu has a Facebook page ( http://www.facebook.com/stevenchu ) where he posts short messages on a variety of subjects, such as energy conservation. The NARA employs the aforementioned social media technologies for multiple purposes. According to David S. Ferriero, the National Archivist, "Social media tools can help us make it easier for researchers, students, and the general public to learn about and make use of the billions of items in our collection. And just as important, they give the public direct ways to reach us: asking questions, telling us what's important to them, helping us plan for the future.... Digitization and online access to government records can also benefit from the collaborative expertise of the many, including the citizen archivists, researchers, federal agencies, the private sector, and IT professionals." The Department of State uses Twitter ( http://twitter.com/#!/statedept ) as a tool of public diplomacy. Along with online video and other new media, Twitter enables the agency to speak directly with foreign audiences. After the April 20, 2010, Deepwater Horizon explosion in the Gulf of Mexico, a multi-federal agency "unified command" was established. It utilized a website (deepwaterhorizonresponse.com), Twitter, Facebook, Flickr, and YouTube to explain how it was responding to the oil spill, and how affected individuals (e.g., fishermen) could get assistance. The Department of Veterans Affairs (VA) hired Alex Horton, a former soldier who has been openly critical of the VA, to write for the VA blog ( http://www.blogs.va.gov/VAntage/ ). "Alex is not here to flack for the agency," his VA supervisor has said. Horton serves as an in-house critic of the agency, identifying to the VA shortcomings in its services and understanding of veterans' issues. Smithsonian museums, such as the Museum of Natural History and the National Postal Museum, have allowed the public to vote via the Internet on which items it would like to see displayed in particular exhibits. The development and use of new media by agencies has several implications for Congress in its oversight and enforcement of agency public communications. (1) Quantity of Agency New Media Communications . The ease of producing new media communications makes it easier for agencies to produce more public communications. The Department of State, for example, has more than 15,191 posts ("tweets") from its main Twitter account ( http://twitter.com/#!/StateDept ) since late 2008, and this is not its only Twitter account. More communications may provide for more opportunities for an agency to transgress (inadvertently or otherwise) the statutory prohibitions against unauthorized publicity and propaganda and lobbying with appropriated funds (18 U.S.C. 1913). (2) Quality of Agency New Media Communications . New media technologies can remove the filters between agency employees and the public. This intimacy and immediacy enables prompt communications between agencies and the public. It also may lead to agency employees making misstatements of fact or comments that violate statutory restrictions. Daniel Mintz, who served as CIO of the Department of Transportation during the second term of President George W. Bush, has further cautioned, "any material a federal employee publishes [online] can be taken as establishing or implying the establishment of a formal policy." (3) Locating Agency New Media Communications . The nature of new media communications could complicate oversight further. Digital communications often are "born digital"—they exist in digital format only, and often may be deleted easily. Digital communications produced today can be difficult to locate subsequently, especially if they are "real-time" communications (e.g., live online "chats" or video). The NARA has issued guidance to agencies on the preservation of new media communications. However, managing and preserving electronic records in general is a complex undertaking, and historically agencies have not given these activities high priority. (4) Authenticating and Securing Agency New M edia Communications . As with paper-based communications, new media communications can be altered or forged. The Government Printing Office produces digital documents that carry a signature indicating their authenticity. But federal agencies' new media public communications seldom are subjected to similar security protocols. Someone with desktop publishing software and the requisite skills easily could download an agency's new media, alter its content, and then distribute it via e-mail and document-sharing websites. In some instances, agencies' new media communications have been commandeered by hackers or other malefactors and used to send out inappropriate content. (5) Identifying Publicity Experts . New media technologies may make it more difficult to determine who is acting as a "publicity expert" for the purposes of 5 U.S.C. 3107. For one, the employees who author new media often are not readily discernable. For example, government agencies' Twitter accounts seldom state which employees are authorized to send agency tweets. Government agency blog posts may not list an author. Additionally, Twitter, Facebook, and other new media technologies are not difficult to use, which makes it easier for agencies to have more federal employees (whatever their official agency position) communicate with the public. For example, the Department of Commerce's Chief Economist has a blog ( http://www.esa.doc.gov/blog ) and Twitter account ( https://twitter.com/#!/EconChiefGov ). Similarly, Congress established the position of chief information officer (CIO) within federal agencies to coordinate and monitor the acquisition and implementation of information technology programs ( P.L. 104-106 , Div. E, Title LI, §5125(b)-(d); 110 Stat. 3009-393; 40 U.S.C. 11315). CIOs are not public affairs personnel, yet some have blogs that promote their agencies' activities. (6) Identify ing Agency Grassroots Lobbying . The use of new media may make it more difficult to discern when an agency has violated 18 U.S.C. 1913. As noted previously, grassroots lobbying occurs when an agency consciously encourages the public to pressure Congress. Arguably, any time an agency publishes anything on the Internet it could have the effect (intentionally or unintentionally) of encouraging citizens to contact Congress, especially if the communication "goes viral." Thus, an agency may think it is serving the public's "need to know" by publishing its congressional testimony online on the day of a hearing. Congress, meanwhile, might view this as an attempt to create public pressure. Additionally, in the past, agency grassroots lobbying efforts could be identified partly based upon the format of the communication (e.g., press releases and direct mail). Today, new media have expanded the number of formats that agency communications may take, and any new media format might carry content that has the effect of grassroots lobbying. (7) Rebroadcasting and the Loss of Control Over Communications. Government communications produced as new media may be easily rebroadcast. For example, a document posted on an agency website may be downloaded by an individual and then reposted on a personal website or blog. If the initial document contained an error or transgressed the statutory limitations on public communications, it would be difficult for the agency to rectify the situation by removing all online reproductions of it. The ease with which new media may be rebroadcast also may raise unforeseen legal issues. Thus, should a federal agency "retweet" another federal agency's communication, could the former agency be held culpable if the initial communication violated any of the statutory restrictions on public communications? As noted earlier, Congress historically has found it challenging to enforce the current statutory restrictions on agency communications. Agencies' adoption of new media appears to have further complicated oversight. Should Congress find that the proliferation of new media communications is problematic, it may find value in considering a range of possible policy options to improve or augment the public communications restrictions, such as the following: 1. Defining the major terms in the statutes, such as "publicity expert," "publicity," and "propaganda." 2. Updating the 1919 anti-lobbying statute (18 U.S.C. 1913) to explicitly extend coverage to new media communications. 3. Surveying agencies to see whether agency employees who use new media communications technologies are trained to respect the current statutory public communications restrictions. The Department of Veterans Affairs, for example, has released a policy directive for VA employee use of social media. It makes no mention of the statutory prohibitions. 4. Requiring all agency public communications to identify the author and his or her position at the agency. 5. Requiring the OMB to provide agencies with public communications guidelines. The Information Quality Act (IQA; P.L. 106-554 ; 114 Stat. 2763A-153; 44 U.S.C. amendments), which was enacted December 21, 2000, required the OMB to issue guidance to federal agencies designed to ensure the "quality, objectivity, utility, and integrity" of information disseminated to the public. However, as an amendment to the Paperwork Reduction Act (44 U.S.C. 3501), the IQA's coverage has not been construed by OMB as covering public relations communications (67 Federal Register 8460). 6. Requiring agencies to report annually to Congress on their public communications activities, expenditures, and the agencies' rationales for these activities. 7. Including in agencies' annual appropriation acts a requirement that GAO assess agencies' public communications for comportment with the public communications restrictions. This would provide Congress with assessments of agency compliance; it also could serve as a reminder to agencies of the public communications restrictions. | This report intends to assist Congress in its oversight of executive branch agencies' public communications. Here, "public communications" refers to agency communications that are directed to the public. Many, and perhaps most, federal agencies routinely communicate with the public. Agencies do so for many purposes, including informing the public of its rights and entitlements, and informing the public of the agency's activities. Agencies spent more than $900 million on contracts for advertising services in FY2010, a figure that does not include all agency communications expenditures. Congress frequently has investigated agency public communication activities. For example, in late February 2012 the Senate Homeland Security and Governmental Affairs Committee's Subcommittee on Contracting Oversight began investigating 11 federal agencies' public communications activities and expenditures. Congressional oversight of agency public communications activities is not new; it has occurred frequently since at least the beginning of the 20th century. Congress has enacted three statutory restrictions on agency communications with the public. One limits agencies' authority to hire publicity experts, another prohibits using appropriated funds to lobby Congress, and a third disallows using appropriated funds for "publicity or propaganda." For a number of reasons, enforcing these restrictions has been challenging, not least of which is that these statutory prohibitions do not well clarify licit from illicit public communications. Many federal agencies have adopted new electronic communication technologies over the past two decades. These "new media" technologies include e-mail, websites, weblogs (or blogs), text messaging, and social media such as Facebook and Twitter. Agencies' use of these new media has implications for congressional oversight of agency public communications. Most fundamentally, the ease of use of new media and the nature of digital communications further complicates congressional oversight and enforcement of the public communications restrictions. This report will be updated in the event of any significant developments. |
Figure 1. Russia and Northeast AsiaSource: CRS graphics. Since the end of the Cold War, Russia has played a mostly quiet role in East Asia, only intermittently focusing its attention on the Pacific while primarily orienting its foreign policy toward Europe and former Soviet states. In the past few years, and particularly in the wake of Russian aggression in Ukraine in 2014, Russia's relations with the West have soured. In part as a consequence, Moscow appears to be stepping up efforts to develop closer ties with countries in East Asia, consistent with Vladimir Putin's 2012 presidential campaign promise to "turn to the East." As one European analyst put it, "Originally, Russia was simply attracted by the dynamic developments in Asia and China; however, since the Ukraine crisis and the deterioration of the zapadny vektor ('Western vector') in 2014, its interest has turned into a necessity." In 2014, Putin signed legislation to offer a range of tax benefits and subsidies to businesses that establish operations in the Russian Far East, with an eye to expanding Russia's trade with Asia. China, Japan, and South Korea, all in need of energy supplies, offer commercial opportunities as the West imposes economic sanctions on Russia and Russia develops its oil and gas reserves. Although most see a geostrategic alignment between Moscow and Tokyo as improbable, such an arrangement could offer a regional counterweight to Beijing's rising stature. At the same time, Russia's flirting with a partnership with China provides a retort to the U.S. "rebalance" to Asia strategy. Already tense, U.S. relations with Moscow have frayed further since Russia's intervention in Ukraine in February-March 2014 and its initiation of military activities in Syria in 2015. The United States led an effort to impose multilateral sanctions on Russia and isolate Moscow diplomatically, encouraging its Asian allies to do the same. (See Appendix .) Although its economic power is declining as energy prices fall, Russia still has strength in terms of military capability, diplomatic capital by virtue of its permanent seat on the United Nations Security Council, status as a nuclear state, and sheer geographic size. Analysts believe leaders in Moscow increasingly view the world through an anti-U.S. lens and hold many grievances against the West. From this mindset, Russia may see Asia as an area in which it is able to challenge U.S. interests. Under President Putin, Russia's outreach to Asia has been inconsistent, and at times contradictory. In 2015, Putin failed to attend the two largest East Asia international meetings: the Asia Pacific Economic Cooperation (APEC) forum and the East Asia Summit (EAS), although Russia is a member of both groupings. While pursuing warmer relations with Tokyo, Russia has accelerated a military buildup on one of the disputed northern islands that Japan also claims. After Russia appeared to engage North Korea, leader Kim Jong-un declined to attend a 2015 World War II commemorative ceremony in Moscow, and the relationship apparently faltered. With China, Moscow alternates between summits with Beijing and shows of military might to counter China's moves, particularly in contested areas like the Artic region. On the whole, the Russian economy remains poorly integrated with Asian countries, despite some apparent natural outlets for more trade. This report will examine how Russia has sought to engage Northeast Asian states, and vice versa, since 2012. It will also evaluate the durability of developing relationships and the relative value of these ties to the individual states. It will explore whether Russia might become a bigger geopolitical player in the region, and how this might affect U.S. interests in the Asia-Pacific. For Members of Congress, Russia's relations with countries in Northeast Asia are important to consider. In addition to their impact on regional dynamics, they have implications for general foreign policy oversight, as well as for more specific issues such as the efficacy of sanctions policy, the developing security competition in the Arctic region, and alternative blocs of influence in international fora like the United Nations Security Council. Congress could express concern or interest in this area through additional hearings, an expansion of reporting requirements for the Departments of Defense and State, and other legislation that focuses on Russia's engagement in Northeast Asia. A Chinese-Russian coalition almost inherently embodies a challenge to the U.S. presence in the Asia-Pacific and could hamper U.S. leadership in the region, as well as globally. During Putin's state visit to Beijing in June 2016, he and Chinese President Xi Jinping issued a joint statement on "global strategic stability" that criticized the United States' military and alliance policies, accusing the United States of enhancing instability and possibly triggering a new arms race. A united front by China and Russia could undercut the efforts of the United States and its allies to consolidate international laws and norms as part of the existing international order, a particular focus of U.S. diplomacy in East Asia. As veto-wielding permanent members of the United Nations Security Council, China and Russia already often find common ground on security issues; an enhancement of relations could further diminish American and Western influence in dealing with international problems through the United Nations. If Moscow and Beijing were to develop a stronger partnership, the two powers might reach a strategic accommodation on areas like the South China Sea and the East China Sea, limiting U.S. ability to challenge China's increasing maritime assertiveness. Some observers already see indications of China's enlisting Russia's support for its regional strategy: in April 2016, Russia's foreign minister joined his Chinese counterpart in saying that non-claimants should not take sides on territorial claims in the South China Sea. This appears to be a rebuff to the U.S. position on the South China Sea. Although the U.S. government does not take a position on specific sovereignty disputes, it urges respect for customary international law; opposes the use of coercion, force, or threat to assert claims; and has supported the efforts of smaller Southeast Asian nations to address China's land reclamation and maritime claims though diplomacy and compulsory dispute-resolution mechanisms. One barometer for Russia-China relations is Russian willingness to sell China some of its most sophisticated military systems. If Moscow continues to open up its market to purchases from China, the strategic balance of power in Asia could shift in areas such as the South China Sea and the Taiwan Strait. (See " Security Relations " section below.) Russia and China have also joined voices in objecting to the deployment of a U.S. ballistic missile defense (BMD) system on the Korean peninsula. After North Korea conducted its fourth nuclear weapon test and a satellite launch in 2016, the South Korean government announced that it would deploy a U.S. Theater High Altitude Area Defense (THAAD) BMD system to South Korea. Seoul resists full integration into the U.S.-led regional BMD network, but has agreed to a policy of interoperability with U.S. BMD assets. Both Moscow and Beijing strenuously objected to the THAAD announcement, citing the "direct threat" to the security of China and Russia given the range of the system's radar. U.S. defense planners and some Members of Congress have supported the idea of an integrated BMD system among Japan, South Korea, and the United States, but vehement Russian and Chinese opposition could contribute to South Korean caution as it goes forward with deployment of the THAAD system. If Beijing and Moscow pull closer to an informal alliance, the regional organizations that they dominate could become more coordinated and potentially more powerful. The Shanghai Cooperation Organization (SCO) is in the process of admitting India and Pakistan as full members (see " Shanghai Cooperation Organization (SCO) section). This expansion could reduce U.S. economic leverage with SCO members if the group embraces a more integrated economic framework and, some analysts suggest, reduce the efficacy of sanctions in the region. Already, U.S. influence in the security sphere in Central Asia is diminished with the closure of its base in Uzbekistan in 2005 and its last base in Kyrgyzstan in 2014. China and Russia are far from embracing a full alliance with one another. Strong distrust still exists in their bilateral relationship, and cooperation is likely to be on an ad-hoc basis, without encompassing all political and economic dimensions. Despite the barriers to a deeper partnership, however, Beijing and Moscow's shared sense that the new geopolitical order of East Asia should resist a dominant U.S. influence remains a potent force. South Korean and Japanese response to Russian overtures could create tensions in the U.S. bilateral alliances with each, as well as weaken the international sanctions regime against Moscow. Although the U.S.-Japan alliance has thrived in recent years, Tokyo appears eager to engage Russia, particularly under Prime Minister Shinzo Abe's leadership. Some U.S. officials could view Abe's frequent meetings with Putin—which could potentially include a formal state visit to Japan—as undermining the U.S. effort to isolate Putin diplomatically. (This was particularly true in the immediate aftermath of the Ukraine crisis, when the United States avoided meetings with Putin. Washington has adjusted its approach since, and Obama has met directly with Putin.) Washington and Tokyo have made significant advances in their military alliance since 2012, including updating bilateral defense guidelines. Implementation of the security legislation that Tokyo passed in 2015 is at a sensitive stage; capitalizing on these upgrades to the alliance will likely depend on continued strong relations at the leaders' level. If diplomatic priorities on Russia diverge, however, the U.S.-Japan alliance could lose some of its recent momentum. Some U.S. analysts contend, however, that a partnership between Japan and Russia could be beneficial for the United States in the long run. They argue that a stronger Japan-Russia relationship could provide a counterweight to China's strength in the region. Particularly in the maritime arena, Japan and Russia could form a complementary partnership in response to China's assertiveness. Russia has traditionally had a strong defense relationship with Vietnam and might be persuaded to back Hanoi's claims in the South China Sea more forcefully. Further, Tokyo seeks support for its territorial dispute with Beijing over the Senkaku Islands (known as Diaoyu in China and Diaoyutai in Taiwan). Russia has not taken a position on the East China Sea territorial claims; some analysts have even suggested that Russia could be a mediator there. South Korea's alliance with the United States has strengthened in reaction to North Korean provocations, including Pyongyang's fourth nuclear weapon test, a rocket launch, and the test of a submarine-based missile, all in 2016. The latest upgrade is deployment of the THAAD missile defense system, which may increase Russia's and China's objections to the U.S. military presence in the region. South Korean leaders already face some domestic criticism over Seoul's alleged dependence on the United States; Russian (and Chinese) complaints about U.S. alliances may amplify these voices in South Korean politics. On the other hand, better ties with Russia could help Seoul gain more independence from Beijing. Although China is by far South Korea's most important trade partner, more linkages with Russia could provide Seoul with another, albeit less influential, regional partner on such issues as pressuring North Korea to curb its provocations. Diplomatic and economic support for North Korea from Russia could undermine U.S. and Chinese efforts to pressure North Korea to change its behavior and re-engage in denuclearization talks. If Moscow and Pyongyang draw closer—as they appeared to be doing in 2014-2015—the united diplomatic front among the Six-Party Talks partners could fray. The Talks, the multilateral negotiations comprised of the United States, China, Japan, South Korea, North Korea, and Russia, have not convened since 2008, but remain the primary multilateral vehicle to deal with North Korea's nuclear programs. Many observers saw Moscow playing a small but productive role in the talks when they were active in the mid-2000s, but Russia's renewed interest in staking a diplomatic presence in the region could mean their engagement in the talks is more disruptive to the process. Russia could provide more support—at least diplomatically—for the North Koreans even if China takes a harder line against the regime. Russia, however, appears to remain concerned about North Korea's nuclear weapons program and the uptick in relations seems to have been arrested by North Korea's provocations. Despite working with China to dilute several United Nations Security Council (UNSC) resolutions that condemned Pyongyang's nuclear weapon and missile tests, Russia ultimately signed on to a tough resolution (UNSC Resolution 2270) in 2016 that could hurt its economic projects in North Korea. The resolution bans or limits North Korean exports of several natural resources, which could curtail Pyongyang's ability to compensate Russian companies for their investments and deliveries. Implementation of existing projects may slow or fail as a result. Some analysts estimate Moscow's losses at several hundred million dollars due to lost trade. In any event, it is unclear how much economic assistance and trade Russia could provide North Korea, particularly if Pyongyang is unwilling to pay market prices. Some analysts argue that if the United States and its allies moved more aggressively to alter the situation on the Peninsula, or if the regime in Pyongyang collapsed on its own accord, Moscow and Beijing may find common cause in supporting North Korea. Both countries share a strong desire to prevent a shift in the regional balance that a reunified peninsula under U.S. influence might produce. Moscow and Beijing have many reasons to cooperate. Both countries have a desire to counter what they claim to be U.S. hegemony, both regionally and worldwide. Both are wary of the U.S. military presence in Asia and often criticize U.S. efforts to upgrade the United States' defense capabilities with its treaty allies, Japan and South Korea. Both hold vetoes on the UNSC and often work together to adjust or oppose UNSC resolutions that are supported by Western countries. Both were unnerved by a series of "color revolutions" worldwide in which citizen demonstrations brought down or starkly challenged authoritarian governments, and both are suspicious of U.S. involvement in these movements. When Chinese President Xi Jinping held a military parade in September 2015 to commemorate the 70 th anniversary of the victory over Japan in World War II, Putin appeared prominently beside Xi in Tiananmen Square, just as Xi did for Putin in commemorating the victory over Nazi Germany in Moscow earlier that year. Scholars point to Putin's personal interest in cultivating a friendship with Xi to strengthen the bilateral relationship. Experts have also advanced arguments that both capitals, driven in part by national identity factors, have supported each other in international disputes and intentionally minimized differences in their approach to foreign policy. Relations have been particularly robust since Xi took power in 2012. In 2013, Xi made Russia his first overseas trip as president. Since then, the two presidents have conducted a series of high-profile visits and announced similarly high-profile agreements, often apparently calibrated to make a statement to the United States and other Western countries. In 2014, as Western powers adopted sanctions on Russia in retaliation for the Ukraine intervention, China and Russia held a summit and announced a $400 billion natural gas deal, along with over 40 other economic cooperation agreements. Shortly after the summit, both leaders attended the opening of bilateral naval exercises in the East China Sea near the disputed islands that both China and Japan claim. Russia's intervention in Ukraine shaped relations with China today. On the one hand, it drove closer cooperation and a strong show of solidarity as Western nations imposed sanctions and attempted to isolate Putin diplomatically. However, it also created an imbalance in the relationship, as Moscow was suddenly frozen out of European foreign policy and in need of Beijing's support. With China enjoying a boost in its leverage, it was able to derive more concessions from Russia, including in negotiations on energy deals. Thus, while the Ukraine crisis intensified an already warming relationship, it also may have introduced an asymmetry in relations. Russia, still smarting from losing its superpower status, may not be comfortable playing the role of junior partner to its former rival China. As Russia's economic and diplomatic strength have withered, China has not remained singularly driven by what one journalist calls "political sympathy" as it pursues its own national interests. While Russia is driven closer to China by economic necessity, China has more options. Further, Beijing has appeared to be uneasy with Russia's invasion of Ukraine, as it is at odds with China's official statements concerning respect for the sovereignty, independence, and territorial integrity of other nations. China has maintained a policy that many analysts call "benevolent neutrality" toward the Ukraine crisis, carefully treading the line by stating its respect for Ukraine's sovereignty but noting that it "takes into consideration the complicated historical background and realistic factors of the Crimea issue." However, any future Russian military adventurism could prompt Beijing to consider distancing itself from Moscow. This would be particularly true if China begins to assess that Russian actions are destabilizing regions to the detriment of Chinese interests. Analysts are divided over how enduring the Moscow-Beijing partnership will be in the medium to long term. In early 2016, a senior Chinese official described the relationship as "a stable strategic partnership and by no means a marriage of convenience: it is complex, sturdy, and deeply rooted." To a large extent, it is dependent on external events in a vastly complicated web of relationships around the world. U.S. behavior may be the largest variable: to the extent that China and Russia feel that the United States is challenging their strategic space, they may feel driven to develop stronger relations. In the current context, however, Beijing may not want to enter into an explicitly anti-Western alliance; its trade volume with the United States dwarfs that with Russia, and it is loath to confront the West directly as it continues its path of economic development. Other factors could prevent a more full-fledged alliance, not least among them a history of rivalry, including the ideological divide that led to the Sino-Soviet split in the 1960s. The Russia-China relationship appears to be characterized by a degree of strategic mistrust. Each nation has responded, sometimes aggressively, to counter the other's military advances, particularly in the Arctic region. (See " Arctic Geopolitics " section below.) Tensions have also periodically risen because of many Russians' perception that large numbers of Chinese migrants are crossing the border for possible economic opportunity in the sparsely populated Russian Far East. Many observers point out that the flow may go in the other direction, given the comparative economic vibrancy of the Chinese side, and assert that the numbers of Chinese are much lower than suspected. Regardless of the reality on the ground, however, Russian popular opinion continues to harbor suspicions about Chinese presence in the resource-rich region. Elsewhere in Asia, Chinese and Russian interests sometimes collide. In Southeast Asia, Russia historically had the strongest relationship with Vietnam since the Soviet Union allied itself with North Vietnam and remained its benefactor through the Cold War period. Today, the Russian military enjoys access to Vietnam's Cam Rahn Bay base. Beijing is wary of Moscow's relationship with Vietnam and may be frustrated that Russia does not back China's position in the South China Sea more fully. Similarly, Russia does not want to lose its foothold in Southeast Asia or alienate other ASEAN powers by siding with China. Commercial interests in China are also increasingly wary of investment in Russian projects. The drop in energy prices has cast doubt on the profitability of a number of energy projects, and investment efforts in Russia have fallen short of earlier goals. (See " China-Russia Energy Ties " section.) Other than the "political" development banks (state institutions driven by Beijing's political interest), few large banks are interested in taking on risky ventures given Russia's economic conditions and the imposition of international sanctions. Although Russia and China pledged in 2011 to increase trade to $200 billion by 2020, the two countries missed the interim goal of $100 billion by 2015 by nearly $35 billion. One Chinese scholar described the relationship with Russia as "warm politics and cold economy." Trade between the two nations plummeted in 2015, with Chinese imports from Russia falling by nearly 20% and Chinese exports to Russia falling by 34%, although these declines are mostly due to the steep drop in energy prices. In the economic relationship, Chinese power is again evident: China is Russia's largest trading partner, but Russia does not rank in China's top five partners. China-Russia security relations have advanced significantly since 2012. Russia and China have held increasingly large and sophisticated military exercises since 2011, including joint naval drills in the East China Sea in 2014 and in the Sea of Japan in 2015. The exercises include war gaming, as well as search and rescue operations and amphibious assaults. In early 2016, the two countries' defense ministers announced that they intended to deepen military cooperation and increase the number of joint exercises. Analysts say that Beijing and Moscow intend to send strong signals to the West, particularly the United States, by holding these high-profile exercises. Both Putin and Xi attended the opening ceremonies of the 2014 drills, signifying the political importance of the exercises. Russian arms sales to China have been a central aspect of the defense relationship, running about $2-$3 billion annually in the early 2000s. Sales appeared to dwindle in the mid-2000s, but have recently seen another uptick, particularly since the Ukraine crisis. In 2015, Moscow agreed to sell China some of its most sophisticated weaponry—such as the Sukhoi Su-35 fighter jets and S-400 anti-aircraft missile systems—because of a perceived need to boost defense industry exports. Some analysts believe increases in arms sales could lead to more technology transfers to China as well as cooperation on defense-related research and development. However, competition and distrust are also evident in the area of arms sales. Russian arms dealers are suspicious that China is copying Russian designs as China's military modernization effort moves toward domestic manufacturing. Moreover, Russia and China have begun to compete with one another in the international arms market, with both countries targeting Asian and African middle-income countries. Russia finds itself at a disadvantage in this area, as China tends to offer its arms deals along with larger, more comprehensive development packages that include favorable loans and infrastructure investments. As permanent, veto-wielding members of the Security Council, Russia and China often find common cause at the United Nations, particularly in opposing positions taken by the other three members of the Security Council: the United States, the United Kingdom, and France. In recent years, Russia has generally deferred to China in matters related to North Korea, while China has followed Russia's lead on negotiations involving Syria. While this pattern can build cooperation and trust between Moscow and Beijing, occasionally it can also generate tension. As the UNSC debated a resolution imposing sanctions on North Korea for its fourth nuclear test in February 2016, Russia reportedly was angered by China's failure to adequately protect Russian commercial interests in its North Korean investments. Overall, however, the two capitals often find it mutually beneficial to support each other's interests. If confrontation between the United States and Russia and/or China intensified, the United Nations represents one of the primary arenas where U.S. global interests can be challenged. Both China and Russia have advanced new initiatives that aim to consolidate trade and transportation networks between Europe, Asia, and even Africa. These plans reflect both countries' interest in developing stronger economic links, particularly in the energy realm, with Central Asia and beyond. China's "One Belt, One Road" (OBOR) initiative envisions the development of energy infrastructure, roads, railways, ports, and industrial parks that span three continents. Putin, meanwhile, has proposed a Eurasian Economic Union concept that similarly promotes economic integration; the original membership included Belarus, Kazakhstan, Armenia, and Kyrgyzstan, but Putin has stated he would like it to expand to all former Soviet states. An inherent tension exists in these two plans: Russia has long considered Central Asia to be a part of its traditional sphere of influence, and is wary of China's drive to build infrastructure that could redirect economic activity toward China. In May 2015, Beijing and Moscow announced that they intended to link the two plans, with China providing most of the necessary capital and Russia offering security assurances for the projects. Despite the fanfare of the announcement between the two leaders, analysts report little progress in reconciling the two projects. When Putin paid a state visit to Beijing in June 2016, a Russian commentator noted that the plans to link the initiatives "have not advanced a step." To some observers, the declaration may have been intended less as a blueprint for action and more as an indication of the leaders' determination to avoid open hostility between the two plans. A similar dynamic has played out in the Shanghai Cooperation Organization (SCO): Russia seeks to assert its traditional role as a guarantor of security to the Central Asian region while China looks to establish its centrality as an economic powerhouse. The SCO also reinforces the shared sense of the need to counter what are seen as Western, and specifically U.S., efforts to contain China and Russia. An early SCO (then the "Shanghai Five") joint statement pledged to "oppose intervention in other countries' internal affairs on the pretexts of 'humanitarianism' and 'protecting human rights;' and to support the efforts of one another in safeguarding the five countries' national independence, sovereignty, territorial integrity, and social stability." In 2009, the SCO approved Russia's cyber- and information war-related proposal, which described the spread of information damaging to "spiritual, moral, and cultural spheres of other States" as a security threat. During the 2014 SCO meeting, China's Minister of Public Security accused "external forces" (implicitly referring to Western nations) of attempting to foment "a new wave of color revolutions." The SCO (originally the "Shanghai Five") was created in 1996 by China, Russia, Kazakhstan, Kyrgyzstan, and Tajikistan, with the Treaty on Deepening Military Trust in Border Regions (1996) and then later the Treaty on Reduction of Military Forces in Border Regions (1997). Uzbekistan later joined, and India and Pakistan appeared to be inching toward full membership in 2016. Ten other countries hold observer status, including Iran. The initial purpose of the grouping was to engage in confidence-building, manage border conflicts, and maintain stability in Central Asia, but the group eventually came to focus on wider political, security, economic, and cultural issues as well. Regular military drills among the members focus mostly on maintaining stability and combatting what member states deem to be "terrorism, separatism, and extremism." For years, China has been pushing the SCO to take on more economic roles. China-led economic initiatives within the organization include a potential free trade zone (first suggested in 2003), an SCO Development Bank, and a Development Fund. The SCO agreed in 2012 to establish the Bank and the Fund and decided during the 2015 summit to continue to work toward their creation. Nevertheless, few concrete steps have been taken yet due in part to Moscow's and other capitals' concern with Beijing's economic influence within the SCO and in Central Asia. The slow pace of the SCO's actions in the economic realm has prompted China to push for its own Eurasian initiatives. Russia's overtures to the East appear to have gained the most traction in Japan. Despite joining Japan's G7 partners in imposing sanctions on Russia, Prime Minister Shinzo Abe has aggressively pursued better relations with Moscow. In May 2016, Abe visited Putin in Sochi, Russia, to discuss the two countries' lingering territorial dispute (see " Japan-Russia Territorial Dispute " section) and pledge increased economic engagement. The two leaders made plans to meet again at the Eastern Economic Summit in Vladivostok in September 2016, with a possible visit by Putin to Japan later in the year. In mid-2016, the Moscow-Tokyo relationship appeared vibrant to many observers. When Abe returned to the premiership in 2012, after an earlier one-year term as Prime Minister in 2006-2007, he moved to reinvigorate Japan's diplomacy. Among his targets was Russia, with which Japan has never signed a peace treaty formalizing the end of World War II. Abe met Putin five times in his first year in office, explicitly aiming to resolve the territorial dispute over four islands in the Kuril Chain, known in Japan as the Northern Territories, which are now under Russian administrative control. Overall relations were on the upswing: bilateral trade in 2013 rose to a record $34.8 billion, the ministers of defense and foreign affairs held "2+2" talks, and the two governments announced new plans on energy cooperation. As many Western powers distanced themselves from Russia in part because of Putin's anti-gay comments and policies, Abe was among the most high-profile leaders at the 2014 Winter Olympics Opening Ceremony in Sochi, Russia. On its face, a Russia-Japan partnership makes sense. Japan, particularly under Abe, faces skepticism from neighbors who distrust Japan and see any Japanese move to advance its security role in the region as a reversion to militarism. After shutting down its nuclear power generation capacity following the March 2011 meltdown of the Fukushima Daiichi nuclear power plant, Japan is also in need of more energy imports; the Russian Far East offers an abundance of fossil fuels practically next door. Shared values with the West and a commitment to democracy aside, Japanese leaders appear to take the position that Russian military moves in Eastern Europe do not present a direct security threat to Japan. Russia wants customers for its natural resources and has for years promised to become a more engaged Pacific power. Putin, too, needs friends: now somewhat of an international pariah for his aggression in the Crimea, crackdown on civil liberties at home, and jingoistic rhetoric, his power is challenged by plummeting energy prices and economic sanctions. At the center of both countries' strategic concerns is China's massive economic and geopolitical presence. For Japan, lessening its northern territorial vulnerabilities would allow it to focus on the more acute problem of China's intrusions and claims in the disputed Senkaku Islands (known as Diaoyu in China and Diaoyutai in Taiwan) as well as free up military and Coast Guard assets currently stationed in the north. Russian bombers and patrol planes routinely fly through Japan's northern air space, prompting Japan to scramble fighter jets in response. In 2015, such scrambles increased sharply to levels not seen since the Cold War. Both Russia and Japan may be eager to exploit each other in relation to concerns about China's increasing maritime presence in the Pacific. If an agreement on the Kuriles is accompanied by a consensus between Japan and Russia to cooperate at the strategic level, the reasoning goes, Abe and Putin could tilt the balance of regional relations in their favor, at the expense of China. Many indicators suggest that efforts to upgrade the Russia-Japan relationship may falter, however. Moscow's foreign policy can be unpredictable and inconsistent, perhaps even by design, and under Putin Russia has been known to lash out at potential rivals. Russian oil and gas supplies are far from a panacea for energy-hungry Japan, and Tokyo may see Russian attempts to manipulate energy supplies to Eastern Europe for political leverage as a warning sign. Russia's development of its Far East's energy resources has been problematic, dominated by Russian national energy firms and subject to fluctuating geopolitical concerns. For years, Moscow has played coy about the route of pipelines from its Far East to Asian markets, and Japanese energy firms may see the area as too risky for further investment. Domestic politics in each country also restrain both leaders, who are loath to be seen as giving up concessions at a time when territorial disputes are so prominent for both countries. After Russia's aggression in Ukraine, Japan faced considerable pressure from the United States and other Western powers to isolate Moscow diplomatically and financially. Japan complied with imposing financial sanctions, but took a somewhat minimalist approach, including postponing a visit from Putin and freezing several other diplomatic initiatives. Though Tokyo has restarted its efforts to engage Russia, it faces a difficult balancing act given the concerted effort by other Western nations to punish Putin for his behavior. Russia and Japan used to cooperate in the G-8, for example, but that venue was eliminated after Russia was ejected from the group for its intervention in Ukraine. The U.S.-Japan alliance plays more than just a passing role in Japan's strategic calculus. Washington puts pressure on Tokyo to support U.S. foreign policy priorities, though there is a high degree of natural strategic convergence. The United States and Japan share a fundamental affinity: upholding the rules and norms of the international order has been a major emphasis in the foreign policies of Washington and Tokyo. Moscow takes a starkly different approach, which some analysts describe as classical realpolitik. Putin appears to view the world and Russia's role in it through a sharply anti-American lens, while Japan continues to identify the U.S.-Japan alliance as the centerpiece of its security strategy. If Putin and Abe manage to advance relations, reconciling these different views could be difficult. As Tokyo and Moscow have explored a detente, Putin has emphasized the benefits of expanding the Japan-Russia trade relationship. Current economic relations are not particularly robust: Russia was Japan's 14 th -largest export market and 12 th -largest import market in 2015, while Japan was Russia's 6 th -largest trade partner. Foreign investment has also been relatively low: Japan External Trade Organization data show that Japanese investment in India and Brazil, fellow BRICS countries with Russia, was 297% and 541% more, respectively, than Japanese investment in Russia in 2015. For years, Japan's policy toward Russia has focused on the dispute over the ownership of four small islands north of Hokkaido, known as the "Northern Territories" in Japan. These islands—Etorofu, Kunashiri, Shikotan, and the Habomai Archipelago—were seized by the Soviet Union in the final days of World War II. Since the 1960s, periodic attempts to resolve the dispute have fallen short. Although Soviet and Russian governments have floated the idea of returning two islands, Tokyo has insisted on reversion of all four islands. When some Japanese negotiators developed a "two islands plus alpha" compromise in 2000-2001 (meaning two islands in addition to other concessions, such as fishing rights), hardline elements in the Japanese Foreign Ministry defeated the proposal. Since Abe's return to office and his initiative to rebuild relations with Russia, his government has restarted efforts to resolve the lingering territorial issue. Despite renewed attention and some analysts' optimism, progress has not materialized. Under Putin, Russia appears to have little appetite for ceding territory, despite the fact that Putin mentioned a " hikiwake " (a judo term meaning a draw) back in 2001. Russia has apparently consolidated its claims over the islands by sending high-level emissaries and continuing an ongoing military buildup. The Russian military conducted a series of exercises throughout Russia's Eastern District in late summer 2014, including on Etorofu and Kunashiri. Another set of exercises in spring 2014 included bombers and submarine patrol aircraft that circled Japan. In August 2015, Russian Prime Minister Dmitry Medvedev visited Etorofu, highlighting Moscow's development plan for the islands, prompting Tokyo to lodge an official protest. Medvedev also visited the islands when he was president of Russia in 2010. After a May 2016 meeting with Putin, Abe declared that the leaders agreed "a new approach" was needed, yet gave no indication of a politically acceptable compromise. Putin has emphasized the continued relevance of the 1956 Soviet-Japanese Joint Declaration, thereby suggesting that Russia remained willing to transfer Shikotan and Habomai (the smallest group of the disputed islands) to Japan after the conclusion of a peace treaty. Japan has continued to demand return of all four islands, though some analysts see hints that it would be open to a compromise of some sort. Without resolving the territorial issue and signing a peace treaty, many analysts doubt that Japan and Russia can meaningfully advance bilateral relations. Due to deeply entrenched national identity issues associated with the territorial dispute, many analysts see a breakthrough as unlikely. The question is if Putin and Abe, both seen as strong nationalist figures in their respective countries, can reach a deal that serves each other's needs. Russia's interest in the divided Korean peninsula is less easily defined and has not occupied as central a role in its foreign policy as have its relations with China. As Russia has refocused its attention on East Asia, Moscow's relations with the Koreas have developed more fully and, in particular, Russian views on a potential reunification of Korea have come into sharper relief. Russia's desire to develop its natural resources and sell them to the Asian market could be strengthened by land access through the Koreas, leading one Russian analyst to call Russian involvement in the Peninsula as "the key to Asia." Russia has a pragmatic interest in stability and peace between the two Koreas, not least because of its land border with North Korea. On the other hand, the division between North and South offers Moscow an opportunity to pressure South Korea using Russia's ties to the North. Russian leaders have exploited both of these positions to maximize its leverage in the region. In the past, some analysts have posited that reunification may not threaten Russia's interests compared to the potentially seismic geopolitical implications for the United States, Japan, and China. But since it has begun to execute its "look east" strategy, Moscow appears to have prioritized the maintenance of the status quo situation based on the fear that any change could lead to a reduction in Russian influence. Russian analysts generally emphasize economic and infrastructure projects as a first step in inter-Korean cooperation, and some analysts suggest that eventually Russia may favor peaceful unification under a possible federation system. Russian officials have stated that they opposed joint defensive exercises between the United States and South Korea and share concerns with China about U.S. troop presence on its borders under a U.S.-allied unified Korea. For many years Russia played a small, occasionally productive role in the now-dormant Six-Party Talks. Moscow now appears to be amplifying its role as a regional actor in dealing with North Korean provocations. Apparently following China's lead, Russia has insisted that North Korea commit to denuclearization and has joined the UNSC resolutions that condemn Pyongyang's repeated nuclear weapon and missile tests. China and Russia have often both watered down some of the toughest sanctions proposed by the UNSC, but have not blocked them and have approved increasingly critical language to describe North Korea's actions. Historically, North Korea was a client state of the former Soviet Union and had extensive economic, political, and military ties to its patron. After the Soviet Union dissolved in 1991, economic support for North Korea evaporated, leaving China as North Korea's dominant economic partner. Pyongyang-Moscow relations weakened and both countries were consumed with addressing their own internal problems. Gradually, Moscow and Pyongyang re-engaged, and relations appeared positioned to develop further in 2014. As China's relations with North Korea dampened under Kim Jong-un, Russia appeared poised to step in as a North Korean ally. Russia announced it would forgive 90% of North Korea's debt and accelerate investment in North Korea to build a gas pipeline and rail links through the country. Although Russia was not able to offer China's level of economic assistance or diplomatic protection, relations appeared to be on the upswing as the two countries declared 2015 a "Year of Friendship." Defense relations appeared to be improving: the two countries announced they were planning joint military exercises and possible new confidence-building security agreements, and military officers paid official visits to the other's capital. However, the partnership seemed to chill after Kim Jong-un appeared to accept, then suddenly shun, Putin's invitation to attend Russia's commemoration of the end of World War II in May 2015. This rift between the two leaders, combined with Pyongyang's series of provocations in early 2016 and Russia's subsequent willingness to join the international community in punishing the regime, may have halted any sustained upgrade of the relationship. Still, some analysts see the possibility of Moscow-Pyongyang cooperation expanding in the future, particularly as Putin looks to assert more Russian influence in the region. Among the participants in the now dormant Six-Party Talks, Moscow now imposes the fewest demands on North Korea, promoting negotiations and economic development without conditions. If Pyongyang at some point decides to re-emerge from its isolation, it may seek more coordination with the country that most closely supports its political goals of reunification with independence from China and the United States. Most foreign-funded large-scale infrastructure projects in North Korea have faltered due to the challenges of investment in North Korea. The grander plans for gas pipelines, electric transmission lines, and a functioning railway through the two Koreas have all run into obstacles. North Korea's Special Economic Zone in Rason (located in the two municipalities Rajin and Sonbong) has provided the most significant area of investment. With access to the Sea of Japan, the warm-water port of Rason is a center for both Chinese and Russian projects, although Chinese investment far exceeds Russian. Russia constructed a railway segment—opened in 2013 after about a decade of construction—that connects the port with the Russian border city of Khasan and modernized the Rason terminal. According to reports, however, the railway is used only occasionally for deliveries of coal to North Korea to be sold to Asian markets. Russia has also reportedly invested over $60 million to develop one of Rason's piers. The SEZ may represent the most promising area for further development of economic relations, but could also be an arena of competition with Chinese investors. Russia appears to regard South Korea as a flexible player in regional geopolitics. This perception, undergirded by growing trade, has made South Korea-Russia relations stable and generally friendly, if not widely developed. Both countries—wary of depending too heavily on China—may see increased cooperation as positive in diversifying regional partnerships. Compared to her predecessors, President Park Geun-hye has increased emphasis on reunification and the need to prepare for it; she may see Russian economic integration and friendly political ties as helpful for this eventuality. Tensions have emerged, however, as Moscow has looked to play a more assertive role in dealing with North Korea, particularly in the wake of North Korea's early 2016 nuclear test and rocket launch. As Park began her presidency in 2013, Russian and South Korean strategies appeared to be complementary. During the first years of her term, Park promoted her strategy of building trust with North Korea. In this "trustpolitik" approach, she welcomed Russian plans to build new rail and pipeline links through North Korea. Russia responded favorably to South Korean rhetoric on developing strong Eurasian cooperation and economic links. Park's "Eurasian Initiative," announced in 2013, sought to build energy and logistic infrastructure to link European and Asian trade more closely. This area of cooperation was on display during two 2013 summits—the first in Moscow and the second in Seoul: the two sides agreed on a long list of potential cooperative projects on the peninsula, ranging from new infrastructure and development of energy trade to environmental agreements. The promise of these projects has largely not panned out. North Korea's provocative missile and nuclear weapon tests in the years since have stalled many of Seoul's efforts to build such trust, and many of the joint Russia-South Korea projects have stalled as well. For example, after the United Nations Security Council passed Resolution 2270 imposing stricter sanctions on North Korea, South Korea halted the practice of using Rason for transshipments of coal from Russia. Although Russia-South Korea presidential summits emphasized growing trade ties, the two nations do not currently have particularly deep trading relations. Russia is South Korea's 15 th -largest trade partner overall and South Korea is Russia's 9 th largest. Russia's exports to South Korea are overwhelmingly dominated by the energy sector. (See " South Korea-Russia Energy Ties " section below.) Strategic differences have emerged as well. Some observers claim that Moscow does not perceive the U.S.-South Korea alliance in the same way it sees the U.S.-Japan alliance. Whereas the U.S.-Japan alliance is seen as a threat to Russia's security, Russian analysts see the U.S.-South Korean counterpart as dedicated mostly to maintaining stability on the Korean peninsula. However, it appears that Moscow views some U.S.-South Korea alliance initiatives with skepticism. In February 2016, in the wake of North Korea's fourth nuclear test, the United States and South Korea announced that they would move forward on deployment of the Theater High Altitude Area Defense (THAAD) ballistic missile defense (BMD) system. China had earlier criticized the possibility, and Russia echoed Beijing's complaints that the system's radar range extended well beyond the Korean Peninsula and would threaten the region's security. South Korea-Russia relations have been disturbed by a series of other factors. Park declined to attend Putin's May 2015 ceremony marking the 70 th anniversary of the victory over Nazi Germany. As Russia has moved to become a more active player in responding to the North's provocations, Seoul has taken issue with Moscow's approach, even as Russia has shown a willingness to come down harder on North Korea. South Korea has taken a harder line on sanctions and other punishment of the North, while Russia continues to encourage direct talks with Pyongyang. Beyond these different approaches, some analysts see Seoul as somewhat dismissive of Russia's relevance to the Peninsula's security problems, an attitude that does not please Moscow. The Arctic region is emerging as new arena of strategic competition. Due to climate change and the development of ice breakers, the Northern Sea Route has become passable year-round. This passage is the shortest route between the Atlantic and Pacific and can decrease the travel time by sea between Europe and Asia by 12 days. For Japan, use of this route, particularly for energy imports, would provide an alternative to the more risky and crowded southern route. In 2015, the Russian government announced a plan to increase the capacity of the Northern Sea Route 20-fold in the next 15 years by developing the necessary infrastructure, including emergency services and escort vessels. Analysts caution, however, that increased traffic on the northern passage could also encourage the militarization of the area as countries move to protect their commercial interests. The past five years have revealed undercurrents of military competition. As Russia has re-opened shuttered Soviet-era military bases and moved to build up its infrastructure in the Arctic, China has also made its first forays into the region. After sending its first icebreaker into the Arctic in 2012, China is now building another. (The United States also has 2 operational icebreakers; Russia has 41.) After China sent its first icebreaker on its maiden voyage, Russia launched military exercises as the Chinese vessel neared Sakhalin. In 2013, Chinese naval warships appeared in the Sea of Okhotsk, setting off massive land and sea military exercises by Russia in response, personally supervised by Putin. In March 2015, Russia held large-scale military exercises involving 45,000 troops and submarines in its strategic nuclear arsenal. Russia also plans to develop a new army brigade around its energy projects on the Yamal peninsula. As President Obama visited Alaska in September 2015, five Chinese navy ships were spotted in international waters in the Bering Sea. The Arctic Council is an international forum devoted to monitoring and discussing issues in the region. The United States, Russia, Canada, and several Scandinavian countries are permanent members, while Japan, China, and South Korea are among the 12 observer nations. Russia was vocal in support of Japan's application for observer status in 2009, but not supportive of China's application. Japan's interest in Russia's $27 billion Yamal liquefied natural gas (LNG) development project may increase its attention to the Arctic region. Although this suggests that Japan and Russia could view the Arctic as a cooperative arena for energy trade, the proximity of the disputed Northern Territories to the Arctic northern route, particularly given Russia's continued military buildup on the islands, points to an area of potential tension in the relationship. Russia's massive but underdeveloped energy reserves constitute a large part of the appeal of Russia for energy-hungry Asian nations, and lend economic ballast to the push to develop closer diplomatic relations. Although Russia already exports oil and gas to Japan, China, and South Korea, Russian oil and gas make up a small percentage of the energy supply for these three states that depend heavily on fossil fuel imports. All three nations depend heavily on energy imports from the Middle East, a region where political turmoil often threatens access and creates volatility in prices, although China has worked to diversify its energy suppliers and has growing energy ties with Central Asia and other regions, too. For Seoul, Tokyo, and Beijing, access to oil and gas supplies from Russia could offer an additional, stable source of energy imports. Russia, too, has increased its focus on developing these markets. In February 2014, the Russian Ministry of Energy released an updated energy strategy that sharply raised its targets for exports to the Asia-Pacific region as a percentage of total energy trade, from 27% in its 2009 strategy, to 34%, with a particular jump in natural gas exports. However, the drive to develop robust energy partnerships with Russia has diminished in the past few years due to several factors. Some Asian customers see the potential for availability of large quantities of natural gas imports from the United States, and the dramatic decline in energy prices has reduced the appetite for costly new development projects in Russia's Far East. Moreover, private firms are reluctant to invest in Russia's market because of the Kremlin's assertion of control over energy companies in Russia and a history of failed deals. More recently, the imposition of sanctions by Western countries has limited access to capital markets and technology for major infrastructure development, such as LNG terminals. Asian companies also complain that Moscow has a tendency to play different countries off one another in bidding for upstream projects, creating another layer of political risk. The competition becomes even more fraught when dealing with pipeline projects because the supply is directed to only one destination. This creates a stable source for the buyer but also provides more leverage to the supplier. Russia may consider the inflexibility of pipelines to be a risk factor when evaluating long-term commitments. Energy deals have formed the centerpiece of Russia and China's recent partnership, particularly after Moscow's relations with the West soured after the crisis in Ukraine. China, as the world's largest energy consumer, is seeking to boost the share of renewable energy in its overall energy mix, but is also seeking new sources of fossil fuels for its economy, now growing more slowly than in the past, at approximately 6% a year. Like Japan, China wants to reduce its dependence on Middle East energy suppliers, and Russia's large reserves have been among its targets for new development. China has been willing to sign large oil-for-loan deals with Russia. Russia supplies over 10% of China's crude oil imports, with some of this coming via pipeline from Eastern Siberia oil fields. China does not currently import any significant amount of LNG from Russia. It inked two massive gas pipeline agreements with Russia in 2014, but these eye-catching deals—the "Power of Siberia" and "Altai" gas pipelines—have been postponed until at least the 2020s, and doubts are growing about their profitability. Meanwhile, China has diversified its suppliers. While Russia was hoping to use China to demonstrate to its largely European market that it had other buyers, the fate of the deals has not helped Moscow make its case. China's push to develop energy deals with Central Asia has yielded several major pipelines with Turkmenistan, Uzbekistan, and Kazakhstan. These agreements have raised tension between these countries and Russia, however, given Moscow's view that these former Soviet republics should operate within its sphere of geopolitical influence. Central Asia's rich gas fields now compete with Russia's reserves on the international market and increase China's energy security, particularly because the gas is delivered via dedicated pipelines. With the exception of the Sakhalin projects, Japan and Japanese companies have had limited success in developing energy relationships with Russia. Japan, as the top natural gas customer in the world, gets about 10% of its LNG from Russia. Japanese firms—including Mitsui, Mitsubishi, and the SODECO consortium—are all minority stakeholders in various Sakhalin projects in both oil and gas. With energy prices soaring in the mid-2000s, the Kremlin asserted control and required that all projects be majority-controlled by state-owned companies Gazprom and Rosneft. Since the Fukushima nuclear reactor disaster following the earthquake and tsunami of March 2011, Japan's energy portfolio has transitioned to a dependence on fossil fuels without the steady source of nuclear power. Japan is particularly attracted to the environmental benefits of natural gas (compared to coal or oil), and is eager to import more LNG from the United States. Although Japanese companies remain wary, Japanese leaders may be trying to take a longer view and develop a stable supplier in Russia. Although Tokyo has largely kept its territorial issues with Moscow on a separate track from its energy relationship, the two have been increasingly intersecting as Japan looks to woo Russia. When Abe met with Putin in Sochi in May 2016, the Japanese side laid out an eight-part plan focusing on Japanese investment in the Russian Far East. A top Abe aide told the press that, "We, of course, believe that peace treaty negotiations and joint economic projects with Russia should be conducted in parallel." South Korea depends on imports for 97% of its energy, and is the ninth-largest consumer in the world. With no international gas or oil pipelines, it relies entirely on tankers to deliver its energy supplies and heavily depends on sources in the Middle East. After South Korea scaled back its crude oil imports from Iran due to pressure from the United States in 2012, Russia made up some of the difference. South Korea imports 4%-5% of its LNG and oil from Russia. Although South Korea did not impose sanctions on Russia following the crisis in Ukraine, Seoul officials claim that existing plans for projects with Russia, including those in the energy sector, were scaled back. With the Korean Peninsula contiguous with Eastern Russia, the potential for overland energy trade is vast, but the myriad strategic, logistical, and geographic challenges of North Korea make such plans difficult to implement (see " Korea-Russia Peninsula Relations " section). Over the years, a variety of plans for overland railways or pipelines that would deliver oil or gas to South Korea have been put forward, but they have always been ultimately stymied by the stubborn security situation on the Peninsula. For Members of Congress, Russia's effort to develop stronger economic and security ties with the countries of Northeast Asia may be important because of the potentially significant impact on global geopolitics. In conducting oversight of foreign policy, Congress may request that the executive branch keep relevant committees closely informed of how Tokyo, Beijing, Seoul, and Pyongyang are responding to Moscow's overtures. In considering issues such as the North Korean nuclear problem, maritime challenges in the Pacific, global energy policy and politics, or the U.S. rebalance to Asia, Congress may give additional weight to how Russian involvement affects U.S. interests. Russia's "Turn to the East" could impact several other areas that are of interest to Congress. One is the efficacy of U.S. sanctions policy on Russia given the lighter sanctions imposed on Russia by Japan and South Korea and China's attempt to broaden its economic cooperation with Russia. Another area that has been the subject of increased congressional interest is the development of the policy in the Arctic; Chinese and Russian competition in that region could affect whether additional U.S. military assets are necessary or desirable. Congress may also reconsider how enhanced Russian and Chinese cooperation at the United Nations could impact U.S. global interests. Measures that Congress could consider include: Additional hearings by the Senate Foreign Relations Committee, House Foreign Affairs Committee, Senate Armed Services Committee, or House Armed Services Committee to assess how Russia's efforts to upgrade relations with China, particularly its increase in military-to-military contacts, affect the U.S. security position in the Asia-Pacific. Formal requirements that the Departments of Defense and State include in their reporting to Congress assessments of how Russia is developing its relations with China, Japan, and the Korean Peninsula. References in the National Defense Authorization Act (NDAA) to Russian activities that may alter the geopolitical environment in the Asia Pacific. Assessment of how existing sanctions on Russia are affected by U.S. allies' compliance with G-7 sanctions associated with the Ukraine crisis. Specifically, Congress may examine whether Japan and South Korea should strengthen restrictions on trade with Russia and how the U.S. State Department prioritizes this issue in relations with Seoul and Tokyo. Hearings, reporting requirements, and possible legislation on the U.S. position in the Arctic region and how changing security relations among Northeast Asia countries affect the U.S. presence and resources in the Arctic. After Russia annexed Crimea in March 2014, international condemnation was swift and widespread. At the United Nations, 100 countries voted for a resolution that supported Ukraine's territorial integrity and labeled the referendum invalid. Russia was suspended from the G8, and in April 2014 the remaining G7 members imposed sanctions on Russia. Among the Asian powers, only Japan and South Korea joined the Western countries in voting for the U.N. resolution, with only Japan imposing sanctions. Tokyo has imposed a number of sanctions on Moscow, but they have been relatively weak compared to the ones implemented by other Western nations. Notably, Japan has not imposed any energy-sector-related sanctions. Tokyo has stated that it will not hold talks on the Northern Territories until the situation in Ukraine is more fully resolved. Abe also attempted to use Russia's annexation of Crimea to draw the international community's attention to China by arguing that Beijing might make similar moves with regard to the Diaoyu/Senkaku Islands. South Korea's response was likely tied to Seoul's desire to obtain Moscow's cooperation on North Korea. South Korea refused to recognize Russia's annexation and voted "yes" for the U.N. resolution on Ukraine's territorial integrity, but chose not to impose any sanctions on Moscow. China abstained from the U.N. vote and did not impose sanctions. China's response is motivated by Beijing's discomfort with the notion of states asserting independence through referendums as in the case of Crimea, and its stated ideological opposition to sanctions. China expressed discomfort with regard to Russia's annexation of Crimea, stating that "China always respects the sovereignty and territorial integrity of all states. The Crimean crisis should be resolved politically under the frameworks of law and order." At the same time, China has noted Crimea's particular importance to Russia. While stating its clear opposition against independence through referendums, Beijing has decided to treat the Crimea case as an exception, perhaps seeing some parallels to China's own claims over Taiwan. Likely in a bid to seek more international partners and escape isolation, North Korea has unequivocally supported Russia's position. North Korea was one of only 11 countries to vote "no" on the U.N. resolution affirming Ukraine's territorial integrity. The Kim regime also stated that Russia's annexation of Crimea was "fully justified." Northeast Asian responses to Russia's annexation of Crimea are summarized as follows. | Since Russia's aggression in Ukraine and its annexation of the Crimea in March 2014, Moscow's already tense relationship with the United States and Europe has grown more fraught. After the imposition of sanctions on Russia by much of the West, Russian President Vladimir Putin has turned to East Asia, seeking new partnerships to counter diplomatic isolation and secure new markets to help Russia's struggling economy. His outreach to Beijing, Tokyo, Seoul, and Pyongyang has met varying degrees of success. The most high-profile outreach was a summit with Chinese President Xi Jinping in May 2014, when the leaders announced dozens of economic cooperation agreements. Putin has met with Japanese Prime Minister Shinzo Abe over a dozen times in an effort to resolve a territorial dispute and improve bilateral relations. Putin has also reached out to both Koreas in his bid to step up engagement with Northeast Asian countries. Russian engagement in Northeast Asia challenges the U.S. strategic presence in the region in a number of ways and represents a new arena of potential concern for Congress. If Moscow's engagement efforts succeed, it could undermine U.S. efforts to impose sanctions on Russia and isolate Putin diplomatically for his intervention in Ukraine. It could also create mistrust between the United States and its allies Japan and South Korea if those countries' leaders are drawn closer to Russia. Diplomatic initiatives in the region to deal with the threat of North Korea's nuclear weapons and ballistic missile programs could suffer if Moscow disrupts international efforts to rein in North Korean provocations. Perhaps most importantly, China and Russia could form a regional bloc whose primary purpose could be to reduce U.S. economic leverage and challenge the U.S. security presence in the region. The Chinese-Russian relationship is driven in large part by the perceived threat of the U.S. rebalance to Asia and their shared perspective of American unilateralism. Concrete progress on bilateral projects, however, is marked by inconsistency and faltering implementation of agreements. With Russia's economy devastated by falling energy prices since 2014, China appears to view Russia as a junior partner. Although Russia-China military relations have increased rapidly, so too has an element of competition, particularly in the Arctic region. Chinese firms are wary of investing in Russia, seeing it as politically risky and commercially unattractive. In multilateral fora like the Shanghai Cooperation Organization and new Silk Road initiatives, China wants to expand its economic clout while Russia looks to assert its military dominance in Central Asia. These tensions may prevent a full-fledged strategic partnership, but relations continue to grow stronger through regular bilateral summits and global cooperation. Japan appears enthusiastic about improving relations with Russia and resolving their territorial dispute over four islands at the northern edge of Japan. Even as U.S.-Japan security links grow stronger, Abe continues to respond to Putin's overtures with an eye on balancing China. Russia's economic engagement of Pyongyang has chilled since the Kim regime resumed testing nuclear weapons and missiles. The stalemate in inter-Korean relations and the abandonment of cross-border projects also limit Russia's potential role in facilitating infrastructure and trade links on the Peninsula. Seoul's increasingly close U.S. alliance contracts the space for Moscow's diplomatic maneuver. Japan, South Korea, and China all have interest in Russia's supply of oil and gas from its resource-rich Far East. Although several partnerships already exist, dealing with Russia's government-controlled energy companies has proved difficult. Private firms are reluctant to invest in a politically risky environment, and the availability of cheap energy from elsewhere has dampened commercial enthusiasm for investing heavily in Russia's energy industry. Despite obstacles, Russia's pursuit of better relations with countries in East Asia remains a complicating and potentially destabilizing factor for the U.S. policy of rebalancing its security and economic interests to the region. Russia could become a larger factor for Congress to consider when assessing progress on the rebalance to Asia strategy. Russia's "Turn to the East" could also affect areas of congressional concern such as the efficacy of U.S. sanctions policy, U.S. North Korean policy, U.S. strategy in the Arctic region, U.S. priorities at the United Nations, and global energy politics. |
Once a port of call on ancient maritime trade routes, Sri Lanka is located in the Indian Ocean off the southeastern tip of India's Deccan Peninsula. The island nation was settled by successive waves of migration from India beginning in the 5 th century BC. Indo-Aryans from northern India established Sinhalese Buddhist kingdoms in the central part of the island. Tamil Hindus from southern India settled in the northeastern coastal areas, establishing a kingdom in the Jaffna Peninsula. Beginning in the 16 th century, Sri Lanka was colonized in succession by the Portuguese, Dutch, and English, becoming the British crown colony of Ceylon in 1815. In the late 19 th century, Tamil laborers were brought from India to work British tea and rubber plantations in the southern highlands. Known as Indian Tamils, the descendants of these workers currently comprise approximately 4% of Sri Lanka's population and are clustered in the south-central "tea country." Descendants of earlier Tamil arrivals, known as Sri Lankan or Ceylon Tamils, constitute up to 13% of the country's population and live predominantly in the North and East. Moorish and Malay Muslims (largely Sunni) account for another 9% of the population. The majority of Sri Lankans (about three-quarters) are ethnic Sinhalese, most of them Buddhist. In 1972, Ceylon was renamed Sri Lanka ("resplendent land"), as it was known in Indian epic literature. Although Ceylon gained its independence from Britain peacefully in 1948, succeeding decades were marred by ethnic conflict between the country's Sinhalese majority clustered in the densely populated South and West, and a largely Hindu Tamil minority living in the northern and eastern provinces. Following independence, the Tamils—who had attained educational and civil service predominance under the British—increasingly found themselves discriminated against by the Sinhalese-dominated government, which made Sinhala the sole official language and gave preferences to Sinhalese in university admissions and government jobs. The Sinhalese, who had deeply resented British favoritism toward the Tamils, saw themselves not as the majority, however, but as a minority in a large Tamil sea that includes approximately 60 million Tamils just across the Palk Strait in India's southern state of Tamil Nadu. The Sri Lankan civil war, a separatist struggle between the two ethnic groups, lasted 26 years, ending with the Sinhalese-dominated government's defeat of Tamil separatist groups in 2009. Although there are no exact figures on the death toll, an estimated 30,000-40,000 people were killed in the war. The government of Sri Lanka has denied any accusations of war crimes and resents recent international pressure to address a more equitable economic and political structure. U.S. policy towards Sri Lanka has historically supported Sri Lanka's sovereignty and territorial integrity as well as its democratic institutions and socio-economic development. The United States has also supported policies that would foster inter-communal harmony and ethnic reconciliation with the Tamil minority of the country. Since 2009, U.S.-Sri Lanka relations have centered on human rights abuses committed at the end of the civil war. Susan Rice, then the U.S. Permanent Representative to the United Nations, welcomed the April 2011 U.N. Panel of Experts Report on Sri Lanka and stated that the U.S. supports an effective, transparent post-conflict reconciliation process in Sri Lanka that includes accountability for violations by all parties. The report indicates the need for an independent and full accounting of the facts in order to ensure that all allegations of abuse are addressed and impunity for human rights violations is avoided. U.S. Assistant Secretary of State for South and Central Asia Robert Blake, who was also previously U.S Ambassador to Sri Lanka, reportedly stated that the U.S. first looks to host governments to take responsibility for such issues but that "international mechanisms can become appropriate in cases where states are either unable or unwilling to meet their obligations." In light of human rights concerns, Washington sponsored a United Nations Human Rights Council resolution in 2012, to the displeasure of Colombo, calling upon the government to provide more comprehensive action and legal support to address human rights violations during the civil war, and to address inequalities between ethnic groups in the nation. In March 2013 UNHRC adopted a U.S.-sponsored reolution which again called on Sri Lanka to address human rights concerns and and to take steps to foster reconcilliation. The 113 th Congress has also expressed its views on the situation in Sri Lanka. H.Res. 247 , "Expressing support for internal rebuilding, resettlement, and reconciliation within Sri Lanka that are necessary to ensure a lasting peace," was introduced on June 4, 2013, and calls for transparency, reconciliation, media freedom, investigation into war crimes, access for humanitarian workers into war-affected regions, demilitarization, as well as the equal distribution of political power. The bill was referred to the House Committee on Foreign Affairs. The United States Agency for International Development (USAID) has maintained a presence in Sri Lanka since 1948. A key goal of this assistance is to even the inequitable growth and development between the dominantly Sinhalese-populated and dominantly Tamil-populated provinces, specifically targeting widows, ex-soldiers, and combatants and marginalized communities for economic assistance programs. The USAID funded projects aim for long-term, sustainable development, and include initiatives to improve democratic institutions. USAID has especially assisted Sri Lanka's agricultural sector, through programs focused on farmer productivity, and helping farmers market their products. Its infrastructure assistance has focused on upgrading schools and hospitals, as well as livelihood skills and the educational structures for students. The United States also works with the Sri Lankan defense establishment through the International Broadcast Bureau (IBB), which controls a radio-transmitting station in Sri Lanka. Defense cooperation also assists technical and training opportunities for Sri Lankan defense, as well as other fields such as intellectual property rights, biotechnology, and cybersecurity. The U.S. has most actively been involved in food security, easing cultural tensions between Sinhalese and Tamil populations, as well as promoting peaceful transitions in Sri Lankan provinces. The Republic of Sri Lanka has a multi-party democratic structure with high levels of political conflict and violence. The country's political life long featured a struggle between two broad umbrella parties—President Mahinda Rajapaksa's Sri Lanka Freedom Party (SLFP) and the United National Party (UNP). The president's United Freedom People's Alliance (UFPA), of which the SLFP is the main party, has consolidated power. President Rajapaksa gained widespread popularity among the Sinhalese majority for ending the war. The SLFP is viewed as being more Sinhala nationalist and statist than the UNP. The political divisions between the Sinhalese and Tamil populations remain serious. The government has amended the constitution to restrain provinces from merging, making it impossible for Tamils in Sri Lanka to have a majority within the regions where they currently have large populations, as well as constraining the rise of the political groups sympathetic to Tamil causes. The SLFP has, moreover, taken steps to make the central government much stronger, through proposed bills and amendments, in efforts to keep power in President Rajapaksa's government. Sri Lanka follows a strong executive presidential system of government. Under this French-style system, the popularly elected president has the power to dissolve the 225-member unicameral parliament and call new elections, as well as to appoint the prime minister and cabinet. President Rajapaksa's was reelected to a second six-year term in January 2011; the current parliament was elected in April 2011. The president's family plays an important role in government. The U.S. State Department found that "both elections were fraught with violations of the election law by all major parties and were influenced by the governing coalition's massive use of state resources." The ruling UPFA now has a significant majority in parliament. The next presidential election is scheduled for 2015 and the next parliamentary election is to be held by 2016. Given the UPFA's large majority in parliament, it is likely that it will serve out its full term. The current government is accused of a number of serious human rights violations that have persisted since the civil war ended. They include the targeting, surveillance, and limitation of free speech by the media and individuals. President Rajapaksa has also appointed family members to high ranking government positions. Human rights groups say the government has also killed, threatened, or detained human rights defenders, and remains non-trasparent. Sri Lanka's economy mainly relies on the services sector, and has a thriving tourism market. It additionally relies on agriculture and, to a lesser extent, industry, with the largest exports being garments, tea, spices, rubber, gems and jewelry, refined petroleum, fish, and coconuts/coconut products. Nearly 20% of the nation's exports reach the United States, though other large trading partners include neighboring India and several European Union nations. Rajapaksa has identified improving the investment climate in Sri Lanka as a priority. Large trade and balance of payments deficits remain a concern. Other presidential economic priorities reportedly include rural and infrastructure development. Sri Lanka and the United States have an important bilateral economic relation. The U.S. Department of State notes: The United States is Sri Lanka's second-biggest market for garments, taking almost 40% of total garment exports. United States exports to Sri Lanka were estimated at $302 million for 2011, consisting primarily of wheat, aircraft and parts, machinery and mechanical appliances, plastics, and medical and scientific equipment. India remains the largest source of foreign investment in Sri Lanka, with direct investments of over $1 billion in the last ten years. Other large investors include Taiwan, Canada, the Virgin Islands, Netherlands, Singapore, the United Kingdom, the United States, and Australia. Colombo has faced criticism for the way it has addressed alleged domestic human rights violations. The government has been accused by the international community of favoring the Sinhalese people, and doing little to promote equal political voice and economic opportunities for its Tamil population. The human rights abuses that the Sri Lankan government has been accused of include control over the media and harassment of journalists, sudden "disappearances" in the forms of arrests or abductions of Tamil sympathizers, the military's monitoring and control of Tamil populations in the north and eastern provinces, and insufficient government interest in investigating the location and status of former Tamil militants, despite family requests. Abuses against women have also increased in recent years. Peaceful protests and supporters are often punished for what the government views unfavorably, and although some actions have been taken in the past by the Sri Lankan governments, they are viewed as having been ineffective. On March 21, 2013, with support from the United States and India, the United Nations Human Rights Council voted to pass a resolution which is critical of the Sri Lankan government's failure to take action to stop ongoing human rights violations and calling for an investigation into abuses committed during and in the aftermath of the country's 26-year civil war. Despite a significant campaign by the Sri Lankan government to prevent its passage, twenty-five countries voted in support of the resolution while thirteen countries opposed and eight abstained. The non-binding resolution has faced criticism due to its relatively weak nature. It "encourages" Sri Lanka to take action, and, while it discusses human rights violations, it does not address the need for international investigations into the conflict. Regardless of the international community's fears of future conflict, Colombo has dismissed and continues to criticize international actions deeming them unfair. The Wall Street Journal reports that "Colombo pushed back against the U.S., forcefully rejecting the resolution and saying it plays down the country's efforts to rebuild Tamil areas and to promote reconciliation between the country's Sinhalese majority and its Tamil minority." The envoy for the Human Rights Council stressed the strength of Sri Lankan domestic policies, and accused the international community of indifference. Sri Lanka is situated near strategically important sea lanes that transit the Indian Ocean. These sea lanes link the energy rich Persian Gulf with the economies of East and Southeast Asia. Recent developments demonstrate to some observers that the maritime strategic dimension of the Indo-Pacific is increasingly integrating the Indian and Pacific Ocean littoral regions into a more unified strategic arena. Sri Lanka and India share close longstanding historical and cultural ties. India's native Tamil populations feel kinship with Sri Lanka's Tamils. Recently, India, along with the United States, has been an active voice for reconciliation, and fair elections within the international community. Although India has and continues to be a strong economic partner of Sri Lanka, the connection between the Tamil minority in Sri Lanka and the native Tamil populations in India have been a factor in relations between Tamil and Sinhalese ethnic groups in Sri Lanka. The relationship is also aggravated by massive refugee populations. India has played host to large number of Tamil refugees, both during and post the Sri Lankan civil war. In late 2012 the Indian government estimated that more than 100,000 Tamil refugees reside in the southern state of Tamil Nadu, which shares a common language and a maritime border, at the closest points, of about 40 miles away. Of this figure, 68,000 refugees remain in camps operated by the Indian government, while 32,000 live outside of the refugee camps. Although living conditions in the refugee camps are poor, only 5,000 refugees have returned to their native Sri Lanka after the declared end of the civil war, regardless of UNHCR's assistance. Recent contentions have risen over the Palk Strait, a strait between the southern tip of India's state of Tamil Nadu, and the northern tip of Sri Lanka, in which fishermen from both nations compete for limited resources. Sri Lankans have accused Indian fisherman of encroaching into their waters, while Indian fisherman accuse Sri Lankan naval vessels of threatening behavior, including damage of vessels, robbery of stocks, and abuse against the fishermen. The dispute stands as a piece of a larger long-standing grudge between the native Tamil Indians who empathize with the defeated Tamil minorities in Sri Lanka, and their mistrust and anger against the Sinhalese dominant government. Despite differences, India and Sri Lanka have a close relationship through commercial interests, the growing tourism industry, educational cooperation, and migrant workers as well as mutual cultural and religious interests. India is Sri Lanka's largest trading partner. China and Sri Lanka have developed increasingly close ties in recent years. In the last five years, China has invested heavily in Sri Lanka's defense and security. This comes in addition to Beijing's promises for assistance in other scientific and militaristic endeavors, including maritime, satellite and space technology programs. Some view China's initiatives in Sri Lanka as part of a "string of pearls" strategy by China to gain access to ports to help it secure its interests along the sea lanes which link the energy rich Persian Gulf with China's economic and trade centers on the east coast of China. Others are less concerned by China's investment. Chinese assistance is viewed by some as having played a key role in enabling Sri Lanka to win its civil war against the LTTE. According to an Operations Officer of the U.S. Army and Marine Corps Counterinsurgency Center: The most decisive factor enhancing Sri Lanka's ability to combat the LTTE involved significant economic and military aid from China.... China's aid enabled the Sri Lankan government to attain the military superiority needed to defeat the LTTE.... In exchange for the aid, China received development rights for port facilities and other investments. China has assisted Sri Lanka with a series of very large infrastructure development projects, a second international airport, a telecommunications tower in Colombo, and the reconstruction of highway A9 between Kandy and Jaffna. China is also assisting with railways and a $1.3 billion coal power plant development. It was announced in April 2013 that China would lend Sri Lanka $200 million to finance part of the Matara-Kataragama railway. Sri Lanka's disapproval of the West's and India's focus on human rights within the country, has led some to conclude that the these foreign influences are waning in Sri Lanka relative to Chinese influence. Some in strategic circles in New Delhi are increasingly concerned that China may be seeking to gain strategic positions around India in South Asia and the Indian Ocean. India and China have unresolved border disputes that date back to their 1962 border war. China remains a large trading partner of Sri Lanka with $3.2 billion in bilateral trade in 2011. Comparatively, Sri Lankan exports to the United States totaled $2.1 billion in 2011 while United States exports to Sri Lanka totaled $302 million in 2011. Sri Lanka holds the status as the only South Asian nation with a relatively high Human Development Index score, demonstrating the focus of government policies on social factors. In particular, the island nation has excelled in health and education, though concerns about the environment and the nation's susceptibility to natural disasters remain significant. The Sri Lankan Ministry of Health targets maternal and child health problems, malaria, hypertension, hearth disease, and HIV/AIDS, has pledged itself to the improvement of preventative health programs. It provides universal healthcare for all Sri Lankan citizens, though studies have revealed that there is still a priority for healthcare assistance to high income groups. Sri Lanka possesses one of the most diverse ecosystems in the world. Conservation International, a U.S.-based organization focused on environmental research, policy, and field work, notes that, "Sri Lanka alone may be home to as many as 140 endemic species of amphibians. The region also houses important populations of Asian elephants, Indian tigers, and the endangered lion-tailed macaque. Freshwater fish endemism is extremely high as well, with over 140 native species." Grouped along with the Western Ghats region, which extends through the western peninsula of India, Sri Lanka remains one of the thirty-four "biodiversity hotspots" in the world; one of the regions that are known to house important medical plants, different grain sources, spices, and genetic resources of plants and animals. According to the Australian Department of Sustainability, Environment, Water, Population and Communities, Biodiversity hotspots are areas that support natural ecosystems that are largely intact and where native species and communities associated with these ecosystems are well represented. They are also areas with a high diversity of locally endemic species, which are species that are not found or are rarely found outside the hotspot. They are also defined by the risk of destruction that they face, and the lack of conservation efforts due to their high monetary potential. The rapid threat of environmental degradation is very real for the South Asian nation. Sri Lanka's ecosystem has been under immense strain, with a lack of regulation of the biodiversity. Today, the nation's remaining forests only account for 1.5% of the original, due to farms, loggers, poachers, population pressures, and fishing. The United Nations Development Programme reports that between the twenty years of 1990 and 2010, Sri Lanka's forests have been reduced by an alarming and unsustainable 20.9%. Often the use of the forests and its biodiversity is illegal, but continues to occur. These environmental degradation processes have taken many forms in Sri Lanka, and has altered the terrain of the disaster-vulnerable nation. Sri Lanka has had a susceptibility to a number of natural disasters due to its geographic position. A majority of the disasters are hydro-climatological, taking the form of cyclones, tsunamis, landslides, droughts and floods. According to the United Nations Office for the Coordination of Humanitarian Affairs (OCHA), in the last 34 years, the death toll due to natural calamities has remained over 37,000. One of the deadliest recorded tsunamis hit India, Thailand, Sumatra, and Sri Lanka in December 2004, contributing to this massive figure. U.S. Geological Survey (USGS) reports that the 2004 tsunami claimed over 31,000 lives in Sri Lanka with its 9.0 scale earthquake, while the Office for the Coordination of Humanitarian Affairs (OCHA) states that displacement due to threat of tsunamis, earthquakes, and other natural phenomenon is also common, noting that, "as recently as November 2010, a monsoon triggered devastating floods across parts of the country, affecting close to 1.2 million people" | The Democratic Socialist Republic of Sri Lanka, an island nation in the Indian Ocean, is a constitutional democracy with a relatively high level of development. For two and a half decades, political, social, and economic development was seriously constrained by years of ethnic conflict and war between the government and the Liberation Tigers of Tamil Eelam (LTTE), also known as the Tamil Tigers. After a violent end to the civil war in May 2009, in which authorities crushed LTTE forces and precipitated a humanitarian emergency in Sri Lanka's Tamil-dominated north, attention has turned to whether the government now has the ability and intention to build a stable peace in Sri Lanka. This report provides historical, political, and economic background on Sri Lanka and examines U.S.-Sri Lanka relations and policy concerns. In recent years interest in Sri Lanka has focused on human rights issues related to the final stages of Sri Lanka's 26-year civil war with the LTTE, and its attendant humanitarian emergency. Sri Lanka has faced criticism for what has been viewed as an insufficient response to reported war crimes, a more nepotistic and ethnically biased government, as well as increasing restrictions on media and an unequal distribution of economic development. Between 1983 and 2009, a separatist war costing at least 70,000 lives was waged against government forces by the LTTE, a rebel group that sought to establish a separate state or internal self-rule in the Tamil-dominated areas of the north and east. The United States designated the LTTE as a Foreign Terrorist Organization in 1997. Sri Lanka offers a test case of how to respond to a brutal military victory over a violent ethno-nationalist separatist movement. The situation presents decision-makers questions of how to balance the imperatives of seeking accountability and resolution, providing development assistance, and promoting broad geopolitical interests. President Mahinda Rajapaksa has a firm hold on government and popular support among the Sinhalese majority for his leadership in presiding over a military victory over the LTTE. But Sri Lanka remains a multi-ethnic society, where long-held historic grievances have been deepened still further by the conflict's brutal end. Although Sri Lanka maintains strong economic ties with countries in its close geographic proximity, Sri Lanka-India relations have been strained due to political and ethnic tensions (Sri Lanka's minority Tamils have strong linkages with Tamil communities in India), and there has been an increase in military and energy related investments from China in recent years. Sri Lanka remains the only South Asian nation with a high human development index ranking. The United States recognizes the importance of the nation with its significant geographic positioning, and has paid close attention to human rights in the island nation. The U.S.-Sri Lanka relationship has been focused on human rights issues over the last few years, with an emphasis on U.S. sponsorship of resolutions through the United Nations Human Rights Council. |
A primary mission of the Department of Homeland Security (DHS, Department) is to "prevent terrorist attacks within the United States, reduce the vulnerability of the United States to terrorism, and minimize the damage, and assist in the recovery from terrorist attacks that do occur in the United States. The current organization of the Department is displayed at Figure 1 . To support this mission, DHS has had an intelligence component since its inception in 2003. The Homeland Security Act of 2002, assigned the original DHS intelligence component—the Directorate of Information Analysis and Infrastructure Protection—with responsibility to receive, analyze, and integrate law enforcement and intelligence information in order to— "(A) identify and assess the nature and scope of terrorist threats to the homeland; (B) detect and identify threats of terrorism against the United States; and (C) understand such threats in light of actual and potential vulnerabilities of the homeland." Congress also made information sharing a top priority of the new DHS intelligence organization, requiring it "to disseminate, as appropriate, information analyzed by the Department within the Department, to other agencies of the Federal government with responsibilities related to homeland security, and to agencies of State and local government and private sector entities, with such responsibilities in order to assist in the deterrence, prevention, preemption of, or response to, terrorist attacks against the United States." Following the release of the 9/11 Commission Report in 2004, which identified a breakdown in information sharing as a key factor contributing to the failure to prevent the September 11, 2001 attacks, Congress underscored the importance it attached to information sharing at all levels of government. The Intelligence Reform and Terrorism Prevention Act of 2004 required the President to "create an information sharing environment for the sharing of terrorism information in a manner consistent with national security and with applicable legal standards relating to privacy and civil liberties," and "to designate an individual as the program manager responsible for information sharing across the Federal Government." In July 2005, following "a systematic evaluation of the Department's operations, policies and structures" (commonly called the Second Stage Review or "2SR"), former Secretary of Homeland Security, Michael Chertoff, initiated a major reorganization of DHS. In his remarks describing the reorganization, he noted that "…intelligence lies at the heart of everything that we do." In an effort to improve how DHS manages its intelligence and information sharing responsibilities, he established a strengthened Office of Intelligence and Analysis (I&A) and made the Assistant Secretary for Information Analysis (now Under Secretary for Intelligence and Analysis) the Chief Intelligence Officer (CINT) for the Department. He also tasked I&A with ensuring that intelligence is coordinated, fused, and analyzed within the Department to provide a common operational picture; provide a primary connection between DHS and the Intelligence Community (IC) as a whole; and to act as a primary source of information for state, local and private sector partners. In testimony to a House of Representatives hearing shortly after his selection, the first DHS CINT, stated that "[m]y goal and my role as chief intelligence officer is to see that Homeland Security intelligence, a blend of traditional and nontraditional intelligence that produces unique and actionable insights, takes its place along the other kinds of intelligence as an indispensable tool for securing the nation. He also set five priorities: Improving the quality of intelligence analysis across the department; integrating the DHS IE; strengthening support to state, local, and tribal authorities and the private sector; ensuring that DHS IE takes its place in the IC; and solidifying the relationship with the Congress; and improving transparency and responsiveness. Since the 2SR reorganization, Congress imposed additional requirements on DHS through the Implementing Recommendations of the 9/11 Commission Act of 2007: Integrate information and standardize the format of intelligence products produced within DHS and its components. Establish department-wide procedures for review and analysis of information provided by state, local, tribal, and private sector elements; integrate that information into DHS intelligence products, and disseminate to Federal partners within the Intelligence Community. Evaluate how DHS components are utilizing homeland security information and participating in the Information Sharing Environment. Establish a comprehensive information technology network architecture to connect various DHS elements and promote information sharing. Establish a DHS State, Local, and Regional Fusion Center Initiative to establish partnerships with state, local, and regional fusion centers. Coordinate and oversee the creation of an Interagency Threat Assessment and Coordination Group that will bring state, local, and tribal law enforcement and intelligence analysts "to work in the National Counterterrorism Center (NCTC) with Federal intelligence analysts for the purpose of integrating, analyzing and assisting in the dissemination of federally-coordinated information…." The DHS IE consists of those elements within DHS that have an intelligence mission. These include I&A, the Homeland Infrastructure Threat and Risk Analysis Center, and the Intelligence Division of the Office of Operations Coordination and Planning (all located at the DHS headquarters), and the intelligence elements of six operational components: U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), U.S. Citizenship and Immigration Services (USCIS), Transportation Security Administration (TSA), U.S. Coast Guard (USCG), and U.S. Secret Service (USSS). The Department and USCG are statutory members of the IC. On February 11, 2010, the Senate confirmed President Obama's selection of Caryn Wagner to serve as Under Secretary for Intelligence and Analysis. As she assumes responsibility for the DHS IE, Congress will likely be interested in the progress of integration of the Department's intelligence components and the quality and relevance of the intelligence DHS IE produces for front line law enforcement and security officials who are responsible for protecting America and its people. Also in February, DHS published its first Quadrennial Homeland Security Review (QHSR), a comprehensive assessment outlining its long-term strategy and priorities for homeland security and guidance on the Department's programs, assets, capabilities, budget, policies, and authorities. The next step in the Department's QHSR process is to conduct a "bottom-up review" to systematically link strategy to program to budget. The results of that review will be particularly important as Congress considers an authorization bill for DHS. Some have argued that there is a broad homeland security intelligence enterprise that encompasses not only the DHS IE, but other organizations at the Federal, state, local, tribal, and private sector levels that collect and analyze homeland security information and disseminate intelligence products. This report will focus on the DHS IE both at headquarters and within the components; how it is organized; and how it supports key departmental activities to include homeland security analysis and threat warning, border security, critical infrastructure protection, and support to and the sharing of information with state, local, tribal, and private sector partners. It will also discuss oversight challenges and options for Congress to consider on these issues. According to its December 2009 Strategy , the mission of I&A is "To strengthen DHS and its partners' ability to perform homeland security functions by accessing, integrating, analyzing, and sharing timely and relevant intelligence and information, while protecting the privacy, civil rights, and civil liberties of the people I&A serves. It accomplishes this by ensuring that information related to homeland security threats is collected, analyzed, and disseminated to the full spectrum of homeland security customers in the Department, at state, local, and tribal levels, in the private sector, and in the IC." The Under Secretary for I&A is the Chief Intelligence Officer for the Department and is responsible to lead I&A and the entire DHS IE. The Under Secretary is also the Department's chief information sharing officer and is responsible for implementing the objectives of the PM-ISE within DHS. To accomplish its mission, I&A participates in all aspects of the intelligence cycle" – the process by which information is acquired, converted into finished intelligence, and made available to policymakers. Generally the cycle comprises five steps: planning and direction, collection, processing, analysis, and production and dissemination." It is an iterative process in which collection requirements based on national security threats are developed, and intelligence is collected, analyzed, and disseminated to a broad range of consumers. DHS does not generally engage in traditional foreign intelligence collection activities such as imagery intelligence, signals intelligence, human intelligence, measurement and signatures intelligence, and foreign open source intelligence. But, as former Secretary Chertoff has noted: Intelligence, as you know, is not only about spies and satellites. Intelligence is about the thousands and thousands of routine, everyday observations and activities. Surveillance, interactions—each of which may be taken in isolation as not a particularly meaningful piece of information, but when fused together, gives us a sense of the patterns and the flow that really is at the core of what intelligence analysis is all about.... I&A combines the unique information collected by DHS components as part of their operational activities (e.g., at airports, seaports, and the border) with foreign intelligence from the IC; law enforcement information from Federal, state, local, and tribal sources; private sector data about critical infrastructure and key resources; and information from domestic open sources to develop homeland security intelligence. This encompasses a broad range of homeland security threats. It includes border security information to counter human smuggling and trafficking, cargo data to prevent the introduction of dangerous items, information to protect critical infrastructure against all hazards, information about infectious diseases, and demographic data and other research about 'violent radicalization.' The DHS I&A Strategy identifies its core customers as the President; Secretary of Homeland Security; DHS Components; State, Local, Tribal, and Private Sector Partners (through State and Major Urban Area Fusion Centers); the IC; and Federal Interagency Partners. In short, I&A's customers range from the Chief Executive all the way to individual border patrol agents, Coast Guard seamen, and airport screeners. According to Under Secretary Wagner, "A primary role of I&A is to share intelligence and information with our partners at the state, local, tribal, and private sector levels. It is our job to meaningfully convert what may appear to be bits of unrelated information into a product that helps protect our communities." State, local, and tribal law enforcement are "first preventers" of terrorism and require timely and actionable intelligence to respond to threats. They also need intelligence about the latest terrorist tactics and techniques so that they know what to look for and what to do when they encounter suspicious behavior or dangerous items. In addition, I&A supports the operators of the nation's publicly and privately-owned critical infrastructure with threat information and other intelligence that supports their risk management decision making. Former Under Secretary Charles Allen noted that "virtually any terrorist attack on the homeland that one can imagine must exploit a border crossing, a port of entry, a critical infrastructure, or one of the other domains that the department has an obligation to secure. DHS Intelligence must learn and adapt faster than the enemy, so that our department with all its partners in the federal, state, and local levels of government and the private sector have the information edge they need to secure our nation." I&A is a full partner within the IC and represents DHS on several IC committees. The Under Secretary, for example, is a member of the Director of National Intelligence (DNI) Executive Committee. I&A contributes analytic staff to the National Counterterrorism Center (NCTC). The office also contributes items to the President's Daily Brief providing a unique homeland security perspective on terrorism and other threats to the United States to the nation's leaders. Among the many challenges for DHS since its founding has been the integration of 22 legacy and newly-created agencies. This also includes the integration of intelligence activities of the Department's operational components whose intelligence organizations predate the establishment of DHS. These intelligence elements were created to support the operational missions of their respective components and were tailored accordingly. One of the objectives of the Department's 2005 2SR reorganization was to enhance integration to include its intelligence effort. The Under Secretary for I&A is also the Chief Intelligence Officer for the entire Department. Congress also made the Under Secretary responsible to "establish the intelligence collection, processing, analysis, and dissemination priorities, policies, processes, standards, guidelines, and procedures for the intelligence components of the Department." The heads of the DHS intelligence components do not report to the Under Secretary, but to their respective component chiefs. However, pursuant to the Implementing Recommendations of the 9/11 Commission Act of 2007, they are required to advise and coordinate closely with the Under Secretary on their activities in support of the intelligence mission of the Department. The HSIC was established to serve as the mechanism to provide senior-level direction for Department-wide intelligence activities and to promote integration efforts. It is chaired by the Under Secretary and is comprised of the key intelligence officials in applicable DHS components. In March 2010 testimony, Under Secretary Wagner, stated that the HSIC "... now reflects a broader range of DHS activities that require intelligence support" and ... is focused on governance-level, enterprise-wide objectives, such as collaboratively defining intelligence activities for the Department's Bottom Up Review; and developing new tools for conducting DHS Intelligence Enterprise program reviews. The HSIC oversaw the completion of the first coordinated, Enterprise-wide analytic production plan, which builds on the expertise of the operational components to produce products in their areas, deconflicts competing efforts, and helps focus analytic efforts on QHSR priorities. I&A is funded through the classified National Intelligence Program (NIP), formerly known as the National Foreign Intelligence Program. For budgetary purposes, intelligence spending is divided between the NIP; and the Military Intelligence Program that supports the Secretary of Defense's intelligence- and counterintelligence-related responsibilities. The DNI does not publicly disclose details about the intelligence budget, but consistent with Section 601 of the Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ), the DNI reported that the aggregate amount appropriated to the NIP for FY2009 was $49.8 billion. As part of its responsibility to integrate Department intelligence activities, the Under Secretary for I&A is responsible for presenting a consolidated intelligence budget to the Secretary. DHS operational component intelligence activities are generally not part of the NIP—therefore they are not classified—with the exception of the activities of the Coast Guard's National Intelligence Element. Those budgets are listed within each component's appropriation, however they are generally co-mingled with other operational activities. Within the FY2009 homeland security appropriation, the total I&A budget figure (classified) is combined with the budget figure for operational activities (unclassified) within the Analysis and Operations category. I&A is led by an Under Secretary, a position subject to Senate confirmation. The Under Secretary also serves as the department's Chief Intelligence Officer. Caryn Wagner assumed this position on February 11, 2010. The Under Secretary is supported by a Principal Deputy Under Secretary, currently Mr. Bart R. Johnson, who served as Acting Under Secretary from May 2009-February 2010. The current I&A organization is at Figure 2 . However to support the strategic goals of its December 2009 Strategy and the homeland security missions described in the Department's QHSR report, I&A intends to realign organizationally in 2010. I&A is focused on five "analytic thrusts" aligned with the principal threats to the Homeland: border security, including narcotics trafficking, alien and human smuggling, and money laundering; radicalization and extremism; particular groups entering the United States that could be exploited by terrorists or criminals; critical infrastructure and key resources; and weapons of mass destruction (WMD) and health threats. Following a 2009 comprehensive evaluation of its analytic capabilities and functions, I&A has informed Congress that its analysis and production resources have been prioritized to: Realign analytic resources to improve and expand support to [the] state, local, and tribal consumer base. Develop an analytic capability and methodology for assessing Suspicious Activity Reporting data. Create a centralized analysis group to meet the intelligence and information needs of the Secretary and Department components, including improved coordination and information sharing. Augment [the] border security analytic capability. Strengthen our collaboration and consultation with other producers of intelligence and information products. I&A produces numerous products for its customers. In 2008, there was a realignment and standardization of the I&A finished intelligence product line which now include: Homeland Security Threat Assessment (HSTA) . This is an annual threat assessment that represents the analytical judgments of DHS and assesses the major threats to the homeland for which the nation must prepare and respond. This includes the actions, capabilities, and intentions of domestic and foreign terrorists and extremists and the possible occurrence of systemic threats. It focuses on domestic extremists, international terrorists operating in the homeland or directing attacks against it, and systemic threats such as pandemics and transnational criminal organizations. The HSTA is produced in classified and "Unclassified/For Official Use Only" versions. Intelligence Warning. Contains urgent intelligence. Intelligence Note. Contains timely information or analysis on a current topic. Homeland Security Assessment. Consists of in-depth analysis on a topic. Homeland Security Monitors. These are produced monthly in collaboration with the components and may be classified or unclassified. Examples include: Border Security Monitor Cyber Security Monitor Cuba-Gram Reference Aids. These are less analytical and more descriptive. For example, they might describe what an anthrax lab looks like or the latest on improvised explosive devices (IED) and fuses. They contain photos and diagrams and inform law enforcement and first responders what to look for and what actions to take if they are encountered. Perspective. These are longer term analytic pieces. Joint Homeland Security Assessment/FBI Intelligence Bulletin. These are joint reports done in conjunction with the FBI. I&A also produces Homeland Intelligence Reports (HIR) which contain information that has yet to be fully evaluated. These are similar to the Intelligence Information Report (IIR) produced by other IC agencies. An HIR could contain information related to border encounters, information shared by a state or local fusion center, or other information of homeland security interest. There are also Homeland Security Intelligence Reports (HSIR) that are produced by the DHS component agencies. HSIR's, however, do contain some analysis. I&A makes the products of its analysis available to state and local officials through classified and unclassified intelligence networks: The Homeland Security Information Network (HSIN) is a secured, web-based platform that facilitates Sensitive But Unclassified information sharing and collaboration between federal, state, local, tribal, private sector, and international partners. It is managed by the DHS Directorate of Operations Coordination and Planning. The HSIN platform was created to interface with existing information sharing networks to support the diverse communities of interest engaged in preventing, protecting from, responding to, and recovering from all threats, hazards and incidents under the jurisdiction of DHS. It provides real-time, interactive connectivity between states and major urban areas and the National Operations Center (NOC). There are five community of interest portals on HSIN: Emergency Management, Critical Sectors, Law Enforcement, Multi-Mission Agencies, and Intelligence and Analysis (HSIN-Intelligence). The latter portal provides state, local, and tribal authorities access to unclassified intelligence products. The Homeland Security State and Local Intelligence Community of Interest (HS-SLIC) is a nationwide, virtual community of intelligence analysts that operates on a special portal on the HSIN network. The system contains collaborative tools such as discussion thread, chat tool, and secure messaging through which analysts collaborate. HS-SLIC has members from 45 states, the District of Columbia, and seven Federal agencies. The Under Secretary has established a governance board for HS-SLIC with strong participation by state and local officials. The Homeland Secure Data Network (HSDN) provides access to collateral Secret-level terrorism-related information. This includes NCTC Online, a classified repository that serves as the counterterrorism community's library of terrorism information. I&A has deployed HSDN terminals to 33 state and local fusion centers and intends to install terminals in all of the fusion centers as soon as security requirements are met. A longstanding challenge for the department is the focus of I&A analysis and the relevance of its products to state, local, tribal, and private sector customers. For example, at a homeland security forum in early 2008, some state and local participants expressed unhappiness with the flow of intelligence from DHS. According to the forum's findings, published in the journal Homeland Security Affairs , "[t]he Department had become 'irrelevant' to states and localities as a source of intelligence, because that intelligence lacks timeliness and adds so little value to local terrorism efforts. Another participant noted that 'the stream of intelligence from DHS is useless ... '" Among efforts to address the issue, former Under Secretary Allen established a State and Local Fusion Center (SLFC) Pilot Project Team in 2006 to work with six fusion centers in five states to enhance DHS support. In an effort to strengthen intelligence and information sharing and analysis capabilities following the 9/11 attacks, states and major urban areas established intelligence fusion centers. Congress has defined fusion centers as a "collaborative effort of two or more Federal, state, local, or tribal government agencies that combines resources, expertise, or information with the goal of maximizing the ability of such agencies to detect, prevent, investigate, apprehend, and respond to criminal or terrorist activity." At the end of 2009, there were 72 DHS/FBI designated state and Urban Area Security Initiative (UASI) fusion centers. Congress mandated that DHS support fusion centers in the Implementing Recommendations of the 9/11 Commission Act of 2007 . Through the DHS State, Local, and Regional Fusion Center Initiative, I&A supports these centers by providing operational, analytic, reporting, and management advice and assistance; training; information technology systems and connectivity; and intelligence officers and analysts to participating fusion centers to the maximum extent practicable. I&A intelligence officers assigned to fusion centers are responsible for providing intelligence support, including briefings to state and local officials; reviewing and analyzing suspicious activity reports and writing HIRs based on state and local information; supporting the development of state and local intelligence products; posting material on the HSDN and the HS-SLIC portal; and reaching back to I&A for intelligence products and IT resources. As of March 2010, there are 57 officers deployed to fusion centers and Under Secretary Wagner has stated that DHS plans to deploy a total of 76 officers (there would be more than one officer at some fusion centers) by the end of FY2010. In interviews of several fusion center directors for this report, those that had I&A officers assigned to their centers were pleased with the contributions they were making. The directors who did not have an officer assigned were anxious to get one. Another program intended to improve the focus, relevance, and accessibility of federal intelligence products for state, local, and tribal officials is the ITACG. In 2007, Congress amended the Homeland Security Act by directing the establishment of the ITACG at NCTC to "improve information sharing within the scope of the Information Sharing Environment ...with state, local, tribal, and private sector officials." Among the objectives of the ITACG is to provide a formal mechanism to inject a state, local, tribal and private sector perspective about the types of intelligence products they need and how these products should be produced and disseminated in order to be of greatest value for these officials. The ITACG consists of two elements, an ITACG Advisory Council to set policy and develop processes for the integration, analysis and dissemination of federally-coordinated information; and an ITACG Detail comprised of state, local, and tribal homeland security and law enforcement officers and intelligence analysts detailed to work at NCTC with federal intelligence analysts. The Under Secretary for I&A, as the Secretary's designee, was directed to establish and maintain the ITACG Detail and assign a senior intelligence officer from the department, who would report directly to the Director of NCTC and manage the Detail on a day-to-day basis. One historical barrier to the sharing of intelligence information with state, local, and tribal officials has been the need to protect the sources and methods used to obtain the intelligence information. The requirement for security clearances and "the need to know" principle have been cited as impediments to access by these officials. But, as one observer has pointed out, "The local deputy or officer is not interested in the sources of the information nor the means that were utilized to obtain it. The deputy or officer does need the tactic, technique, procedure, method, or resource being reported on to ensure he or she recognizes precursors of an attack when encountered on the streets." The ITACG Detail is intended to educate and advise NCTC analysts about state, local, tribal, and private sector requirements, and then assist those analysts in the preparation of versions of the products at the lowest possible level of classification to make them accessible to those customers. As of November 2009, the Detail consists of five state and local law enforcement officers and a fire services officer. The Detail and the Advisory Council have agreed on the need for increased representation, specifically in the areas of tribal operations; homeland security planning and operations at the State and local level; health and human services; and State and local intelligence analysis. The intent is to grow the ITACG Detail to a full complement of ten SLT representatives. The ITACG Detail has been operational since late January 2008, so it may be too early to judge how effective it has been in influencing the IC's production and dissemination of intelligence products at a level of classification useful for state, local, tribal, and private sector consumers. In its November 2009 report to Congress on the ITACG, the PM-ISE reported the following achievements of the ITACG detail: Informs and helps shape IC products for state and local agencies by reviewing, and when appropriate, providing comments during the drafting phase of the process. Since its inception, the Detail has participated in the production of 214 intelligence products. Created the Roll Call Release (RCR), a collaborative For Official Use Only (FOUO) product produced by DHS, FBI, and the Detail. The product is written specifically for state, local, and tribal (SLT) "street-level" first responders and focuses on terrorist tactics, techniques, procedures, terrorism trends, and indicators of suspicious activity. The success of this product can be measured by its incorporation into SLT-created publications and from the interest the product has also drawn from international law enforcement partners. Since the product line was created in December 2008, 26 RCRs have been published. Works closely with NCTC's Operations Center in the preparation of the Terrorism Summary (TERRSUM). The TERRSUM is a daily, SECRET- level digest of intelligence deemed to be of potential interest to SLT entities. Since its inception in June 2008, over 350 TERRSUM products have been published. Approximately 45 percent of the articles included in the TERRSUMs have been suggested by the ITACG Detail. The ITACG Intelligence Guide for First Responders was developed by SLT and federal members of the ITACG to assist SLT first responders in accessing and understanding federal intelligence reporting. The guide helps first responders understand IC jargon and acronyms, provides awareness of what information is available to them, how to access this information, and to help them understand threat reporting. The guide has been posted to several Internet websites and official unclassified portals. In addition, the guide has been mailed to over 16,000 police departments and 32,000 fire departments across the United States, Guam, Puerto Rico, and the Virgin Islands. A senior police official at a major police department commented that "the ITACG is a good step forward, but the problem is that the IC still has a 'Cold War' mindset. The culture needs to change." He did, however, acknowledge being told by a law enforcement member of the ITACG Detail that "when he [the Detail member] reviews products and highlights things, 'the light bulbs are coming on at NCTC.' It is beginning to manifest itself in how the product is written, focusing on the right priorities." However, one senior police official is concerned that "the ITACG is limited to editing intelligence and returning those products to originating agencies where the information may or may not reach state and local law enforcement personnel." This police official recommends that the ITACG "be authorized as an approved dissemination point for state and local fusion centers nationwide. ITACG liaison personnel are necessary to maintain a flow of current intelligence and must have authority to release information to state and local agencies." This Office of the Deputy Under Secretary for Mission Integration (DU/S-M) is responsible for DHS IE integration activities; policies governing enterprise-wide production and standardization of reports; the I&A Strategic Plan; training, and the implementation of a comprehensive information systems architecture. As part of its integration responsibilities, the DU/S-M is responsible for program review, department-level analysis, and cross-cutting intelligence initiatives. The DU/S-M also chairs the Intelligence Career Management Board that reports to the HSIC and is responsible for developing core competencies for the intelligence cadre of the Department. It does this through a document called the Learning Road Map that describes the tasks intelligence professionals perform, lists the training courses and other opportunities to learn the tasks, and provides measures to assess performance. The DU/S-M organization also manages I&A responsibilities for the Department's Counterintelligence (CI) Program and the Integrated Border Intelligence Program. I&A established the IBIP to enhance its support to border security activities. Under the program, additional personnel and support infrastructure have been committed to support all of the Department's border security operations. The program is designed to link DHS intelligence resources, and those of state and local partners, with the IC in order to deliver actionable intelligence to front-line operators and to fuse national intelligence with law enforcement information. An important initiative within the IBIP is the Homeland Intelligence Support Team (HIST). The first HIST team was deployed in 2007 to El Paso, Texas. It consists of intelligence officers from I&A whose mission is to coordinate and facilitate the delivery of national intelligence and enhance information fusion to support DHS operational missions at the border. In this regard it serves as a bridge between the national and field levels and between I&A and the component intelligence staffs at the border. It can also push/pull information from state and local law enforcement officials. The HIST also helps provide context to I&A analysts on topics such as border violence. Its focus areas are alien smuggling, border violence, weapons trafficking, illicit finance, drug trafficking, and the nexus between crime and terrorism. Its location at the El Paso Intelligence Center (EPIC) gives the HIST staff immediate access to each of the DHS operational components plus 15 other Federal, state, and local agencies. I&A has also increased staffing of the "Borders Branch" within I&A's analytic element. One senior I&A official cited this as an example of an evolving focus away from purely terrorism issues to enhanced support for specific departmental concerns. In 2005, there were only three analysts working border issues. By mid-2008, there were 20 on the border team. In the same three years, I&A increased the production of HIR's from 600, of which 3% were related to the border, to 3,563 in FY2008, of which 22% were border related. For more than 30 years, the Civil Applications Committee (CAC) has facilitated requests by civil agencies to make use of space-based imaging and remote sensing capabilities in support of traditional mapping applications, as well as a broad range of resource management, environmental climate natural disaster, and remote sensing applications. In its September 2005 report, a DNI study group unanimously recommended that the scope of the CAC be expanded beyond civil applications to include homeland security and law enforcement applications. In May 2007, the DNI designated DHS to be executive agent and functional manager of the NAO whose mission is to facilitate the use of IC technological assets for those purposes. I&A placed this office within the DU/S-M organization. The establishment of this office, however, has been controversial. In 2008, Congress prohibited the use of funds "to commence or continue operations of the NAO until the Secretary of Homeland Security certifies in FY2009 that NAO programs comply with all existing laws, including all applicable privacy and civil liberties standards and that clear definitions of all proposed domains are established and auditable." Congress also required the Government Accountability Office (GAO) to review the certification and report to Congress. After the Obama Administration took office, DHS revisited the need for an NAO program. On June 23, 2009, after a five-month review, which the department stated was conducted in coordination with its law enforcement, emergency management, and intelligence partners, Secretary Napolitano announced her decision to end the NAO program. The CAC will continue to foster information sharing for the civil community and will seek to provide CAC members access to the skills and information necessary to protect and maximize the use of assets; facilitate relationships between the Civil and the Intelligence communities to identify and document their requirements; and expand a monthly inter-community forum for technology and information exchange to a much broader audience. HITRAC is the Department's infrastructure-intelligence fusion center. It is not a formal part of I&A, but is jointly resourced and managed by I&A and the Office of Infrastructure Protection, an office within the DHS National Protection and Programs Directorate. HITRAC's mission is to produce and disseminate timely and meaningful threat- and risk-informed analytic products that can effectively influence the development of infrastructure protection strategies. Its use of intelligence and infrastructure expertise to support risk management decision making is illustrated at Figure 3 . HITRAC is organized into two divisions responsible for the Center's principal functions. The Risk Analysis Division performs infrastructure risk analysis and prioritization to support decision making. The division manages Congressionally-mandated and priority initiatives, including the Tier 1 and Tier 2 Program and the Critical Foreign Dependencies Initiative (CFDI). The Threat Analysis Division provides three services: critical infrastructure threat analysis, cyber threat analysis, and regional threat analysis including threat assessments to support the Committee on Foreign Investment in the United States (CFIUS). HITRAC products include State Threat Assessments that support the State Homeland Security Grant Program; Regional Infrastructure Assessments; Strategic Sector Assessment that provide an overall assessment of potential terrorist threats to critical infrastructure and key resources; Quarterly Suspicious Activity Analysis of suspicious incident reports to identify signs or patterns of activity that might pose a threat; Infrastructure Intelligence Notes that provides the private sector with a timely perspective on events, activities, or information of importance to support their specific sector-level security planning; and Homeland Security Assessments and Joint Homeland Security Assessments that communicate intelligence information that impacts the security of U.S. persons and infrastructure. In an effort "to improve its operations coordination and planning capability for non-routine, multi-Component operations to protect, prevent, respond to, and recover from significant threats and hazards, former Secretary Chertoff in 2008 directed the enhancement of an already extant DHS organization—OPS—which was built on the foundation of the former Office of Operations Coordination. I&A provides staff to the OPS Intelligence Division, including its director. A persistent challenge for the Department since its founding has been the integration of 22 legacy and newly-created agencies. Although the Homeland Security Act of 2002 transferred most operational responsibilities to DHS, many of these components derive their authorities from earlier legislation. The execution of these authorities and responsibilities provides them with nominal operational independence. The Department has sought to develop a robust, department-wide operations planning and coordination capability to support DHS integration. But, when operational activities involve only one or two components or routine operations, the need and incentive for "department-level" planning and coordination is diminished. A further imperative for department-wide operational planning and coordination is to support crisis and contingency planning and operations to support the Secretary of Homeland Security in his/her HSPD-5 role as the principal Federal official for domestic incident management. That role not only involves coordinating activities within DHS and its components, but also all "Federal operations within the United States to prepare for, respond to, and recover from terrorist attacks, major disasters, and other emergencies." The Intelligence Division at OPS is staffed by selected I&A personnel who provide timely, tailored intelligence products and services to support Departmental and interagency plans and operational coordination efforts. The division reaches back to, coordinates with, and leverages I&A parent elements, I&A representatives at state and local fusion centers, component intelligence organizations, and IC agencies as required, for threat-related intelligence, analysis, and other support. How the division is integrated into the OPS structure is shown in Figure 4 . In short, the key function of the OPS Intelligence Division is the application of intelligence research and analysis to conditions on the ground that must be considered for effective planning and operations and the development of a Common Intelligence Picture (CIP). Former Secretary Chertoff provided insight into what a Common Intelligence Picture for DHS should look like: Understanding the enemy's intent and capabilities affects how we operate at our borders, how we assess risk in protecting infrastructure, how we discern the kind of threats for which we must be prepared to respond…. We need to have a common picture across this Department, of the intelligence that we generate and the intelligence that we require. We need to fuse that information and combine it with information from other members of the intelligence community, as well as information from our state and local and international partners. Contributing to the development of a Common Intelligence Picture for the department as a whole is one of the important roles for the OPS Intelligence Division. CBP is the agency responsible for securing the nation's borders at and between ports of entry (POE). It was established in 2003, as a result of the Homeland Security Act of 2002, consolidating the inspection and patrol functions of the legacy U.S. Customs Service, the Immigration and Naturalization Service (INS), the U.S. Border Patrol (BP), and the Animal and Plant Health Inspection Service (APHIS). CBP's primary mission is to prevent the entry of terrorists and the instruments of terrorism into the United States. But it also has responsibility to prevent illegal immigration; regulate and facilitate international trade; collect import duties; enforce U.S. trade and drug laws; and protect Americans and U.S. agricultural and economic interests by preventing the importation of harmful pests, diseases, and contaminated, diseased, infested, or adulterated agricultural and food products. CBP accomplishes its various missions by inspecting persons and goods to determine if they are authorized to enter the United States. CBP officers and Border Patrol agents intercept illegal narcotics, firearms, counterfeit merchandise, and other types of contraband. They also interdict unauthorized aliens and enforce more than 400 laws and regulations at the border. In October 2007, CBP reorganized its intelligence and anti-terrorism functions by establishing the OIOC headed by an Assistant Commissioner. It provides intelligence support to CBP's effort to detect, identify, target, and interdict terrorists, terrorist threats, weapons of mass destruction (WMD), illegal aliens and alien smuggling groups, narcotics traffickers, and other criminals attempting to penetrate or use the borders of the United States to facilitate their illegal activities. The Assistant Commissioner for OIOC is also responsible for managing the coordination of field operations among and beyond CBP elements and for CBP's continuity of operations program. The OIOC also functions as the situational awareness hub for CBP providing timely and relevant information and actionable intelligence to operators and decision-makers. The OIOC is divided into four divisions, Incident Management, Field Coordination, Analysis and Targeting, and Intelligence and Situational Awareness. OIOC analysts are stationed at its headquarters and are posted to other agencies in a liaison capacity, such as NCTC, the NJTTF, and the Human Smuggling and Trafficking Center (HSTC). CBP intelligence operations are designed to support the full range of CBP missions, particularly its primary mission of preventing the entry of terrorists and the instruments of terrorism. To that end, the CBP OIOC is engaged in the entire intelligence cycle, including planning, collection, processing, production, and dissemination of "all source" information and intelligence to support CBP's operational elements, as well as their partners within DHS and other government agencies. Although CBP does not engage in traditional foreign intelligence collection activities, it receives information from DHS I&A, the IC, and law enforcement agencies. In addition, CBP gathers and analyzes large amounts of data concerning persons and cargo inbound to the U.S. as well as information derived from the apprehensions of illegal aliens, drug seizures, and other border enforcement activities. For example, CBP collects advance passenger information (API) for all air and ship passengers and crew traveling to or from the United States. During its border inspection activities, CBP officers may also examine documents, books, and other printed material, as well as computers disks, hard drives, and other electronic or digital storage devices. All of this data is a unique source of operational intelligence that is potentially very useful to other Federal agencies with national security missions. The border environments in which the CBP offices operate illustrate how intelligence supports DHS and CBP mission activities. CBP officers conduct screening activities to determine the admissibility of persons and goods and interdict dangerous people, dangerous items, and contraband. Given the volume of people and goods seeking entry into the U.S. every year, it is impractical for CBP to physically inspect every person or shipment that arrives at a U.S. port. Therefore, CBP analyzes trade data and cargo, crew, and passenger manifest information to 'target' its inspection resources towards those persons or cargo shipments that potentially pose the highest risk. Intelligence from other Federal agencies, in the form of 'lookouts,' and other law enforcement and intelligence reporting, is also reviewed. The targeting mechanism used by CBP is the Automated Targeting System (ATS). ATS is composed of six modules that focus on exports, imports, passengers and crew (airline passenger and crew on international flights, passengers and crew on sea carriers), private vehicles crossing at land borders, and import trends over time. These modules employ weighted rule sets to identify high-risk passengers and cargo shipments. In the cargo environment, ATS employs these rule sets to assign scores based on factors associated with risk. Above a certain threshold risk score, cargo is subject to further inspection. A variety of data is used within ATS to perform risk analysis. For cargo, ATS uses data from the Automated Commercial System (ACS), Automated Broker Interface (ABI), Automated Manifest System (AMS), and the new Automated Commercial Environment. The passenger component of ATS (ATS-P) processes traveler information against other information available to ATS, and applies threat-based scenarios comprised of risk-based rules to assist CBP officers in identifying individuals who require additional screening or in determining whether individuals should be allowed or denied entry into the United States. The risk-based rules are derived from discrete data elements, including criteria that pertain to specific operational/tactical objectives or local enforcement efforts. Unlike in the cargo environment, ATS-P does not use a score to determine an individual's risk level. Instead, it compares Passenger Name Record (PNR) and information in the following databases against lookouts and patterns of suspicious activity identified by analysts based upon past investigations and intelligence. Treasury Enforcement Communications System (TECS) Advance Passenger Information System (APIS) Non Immigrant Information System (NIIS) Suspect and Violator Indices (SAVI) Department of State visa databases Passenger Name Record (PNR) systems This risk assessment is an analysis of the threat-based scenario(s) that a traveler matched when traveling on a given flight. These scenarios are drawn from previous and current law enforcement and intelligence information. This analysis is done in advance of a traveler's arrival to or departure from the United States and becomes one tool available to DHS officers in identifying illegal activity. It was through application of the ATS-P that CBP officers at the National Targeting Center selected Umar Farouk Abdulmutallab, who attempted to detonate an explosive device on board Northwest Flight 253 on December 25, 2009, for further questioning upon his arrival at the Detroit Metropolitan Wayne County Airport POE. The operational organization that utilizes the ATS to support CBP officers at POE's is the NTC. It is not an intelligence organization, it is part of the CBP Office of Field Operations. But it is a significant consumer of intelligence information, upon which it conducts analysis and bases recommendations for security actions. It is also a major source of information about passenger and cargo movements that can be exploited for intelligence purposes. The NTC grew out of efforts by the legacy U.S. Customs Service to develop targeting techniques at the port level to detect drug smuggling and currency violations in both the passenger and cargo environments. Post-9/11, Customs began adapting these targeting practices towards anti-terrorist and other national security concerns. In November of 2001, following the 9/11 attacks, the NTC began operations on a 24/7 basis. In March 2007, the NTC was divided into two elements, NTC–Passenger and NTC–Cargo. The NTCP works closely with the OIOC and other intelligence and law enforcement organizations to develop targeting rule sets for ATS-P. They then work with analytical units located at POE's to provide targeting information and real-time response to requests from CBP officers in the field for information on potentially high-risk passengers seeking entry into the United States. One of the most important sources of information analyzed by NTCP is API data which commercial carriers are required to submit to CBP on all air and ship passengers and crew traveling to the United States. The data is examined to determine possible matches with various inspection systems and watchlists that include lookouts on known and suspected terrorists or other persons of interest to U.S. law enforcement agencies. The NTCC supports efforts to detect and prevent dangerous cargo from entering the United States. It examines advance electronic manifest information that CBP requires to be submitted for all modes of transportation. It then uses advanced, computerized risk-assessment techniques within ATS to sort the information according to more than 100 variables. Citing security concerns, federal officials refused to list those variables, but some officials said that the port of origin, the nature of the cargo, and the track records of the exporter and importer were among the criteria. In addition, the NTCC provides significant support to Cargo Security Initiative ports where CBP has stationed targeting teams to identity containers for inspection prior to their being loaded on U.S.-bound vessels. The NTCC works closely with OIOC to develop targeting rule sets for the cargo component of ATS. They also collaborate with NTCP who notifies NTCC of any passenger matches to terrorist-related or other law enforcement lookouts. NTCC will then run those matches against various databases to determine if those individuals are involved with any cargo businesses or specific cargo shipments. The NTCC focuses particular attention on types of cargo that could be ingredients for weapons of mass destruction (WMD), weapons of mass effect, chemical precursors of illegal drugs, and conventional weapons and explosives. Sweeps based on specified targeting parameters are conducted daily to target suspect chemical, biological, radiological, conventional weapons, explosives, and ammonium nitrate shipments. In early 2008, working with ICE and DEA, this targeting identified suspicious bills of lading, which led to the seizure of chemicals associated with the manufacture of methamphetamines. In late 2007, targeting and analysis within NTCC led to the intercept and seizure of over $3 million worth of assault rifles and small arms destined for Central America. While CBP officers work primarily at POE's, Border Patrol agents patrol vast areas along the northern and southern international land borders of the United States that lie in between the POE's, as well as the coasts of Florida, Puerto Rico, and the U.S. Virgin Islands. The Office of Air and Marine (A&M ) supports this mission through its operations within the air and maritime environments. Two centers that provide intelligence support to these operations are the Border Field Intelligence Center (BORFIC) and the Air and Marine Operations Center (AMOC). In addition, the Border Patrol has placed intelligence units within each of its 20 Border Patrol Sectors. OIOC supports BP and A&M with real-time intelligence and strategic analyses about the conveyances, routes, and other methods that undocumented aliens, human smugglers, drug traffickers, and other criminals use to enter or smuggle persons or contraband into the United States. An example of this strategic intelligence analysis was an April 2006 report co-produced by CBP and the NCTC. The report, which surveyed the arrest records of "special interest aliens" (SIA) caught at the U.S. southern border, revealed how these individuals entered the U.S. and how terrorists could exploit such vulnerabilities. In response to this information, DHS developed and implemented a multi-pronged plan to address those vulnerabilities. The plan included targeted training and other efforts to eliminate the proliferation and use of false passports from one African country; and training to build the detection capabilities of several Western Hemisphere countries that were noted to be used by SIA's with false or altered passports in transit to the United States. Originally established as the Border Patrol Field Intelligence Center in 2004 in El Paso, Texas, BORFIC conducts all-source intelligence activities to support the border security mission of the BP and other DHS and CBP elements to predict, detect, deter, and interdict terrorists, terrorist weapons, and human traffickers and contraband smugglers entering the United States. In October 2007, the organization was fully integrated into the CBP OIOC and its name changed to the Border Field Intelligence Center. BORFIC is responsible for supporting security efforts on both the northern and southern borders. It exchanges intelligence and law enforcement information with numerous Federal, state, local, and tribal organizations agencies and actively participates in several interagency and bilateral groups. These include the El Paso Interagency Intelligence Working Group which includes EPIC, DOD's Joint Task Force-North, and the FBI; the Bilateral Interdiction Working Group with Mexico, the Integrated Border Intelligence Teams (IBETS) with Canada, and the Caribbean Border Interagency Group. BORFIC shares law enforcement intelligence information with state and local fusion centers through the HS-SLIC portal. In addition, BORFIC has four personnel assigned to the El Paso Intelligence Center (EPIC) who work in tandem with I&A's Homeland Intelligence Support Team also located there. Located in Riverside, California, the AMOC is a 24/7, multi-agency coordination center that detects, sorts, and monitors air and marine tracks of interest across the nation's borders and maritime approaches. A subordinate center located in Puerto Rico performs the same mission for the Caribbean region. The AMOC also serves as host activity for the central operations of CBP's long-range unmanned aircraft systems and is the CBP focal point for the coordination of unmanned aircraft system maritime operations with the USCG. The AMOC is staffed with intelligence operations specialists who provide connectivity to the OIOC, DHS, and the IC. It also has liaison officers assigned from the USCG, FAA, DOD National Guard Bureau, and the Government of Mexico. The AMOC produces a comprehensive air surveillance radar picture through its Air and Marine Operations Surveillance System (AMOSS). Fusing input from up to 450 sensors, including an extensive network of military and civilian radars across the United States and Canada, the AMOSS can process up to 24,000 fused tracks every 12 seconds and input up to 1,000 flight plans per minute. This allows the AMOC to provide real-time data on suspicious or non-cooperative aircraft and marine vessels to A&M, BP, and the USCG to support interdiction operations as well as to other DHS intelligence and operations centers. In addition to aircraft and vessel location data, Detection Systems Specialists at the AMOC have access to numerous law enforcement and other databases that allow them to provide operational units with information regarding the flight plans, history, ownership, and registration of aircraft and vessels and criminal background information on pilots and vessel crew. In addition to its land and maritime border security mission, the AMOC also supports the multi-agency effort to provide airspace security for the National Capital Region. As a participating agency within the National Capital Region Coordination Center, the AMOC provides its comprehensive radar picture and law enforcement sorting, detection, and investigative capabilities to assist in identifying and determining the threat posed by aircraft that are not compliant with the flight rules in effect for the Washington, D.C. Metropolitan Area Air Defense Identification Zone (DC ADIZ). OIOC collaborates with CBP Office of Field Operations to develop IDSO's based on threat information. IDSO's not only address immediate threat concerns, but also serve to counter predictability in CBP inspection operations. They are enforcement actions that are based upon specific intelligence or current trends and are vetted through the DHS CINT. For example, if an increase in aliens entering the United States illegally from or through a particular country were documented, CBP could develop an IDSO to intensify inspection activity on persons and routes from that country. An IDSO based on specific intelligence was conducted following the March 2004 Madrid train bombings. CBP analysis revealed an increase in aliens attempting to enter the U.S. illegally using freight and passenger railcars along the northern border. In response, CBP assigned officers and resources to targeted POE's to intensify inspections of railcars; NTC intensified its screening of persons and cargo, the BP assisted in capturing and detaining illegal aliens; and CBP intelligence intensified its checks of foreign nationals through the IC. ICE is the largest investigative organization within DHS. It was established in 2003 and incorporated into DHS by consolidating the investigative elements of the former U.S. Customs Service and Immigration and Naturalization Service (INS) and by transferring the Federal Protective Service from the General Services Administration (GSA). ICE's mission is to enforce trade and immigration laws through the investigation of activities, persons and events that may pose a threat to the safety or security of the United States and its people. OI also investigates illegal trafficking in weapons (including weapons of mass destruction), the smuggling of narcotics and other contraband, human smuggling and trafficking, money laundering and other financial crimes, fraudulent trade practices, identity and benefit fraud, child pornography, child sex tourism, and health and public safety dangers. It has four operational divisions: Office of Investigations (OI). OI is responsible for investigating a range of issues that may threaten national security. OI uses its legal authority to investigate issues such as immigration crime, human rights violations, and human smuggling; narcotics, weapons and other types of smuggling; and financial crimes, cybercrime, and export enforcement issues. Of note, ICE Special Agents are the largest non-FBI component of the Joint Terrorism Task Forces (JTTF). Detention and Removal Operations (DRO). DRO is the primary enforcement arm within ICE for the identification, apprehension and removal of illegal aliens from the United States. Office of International Affairs (OIA). With 63 offices in 44 countries, OIA develops partnerships with foreign governments to advance the homeland security mission. Office of Intelligence, discussed below. ICE's intelligence activities are coordinated and managed within the Office of Intelligence. The office is responsible for collecting, analyzing, and disseminating strategic and tactical intelligence for use by the operational elements of ICE and DHS. ICE intelligence activities focus on information related to the movement of people, money and materials into, within and out of the United States. Its objective is to provide timely, accurate, and useful intelligence to support a range of investigative activities by identifying patterns, trends, routes, and methods of criminal activity; predicting emerging and future threats; and identifying potential systemic vulnerabilities and methods to mitigate those vulnerabilities. Although ICE is not a member of the IC, the Office of Intelligence participates in all aspects of the intelligence cycle. In support of the agency's mission, the office collects and analyzes information from a variety of sources including the IC, other federal agencies, other components of DHS, state, local, tribal, and foreign agencies. It also analyzes the considerable information derived from ICE operational activity, such as investigations, document exploitation, and interviews of detainees. Information sources include classified intelligence reporting, law enforcement sensitive information, and open source material such as commercial and trade data. Consumers of ICE intelligence products are ICE investigators; DRO and FPS officials; the ICE and DHS leadership; DHS partners, particularly CBP; the Department of State; FBI; the Drug Enforcement Administration; the Bureau of Alcohol, Tobacco, and Firearms, and state and local law enforcement agencies. The Office of Intelligence is led by a Director and consists of six divisions and 26 Field Intelligence Groups. The Intelligence Operations Division coordinates and provides intelligence support to ICE field components, including the ICE Special Agent-in-Charge (SAC) offices, DRO field offices, and FPS regions. The Intelligence Programs Division analyzes information obtained from intelligence, law enforcement, and open sources and produces finished intelligence products to support ICE, DHS, and other intelligence and law enforcement consumers. The Intelligence Programs Division has the following specialized units: Counter Proliferation Intelligence, Human Smuggling and Public Safety (HSPSU), Contraband, Illicit Finance/Trade Fraud, and International Intelligence, and the Tactical Intelligence Center located in Bay Saint Louis, Mississippi, which works with the National Security Agency and other intelligence units to integrate and analyze signals intelligence, human intelligence, and law enforcement information to identify new criminal organization targets for ICE investigations, assist NSA in SIGINT targeting, and support other Office of Intelligence units in performing strategic level intelligence analysis. The International and Border Support unit focuses production on two primary areas. The first is support rendered to the ICE Attachés of the Office of International Affairs through the International Intelligence Unit. The second is through another cell that provides support to Southwest Border operations that target criminal organizations operating in that region, especially those that contribute to escalating violence along the border. Southwest Border is focused on four operations: the Border Violence Intelligence Cell, Support the Border Enforcement Security Taskforces, Operation Armas Cruzdas, and Operation Firewall. The BVIC was established in January 2008 in order to provide intelligence support for ICE weapons smuggling investigations and government-wide efforts to combat violence along the United States-Mexico border. It is located at EPIC within the Crime-Terror Nexus Unit. The BVIC works closely with I&A's Homeland Intelligence Support Team, and other partners at EPIC. As the level of violence along the U.S.- Mexican border intensified in the past two years, ICE has partnered with Mexican and other U.S. law enforcement agencies on three initiatives described below to enhance border security, disrupt transnational criminal organizations, and stop the illegal flow of firearms from the United States into Mexico. These are the Border Enforcement Security Task Forces (BEST), Armas Cruzadas, and Operation Firewall. The BVIC supports all three programs. At the BVIC, all-source intelligence is analyzed and operational leads are provided to the BEST task forces and ICE attaché offices. The BVIC also analyzes data from arrests and seizures by the BEST task forces and exchange intelligence with Mexican law enforcement agencies. In November 2008, the BVIC, in collaboration with CBP and DHS I&A, produced an Intelligence Report, United States Southbound Weapons Smuggling Assessment , which examined U.S. southbound weapon smuggling trends. This report was designed to support the BEST's and other operational components in planning and conducting outbound firearms smuggling operations. In December 2008, the BVIC also co-authored a strategic-level analysis for the ICE and DHS leadership on the same issue. The BEST initiative consists of a series of multi-agency investigative task forces, of which ICE is the lead agency. They seek to identify, disrupt, and dismantle criminal organizations posing significant threats to border security. Other agency participants include CBP, the Drug Enforcement Administration (DEA), Bureau of Alcohol, Tobacco, and Firearms (ATF), FBI, USCG, and the U.S. Attorney's offices, and state and local law enforcement. The Mexican law enforcement agency Secretaria de Seguridad Publica is a partner along the southern border. The Royal Canadian Mounted Police and Canadian Border Services Agency are partners on the northern border. There are currently BEST task forces on both the northern and southwestern borders with ten on the southwest border. Each BEST concentrates on the prevalent threat in their area. On the southern border, this entails cross-border violence; weapons smuggling and trafficking; illegal drug and other contraband smuggling; money laundering and bulk cash smuggling; and human smuggling and trafficking. The Office of Intelligence maintains 28 analysts within the Southwest Border BESTs to ensure responsive intelligence support and appropriate information sharing with other federal, Government of Mexico, state, tribal and local law enforcement partners. Armas Cruzadas is a partnership between U.S. and Mexican law enforcement agencies. Its objective is to synchronize bilateral law enforcement and intelligence sharing operations in order to identify, disrupt, and dismantle trans-border weapons smuggling networks. Among the activities under Armas Cruzadas, ICE Border Liaisons are deployed to the border to strengthen bilateral communication. There is also a Weapons Virtual Task Force, a virtual online community where U.S. and Mexican investigators can share intelligence and communicate in a secure environment. For the United States, ICE is a major participant agency in Armas Cruzadas because of its authority as the Federal agency responsible for investigating cases involving weapons being smuggled out of the United States. ATF participates as a result of its authority over weapons being illegally sold and transported within the United States. CBP is also a participating agency due to its border security responsibilities. Operation Firewall is an initiative to combat bulk cash smuggling, one of the methods that transnational criminal organizations use to move the proceeds from their criminal activities to fund future operations. ICE has found that as successful enforcement has made the transfer of illicit funds between banks and other financial institutions more difficult, criminal organizations are increasing their use of bulk cash smuggling. Operation Firewall is a joint effort with CBP to target the full array of methods used to smuggle bulk cash, including commercial and private passenger vehicles, commercial airline shipments and passengers, and pedestrians crossing U.S. borders with Mexico and Canada. The Collection Management and Requirements Division coordinates the intelligence collection and reports efforts within ICE. In this regard, it works closely with other DHS and IC elements to articulate ICE intelligence requirements to collection elements within the IC to ensure the flow of needed information to ICE. This division also manages the ICE Joint Intelligence Operations Center. The Office of Intelligence also has two divisions which provide support activities, the Business Management Division and the Executive Information and Technology Division. Business Management provides support to daily operations throughout the homeland and overseas through executing procurement, budget, logistics, and training functions. The Executive Information and Technology Division provides information technology services that support day to day operations, processing large quantities of information, and managing secure communications systems networks. This division also includes the Intelligence Document Exploitation (IDocX). Under this program, captured media, such as hard copy documents, audio recordings, and electronic media are exploited in order to develop intelligence products. Hard copy documents, for example, are converted into digitized data allowing ICE to create a vital resource for analysis, pattern recognition, and information sharing accessible to intelligence analysts and investigators. The Office of Intelligence field organization consists of 26 FIGs that are aligned and co-located with ICE SAC offices throughout the United States. They replaced the former Field Intelligence Units in a reorganization of the ICE field intelligence structure intended to improve connectivity and working relationships with ICE operational elements and enhance coordination with other Federal, state, local, and cross border partners. Each FIG is managed by a Field Intelligence Director or advisor and is staffed by a mix of intelligence and operational personnel. FIG personnel identify and analyze criminal trends, threats, methods and systemic vulnerabilities related to ICE strategic priorities within their office's area of responsibility. FIG intelligence reports, assessments, and other products primarily support the ICE leadership and field managers, but are also disseminated to other DHS, law enforcement, and IC member agencies. The HSTC was established in 2004 and serves as the U.S. Government's intelligence fusion center and information clearinghouse for all federal agencies addressing human smuggling, human trafficking, and the facilitation of terrorist mobility. Human smugglers seek to profit from the illegal transportation of persons into a country. Human traffickers seek to profit from transporting a person into a country for the purpose of exploiting them. As a profitable destination for smuggled and trafficked persons, both are major problems for the United States. Numerous transnational organized crime groups are involved in the trade. Congress formally established the HSTC in the Intelligence Reform Act and Terrorism Prevention Act of 2004. In 2007, Congress strengthened the Center's manning and funding in Section 721 of the Implementing Recommendations of the 9/11 Commission Act of 2007 . The HSTC focuses on the transnational issues that share one common link – illicit international travel. It brings together federal agency representatives from the policy, law enforcement, intelligence, and diplomatic areas to work together on a full-time basis to convert intelligence into effective law enforcement and diplomatic action. The HSTC prepares strategic reports for U.S. law enforcement and U.S. policy-makers. The HSTC is congressionally mandated to produce an annual report about vulnerabilities in travel systems. The HSTC also serves as a focal point for international police agencies and provides a mechanism for the exchange of information between the United States and its allies. HSTC is the official point of contact for INTERPOL on trafficking matters for the USG. Members of the HSTC conduct frequent training to law enforcement officials, consular officials, prosecutors and non-governmental organizations, both foreign and domestically. ICE is a major contributor of personnel to the HSTC. The Center's Director is an ICE employee. The ICE Office of Intelligence provides intelligence support through the Intelligence Program Division's Human Smuggling and Public Safety Unit. The shortage of staff at the Center has impeded its ability to accomplish its mission. According to the HSTC charter, "[t]he principal determinant of the success of the Center will be its ability to draw on and integrate the diverse experience and perspectives of its full-time staff ... it is critical that key members of the community of interest provide well-qualified personnel to the Center." Various agency members of the community of interest have made commitments to detail personnel to the Center but have been inconsistent in doing so. For example, there are no staff currently detailed to the Center from DOD, FBI, or CIA. Congress may wish to consider legislatively-mandating minimum staffing by agencies critical to the Center's success. At present, each participating agency provides staff "out of hide," meaning they are not reimbursed for the personnel they detail to HSTC. To alleviate this impact, Congress may also wish to consider dedicated funding for the detailee positions at the Center. As the agency that oversees lawful immigration to the United States, USCIS establishes immigration services, policies and priorities to preserve America's legacy as a nation of immigrants while ensuring that no one is admitted who is a threat to public safety. The Homeland Security Act of 2002 established USCIS as a component of DHS in 2003 and transferred to the new agency the immigration and citizenship adjudication functions of the former INS. The three principal immigrant service activities of USCIS are the adjudication of petitions for immigration benefits; the adjudication of naturalization petitions from lawful permanent residents desiring to become U.S. citizens; and the consideration of refugee and asylum claims, and related humanitarian and international concerns. USCIS is not a law enforcement agency nor a member of the IC and the vast majority of its funding is derived from fees collected from immigration benefit applicants and petitioners. Thus its activities are limited to adjudication of immigration benefits, which includes conducting background checks on the individuals and organizations who submit applications and petitions, as well as the intended beneficiaries. As part of that process, USCIS collects biometrics, in the form of digital photographs and fingerprints. On average each day, USCIS processes 30,000 applications for immigration benefits, issues 7,300 Permanent Resident Cards (Green Cards), adjudicates 400 refugee applications, and naturalizes 3,400 new civilian citizens and 30 new citizens who are member of the U.S. Armed Forces. USCIS also has the authority to detect and combat immigration fraud. In a Conference Report to the FY2005 Department of Homeland Security Appropriations Act, Congress recognized USCIS as the responsible agency for developing, implementing, directing, and overseeing the joint USCIS-ICE anti-fraud initiative and conducting law enforcement/background checks on every applicant, beneficiary, and petitioner prior to granting any immigration benefits. Individuals and organizations intent on harming the United States have become increasingly sophisticated in their methods of gaining entry into the country. The nexus between immigration benefit fraud and threats to national security was illustrated in the 1993 World Trade Center bombing when the plot's mastermind, Mahmud Abouhalima, received a residency visa as an "agricultural worker" despite the fact that he was employed as a New York City cab driver. In 2004, USCIS established the Office of Fraud Detection and National Security (FDNS). In January 2010, FDNS was promoted to a Directorate to reflect the priority USCIS places on its anti-fraud and national security responsibilities and to place greater emphasis on them. FDNS consists of four branches that collectively are responsible for detecting, pursuing, and deterring fraud; ensuring background checks are conducted on all persons seeking benefits before granting benefits; identifying systemic vulnerabilities and other weaknesses that compromise the integrity of the legal immigration system; and serving as USCIS' primary conduit to and from law enforcement and intelligence agencies. Within FDNS, there is an Intelligence Branch that manages the analysis, reporting, production, and dissemination of immigration-based intelligence products. Those products are designed to focus on the identification of fraud trends or vulnerabilities that are being exploited in the immigration benefits processes while also enhancing national security efforts. The branch manages and directs assets and resources at the headquarters office, five USCIS Service Centers, and within all District Offices. It also establishes liaison with state and local intelligence fusion centers to promote information sharing and collaboration efforts. The branch is also the conduit for information-sharing, coordination, and collaboration with the IC and various law enforcement agencies. To promote information sharing and provide immigration subject matter expertise, FDNS has placed liaison officers within DHS I&A, the Terrorist Screening Center, NCTC Terrorist Identities Group, the National Joint Terrorism Task Force, DHS Threat Task Force (DTTF), ICE National Security Unit, CBP NTC, State Department's Kentucky Consular Center, FBI National Name Check Program (NNCP), the HSTC, INTERPOL Headquarters in Lyon, France, and the INTERPOL U.S. National Central Bureau. Intelligence Research Specialists within the branch conduct research and analysis to identify previously unknown links, associations, emerging trends, correlations, anomalies, and indications and warnings with national security or public security threat implications. They produce and disseminate immigration-related intelligence products to a broad audience to include field officers, field and headquarters leadership at USCIS, DHS components, and other Federal, state, and local agencies. For example, there is considerable potential intelligence value in the research and analysis of data within the various USCIS electronic databases as well as the information contained in the more than 90 million immigrant Alien Files (A-Files) in the custody of USCIS (with more than 7 million new A-Files added each year). An example of the type of intelligence product produced by the FDSN Intelligence Branch was a classified report following the June 2007 failed bombings in London and Glasgow. Police in the United Kingdom (UK) determined that the suspects, who utilized al Qa'ida-like strategies and devices, were immigrants to the UK and working there as medical professionals. This suggested the possibility of similar tactics being used in attacks within the United States. In a response to those events, the FDNS Intelligence Branch queried USCIS databases and records for information on individuals with backgrounds similar to those of the UK plotters. A classified report was produced that identified individuals with exact matches to national security-related hits and individuals under investigation by Federal law enforcement. In addition, over 30 individual intelligence reports were prepared, published, and disseminated to the Intelligence Community. The Intelligence Branch also administers the USCIS Request for Information (RFI) program, coordinating the preparation of agency responses to requests for immigration information from agencies and organizations outside of DHS, as well as other components and offices within DHS. In November 2001, Congress established TSA through the Aviation and Transportation Security Act of 2001 (ATSA) . The agency was originally made part of the Department of Transportation, but was transferred to DHS pursuant to the Homeland Security Act when the Department was established in March 2003. TSA is most commonly known for its aviation security role, particularly the security screening of airline passengers and their baggage. However, ATSA assigned the Assistant Secretary for TSA responsibility for security in all modes of transportation – aviation, maritime, mass transit, highway and motor carrier, freight rail, and pipeline. These modes form a transportation network that is central to the American economy. That network connects cities, towns, and farms, and moves millions of people and millions of tons of goods. The majority of transportation infrastructure in the United States is privately-owned. The remainder is owned and operated by state, local, or regional entities. The size of the transportation sector in the United States makes it impossible for the Federal government to provide security for all modes. The exception is the commercial aviation sector. But, TSA does provide threat and other intelligence information to support security programs for each sector. In addition, TSA collaborates with industry and government operators and other stakeholders to develop strategies, policies, and programs to reduce security risks and vulnerabilities within each mode. Finally, it seeks to enhance capabilities to detect, deter, and prevent terrorist attacks and respond to and recover from attacks and security incidents, should they occur. TSA uses a threat-based, risk management approach to the security task. According to former TSA Administrator Kip Hawley: "It begins with intelligence gathered by multiple U.S. agencies that is analyzed, shared, and applied." Intelligence is a key driver in determining the level of security appropriate for the threat environment. The Assistant Secretary for TSA is responsible "to receive, assess, and distribute intelligence information related to transportation security and to assess threats specifically related to transportation. The TSA intelligence function is centered in its Office of Intelligence (TSA-OI) and led by an Assistant Administrator for Intelligence. The office consists of six divisions and an intelligence cell at the Transportation Security Operations Center (TSOC) (also known as the "Freedom Center") in Herndon, Virginia. OI is the only organization that analyzes threats specifically related to transportation. Although it is not an intelligence collector, the office works closely with IC agencies. It participates in NCTC's Daily Intelligence Secure Video Teleconference (SVTS) and receives and analyzes intelligence from the IC to determine its relevant to transportation security. Sources of information outside the IC include other DHS components, law enforcement agencies, and owners and operators of transportation systems. OI also reviews and analyzes the suspicious activity reporting by Transportation Security Officers, Behavior Detection Officers, and the Federal Air Marshal Service (FAMS). The office also works on intelligence issues with its counterparts in the United Kingdom and Canada. An extensive two-way exchange of information is a unique aspect of OI's relationship with its stakeholders. OI has received funding associated with the Implementing Recommendations of the 9/11 Commission Act of 2007, to establish and implement an information sharing and analysis center (ISAC) for transportation security. OI is in the process of developing both the concept for the TS-ISAC and a milestone plan to establish this capability by early FY2011. Once operational, TSA envisions that the TS-ISAC will provide enhanced solutions for collaboration and information sharing with its stakeholders in the transportation industry. OI analysts review and analyze information from its many sources in order to produce intelligence on current and emerging threats to U.S. transportation modes, provide tactical support to Federal Air Marshal missions, and support security for other special events. The Intelligence Watch and Outreach Division provides 24/7 indications and warning of threats to the transportation network. The Transportation Intelligence Analysis Division is responsible for in-depth threat analyses. Products are disseminated at appropriate classification levels to OI's principal stakeholders – the TSA leadership, the Office of Security Operations (which performs day-to-day management of the TSA aviation security program), the Office of Global Strategies, Transportation Security Network Management, the FAMS, and public and private transportation industry elements. Intelligence products are also shared with IC members and other DHS organizations. OI analytic products include the Administrator's Daily Intelligence Brief, Information Bulletins and Circulars, the Transportation Suspicious Incident Reports (TSIR), and the Transportation Intelligence Note (TIN). The TSIR and the TIN products contain information on the latest potential threats, intelligence estimations and trends, and situations observed in transportation systems around the nation and the world. They are produced at the Unclassified/For Official Use Only level for TSA employees and transportation security professionals to enhance situational awareness. TSA-OI has deployed field intelligence officers to major airports throughout the United States. They work directly for OI through the respective Eastern or Western Regional Field Intelligence Coordinator. The field intelligence officers are responsible for providing intelligence support and threat briefings to the TSA Federal Security Directors, their staffs, and security workforce in their area of responsibility. In addition, they conduct liaison with the JTTF's and state, local, and tribal law enforcement officials and intelligence fusion centers. Former TSA Administrator, Kip Hawley has described TSA's aviation security strategy as an interlocking system of multiple layers of security. But, he says, "[w]e cannot focus on a 'catch them in the act" strategy that waits until a person tries to board an aircraft with a weapon ... our success is greatly improved with our ability to anticipate the terrorist act and thwart it well before it gets off the ground." He goes on to say "[a]s important as it is to detect threat objects, it is imperative that we use intelligence to aid in the identification and interception of the people who would do us harm." Intelligence supports several elements of the airline passenger prescreening systems in use or proposed by TSA, such as the No Fly and Selectee Lists and Secure Flight. OI's specific role in each of these is described below. In addition to uncovering terrorist plots, U.S. intelligence and law enforcement agencies focus considerable effort on identifying individuals who are believed to be or are suspected of being terrorists. Agencies in possession of such intelligence nominate such persons for inclusion in the U.S. Government's consolidated terrorist watchlist, the TSDB. The "No Fly" and "Selectee" lists are subsets of the TSDB that are used to screen air travelers. The "No Fly" list contains the names of individuals who are prohibited from boarding an aircraft "based on the totality of information, as representing a threat to commit an act of 'international terrorism' or 'domestic terrorism (as defined in 18 U.S.C. 2331) to an aircraft (including threat or air piracy, or a threat to airline, passenger, or civil aviation security), or representing a threat to commit an act of "domestic terrorism" with respect to the homeland." The "Selectee" List is a list of individuals who "do not meet the criteria to be placed on…the "No Fly" list…and who meet the selectee criteria as members of a foreign or domestic terrorist organization (including foreign terrorist organization designated pursuant to 8 U.S.C. 1189); or associated with terrorist activity (as defined in Section 212(a)(3)(B) of the Immigration and Nationality Act)…" Individuals on the Selectee List may fly only after they and their checked and carry-on baggage have been subjected to additional screening Originally maintained by TSA (and the FAA prior to 9/11), the No Fly and Selectee lists were transferred to the Terrorist Screening Center (TSC) in 2004. The TSC was established under the auspices of the FBI in an initiative under Homeland Security Presidential Directive (HSPD)-6. These lists are distributed to TSA, which is responsible for screening domestic airline passengers, and CBP which screens international passengers for admittance to the United States. At present, for domestic flights, the matching of passenger names against No Fly and Selectee lists is performed by the airlines on the basis of unclassified versions of watch lists sent to them by TSA. There has been controversy about the No Fly list—its size and the names of those reported to have been on the list. The American Civil Liberties Union (ACLU) claimed in 2008 that the list contained over 1 million names. Individuals who have been reported at some point to be on the list—and were either refused travel or allowed to travel only after some delay—include politicians, musicians, and figures from other professions. It was even reported that some Federal Air Marshals were denied boarding on flights they were assigned to protect because their names matched those on the No Fly list. The U.S. Government maintains that it has scrubbed these lists. At an October 22, 2008 press conference, then-DHS Secretary Michael Chertoff said there are 2,500 on the No Fly list, fewer than ten percent of whom are U.S. persons. He also said that there are less than 16,000 individuals on the Selectee lists. However, following the attempted bombing of Northwest Flight 253, on December 25, 2009, the No Fly List has nearly doubled to approximately 6,000 according to a senior intelligence official. "The list expanded, in part, to add people associated with al-Qa'ida's Yemen branch and others from Nigeria and Yemen with potential ties to [Umar Farouk] Abdullmuttalab ... " who is alleged to have attempted the bombing of the flight. DHS has also established a redress mechanism where individuals, who believe their names are on one of the lists in error, may appeal. The program is called DHS Traveler Redress Inquiry Program (DHS TRIP ). The No Fly and Selectee Lists are an integral part of TSA's airline passenger pre-screening system and one of the biggest tools, the agency argues, for keeping dangerous people off aircraft. OI, however, plays a limited role in who is added to these lists since the preponderance of individuals are nominated for inclusion by other core intelligence and law enforcement agencies. However, according to Acting TSA Administrator Gale Rossides, following the attempted bombing of Northwest Flight 253, "DHS is working with our interagency partners to re-evaluate and modify the criteria and process used to build the Terrorist Screening Database (TSDB), including adjusting the process by which names are added to the No-Fly and Selectee Lists." After abandoning an effort to establish a follow-on system to the Computerized Passenger Prescreening System (CAPPS), TSA began development of a new system of passenger pre-screening called Secure Flight. In October 2008, TSA announced the issuance of the Secure Flight Final Rule. This would shift pre-departure watch list matching responsibilities from individual aircraft operators to TSA, thus carrying out a recommendation of the 9/11 Commission. Secure Flight is intended to alleviate the biggest challenge in the application of the No Fly and Selectee list in the passenger prescreening process—the incorrect matching of names on these watchlists with non-threatening passengers whose names are similar. Under Secure Flight, airlines will be required to collect a passenger's full name, date of birth, and gender when making an airline reservation. This additional information is expected to prevent most inconveniences at the airport, and will be particularly important for those individuals with names similar to those on the watch list. Then-TSA Administrator Kip Hawley asserts that "Secure Flight will improve security by maintaining the confidentiality of the government's watch list information while fully protecting passengers' privacy and civil liberties." Under the Secure Flight program, DHS began transferring responsibility for watch list matching to TSA in 2009, and the transition is targeted for completion by the end of 2010. The primary mission of the FAMS is to deter, detect, and defeat hostile acts targeting U.S. air carriers, airports, passengers and crews. The United States first established such a capability in 1968 with the FAA Sky Marshal program. That program was enlarged in 1985 and renamed the Federal Air Marshal Service. After 9/11, the program was greatly expanded and, pursuant to ATSA, was transferred from FAA to TSA. After DHS was established, the FAMS were briefly part of ICE, but were returned to TSA in 2005 where they remain today. In addition to their anti-hijacking duties, the FAMS provide support during national emergencies and contingencies, such as Hurricane Katrina and the evacuation of American citizens from Lebanon during the 2006 conflict between Israel and Hezbollah. They also participate in Visible Intermodal Prevention and Response (VIPR) teams which augment security at key transportation facilities in urban areas around the country. However, the predominant activity for the FAMS is to provide in-flight security for commercial airline flights. Some have questioned the extent of air marshal coverage of such flights. In a March 2008 investigative report, CNN claimed that "of the 28,000 commercial airline flights that take to the skies on an average day in the United States, fewer than 1 percent are protected by on-board, armed federal air marshals." TSA insists that the size of the federal air marshal cadre should be classified, as well as the number and itinerary of flights on which they fly, arguing that "we should not tip our hand to terrorists and let them know the mathematical probability of air marshals being on flights they may be interested in taking over or otherwise disrupting." However, TSA has publicly stated that the number is in "the thousands." In order to determine which flights should be covered by air marshals, TSA uses an intelligence-driven, risk-based approach. This informs FAM deployments during "steady state" threat conditions and in cases of heightened threat, such as in August 2006 after discovery of the Transatlantic Airline Bombing Plot and in December 2009, following the attempted bombing of Northwest Flight 253. OI provides intelligence to support FAMS mission planning and has an intelligence unit, manned 24/7, at the TSOC. As a nation of travelers and traders, America has a strategic interest in the maritime domain. The oceans bordering North America are both a barrier and a highway, separating the United States from potential enemies, connecting it to allies, and providing a venue for commerce and trade. Due to its complex nature and immense size, the maritime domain is recognized as particularly susceptible to exploitation and disruption by individuals, organizations, and States. The USCG is a military, multi-mission, maritime service that is the "principal Federal agency responsible for safety, security, and stewardship within the maritime domain. These missions are performed in any maritime region where those interests may be at risk, including international waters and America's coasts, ports, and inland waterways. In March 2003, pursuant to the Homeland Security Act , the USCG was transferred from the Department of Transportation to DHS. The USCG has several diverse missions—national defense, homeland security, maritime safety, and environmental and natural resources stewardship. To accomplish these missions, the USCG has authorities unique within the Federal government. It is both an armed service and the nation's primary maritime law enforcement agency. One of the Administration's maritime security planning assumptions is that today's complex and ambiguous threats place an even greater premium on knowledge and shared understanding of the maritime domain. This knowledge and shared understanding is termed "maritime domain awareness" and is defined as "the effective understanding of anything associated with the global maritime domain that could impact the security, safety, economy, or environment of the United States." Since it grants time and distance to detect, deter, interdict, and defeat adversaries, maritime domain awareness has been enshrined as a principal objective of the National Strategy for Maritime Security . The achievement of maritime domain awareness is, therefore, the principal objective of the USCG intelligence program. It is a collaborative effort—especially between the USCG and U.S. Navy —and also with DHS components, such as CBP and ICE, other Federal agencies, and the broader maritime community. Coast Guard intelligence collection begins at the port level and encompasses the entire maritime domain and features maritime surveillance activities by patrol aircraft, unmanned aerial vehicles, shore-based radar, and shipboard sensors including radar and passive electronic surveillance systems. The mission of the Coast Guard Intelligence and Criminal Investigations is to direct, coordinate, and oversee intelligence and investigative operations and activities that support all USCG objectives. It is a binary organization consisting of two closely linked parts: The National Intelligence Element conducts "intelligence activities" as defined in Executive Order 12333 and the National Security Act of 1947 , including the collection, retention, and dissemination of national intelligence (foreign intelligence and counterintelligence) under those authorities. The National Intelligence Element of the USCG became a statutory member of the IC in December 2001 when Congress amended the National Security Act of 1947 . The USCG Cryptologic Program is part of the National Intelligence Element. The Law Enforcement Intelligence Program describes the collection, retention, and dissemination of information pursuant to USCG law enforcement and regulatory authorities. Persons and components that collect, process, and report law enforcement intelligence, or other information, including those persons performing intelligence functions as a collateral duty, are conducting functions under the Law Enforcement Intelligence Program and are not part of the National Intelligence Element. The Assistant Commandant for Intelligence and Criminal Investigations oversees the entire USCG intelligence and criminal investigations enterprise, is the senior advisor on intelligence matters to the Commandant of the Coast Guard, and is the Intelligence Community Element Head, previously referred to as the Senior Official of the Intelligence Community for the Coast Guard National Intelligence Element. In this role, the Assistant Commandant is responsible for providing intelligence support to USCG operations. The Cryptologic Program leverages the USCG's unique access, expertise and capabilities in the maritime environment where other U.S. Government agencies are not often present. This provides opportunities to collect intelligence that supports not only USCG missions, but other national security objectives as well. The USCG describes the mission of its Cryptologic Program as: "inform, warn, and protect Coast Guard, joint, combined, and coalition forces defending national and homeland security interests with timely, focused, and actionable signals intelligence (SIGINT) on adversary disposition, plans, and intent to facilitate tactical, operational, and strategic maritime domain dominance." Through the Service Cryptologic Component, the USCG provides personnel to the National Security Agency/Central Security Service (NSA/CSS) funded through NSA's Consolidated Cryptologic Program. As part of the USCG's Integrated Deepwater System, tactical cryptologic capability will be installed on the new National Security Cutter and select legacy cutters. This capability should become fully operational in early 2011. The cryptologic systems integrated into the cutters are the same systems used by the U.S. Navy giving the cutters full interoperability with the Navy and, the USCG believes, decrease training and development costs. The USCG sees this capability as the cornerstone of the Global Maritime Intelligence Integration effort. The Coast Guard Counterintelligence Service (CGCIS) helps preserve the operational integrity of the Coast Guard by shielding its operations, personnel, systems, facilities, and information from the intelligence activities of foreign powers, terrorist groups and criminal organizations. CGCIS performs this role through counterintelligence investigations, operations, collection, analysis and production, and Counterintelligence (CI) functional services. CI uses these various aspects to also provide support to anti-terrorism/force protection; research and technology protection; and infrastructure protection/information operations. CGCIS works with the DHS CI program to ensure interoperability and to provide unique capabilities throughout DHS. The mission of the CGIS is to conduct professional criminal investigations, engage in law enforcement information and intelligence collection, provide protective services and establish and maintain law enforcement liaison directed at preserving the integrity of the Coast Guard, protecting the welfare of Coast Guard personnel, and supporting Coast Guard and DHS maritime law enforcement and counter-terrorism missions worldwide. CGIS is a federal law enforcement agency whose authority is derived from 14 U.S.C. §95. This authority provides for USCG special agents to conduct investigations of actual, alleged, or suspected criminal activity; carry firearms; execute and serve warrants; and make arrests within their jurisdiction as defined in the statute. The Coast Guard is divided operationally into two geographic areas, the Atlantic and Pacific. These, in turn, are divided into districts; each of which is responsible for a portion of the nation's coastline. The intelligence elements that support the operational organizations are overseen by the Assistant Commandant. They are the Intelligence Coordination Center, the Atlantic and Pacific Area Intelligence staffs, the Maritime Intelligence Fusion Centers, and the District and Sector Intelligence staffs. The ICC is the national-level coordinator for collection, analysis, production, and dissemination of Coast Guard intelligence. It is the focal point of interaction with the intelligence components of other government entities such as the Department of Defense and Federal law enforcement agencies at the national level. The ICC is co-located with the U.S. Navy's Office of Naval Intelligence at the National Maritime Intelligence Center in Suitland, Maryland, and supports all Coast Guard missions. The ICC conducts the following activities: Manages, analyzes, and produces intelligence that satisfies the unique maritime intelligence requirements of the USCG that include the areas of law enforcement, military readiness, counterterrorism, force protection, marine environmental protection, and port and maritime security. Analyzes, produces, and disseminates maritime intelligence in support of senior officials of the USCG, DHS, and other national decision makers. Manages the USCG intelligence collection requirements and collections management processes. Maintains a 24-hour Indications and Warning Center and current intelligence watch which includes the COASTWATCH Branch. The ICC, in conjunction with the Office of Naval Intelligence and CBP, systematically screens arriving commercial vessels for potential security and criminal threats in the form of suspect ships and people. Current regulations require commercial vessels greater than 300 gross tons to submit advanced notice of arrival (NOA) information to the National Vessel Movement Center 96 hours prior to expected arrival in the U.S. ICC Coastwatch checks notice of arrival information against federal databases to identify potential security and criminal threats. Coastwatch's goal is to provide Coast Guard and interagency decision makers as much advance warning as possible, permitting time to coordinate appropriate operational responses and risk mitigation actions. Coastwatch has provided thousands of advanced warnings about arriving individuals identified in Federal counterterrorism, law enforcement, and immigration databases as national security or criminal threats. 27 These centers are analysis and production centers that provide intelligence analysis to USCG operational commanders, the DOD, and IC and other law enforcement partners on geopolitical issues, terrorism, vessel movements and vessels of interest, transnational crimes (drugs, piracy, human smuggling), port security, and living marine resources. The Atlantic MIFC is located in Virginia Beach, Virginia and covers the North and South Atlantic, Gulf of Mexico, Caribbean, Western Mediterranean, and the Great Lakes and all navigable waterways east of the Rocky Mountains. The Pacific MIFC is located in Alameda, California and covers the North, Central, and South Pacific including the Pacific Rim and the west coast of South America. These staffs provide intelligence support to their respective commanders and the International Ship and Port Facility Code (ISPS) Program. District intelligence staffs are also responsible for coordinating human intelligence (HUMINT) collection, conducting regional law enforcement and intelligence liaison, and overseeing the Sector Intelligence Officers. The SIS is the key intelligence support element for all operations within a Coast Guard Sector. The SIS is led by a Sector Intelligence Office (SIO). The SIO is the primary intelligence advisor to the Sector Commander. Having successfully integrated the Field Intelligence Support Teams (FISTs) into the Sector Intelligence Staff, each Coast Guard Sector now has a full time dedicated maritime intelligence component to provide port-level threat assessments as well as conduct collection and reporting for all Sector wide maritime-related threats. As part of these efforts, they conduct liaison with Federal, state, local, tribal, and industry partners. The SIS' also report on activities in foreign ports by debriefing ship crews that have returned to the United States from overseas. These interviews are used at the ICC and the MIFC's to identify vessels or individuals of interest arriving at U.S. ports, or potential threats to maritime security. Although the USSS is best known for its responsibility to protect the President and Vice President of the United States and visiting foreign heads of state and government, it was first established in 1865 as a law enforcement agency with a mandate to investigate the counterfeiting of U.S. currency. Its protective responsibilities began in 1901 following the assassination of President McKinley and were codified by Congress in 1906. The USSS remained a distinct organization within the Department of the Treasury until its transfer to DHS effective March 1, 2003, pursuant to the Homeland Security Act of 2002. Today, in addition to its protective service mission, the USSS is responsible for maintaining the integrity of the nation's financial infrastructure and payment systems. This was historically accomplished through the enforcement of counterfeiting statutes, but since 1984, its investigative responsibilities have expanded to include crimes that involve financial institution fraud, computer and telecommunications fraud, false identification documents, access device fraud, advance fee fraud, electronic funds transfers, and certain money laundering crimes. The USSS employs approximately 3,500 special agents, 1,350 Uniformed Division officers, and more than 1,800 other technical, professional, and administrative support personnel. They work at the headquarters in Washington, D.C. and in 142 field offices and units within the United States and its territories and 22 offices in 18 foreign countries. The USSS is organized into seven offices, Investigations, Protective Operations, Protective Research, Professional Responsibility, Government and Public Affairs, Human Resources and Training, and Administration. The two principal operational offices are Investigations and Protective Operations. The principal support office from an intelligence perspective is the Office of Protective Research. Investigations. This office investigates counterfeiting and other crimes against the integrity of the nation's financial infrastructure and payment systems. Protective Operations. This office performs the protective service mission of the USSS. Protectees include the President and Vice-President and their families, visiting heads of state and government, major Presidential candidates, and former President and Vice Presidents. It also has a uniformed division that is responsible for security at the White House Complex; the Vice President's residence; the Department of the Treasury (as part of the White House Complex); and foreign diplomatic missions in the Washington, D.C., area. In addition, the Office of Protective Operations executes the USSS's responsibility as the U.S. Government lead agency for planning, coordinating, and implementing the operational security plans for National Special Security Events (NSSE). Protective Research. This office is responsible for protective intelligence and analysis. It also evaluates and implements technology-based protective countermeasures. Within its Protective Intelligence and Assessment Division, intelligence, law enforcement, and other information is reviewed and threat and vulnerability assessments are produced. The PID supports the USSS protective service mission through three primary means: (a) receive, evaluate, disseminate, and maintain information concerning subjects (individuals and groups) and activities that pose a known, potential, or perceived threat to persons, property, and events protected by the USSS; (b) investigate those subjects and activities; and (c) conduct protective intelligence 'advances' preceding protectee travel. The division is organized into foreign and domestic branches, a 24-hour duty desk to collect and process threat information, and the National Threat Assessment Center. Unlike other DHS components that collect as well as analyze and disseminate intelligence information, the USSS is principally a consumer of intelligence which it analyzes to mitigate threats to those it is charged to protect. Because of its unique statutory authorities to use intelligence to prevent attacks on the nation's leaders and visiting foreign dignitaries, the USSS maintains that comparisons with intelligence gathering organizations within the IC are difficult, if not impossible. NTAC uses historical information, investigative records, interviews, and other primary source material to produce long-term behavioral research studies that leverage USSS expertise in the protection of persons for homeland security or public safety purposes. The premise for NTAC was developed in the wake of an original assassination research study, the Exceptional Case Study Project (ECSP), conducted in collaboration with the Department of Justice. The ECSP was a study of individuals who had assassinated, attacked, or approached with lethal means, public officials or public figures from 1949-1996 in the United States. One major product from this study was a guidebook on protective intelligence and threat assessment investigations. The NTAC was then established in 1998 as an effort to dedicate resources to better understand, and find ways to prevent, targeted violence; to share this knowledge with others; and to continue to provide leadership in the field of threat assessment. Through the Presidential Threat Protection Act of 2000, Congress formally authorized NTAC to provide assistance to Federal, state, and local law enforcement, and others with protective responsibilities, on training in the area of threat assessment; consultation on complex threat assessment cases or plans; and research on threat assessment and the prevention of targeted violence. Notable NTAC Research Projects include Safe School Initiative (1999-2001). In collaboration with the Department of Education, NTAC studied 37 school shootings, involving 41 attackers that occurred in the United States between January 1974-May 2000. The study examined the thinking, behaviors, and communications of the students who planned and carried out these incidents. The Insider Threat Study (2002-08). With financial support from DHS, NTAC partnered with CERT at Carnegie Mellon University, to examine organizational employees who perpetrated harm to their organizations via a computer or system or network to include intellectual property theft, fraud, and acts of sabotage. Four reports were published based on this study. Bystander Study (2004-08). In collaboration with the Department of Education and McLean Hospital, NTAC explored how students with prior knowledge of targeted school-based violence made decisions regarding whether and with whom to share the information. A report, Prior Knowledge of Potential School-based Violence: Information Students Learn May Prevent a Targeted Attack, was published in May 2008. Institutions of Higher Education Targeted Violence Study (ongoing): Pursuant to a recommendation in a report to the President following the April 2007 shootings at Virginia Tech, the NTAC is in the initial stages of a collaborative project with the Department of Education and the FBI Behavioral Analysis Unit to research targeted violence at institutions of higher education. Managing competing claims for intelligence support is one of the biggest challenge facing the DHS IE. Former Under Secretary Allen stressed the importance of supporting the Department itself—both headquarters and operational components—noting that "... keeping dangerous people and dangerous items from crossing our air, land, and sea borders and protecting our critical infrastructures ... requires having reliable, real-time information and intelligence to allow the Department to identify and characterize threats uniformly, support security countermeasures, and achieve unity of effort in the response." But, the DHS IE also has responsibilities to support the President, the Secretary, and other national leaders with a strategic perspective on a range of "all hazards" homeland security issues including terrorism threats. State, local, and tribal, law enforcement and security officials, as well as the operators of the nation's critical infrastructure, are also important customers. They require timely and actionable intelligence through usable products in order to prepare for and respond to a variety of threats. Helping the Department achieve the right balance among these competing claims on its intelligence resources and capabilities is a challenging task for Congress. The following are options the Congress may wish to consider in exercising its oversight responsibility. In 2009, Secretary Napolitano directed I&A to outline a Department-wide initiative to strengthen the baseline capabilities and analytic capacity of state and major urban area fusion centers. As a result, a new program office for the fusion center program, the JFC PMO, will be established. DHS intends for the office to be managed on a day-to-day basis by I&A, but all relevant DHS components will be involved to include staff from those components. Among the intended responsibilities of the new JFC PMO are: Lead a unified Department-wide effort to develop and implement survey tools to ensure state, local and tribal customers are provided the opportunities to define and identify the types of homeland security-related information they need, and the format in which they need it. Develop mechanisms, in coordination with federal, state, local, tribal, and territorial authorities, to improve the capability of fusion centers to gather, assess, analyze, and share locally generated and national information and intelligence, in order to provide complete pictures of regional and national threats and trends. The Secretary requested a recommendation by March 2010 on the feasibility and optimal structure and resources of the JFC-PMO. Under Secretary Wagner has testified that the Department is also considering how a pending JFC-PMO will align with the White House's direction that DHS, in coordination with the PM-ISE, be the lead agency in establishing a National Fusion Center Program Office. The establishment and operation of these offices will be of interest to Congress. Law enforcement officers have praised fusion centers as a vital resource for information sharing and coordination while at the same time expressing great concern about the sustainment of these centers through consistent funding. Currently, funds from the State Homeland Security Grant Program (SHSGP) and Urban Area Security Initiative (UASI) are used to support state and local fusion centers. These grant programs are managed within DHS by the Federal Emergency Management Agency (FEMA) Grant Programs Directorate (GPD). However, the intelligence and information sharing activities that these funds support are operationally managed by DHS I&A. Some contend this disconnect between fund administration and implementation is problematic. Congress may wish to consider alternative funding arrangements for fusion centers. One option is to designate a percentage of SHSGP and UASI funds for fusion centers. Another is to authorize and appropriate funding for a new grant program for fusion centers. The success of the fusion center program is dependent on the infrastructure that enables state and local fusion centers to have access to each other's information as well as to the appropriate federal databases. The fusion center program and the Nationwide Suspicious Activity Report Initiative (NSI) rely on the concept of shared space architecture, where the fusion centers replicate data from their systems to an external server under their control, making the decision on what to share totally under their control. A secure portal is then created that allows simultaneous searching of all such databases so that fusion centers will be able to aggregate any relevant information that exists throughout the national fusion center network. The NSI project team has arranged for secure access to this portal on one of three existing networks—Law Enforcement Online, Regional Information Sharing Services, or HSIN. Each fusion center will require a server and software to translate data from whatever case management or intelligence system is in place to a separate database on the server. Achieving information sharing objectives also requires that partners establish wide-scale electronic trust between the caretakers of sensitive information and those who need and are authorized to use that information. Fusion Centers must, therefore, acquire a federated capability for identity and privilege management that securely communicates a user's roles, rights, and privileges to ensure network security and privacy protections. The two elements of this are identification/authentication—the identity of end users and how they were authenticated; and privilege management—the certifications, clearances, job functions, and organizational affiliations associated with end users that serve as the basis for authorization decisions. Congress may wish to consider providing funding and leadership to provide this infrastructure capability to all 72 fusion centers. In February 2010, DHS produced its first Quadrennial Homeland Security Review (QHSR), a comprehensive assessment outlining its long-term strategy and priorities for homeland security and guidance on the Department's programs, assets, capabilities, budget, policies, and authorities. The QHSR report outlines the Nation's homeland security missions, which it describes as enterprise-wide (i.e., not limited to DHS): Mission 1. Preventing Terrorism and Enhancing Security Mission 2: Securing and Managing our Borders Mission 3, Enforcing and Administering Our Immigration Laws Mission 4: Safeguarding and Securing Cyberspace Mission 5: Ensuring Resilience to Disasters The report also calls for the maturing and s trengthening of the homeland security enterprise by: Establishing a comprehensive system for building and sharing awareness of risks and threats. Developing and implementing a methodology to conduct national-level homeland security risk assessments. Enhancing critical tools and institutionalizing arrangements for timely access and effective sharing of information and analysis. Establishing a robust approach to identify verification that safeguards individual privacy and civil rights. Ensuring shared situational awareness in the air, land and maritime domains. Using and integrating counterintelligence in all aspects of homeland security to thwart attacks against the homeland. Promoting a common understanding of security as a shared responsibility. Fostering communities that have information, capabilities, and resources to prevent threats, respond to disruptions, and ensure their own well-being. Fostering a broad national culture of cooperation and mutual aid. Ensuring scientifically informed analysis and decisions are coupled to innovative and effective technological solutions. A review of the QHSR report and the forthcoming "bottom-up review" will give Congress an opportunity to review the department's latest judgments about the homeland security-related risks facing the country and what resources should be committed to address those risks. The results of that review will be particularly important as Congress considers an authorization bill for DHS. Former Secretary Chertoff has said that "DHS must base its work on priorities that are driven by risk." DHS has defined "risk" as the product of three variables, threat (the likelihood of an attack occurring), vulnerability (the relative exposure to an attack), and consequence (the expected impact of an attack). The DHS IE identifies, measures, and monitors the threat variable in the DHS risk equation. The role of the DHS IE in risk management decision making at the Department is another area Congress may wish to explore. A recent study by the Homeland Security Institute noted that DHS risk assessments require threat inputs but generating useful threat judgments is challenging. It suggested ways to improve risk and intelligence analyst collaboration to better support DHS decision making. Terrorism remains the paramount concern to the Department. The latest National Intelligence Estimate on the terrorist threat to the United States, concludes that "Al Qa'ida is and will remain the most serious terrorist threat to the Homeland ... has protected or regenerated key elements of its Homeland attack capability ... and that in its Homeland plotting is likely to continue to focus on prominent political, economic, and infrastructure targets with the goal of producing mass casualties, visually dramatic destruction, significant economic aftershocks, and/or fear among the U.S. population." Following the hijacking of aircraft, that were then flown into the World Trade Center and the Pentagon with devastating effects, a significant portion of homeland security resources in the United States were understandably devoted to aviation security—an amount proportionally larger than that of other transportation modes or critical infrastructure. The 2006 Transatlantic Airlines Plot and the Christmas Day 2010 attempted bombing of Northwest Flight 253, demonstrate that the threat to commercial aviation remains but that the tactics employed have evolved. Since 9/11, al-Qa'ida and other terrorist groups with anti-Western and anti-American ideologies have committed several other deadly terrorist attacks, including: Bali, 2002. The Islamist group Jemaah Islamiyah bombed nightclubs killing 202. Madrid, 2004. A Muslim, al-Qa'ida-inspired terrorist cell bombed commuter trains killing 190 and injuring over 1,000. London, 2005. British Islamist extremists bombed city buses killing 52 and injuring over 700. Mumbai, 2008. A team from the militant group Lashkar-e-Taiba conducted a shooting and bombing rampage at two hotels, a railway station, hospital, Jewish Center, cafe, and cinema. 164 were killed. All of these attacks involved mass casualties. All resulted in visually dramatic destruction. But, none of them were committed against civil aviation. Recognizing that some elements of the nation's critical infrastructure are defended in depth against attack, while others are not, a question of abiding interest is whether terrorists might adapt by choosing to attack softer targets in the Homeland, such as nightclubs, commuter trains, buses, or other places where large numbers of Americans congregate. In addition, in a period of less than one year (May 2009-March 2010), there were 12 "homegrown" jihadist-inspired terrorist attacks and plots (two attacks and 10 plots) by American citizens or lawful permanent residents of the United States. By comparison, in over seven years from the 9/11 attacks through May 2009, there was an annual average of only two such plots, none of which resulted in attacks. This has not gone unnoticed by many who are concerned that domestic radicalization, previously viewed as a problem largely confined to Europe, is a bigger threat in the United States than originally believed. And what about methods of attack not yet imagined? The Australian scholar Mervyn Bendle asks us to consider one such scenario. The recent catastrophic bushfires in his own country "alert us to the extreme danger posed by pyroterrorism, especially as global terrorist organizations continue to modify their strategies in the face of increasingly effective counterterrorism measures employed against them. Pyroterrorism can do great harm to valuable natural resources and infrastructure; destabilise and degrade regional economies; kill, maim, terrorise, and radically reduce the quality of life of large populations of people; and even destabilise social and political systems." Bendle argues that this is not an "alarmist, eccentric, or "Islamophobic" notion." His study documents that pyroterrorism involvement has been suspected or established in Greece, Israel, Spain, and Estonia. Moreover, in the late 1990's, the Earth Liberation Front set fire to various forests, commercial and industrial buildings in the United States including the U.S. Forest Service Headquarters in Oregon. Pyroterrorism is just one example of many alternative hypotheses that homeland security risk managers may wish to consider in order to avoid what was famously described in the 9/11 Commission Report as "a failure of imagination." Threat assessment is a critical component of the risk equation. Risk, in turn, is an important element of the QHSR which will ultimately inform how the department proposes to allocate resources in the future based on the evolving threat environment. Therefore, Congress may wish to explore: How I&A will support the next step in the Department's QHSR process, the top-to-bottom review that is intended to link strategy to program to budget. How intelligence analysis and assessments are used within the Department to determine priorities for funding of new or existing homeland security programs. How intelligence analyses and assessments have led to increased or decreased funding for existing programs. The framework that DHS will establish for enhanced collaboration among risk and intelligence analysts. | The primary mission of the Department of Homeland Security (DHS, the Department) is to "prevent terrorist attacks within the United States, reduce the vulnerability of the United States to terrorism, and minimize the damage, and assist in the recovery from terrorist attacks that do occur in the United States." Since its inception in 2003, DHS has had an intelligence component to support this mission and has been a member of the U.S. Intelligence Community (IC). Following a major reorganization of the DHS (called the Second Stage Review or "2SR") in July 2005, former Secretary of Homeland Security, Michael Chertoff established a strengthened Office of Intelligence and Analysis (I&A) and made the Assistant Secretary for Information Analysis (now Under Secretary for Intelligence and Analysis) the Chief Intelligence Officer for the Department. He also tasked I&A with ensuring that intelligence is coordinated, fused, and analyzed within the Department to provide a common operational picture; provide a primary connection between DHS and the IC as a whole; and to act as a primary source of information for state, local and private sector partners. Today, the DHS Intelligence Enterprise (DHS IE) consists of I&A, two headquarters elements supported by I&A, and the intelligence elements of six DHS operational components: U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE). U.S. Citizenship and Immigration Services (USCIS), the Transportation Security Administration (TSA), U.S. Coast Guard (USCG), and U.S. Secret Service (USSS). Congress made information sharing a top priority of the Department's intelligence component in the Homeland Security Act of 2002 and underscored its importance through the Intelligence Reform and Terrorism Prevention Act of 2004. Since the 2SR reorganization, Congress imposed additional requirements for intelligence analysis; information sharing; department-wide intelligence integration; and support to state, local, tribal governments, and the private sector through the Implementing Recommendations of the 9/11 Commission Act of 2007. On February 11, 2010, the Senate confirmed President Obama's selection of Caryn Wagner to serve as Under Secretary for Intelligence and Analysis. As she assumes responsibility for the DHS IE, Congress will likely be interested in the progress of integration of the Department's intelligence components and the quality and relevance of the intelligence DHS IE produces for front line law enforcement and security officials who are responsible for protecting America and its people. In February, DHS produced its first Quadrennial Homeland Security Review (QHSR), a comprehensive assessment outlining its long-term strategy and priorities for homeland security and guidance on the Department's programs, assets, capabilities, budget, policies, and authorities. The next step in the Department's QHSR process is to conduct a "bottom-up review" to systematically link strategy to program to budget. The results of that review will be particularly important as Congress considers an authorization bill for DHS. This report provides an overview of the DHS IE both at headquarters and within the components. It examines how DHS IE is organized and supports key departmental activities to include homeland security analysis and threat warning; border security; critical infrastructure protection; support to, and the sharing of information with, state, local, tribal, and private sector partners. It also discusses several oversight challenges and options for Congress to consider on these issues. This report may be updated. |
The safety of air travel, particularly after the terrorist attacks of September 11, 2001, has been an important priority for the U.S. government. The Aviation and Transportation Security Act of 2001 created the Transportation Security Administration (TSA) and charged it with ensuring the security of all modes of transportation, including civil aviation. The TSA is responsible for prescreening all potential commercial airline travelers before they board an aircraft. Pursuant to this responsibility, TSA uses the "No Fly" list to identify individuals who pose a threat to aviation safety. Persons attempting to board an aircraft who are matched to an identity on the No Fly list are not allowed to board. Although the current number and identity of persons on the No Fly list is not a matter of public record, some recent news reports claim that more than 80,000 people are currently on the list. However, some persons have claimed that their alleged placement on the list was the result of an erroneous determination by the government that they posed a national security threat. In some cases, it has been reported that persons have been prevented from boarding an aircraft because they were mistakenly believed to be on the No Fly list, sometimes on account of having a name similar to another person who was actually on the list. The Department of Homeland Security (DHS) operates a redress process for travelers who wish to contest their right to board an aircraft, but this procedure has been challenged in federal court as violating the Fifth Amendment right to due process. After an adverse ruling in a federal district court case in 2014, the executive branch revised the process. This report provides an overview of the operation of the government's watchlists, examines some of the legal issues implicated by challenges to the No Fly list, and describes recent case law on the matter. The National Counterterrorism Center (NCTC) serves as the central information bank for the U.S. government on "known and suspected terrorists and international terrorist groups." It is the government's principal organization for "analyzing and integrating" intelligence concerning terrorism and counterterrorism. The NCTC maintains the Terrorist Identities Datamart Environment (TIDE), the central repository of the U.S. government containing derogatory information about suspected international terrorists. Based on evaluations of intelligence information, agencies in the intelligence community (IC) nominate individuals known or suspected to be international terrorists and forward the names to the NCTC. Using a non-exclusive list of possible factors, the NCTC determines if each name merits inclusion on the list. As of June 30, 2016, according to the NCTC, about 1.5 million persons were included in TIDE, and about 15,000 were U.S. persons (citizens and lawful permanent residents). TIDE contains all of the government's information regarding persons "known or appropriately suspected to be or to have been involved in activities constituting, in preparation for, in aid of, or related to terrorism (with the exception of purely domestic terrorism information)." Due to the national security importance of this information, the contents of the database are classified. The NCTC "exports" an unclassified subset of the data, including biometric and biographic identifiers, to the Terrorist Screening Center (TSC), which, in turn, operates the Terrorist Screening Database (TSDB). In contrast to TIDE (operated by NCTC), the TSDB (operated by TSC) does not include "derogatory intelligence information." Instead, it consists of "sensitive but unclassified terrorist identity information consisting of biographic identifying information such as name or date of birth or biometric information such as photographs, iris scans, and fingerprints." Established pursuant to Homeland Security Presidential Directive 6, the TSC is managed by the Federal Bureau of Investigation (FBI) and receives support from various federal agencies. The information in the TSDB is obtained from two primary sources. First, as mentioned above, TIDE provides information on the identity of suspected international terrorists. Second, the FBI's Automated Case Support System (ACSS) provides additional information on suspected domestic terrorists directly to the TSC. Whether receiving information from TIDE or ACSS, the TSC will review each file to ensure that it satisfies the government's watchlist standards before adding the name to the TSDB. The information received by TSC must satisfy two requirements to merit inclusion on the TSDB. First, the "biographic information associated with a nomination must contain sufficient identifying data so that a person being screened can be matched or disassociated from a watchlisted terrorist." Second, the "facts and circumstances" must "meet the reasonable suspicion standard of review." This means "articulable facts which, taken together with rational inferences, reasonably warrant the determination that an individual is known or suspected to be or has been engaged in conduct constituting, in preparation for, in aid of, or related to terrorism and terrorist activities." This standard was not mandated by statute, but was "adopted by internal Executive Branch policy and practice." In addition, a 2014 district court opinion stated that there was a "secret exception to the reasonable suspicion standard," but the "nature of the exception and the reasons ... for nomination are claimed to be state secrets." As mentioned above, in contrast to the classified contents of TIDE, the TSDB contains sensitive, but not classified, information about the identity of suspected terrorists. The unclassified nature of the list permits a broad range of federal, state, and local organizations to access the data. Accordingly, the TSC provides various frontline screening agencies with subsets of the TSDB for use in combating terrorism. These watchlists are tailored in accordance with the agency's mission(s) and statutory authorities. For the purposes of monitoring flights, TSA receives two such lists: the No Fly list and the Selectee list. People on the first are prohibited from boarding an American airline or any flight that comes in contact with U.S. territory or airspace. Those on the second are subject to enhanced screening procedures when they attempt to do so. The No Fly and Selectee lists have their own substantive requirements for inclusion, which executive officials have stated are more stringent than the reasonable suspicion standard for placement on the TSDB. In order to qualify for inclusion on the No Fly or Selectee lists, a nomination must "establish[] a reasonable suspicion that the individual meets additional heightened derogatory criteria that goes above and beyond the criteria required for inclusion in the broader TSDB." When a person is placed on the list, they will not receive notice; instead, they will simply be denied boarding or subjected to enhanced screening procedures if they attempt to board a plane. However, in a departure from the traditional requirements for inclusion on the No Fly list, after the failed terrorist attack of the so called "underwear bomber," who attempted to destroy a commercial plane traveling from Amsterdam to Detroit on Christmas Day 2009, the NCTC and TSC were ordered, following an interagency meeting, to add a number of individuals from the TIDE database to the No Fly list. This included a number of "individuals without any information indicating a personal involvement in terrorism." Accordingly, a number of individuals were placed on the No Fly list who may not have met the normal standards for inclusion. Subsequently, TSC, in coordination with the FBI and other intelligence agencies, conducted a review of all the individuals who had been upgraded. This review was completed more than two years after the original upgrading. A 2014 Department of Justice (DOJ) Office of Inspector General audit expressed "concerns about the TSC's ability to ensure that all watchlist records that were modified as a result of the attempted attack were reviewed and returned to the appropriate individualized status." The precise guidelines and particular factors the government relies on to place individuals on terrorist watchlists are not made public. The criteria for placement on the No Fly list, as well as whether a person is on the No Fly list, are considered "Sensitive Security Information" (SSI) and have not been publicly released by the federal government. Initially, TSA required aircraft operators to screen passengers by matching data against the No Fly and Selectee lists. Following the release of the 9/11 Commission Report , the Intelligence Reform and Terrorism Prevention Act of 2004 altered this arrangement by requiring TSA to conduct the matching itself. The act also requires aircraft operators to provide passenger information to TSA for prescreening purposes. TSA issued the Secure Flight Final Rule on October 28, 2008, implementing the act's requirements. Under the program, TSA requires aircraft operators to collect Secure Flight Passenger Data (SFPD) from passengers and provide it to TSA. SFPD includes passengers' full name, date of birth, gender, and can also include certain non-personal information, such as itinerary and a travel record number. The information is collected when a potential passenger makes a flight reservation. This information must be provided to TSA about 72 hours prior to the flight. For reservations that occur after this deadline, aircraft operators must provide the SFPD as soon as possible. TSA then matches the data with the No Fly, Selectee, and Centers for Disease and Control and Prevention (CDC) Do Not Board list. The potential matches are compared to the TSA Cleared List, which contains the identities of individuals who have been cleared through the DHS redress process. TSA then performs manual reviews of potential matches to ensure individuals are included on the No Fly and Selectee lists, which may include the consultation of other databases. Following this process, TSA will prohibit certain passengers from receiving a boarding pass. If such passengers arrive at the airport, air carriers may send updated passenger information to TSA for rematching or may call Secure Flight to resolve an issue. This process may involve contact between Secure Flight and the Terrorist Screening Center to confirm or eliminate a match. At the conclusion of this procedure, a passenger will either be cleared to fly, designated as a selectee for enhanced screening, or barred from boarding the aircraft. Since 2009, Secure Flight has evolved to assign passengers a risk category: high risk, low risk, or unknown. The Secure Flight Final Rule provides that TSA has discretion to check against the entire TSDB and other watchlists when warranted for security reasons, and has developed new lists for passengers considered high risk and subject to enhanced screening. First, working with Customs and Border Protection—which has access to additional information about international travelers—Secure Flight has developed two lists to identify certain individuals for enhanced screening. TSA analysts examine relevant intelligence information to identify factors that may denote a passenger who poses an elevated risk. TSA then develops rules based on these factors, and these rules are provided to CBP, which uses the Automated Targeting System-Passenger to identify individuals who correspond to the rules. Those passengers are then subject to enhanced screening. Second, beginning in April 2011, TSA began matching against an Expanded Selectee List, which includes records in the TSDB with a full name and date of birth that are not on the No Fly or Selectee List but do meet the Terrorist Screening Center's reasonable suspicion standard to qualify as a known or suspected terrorist. Individuals identified in this list are also subject to enhanced screening. A number of travelers who dispute any connection to terrorism have alleged that they have been denied boarding on commercial aircraft. A denial of entry can occur, for example, when a person's name and/or date of birth correspond or are similar to the identity of someone in the government's watchlist database. The Implementing Recommendations of the 9/11 Commission Act of 2007 directed DHS to create an Office of Appeals and Redress for people who believe they have been mistakenly denied boarding or subjected to heightened screening for security reasons. Pursuant to these requirements, DHS established the Traveler Redress Inquiry Program (TRIP) to resolve such issues. In general, the program is designed to offer an efficient remedy for travelers who encounter difficulty with the government's screening process and to centralize a multiagency process of reviewing and responding to any traveler complaints. Following litigation concerning the constitutionality of the redress procedures available to plaintiffs who challenge their inclusion on a government watchlist, the government has revised the DHS TRIP redress procedures. Prior to this revision, passengers who were denied boarding or subjected to additional screening procedures could seek redress by filing a complaint online or by mailing a complaint form. All travelers who did so were assigned a redress number. If DHS decided that a person seeking redress was a match or near match to an identity contained in the TSDB, the agency referred the potential match to the redress unit of the TSC. TSC then determined if the person was an actual match with the identity of someone in the TSDB. If the person was determined to be a match, TSC next determined whether the person should continue to be in the TSDB; and, finally, whether the person should continue to be on the No Fly or Selectee list. Those travelers determined not to match a person in the TSDB were added to the DHS TRIP Cleared List and received a corresponding traveler redress number. Subsequently, a traveler could enter his or her redress number when purchasing an airline ticket. If travelers were on the DHS TRIP Cleared List, they could be cleared by Secure Flight, and presumably would receive authorization to board an aircraft. When the review process was completed, DHS TRIP sent a letter to travelers notifying them that review was complete. The letter, however, did not confirm or deny whether an individual was on the No Fly list or in the TSDB. Notifications usually provided that travelers could seek judicial review in a U.S. court of appeals under 49 U.S.C. § 46110. That review consisted of an ex parte and in camera examination by the court of the administrative record provided by the government containing the evidence it relied upon. If the court disagreed with the government's determination, the court could remand the case to the agency for further consideration. Even after judicial review by a U.S. court of appeals, travelers were never informed of their status on any watchlist or whether they would be permitted to board an aircraft traveling to, from, or within the United States in the future. Instead, a person on a No Fly list who attempted to board a plane would simply be denied boarding. The DHS TRIP redress process did not provide travelers with reasons for inclusion on the list, or a hearing where they might challenge their inclusion on the list. At no point did travelers have the opportunity "to contest or to offer corrections to the record on which any such determination may be based." The "government's policy [was] never to confirm or to deny an individual's placement on the No Fly list." The original redress process was challenged by a number of individuals denied boarding, including on the grounds that it purportedly violated the Due Process Clause of the Constitution. Following an adverse ruling by a federal district court, the government revised the DHS TRIP procedures. Under the current process described by the government, a U.S. person denied boarding who has applied for redress under DHS TRIP will receive a letter indicating whether he or she is on the No Fly list. If so, this letter will also notify the individual that he or she may elect to receive or submit additional information. If a U.S. person requests further information, DHS TRIP will typically provide a second response which "will identify the specific criteria or criterion under which the individual has been placed on the" list, "includ[ing] an unclassified summary of information supporting the individual's No Fly List status." This second letter informs recipients that they may seek further review of their status and to submit information regarding whether their placement on the No Fly list is warranted. Upon receipt of an individual's response, DHS TRIP forwards the case to the TSC Redress office. TSC then reviews the relevant materials and provides a recommendation to the TSA Administrator regarding whether a person should remain on the list. Next, the TSA Administrator will review that recommendation and issue a final decision either removing the individual from the No Fly list, maintaining him or her on the list, or remanding the case to TSC for further information. This final order will be delivered to the individual petitioner as well as TSC. If the order removes the individual from the No Fly List, the TSC Redress Office will update the relevant information to the TSDB and the screening systems that receive information from the TSDB. The Fifth Amendment of the U.S. Constitution provides that no person shall be "deprived of life, liberty, or property, without due process of law." This protection extends to U.S. citizens and noncitizens who have sufficient ties to the United States. Courts have developed two major legal doctrines concerning the protection of rights and liberty interests under the Due Process Clause—procedural and substantive due process. "Procedural due process imposes constraints on governmental decisions which deprive individuals of 'liberty' or 'property' interests within the meaning of the Due Process Clause of the Fifth or Fourteenth Amendment." As explained below, the particular procedures required may vary according to the situation. Substantive due process encapsulates the notion that the Due Process Clause "provides heightened protection against government interference with certain fundamental rights and liberty interests." Courts have found that placement on the No Fly list can potentially implicate procedural and substantive due process rights. However, because claims alleging substantive due process violations are somewhat underdeveloped as of yet, this report primarily examines procedural due process claims, which have received more extensive analysis by federal courts. Some travelers who challenge their placement on the No Fly list and the government's redress process have alleged that their right to international travel has been deprived without due process of law. Courts assessing procedural due process claims first ask "whether the plaintiff has been deprived of a [constitutionally] protected interest." If so, courts next "consider whether the procedures used by the government in effecting the deprivation 'comport with due process.'" Placement on the No Fly list can impede one's ability to travel internationally. While a "right to travel" is not expressly mentioned in the Constitution, the Supreme Court has recognized a right to travel as "a part of the 'liberty' of which the citizen cannot be deprived without due process of law under the Fifth Amendment." The right to interstate travel is less susceptible to government restraint than the right to international travel, as the Court has described the former as "virtually unqualified." The right to international travel is nonetheless a "liberty protected by the Due Process Clause." However, the right to international travel is subject to "reasonable governmental regulations," and not every restriction on a person's right to travel will raise a significant due process concern. In assessing whether a governmental policy infringes upon such a right, courts will often examine the scope of the policy and the degree to which it impairs the ability of a person to feasibly travel. Not every impediment to travel is considered a deprivation of a constitutionally protected interest. In Gilmore v. Gonzales for example, the U.S. Court of Appeals for the Ninth Circuit rejected a constitutional challenge to the TSA's requirement that an airline passenger present identification before boarding an interstate flight. The court noted that the plaintiff was barred from only one form of interstate travel, and ruled that the government's policy did not violate the plaintiff's right to interstate travel "because the Constitution does not guarantee the right to travel by any particular form of transportation." The court explained that the "burden" of presenting identification was not unreasonable and "other forms of travel remain[ed] possible." Several federal courts, however, have distinguished certain challenges to placement on the No Fly list from this case and determined that placement on the No Fly list can deprive someone of a constitutionally protected liberty interest in international travel. For example, one district court noted that Gilmore concerned a plaintiff's right to fly within the United States, while placement on the No Fly list bars international flight. While there may be "alternatives to flying for domestic travel within the continental United States," the court reasoned, flying is often the only feasible method of international travel. Further, Gilmore concerned a requirement to show identification in order to board an airline, while placement on the No Fly list bars flying indefinitely. For these courts, placement on the No Fly list is a deprivation of a constitutionally protected interest, and the government's procedures must therefore comport with due process. Another liberty interest that can be implicated by placement on the No Fly list—thus triggering procedural due process protection—is harm to one's reputation combined with a denial of a legal right or status. Under this "stigma-plus" doctrine, a plaintiff can establish a due process claim by showing (1) "the public disclosure of a stigmatizing statement by the government, the accuracy of which is contested" and (2) "the denial of 'some more tangible interest' ... or the alteration of a right or status recognized by state law." For example, one federal district court found that the plaintiffs, who allegedly had names similar to names on the No Fly list and were regularly subjected to enhanced screening procedures in view of their fellow travelers, satisfied the first prong because public association with terrorism was sufficiently stigmatizing. However, the court found that the plaintiffs failed to satisfy the second prong, because they did not show a "tangible harm." The court noted that the "Plaintiffs do not have a right to travel without any impediments whatsoever," and "have not alleged any tangible harm to their personal or professional lives that is attributable to their association with the No-Fly List, and which would rise to the level of a Constitutional deprivation of a liberty right." In contrast, another federal district court found that plaintiffs who had actually been prevented from flying met both factors. The first was met because placement on a No Fly list "carries with it the stigma of being a suspected terrorist that is publicly disclosed to airline employees and other travelers." The second was met because the plaintiffs suffered a "change in legal status"—they were legally barred from traveling by air to or from the United States, and they would have engaged in such travel had they not been placed on the No Fly list. Nonetheless, another district court, in weighing a challenge to placement on the No Fly list, found the stigma plus doctrine was not satisfied because the plaintiff failed to sufficiently allege facts that would "give rise to an inference that the stigmatizing statements reached the other passengers so as to cause harm to Plaintiff's reputation." As explained above, if a court finds that the government has deprived someone of a constitutionally protected liberty interest—one's right to international travel, for example—then the government must provide that person with due process. This usually requires the government to provide the person with notice of the deprivation and an opportunity to be heard before a neutral party. The Supreme Court has explained, however, that due process is not a "technical conception with a fixed content unrelated to time, place, and circumstances." Instead, the concept is "flexible and calls for such procedural protections as the particular situation demands." Consequently, the precise type of notice, the manner and time of a hearing, and the identity of the decisionmaker can vary according to the situation. When determining the proper procedural protections in a given situation, courts will weigh the private interests affected against the government's interest. In Mathews v. Eldridge , the Supreme Court articulated the balancing test for deciding what procedural protections are required when the government deprives someone of life, liberty, or property. A court must examine three broad factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail. Therefore, as explained more fully below, when a court confronts a challenge to a governmental deprivation of a constitutionally protected liberty interest, a court will balance each of these factors in order to determine what procedural protections due process requires. As explained above, the right to international travel is a constitutionally protected liberty interest that some courts have found to be infringed by placement on the No Fly list. In assessing a procedural due process challenge to the governmental procedures when a person's liberty is infringed, courts will first weigh the private interest affected by the government's action. In assessing the significance of the deprivation, the Supreme Court has examined a number of different factors, including the severity, length, and the finality of a deprivation. For example, the Court has found the termination of welfare benefits—which are based on financial need—to be more severe than the termination of disability benefits, which are not. In the latter case, the Court has ruled, less procedural protections are required. Similarly, the Court has noted the difference between absolute termination and a temporary suspension from one's employment. Again, the latter requires less procedural protections. The weight given the private interest by courts weighing challenges to placement on the No Fly list might turn on the level of generality the court uses to interpret the deprivation. One might argue, for example, that for most people, air travel is often the only feasible method for international travel available. Arguably, placement on the No Fly list can effectively bar someone from traveling internationally. Analyzing the deprivation in this manner might point toward finding the deprivation of a significant liberty interest. In contrast, one might characterize placement on a No Fly list as limited to a restriction on a person's "preferred method of travel," rather than the ability to travel at all. In litigation concerning the No Fly list, the DOJ has argued that "[t]he Constitution does not guarantee ... a right to the most convenient means of travel, nor does it create a liberty interest in travel by airplane in particular." Following this line of argument, because a person on the No Fly list is not barred from travel entirely, the deprivation is of a less significant liberty interest. A court would next examine the risk of an erroneous deprivation of liberty under the current procedural framework and the potential value of imposing additional procedures on the process. Put another way, a court would investigate how likely it is that someone would be incorrectly placed on the No Fly list, and how helpful requiring different procedures would be in preventing such errors. In analyzing the risk of error, a court might examine both the standard used by the government to make its initial decision to place someone on the No Fly list, as well as the procedures currently afforded travelers via DHS TRIP, including its judicial review provision. One factor courts examine in weighing the risk of error is the amount of discretion afforded the decisionmaker. For example, the Supreme Court has distinguished between a deprivation based on a medical assessment and one predicated on a variety of disparate information including "witness credibility and veracity." For the Court, the latter situation involves a greater risk of error than the former. Another factor might be the standard of proof required for the government to deprive someone of liberty. For example, the Court has held that before a state may permanently sever a parent's relation with a child, a state must meet a higher evidentiary threshold than "fair preponderance of the evidence." Yet another factor is the ability to see and challenge the evidence relied on to justify a deprivation. In the context of a security clearance revocation that resulted in the impairment of a plaintiff's job opportunities, the Supreme Court stressed that "where governmental action seriously injures an individual, and the reasonableness of the action depends on fact findings, the evidence used to prove the Government's case must be disclosed to the individual so that he has an opportunity to show that it is untrue." Likewise, in the disability benefits context, the Court has noted the important "safeguard against mistake" of permitting access to the government's information and the reasons for the government's action, as well as the ability of a claimant to submit his own arguments and challenge the accuracy of the government's conclusion. Finally, in the context of considering the government's detention of a U.S. citizen in an armed conflict, the Supreme Court has ruled that a process where "the Executive's factual assertions go wholly unchallenged or are simply presumed correct without any opportunity ... to demonstrate otherwise falls constitutionally short." When a "citizen-detainee ... challenge[s] his classification as an enemy combatant [he] must receive fair notice of the factual basis for his classification, and a fair opportunity to rebut the Government's factual assertions before a neutral decisionmaker." Some plaintiffs who have challenged their alleged placement on the No Fly list have argued both that the current standard used to place someone on a No Fly list entails a high risk of error, and that the current procedure afforded those seeking to challenge their placement on the No Fly list creates a high risk of an erroneous deprivation. There is arguably a considerable amount of discretion involved in making the determination that someone is a danger to aviation safety. In addition, a traveler does not have the opportunity to evaluate the evidence against her or to present her own evidence to correct the record before placement on the list. Some courts have noted government studies that document numerous errors with the operation of the watch lists; and media accounts have highlighted mistaken placements on the No Fly list. The executive branch has argued, however, that such studies predate the current methods used under the Secure Flight program, which has reduced the number of travelers wrongly denied boarding. In addition, DHS TRIP does provide a redress process, which can be appealed to a United States court of appeals. One might argue that this opportunity for judicial review of the agency's determination is sufficient to prevent erroneous deprivations. Finally, a court would examine the government's interest in the matter and the cost of imposing additional procedures. The government has a strong interest in preventing terrorism, which includes ensuring the safety of air travel. The operation of the No Fly list arguably is an important tool to do so. The government also has an interest in protecting sensitive national security information. The executive branch has argued that "protecting TSDB information enables agencies to share that information across the government, without fear that it will be disclosed whenever anyone sues after he or she cannot travel as he or she might choose." Requiring DHS to reveal classified information through this process, even to the complainant, could "damage ... national security, including by jeopardizing intelligence sources and methods." Accordingly, the danger to the public of disclosing certain material might, in some observers' view, outweigh the benefit to the plaintiff. Indeed, the executive branch has argued that "opportunities for confrontation and rebuttal are not absolute requirements of due process, particularly where the information upon which the government acts is highly sensitive." More generally, courts have sometimes been reluctant to require the executive branch to release information that implicates national security concerns. In cases bringing procedural due process claims that concern sensitive materials outside of No Fly list challenges, courts have often declined to require the government to release classified information directly to the plaintiff. Nonetheless, as explained below, at least one federal district court—in ruling on a challenge to placement on the No Fly list—has signaled that permitting a plaintiff's counsel with proper security clearances to access the government's evidence might alleviate some national security concerns. However, in contexts outside of challenges to the No Fly list, some courts have declined to interpret this possibility as foreclosing the government's interest in protecting national security. As the Seventh Circuit reasoned in a 2014 ruling, counsel might, "in their zeal to defend their client ... inadvertently say things that would provide clues to classified material." In contrast, other courts, including the Ninth Circuit, have approved this procedure, at least in certain circumstances. Finally, one alternative used in other national security contexts is a requirement that the government provide unclassified summaries of particular information to a plaintiff, rather than the classified material itself. In addition, specific forms of procedural protections might compromise national security more than others. A requirement that the government provide prior notice to anyone placed on a No Fly list and a pre-deprivation hearing where both sides presented evidence might "aid terrorists in their plans to bomb and kill Americans" by providing advance notice to all suspected terrorists. More generally, the Supreme Court has recognized that a pre-deprivation hearing is not necessary in certain situations, for example, those implicating substantial national security concerns or public safety. Judicial resolution of a due process challenge requires a balancing of all three factors to determine what process is due. Several federal district courts directly addressed challenges to placement on the No Fly list which alleged that the government's prior redress procedures violated due process. In a case in the Northern District of California, a federal court ruled on a claim brought by Rahinah Ibrahim, a Malaysian national who was present in the United States under a student visa in 2005, when she was prevented from boarding a plane to Malaysia and temporarily detained for several hours. During the trial, the government admitted that it had mistakenly placed her on the No Fly list. The court ruled that when the government mistakenly places someone on a No Fly list, due process "requires the government to cleanse and/or correct its lists and records of the mistaken information and to certify under oath that such correction(s) have been made." In addition to ordering this remedy, the judge also directed the government to reveal to the plaintiff whether she was currently on the No Fly list. At least in this situation, the court ruled, where a plaintiff is mistakenly placed on the No Fly list, the current redress procedures under DHS TRIP did not satisfy due process. However, the scope of the ruling is rather narrow. The court explained that its ruling was limited to a situation where the government admits that it has mistakenly placed a traveler on the list. The court left open situations where the government had not conceded error. In contrast, at least two federal district courts have ruled that the government's procedures under the prior DHS TRIP process violated due process in a case where the government did not appear to concede error. In Latif v. Holder , for example, the plaintiffs had been barred from flying and submitted complaints via the prior DHS TRIP process; pursuant to the procedures described above, the government's reply did not confirm or deny whether they were on a No Fly list or provide any reason why plaintiffs could not board an aircraft. The court found that the plaintiffs had "constitutionally-protected liberty interests in traveling internationally by air, which are significantly affected by being placed on the No-Fly list." The court conducted a Mathews balancing test and concluded that the DHS TRIP process failed to provide due process. The court noted the various harms that can result from being denied boarding on international flights and concluded that the deprivation was "significant." Turning to the second Mathews factor, the court noted a "fundamental flaw" of the procedures in both the DHS TRIP and judicial review process: a low evidentiary standard—reasonable suspicion—sufficient to be placed on the No Fly list, combined with a one sided review process. Taken together, the court found, these aspects made it likely that factual errors in the government's record could go uncorrected. Therefore, the court concluded, the government's procedures "contain[ed] a high risk of erroneous deprivation" of the plaintiffs' liberty interests. Further, the court found, providing notice of inclusion on the list, a list of reasons for placement on the list, and/or the opportunity to present exculpatory evidence "would have significant probative value in ensuring that individuals are not erroneously deprived of their constitutionally-protected liberty interests." On the other hand, the court recognized the significant government interest in national security, the third Mathews factor. Nonetheless, the court noted that certain procedural protections were possible that did not endanger national security, such as providing summaries of classified information or permitting defense counsel with appropriate clearances to access sensitive material. Consequently, the court held that "the absence of any meaningful procedures" to contest plaintiffs' placement on the No Fly list violated due process. The court ordered the government to "fashion new procedures" that satisfied due process, including notifying the plaintiffs whether or not they were on the No Fly list and "the reasons for placement on that List." That notice must be sufficient to provide the plaintiffs with a meaningful opportunity to respond, and that response must be taken into account at both the judicial and administrative review stages. However, the court left the precise type of procedures up to the government and allowed for the possibility that such disclosure might "create an undue risk to national security." That determination, however, had to be made on a case-by-case basis. As mentioned above, the government has revised the procedures at issue in the cases discussed above. The adequacy of the new DHS TRIP redress process has also been challenged as violating the Due Process Clause. In a case before the U.S. District Court for the Eastern District of Virginia, after largely adopting the analysis of the court in Latif v. Holder and ruling that the prior DHS TRIP procedures violated due process, the court rejected the plaintiff's motion for summary judgment regarding the revised procedures. The court observed that because the plaintiff had not undergone review under the revised procedures, it could not decide on the current record whether the new process complied with the Due Process Clause. The court did note, however, that "as described to the Court," the new procedures "appear to allow for both a constitutionally adequate post-deprivation review and also a reviewing court to be presented with an administrative record that allows a sufficient assessment concerning whether" the plaintiff was "given a constitutionally adequate opportunity to challenge any placement on the No Fly List." In a footnote, the court observed that "[s]ubstantial issues exist concerning whether and in what form DHS TRIP adequately provides for judicial review of a decision to place someone on the No Fly List," but declined to address these issues in the immediate matter before it. Following the adverse ruling against the government in Latif v. Holder in 2014, the government reconsidered the DHS TRIP petitions and applied revised procedures to the plaintiffs in the case. The government then disclosed that seven of the plaintiffs were not on the No Fly list, but the TSA Administrator decided that six others should remain. Subsequently, in Latif v. Lynch , those remaining plaintiffs moved for summary judgment, claiming that the revised procedures violated due process. The court first ruled that due process does not mandate the use of a "clear and convincing" standard to place individuals on the No Fly list—the standard used in deportation and civil commitment cases. Instead, use of the "reasonable suspicion" standard is appropriate because the deprivation of liberty interest in placement on the No Fly list is less severe. In addition, the court reiterated its earlier conclusion that due process required that the government provide the plaintiffs with reasons for placement on the list sufficient to permit them to respond meaningfully. The court held that the revised DHS TRIP procedures appeared on their face to satisfy this standard because the notice sent to the plaintiffs provided an unclassified summary of the reasons they were placed on the list. However, the court ruled that it could not yet decide whether the disclosure to each individual plaintiff was sufficient as the record did not indicate what information was withheld or the reasons for any withholding. Likewise, the court held that due process did not require the government to release classified information or the actual evidence underlying its decision to place plaintiffs on the No Fly list. The court explained that revised DHS TRIP procedures appeared on their face to satisfy the requirement that the government provide sufficient information to permit the plaintiffs to respond meaningfully, but the record was not sufficiently developed to decide the adequacy of the disclosures made to the specific plaintiffs. Further, the court concluded that the lack of a live hearing with an opportunity to cross-examine witnesses did not violate due process. The court noted that similar procedures have been approved in the context of government designations of entities as Specially Designated Global Terrorists. While the private interest in those situations is a property interest, rather than a liberty interest deprivation as in No Fly list cases, the court found the weight of the two interests to be substantially similar. Because of the important national security concerns at issue, a document based hearing is sufficient to satisfy due process. Finally, the court concluded that "to the extent that Defendants withhold information" from plaintiffs for national security reasons, the government "must implement procedures to minimize the amount of material information withheld." When appropriate, the government must provide unclassified summaries of relevant materials "and/or whether additional disclosures can be made to Plaintiffs' counsel who have the appropriate security clearances." On the record before it, however, the court could not determine whether this standard was met for each plaintiff. As explained above, some travelers have challenged their alleged placement on the No Fly list and the government's redress process in federal court outside of the DHS TRIP review mechanism. However, governmental privileges barring disclosure of sensitive information present hurdles for plaintiffs. In No Fly list cases brought in federal courts, a number of common law and statutory privileges have been invoked by the government to bar a plaintiff's access to certain information via discovery, including the state secrets, law enforcement, and deliberative process privileges. When properly invoked and accepted by courts, these privileges can prevent plaintiffs from examining certain sensitive information potentially relevant to their case, potentially impeding their ability to challenge placement on the list. For example, the state secrets privilege is an evidentiary privilege that allows the government to withhold information during civil litigation if there is a reasonable danger that disclosure would endanger national security. If the government invokes the privilege during litigation, the court will then make an independent determination of the validity of the claim, possibly via in camera review of the relevant materials. If the court is satisfied that the privilege applies, that information will be unavailable to the plaintiff. For example, in a 2015 case challenging a plaintiff's placement on the No Fly list, the government invoked the state secrets privilege and moved to dismiss the case entirely. The government claimed that the privilege applied both to the "sensitive policies and procedures used in the watchlisting process" and any substantive underlying information regarding the reasons for placement on the No Fly list. According to the government, this precluded any consideration of the adequacy of the redress process, as well as a full inquiry into "the possibility of substitute procedures." Indeed, "any attempt to litigate how these nomination procedures were applied in this case ... risks disclosure of the privileged information." In addition, the government argued that due to the potential for sensitive matters to be probed via discovery, "future proceedings will inherently put the privileged information at risk of being disclosed." Accordingly, the government moved to dismiss the case entirely. This motion to dismiss was denied by the court, on the grounds that the plaintiff's claim might be adjudicated without recourse to documents subject to the privilege. The law enforcement privilege has also been invoked by the government in challenges to placement on the No Fly list. The purpose of the privilege is "to prevent disclosure of law enforcement techniques and procedures, to preserve the confidentiality of sources, to protect witnesses and law enforcement personnel, to safeguard the privacy of individuals involved in an investigation, and otherwise to prevent interference with an investigation." The investigation is not required to be ongoing, as disclosure of past tactics might impair future investigations. However, the privilege is not absolute: "[t]he public interest in nondisclosure must be balanced against the need of a particular litigant for access to the privileged information." In order to conduct this balancing test, courts often examine an extensive list of factors. Courts may examine the evidence in camera in order to determine if the privilege applies and balance the litigant's need against the public interest in nondisclosure. If a court determines that the privilege applies, then that information will not be available to the defendant. In No Fly list cases, the executive branch has asserted this privilege over a "plaintiff's status on any terrorist database and the policies and procedures used for determining how an individual's name is placed in such a database." Similarly, the deliberative process privilege has been invoked by the executive branch in challenges to placement on the No Fly list. The privilege allows the government to withhold material that "reflect[] advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated." In order to qualify, documents must be "predecisional" and "deliberative." A document qualifies as the former if it "was prepared in order to assist an agency decisionmaker in arriving at his decision," and the latter if its release would "expose an agency's decisionmaking process in such a way as to discourage candid discussion within the agency and thereby undermine the agency's ability to perform its functions." As with the other privileges, however, its invocation by the government is not absolute. A plaintiff "may obtain deliberative materials if his or her need for the materials and the need for accurate fact-finding over-ride the government's interest in non-disclosure." In the No Fly list context, this privilege might be invoked in an attempt to withhold documents used in certain decision-making processes, such as whether to place an individual on the No Fly list. Finally, TSA has statutory discretion to designate certain material as "sensitive security information," or "information obtained ... in the conduct of security activities ... the disclosure of which TSA has determined would ... [b]e detrimental to the security of transportation." Such information is "not available for public inspection," and the government has claimed exemptions from disclosure at trial on this basis. Nonetheless, as with the privileges discussed above, plaintiffs and their counsel can access information in certain circumstances. Properly balancing the important national security interest of preventing terrorist attacks with the civil liberties of travelers prevented from boarding a plane is a complicated and delicate matter. Operation of the government's No Fly list implicates a wide variety of statutory and constitutional issues. A number of lower courts have ruled that a previous version of the government's redress procedures was unconstitutional. While the government's revised framework is currently the subject of further litigation, initial rulings have generally taken a more favorable view of the constitutionality of the revised process. | In order to protect national security, the government maintains various terrorist watchlists, including the "No Fly" list, which contains the names of individuals to be denied boarding on commercial airline flights. Travelers on the No Fly list are not permitted to board an American airline or any flight on a foreign air carrier that lands or departs from U.S. territory or flies over U.S. airspace. Some individuals have claimed that their alleged placement on the list was the result of an erroneous determination by the government that they posed a national security threat. In some cases, it has been reported that persons have been prevented from boarding an aircraft because they were mistakenly believed to be on the No Fly list, sometimes on account of having a name similar to another person who was actually on the list. As a result, various legal challenges to placement on the list have been brought in court. The Due Process Clause of the Constitution provides that no person shall be "deprived of life, liberty, or property, without due process of law." Accordingly, when the government deprives someone of a constitutionally protected liberty interest, it must follow certain procedures. Several courts have found that placement on the No Fly list may impair constitutionally protected interests, including the right to travel internationally, and that the government's redress procedures must therefore satisfy due process. Typically, due process requires that the government provide a person with notice of the deprivation and an opportunity to be heard before a neutral party. However, the requirements of due process are not fixed, and can vary according to relevant factors. When determining the proper procedural protections in a given situation, courts employ the balancing test articulated by the Supreme Court in Mathews v. Eldridge, which weighs the private interests affected against the government's interest. Courts applying this balancing test might consider several factors, including the severity of the deprivation involved in placement on the No Fly list. In addition, courts may examine the risk of an erroneous deprivation under the current procedural framework and the potential value of imposing additional procedures on the process. Finally, courts may inquire into the government's interest in preserving the status quo, including the danger of permitting plaintiffs to access sensitive national security information. The government has established a redress process—known as DHS TRIP—for individuals who wish to challenge their treatment at transportation hubs. A prior version of these procedures was found by a number of courts to violate the Due Process Clause. The government has since revised DHS TRIP, although these new procedures are also being challenged in federal court. Litigation is further complicated by several legal issues, such as the state secrets privilege, that can bar plaintiffs from accessing certain information during litigation. |
In recent years, the issue of industry gifts and other payments to health care professionals such as physicians, and the possible conflicts of interest that could arise from these payments, has been controversial. Examples of gifts and payments mentioned in media reports include meals, honoraria for speaking engagements, and travel expenses for conferences. As Congress addresses health reform, there has been interest in increasing transparency, preventing inappropriate relationships, and requiring disclosure of gifts and other payments made to physicians. While companies are free to voluntarily disclose this information about gifts and other payments, there is no current federal requirement to do so. Supporters of a federal disclosure provision emphasize concern about the effects of gifts and payments on both the cost of prescription medication and on health care quality. They may point to recent data showing that payments from pharmaceutical companies influence some physicians' decisions to prescribe certain medications, occasionally resulting in over-prescribing of the most expensive medications or even causing unnecessary health risks for patients. They also argue that the ethical guidelines such as the American Medical Association (AMA) code discussed below are insufficient deterrents because they "are not being followed." Groups opposing a federal disclosure argue that it is unnecessary because existing guidelines within the medical and pharmaceutical-marketing professions discourage unethical behavior. They also argue that gifts and payments can benefit patients, as physicians receive product samples, attend educational seminars, and receive detailed information about particular medications. This report outlines the existing AMA guidelines on disclosure and describes certain state disclosure laws and selected federal legislation, in particular, the Physician Payment Sunshine Act of 2009 ( S. 301 , H.R. 3138 ). This report also analyzes various legal and constitutional considerations that may pertain to a federal disclosure requirement. The AMA Code of Medical Ethics, which "serves as the primary compendium of medical professional ethical statements in the United States," addresses ethical considerations for gifts given to physicians by companies in the pharmaceutical, device, and medical equipment industries. In the opinion of the AMA's Council on Ethical and Judicial Affairs on "Gifts to Physicians from Industry," it is acknowledged that while many gifts to physicians from the drug manufacturing and other industries may serve an important and socially beneficial function, other gifts may be considered inappropriate if they fall outside of certain guidelines. For example, gifts accepted by physicians "should primarily entail a benefit to patients and should not be of substantial value." Items such as textbooks, modest meals, and other gifts are appropriate if they serve a genuine educational function. Cash payments should not be accepted. In addition, permissible gifts must be "related to the physician's work," and gifts such as pens and notepads are appropriate under the code. The guidelines also provide that while subsidies used to underwrite the costs of continuing medical education conferences or professional meetings are acceptable, subsidies from industry should not be accepted directly or indirectly to pay for the costs of travel, lodging, or other personal expenses of physicians attending conferences or meetings, nor should subsidies be accepted to compensate for the physicians' time. In addition, physicians should not accept gifts with "strings attached." For example, if gifts are given by a drug company in relation to the physician's prescribing practices, the gift is considered improper. The AMA guidelines are self-regulating, and thus there may be no legal consequences for failure to adhere to these ethical standards. Legislation requiring pharmaceutical companies and other entities to disclose gifts and payments to health care professionals has been enacted in states such as Maine, Minnesota, Vermont, and Massachusetts, as well as the District of Columbia. Minnesota enacted the first disclosure law more than 10 years ago, and other disclosure laws were enacted relatively recently. The state laws have some similarities; they all require disclosure on an annual basis and exempt certain categories of gifts and payments. However, states such as Vermont and Massachusetts prohibit certain gifts from being provided to health care professionals. In addition, states such as Maine, as well as the District of Columbia, require the reporting of expenses relating to marketing products to the general public. As authority for the disclosure requirements, states have invoked their responsibilities as regulators and as protectors of public welfare. They have also expressed concern with the rising cost of prescription medication and noted their role in reimbursing such medication through their Medicaid programs. For example, Maine's asserted purpose in its disclosure legislation focuses on the state's roles as "guardian of the public interest" and "administrator of prescription drug programs." In addition to states that have already enacted disclosure legislation, many other states have considered legislation to regulate the relationship between pharmaceutical companies and physicians. Minnesota's Wholesale Drug Distribution Licensing Act generally prohibits a "wholesale drug distributor" from offering or giving any gift of value to a practitioner. However, a gift does not include drug samples intended for free distribution to patients, items with a "total combined retail value, in any calendar year, of not more than $50," educational materials, and salaries and benefits given to the pharmaceutical companies' own representatives. Minnesota's requirement is a licensing requirement; therefore, a penalty for non-compliance might be denial of a wholesale drug distributor license in the state. Minnesota's act requires each "wholesale drug distributor" to submit an annual report to the state detailing (1) payments to sponsors of medical conferences; (2) honoraria and payments of expenses for practitioners who serve on faculties of professional or educational meetings; and (3) compensation of practitioners in connection with research projects. The report must identify the nature of value of any payments totaling $100 or more to a particular practitioner during the year. In contrast to the other states, Minnesota does not require that an annual summary report be provided to its state legislature. However, the state law provides that information submitted pursuant to its disclosure requirement is "public data." In 2008, Vermont amended its disclosure legislation to ban certain gifts from manufacturers of prescribed products and wholesale distributors to health care providers. A gift is defined by the state statute to include something of value provided to a health care provider for free, including any payment, food entertainment, or anything else of value. The statute makes an exception from the ban for certain specified allowable expenditures. Under the amended disclosure requirements, manufacturers are required to annually disclose to the Vermont Attorney General the value, nature, purpose, and recipient information about allowable expenditures given to health care providers, academic institutions, or certain organizations serving health care providers. The attorney general must report annually on the disclosures to Vermont's General Assembly and the governor and must make the reported data publicly available on a website. The state attorney general may also sue violators for civil penalties not to exceed $10,000, plus attorneys' fees. While Vermont's earlier disclosure law required the attorney general to keep confidential all trade secret information, this provision was repealed by the 2008 legislation. The District of Columbia's disclosure law applies to every "manufacturer or labeler of prescription drugs dispensed in the District that employs, directs, or utilizes marketing representatives in the District." The District requires each pharmaceutical manufacturer or labeler to annually report expenses associated with items such as educational or informational programs or materials; food, entertainment, and gifts; trips and travel; and product samples. Furthermore, each report must provide the "value, nature, purpose, and recipient" of each expense. However, like Minnesota and Vermont, the District exempts certain categories of items from the reporting requirements, including expenses worth less than $25, "reasonable reimbursement" for clinical trials, product samples if they will be distributed to patients for free, and scholarships for attending "significant" conferences if the attendee is chosen by the association sponsoring the conference. Violators of the disclosure law may be subject to a fine of $1,000 plus attorneys' fees. The District of Columbia requires the D.C. Department of Health to compile an annual report presenting the disclosed information in "aggregate form." In addition to the provisions relating to physicians, it mandates disclosure of expenses associated with advertising to the public at large, including through television advertisements, "as they pertain to District residents." Under Maine's disclosure law, pharmaceutical manufacturers and labelers must file an annual report that discloses, among other things, all expenses associated with (1) educational or informational programs or materials; (2) food, entertainment, and gifts; (3) trips and travel; and (4) product samples. Maine's law also exempts expenses worth less than $25, reasonable reimbursement for clinical trials, product samples if they will be distributed to patients for free, and scholarships for attending "significant" conferences if the attendee is chosen by the association sponsoring the conference. As in the District of Columbia, violators may be subject to a fine of $1,000 plus attorneys' fees. The Maine disclosure statute also resembles the District's law in that it contains a broad reporting requirement that extends to expenses associated with marketing to the general public. Maine requires that a report summarizing the aggregate data and a report providing analysis be provided to the Maine attorney general's office and the state legislature each year by November 30 and January 1, respectively. The Massachusetts Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Healthcare, enacted in 2008, requires pharmaceutical or medical device manufacturers that employ a person to sell or market a drug, medicine, or medical device in the commonwealth to adopt and comply with a "marketing code of conduct," as established by regulation. Under this code of conduct, the provision or payment for things such as meals (subject to exception); entertainment or recreational items of value (e.g., tickets to sporting events); and financial support for the costs of lodging, travel, and other expenses of non-faculty health care practitioners attending a continuing medical education (CME) event, conference, or professional meeting may be prohibited. However, the provision, distribution, or dissemination of peer-reviewed academic, scientific, or clinical information, and the provision of prescription drugs to a health care practitioner solely for the use of the practitioner's patients, among other things, are permitted by the code of conduct. In addition, every pharmaceutical or medical device manufacturing company must annually disclose to the department of public health the value, nature, purpose and particular recipient of any fee, payment, or other economic benefit of at least $50, which the company provides to persons authorized to prescribe, dispense, or purchase prescription drugs or medical devices in the commonwealth. The department of public health is responsible for making all disclosed data publicly available and easily searchable on its website. In addition, the department must report to the attorney general items of value provided in violation of the market code of conduct. Legislation has been introduced in the 111 th Congress that would require disclosure of gifts and other transfers of value from manufacturers of a covered drug, device, biological, or medical supply to health care provider recipients. The Physician Payments Sunshine Acts of 2009, as introduced in the House ( H.R. 3138 ) and the Senate ( S. 301 ), contain similar but not identical provisions. In addition, other versions of these bills have been included in health reform proposals considered in various House and Senate committees. Under S. 301 and H.R. 3138 , a manufacturer of drugs and other medical products that provides a payment or other transfer of value to a covered recipient (e.g., a physician, a physician medical practice, or a physician group practice) or a recipient's designee would be required to annually submit specified information to the Secretary about the recipients and the payments or other transfers of value, including a description of the form of transfer of value such as cash or stock, and the nature of the transfer of value (e.g., consulting fee, gift, food, entertainment, charitable contribution). Exceptions would be made for certain transfers of value of a small dollar amount, product samples for patient use that are not intended to be sold, and educational materials that directly benefit patients or are intended for patient use. In addition, manufacturers and other entities would be responsible for submitting to the Secretary information regarding certain ownership or investment interests held by a physician or a physician's immediate family member, not including interest in a publicly traded security or mutual fund. Manufacturers and other entities that fail to submit the required information in a timely manner in accordance with regulations would be subject to an annual civil monetary penalty of at least $1,000 but not more than $10,000 for each payment or transfer of value not reported, up to a maximum of $150,000. Any entity that knowingly fails to submit information would be subject to a civil monetary penalty of at least $10,000 but not more than $100,000 for each payment or transfer of value, and may not exceed $1,000,000 in total for each annual submission of information. In addition, under both bills, the Secretary must make the submitted information available through a website that is searchable, in a format that is clear and understandable, and that meets various other requirements. The bills would also preempt state laws and regulations that have analogous requirements to the federal bill, but would not interfere with state laws that mandate the reporting or disclosure of information not required under the federal bill. In enacting a federal disclosure requirement, Congress may consider the following statutory and constitutional considerations. These considerations include the prohibition of certain payments under the anti-kickback statute, and the question of whether payments to physicians could be considered trade secrets, which require certain legal protections. Another issue is whether requiring a pharmaceutical company or other entity to make a disclosure would violate the freedom of speech guaranteed under the First Amendment. While current federal law does not require disclosure of industry payments to health care professionals, it may prohibit certain payments from being given or received. Under the federal anti-kickback statute, it is a felony to knowingly and willfully offer, pay, solicit, or receive anything of value (i.e., "remuneration"), directly or indirectly, overtly or covertly, in cash or in kind, in return for a referral or to induce generation of business reimbursable under a federal health care program such as Medicare or Medicaid. The statute prohibits both the offer or payment of remuneration for patient referrals, as well as the offer or payment of anything of value in return for purchasing, leasing, ordering, or arranging for, or recommending the purchase, lease, or ordering of any item or service that is reimbursable by a federal health care program. Persons found guilty of violating the anti-kickback statute may be subject to a fine of up to $25,000, imprisonment for up to five years, and exclusion from participation in federal health care programs for up to one year. However, a number of statutory and regulatory "safe harbors" to the anti-kickback statute protect various business arrangements from prosecution. Safe harbors include certain types of investment interests, personal services and management contracts, referral services, space rental or equipment rental arrangements, warranties, discounts, and employment arrangements. As mentioned above, the anti-kickback statute only applies to referrals for services reimbursable under a federal health care program. Thus, if a company were to offer a kickback or other type of remuneration that did not involve reimbursement from the federal government, the anti-kickback statute would not be implicated. In 2003, the Department of Health and Human Services' Office of the Inspector General (OIG) issued Compliance Program Guidance for Pharmaceutical Manufacturers (CPG), designed to assist pharmaceutical manufacturers in developing and implementing internal controls and procedures that promote compliance with applicable statutes, regulations, and requirements of federal health care programs. In addition, the CPG alerted companies and health care practitioners to activities that could lead to prosecution under the anti-kickback statute as well as other federal laws. Among other things, the CPG explains that pharmaceutical companies and their employees and agents often engage in a number of arrangements that offer benefits to physicians or others in a position to make or influence prohibited referrals under the anti-kickback statute. Examples of remunerative arrangements between pharmaceutical manufacturers and parties in a position to influence referrals that were cited by OIG included entertainment, recreation, travel, meals, or other benefits in association with information or marketing presentations, as well as gifts, gratuities, and other business courtesies. OIG indicated these arrangements potentially implicate the anti-kickback statute if any one purpose of the arrangement is to generate business for the pharmaceutical company. While the CPG guidelines for companies to follow in developing or maintaining compliance programs are not legally binding, the document puts manufacturers on notice as to certain arrangements that OIG may see as suspect. A trade secret can be defined as secret, commercially valuable information. It is a company's proprietary interest in such information that is protected from disclosure, theft, or unauthorized use under both state and federal law. The U.S. Supreme Court has explained that for subject matter to be protected as a trade secret, the material must meet minimal standards of novelty and inventiveness to avoid extending trade secret protection to matters of general or common knowledge in the industry in which it is used. Whether information qualifies as a "trade secret" under federal or state law, however, is a question of fact that is to be determined by a jury. Confidential commercial information can lose its trade secret status through unprotected disclosure. For example, a trade secret may lose its legal protection by accidental or intentional disclosure by a company's employee. Once a trade secret is exposed to the public, its protected character is lost forever and cannot later be retrieved. Some pharmaceutical companies have attempted to shield certain physician gift and payment information from public disclosure by designating it as confidential trade secrets, in order to prevent their competitors from gaining information about drugs under development, their marketing practices, and their consulting and research arrangements. Until recently, Vermont law allowed pharmaceutical companies to protect such data as trade secrets, thus preventing the state's attorney general from publicly disclosing the information. This exemption in Vermont's disclosure law, however, was criticized for being too widely used by the companies and thus severely restricting public access to detailed physician payment information. In May 2009, the Vermont legislature passed a law, effective July 1, 2009, that eliminates the trade secret exemption. Neither the Senate or House version of the Physician Payment Sunshine Act 2009 permits a company to characterize physician payment data as trade secrets to avoid public disclosure. However, legislation introduced in the 110 th Congress, the Drug and Medical Device Company Gift Disclosure Act ( H.R. 3023 ), contained a provision that would have directed the FDA commissioner to "keep confidential any information disclosed to or otherwise obtained by the Commissioner ... that relates to a trade secret ... " If Congress were to enact a federal disclosure requirement, it would likely survive judicial scrutiny. A preliminary question when considering the constitutionality of any federal statute is whether any power enumerated in the Constitution authorizes Congress to take such action. A disclosure requirement would likely pass that preliminary threshold. Congress has broad authority to regulate activities under its Commerce Clause power, including the authority to regulate activities as long as they "substantially affect" interstate commerce. The second question in determining the constitutionality of a federal statute is whether the statute violates any constitutional provision. The First Amendment is one plausible basis for a constitutional challenge to a disclosure provision. Specifically, pharmaceutical and other companies might argue that mandatory disclosure of gifts and payments to physicians violates their First Amendment freedoms of speech and association. Companies might identify two different manifestations of "speech" implicated by a federal disclosure provision. First, they might argue that the disclosure of information regarding gifts and payments is unconstitutionally compelled speech. Second, they might argue that the gifts and payments are, themselves, speech that the law unconstitutionally restricts. As a threshold matter, it is not clear that gifts and payments made to physicians are "speech." The Supreme Court has treated monetary transactions as "speech" in the past, most notably in the area of campaign finance. However, the payments at issue here are arguably distinct from campaign contributions because they are not "political expression" or "discussion of governmental affairs" as were the transactions in the campaign finance arena. If the gifts and payments are not speech, then they fall outside of First Amendment protection. A federal provision would likely survive a compelled speech challenge. The First Amendment generally prohibits the government from compelling speech. However, two case law trends suggest that a court would uphold a federal provision compelling disclosure of gifts and payments made to physicians or other health care professionals. First, a court might analyze the disclosure by pharmaceutical companies in the context of compelled commercial speech. Commercial speech is "speech that proposes a commercial transaction." Although the disclosures would not themselves propose commercial transactions, they report transactions made for the purpose of increasing business. In the compelled commercial speech category, under applicable case law, the government's interest need only be "reasonably related" to the disclosure requirements to survive judicial scrutiny. Mandatory disclosure of gifts and payments to health care professionals appears reasonably related to potential governmental interests, such as transparency and patient protection. Second, even if the compelled speech at issue is viewed as non-commercial, a court would likely uphold the provision. Although the Court has invalidated nearly all laws it has reviewed in the non-commercial compelled speech category, most of the Court's non-commercial compelled speech cases addressed political speech, which garners a greater level of constitutional protection than other types of speech. In contrast, the speech implicated here, if not commercial, is medical rather than political. Therefore, a federal disclosure provision would likely survive a compelled speech challenge under the First Amendment. A mandatory disclosure provision would likewise probably survive a restricted speech challenge. Such a challenge would allege that the provision unconstitutionally restricts pharmaceutical companies' gifts and payments to health care professionals. If gifts and payments are "speech," then such transactions are likely also commercial speech, because a likely message conveyed by the gifts and payments is, for example, that doctors should prescribe the promoted drugs. Commercial speech garners less constitutional protection than political or other types of speech. The applicable test for determining the constitutionality of commercial speech is the four-part Central Hudson test. Under the Central Hudson framework, the preliminary questions are (1) whether the speech is protected by the First Amendment (i.e., is not unlawful or misleading), and (2) whether the government's asserted interest in regulation is "substantial." If the regulation satisfies both preliminary questions, the third and fourth prongs then apply: (3) whether the regulation directly advances the government's asserted interest, and (4) if so, whether the regulation is no more extensive than is necessary to serve that interest. Assuming that the gifts and payments made to health care professionals are not unlawful or misleading, a court would find that the first Central Hudson prong is satisfied. A court would also likely find that a federal disclosure requirement satisfies the second prong. In Rubin v. Coors Brewing Co. , the Supreme Court found "substantial" the government's interest in deterring efforts by beer companies to advertise the most potent beer. Here, the government's potential interests—for example, transparency, reduced drug costs, and patient protection—would seem likely to be at least as "substantial" as the interest asserted in Rubin . The third and fourth Central Hudson prongs could be closer issues, but would still likely result in a finding of constitutionality. When applying the third prong, the Supreme Court has indicated that courts should consider the effect of the regulation in its general application, rather than as applied to the particular group challenging the law. In a case invalidating a law on the basis of the third prong, the Supreme Court stated that the government must "demonstrate that the harms it recites are real and that its restriction will in fact alleviate them to a material degree." Although it seems likely that the government could identify a real harm caused by gifts and payments to physicians, some question exists as to whether mandatory disclosure of such gifts and payments would "materially alleviate" that harm. The Court noted in the above case that the government offered "no studies" giving evidence of the asserted harm and failed to present even "anecdotal" evidence that the law would address the harm identified. Thus, the question might be whether the government can present sufficient studies and anecdotal evidence to show that the disclosure would alleviate any identified harm created by gifts and payments to health care professionals. Regarding the fourth Central Hudson prong, the Supreme Court has clarified that "no more extensive than necessary" should not be interpreted strictly to require the government to use the "least restrictive means" of all available alternatives to accomplish its purpose; rather, the fourth prong merely requires a reasonable "fit" between the legislature's ends and the means chosen to accomplish those ends. Thus, a court need only find a reasonable fit between a disclosure rule and the government's asserted interest in order to uphold the government action. For laws affecting political speech, in contrast, the more onerous "least restrictive means" test applies. Nonetheless, in a disclosure case involving political speech in the context of campaign finance, the Court stated that disclosure is generally the "least restrictive means" of addressing corruption in government. Since the fourth Central Hudson prong is less onerous than the "least restrictive means" test, it is likely that disclosure would survive First Amendment scrutiny in the commercial speech arena. A federal disclosure requirement would likely also survive a freedom of association challenge. The Supreme Court has stated that "compelled disclosure, in itself, can seriously infringe on privacy of association and belief." To be constitutional, a disclosure law must have a "relevant correlation" or "substantial relation" to the asserted government interest. It is unclear whether the right of association would extend to an "association" between a pharmaceutical company and a physician, since the Supreme Court cases to date have generally invalidated laws on freedom of association grounds only when political or membership associations were at issue. Even if a court found that the pharmaceutical company-physician relationship constituted an "association" such that it triggered right of association claims under the First Amendment, it is unlikely that a court would find that a disclosure law violated privacy of association rights because the Court has upheld disclosure laws against freedom of association challenges in other contexts. For example, in Buckley v. Valeo , the Supreme Court upheld federal laws mandating disclosure of certain campaign finance activities, holding that the government's interest in regulation outweighed the private association concerns raised by the requirements. It seems likely that government interests asserted here would similarly outweigh the pharmaceutical companies' freedom of association concerns. Finally, it is telling in assessing a federal disclosure requirement's constitutionality that the state disclosure laws now in effect have faced no significant legal challenges. Although a U.S. district court recently invalidated on First Amendment grounds a New Hampshire law regulating prescription information, that law was distinct from the possible federal requirement discussed here because it prohibited disclosure of prescription information. In sum, there have been recent efforts to crack down on perceived conflicts of interest between health care professionals and the pharmaceutical and other medical industries, in particular through disclosure of certain gifts or other payments. Several states have already enacted legislation requiring companies to disclose gifts and payments to these professionals. Federal legislation has also been introduced, which would require disclosure of gifts and other transfers of value from the pharmaceutical and other entities to health care provider recipients. A federal disclosure requirement would likely survive a legal challenge. Pharmaceutical companies might challenge the provision on First Amendment grounds. However, it appears likely that it would survive judicial scrutiny under the various applicable tests of constitutionality. | In recent years, questions have been raised over the propriety of certain financial relationships between health care professionals such as physicians, and the pharmaceutical and other medical industries. As part of these relationships, companies may give gifts or make payments to healthcare professionals as part of their marketing efforts, or for other purposes. In an effort to promote transparency and prevent inappropriate relationships, there has been interest in requiring disclosure of certain types of payments. Several states and the District of Columbia have enacted legislation requiring pharmaceutical companies to disclose gifts and payments made to health care professionals. While companies are free to voluntarily disclose this information, there is currently no federal requirement to do so. This report briefly outlines American Medical Association (AMA) guidelines addressing gifts to physicians from industry, and describes selected state disclosure laws already in effect. The report also discusses proposed federal legislation, in particular, the Physician Payments Sunshine Act of 2009 (S. 301, H.R. 3138). In addition, the report analyzes potential legal and constitutional considerations associated with a federal disclosure requirement, including how a court may evaluate a federal disclosure requirement if it were challenged on First Amendment grounds. If a federal disclosure requirement was enacted and subsequently challenged on these grounds, it appears likely to survive judicial scrutiny. This report supersedes CRS Report RL34094, Requiring Disclosure of Gifts and Payments to Physicians: State Efforts and a Legal Analysis of Potential Federal Action, by [author name scrubbed]. |
Digital television (DTV) is a new television service representing the most significant development in television technology since the advent of color television. DTV can provide movie theater quality pictures and sound, a wider screen, better color rendition, multiple video programming or a single program of high definition television (HDTV), and other new services currently being developed. DTV can be HDTV, or the simultaneous transmission of multiple programs of standard definition television (SDTV), which is a lesser quality picture than HDTV but significantly better than today's television. The rationale often cited for the digital transition is that aside from offering superior broadcast quality to consumers, DTV will allow over-the-air broadcasters to offer the same kinds of digitally-based services (such as pay-per-view) currently offered by cable and satellite television providers. Additionally, it is argued that digital television uses the radiofrequency spectrum more efficiently than traditional analog television, thereby conserving a scarce resource (bandwidth) that can be used for other wireless applications. There are three major components of DTV service that must be present in order for consumers to enjoy a fully realized "high definition" television viewing experience. First , digital programming must be available. Digital programming is content produced with digital cameras and other digital production equipment. Such equipment is distinct from what is currently used to produce conventional analog programming. Second , digital programming must be delivered to the consumer via a digital signal. Digital signals can be broadcast over the airwaves (requiring new transmission towers or DTV antennas on existing towers), transmitted by cable or satellite television technology, or delivered by a prerecorded source such as a digital video disc (DVD). And third , consumers must have a digital television product capable of receiving the digital signal and displaying digital programming on their television screens. Congress and the Federal Communications Commission (FCC) have played major roles in the development of DTV. Starting in 1987, the FCC launched a decade-long series of proceedings exploring the potential and feasibility of a transition from conventional analog televisions to advanced television systems. While the original term used to describe the new television system was high definition television (HDTV), the FCC used a broader term—advanced television (ATV)—referring to any television technology that provides improved audio and video quality. After it became clear that ATV would be using digital signal transmission, the FCC began (in 1995) to use the term DTV (synonymous with ATV) to describe the new service more accurately. In December 1996, after lengthy debate between television manufacturers, broadcasters, and computer firms, the FCC adopted a standard for DTV signal transmission based on recommendations of the Advanced Television System Committee (ATSC). The ATSC standard allows for 18 different video formats, of which four have subsequently been adopted for commercial use. Meanwhile, the Telecommunications Act of 1996 ( P.L. 104 - 104 ) provided that initial eligibility for any DTV licenses issued by the FCC should be limited to existing broadcasters. Broadcasters would be issued DTV licenses while at the same time retaining their existing analog licenses during the transition from analog to digital television. The act provided that broadcasters must eventually return either their existing analog channel or the new digital channel. Also in the 104 th Congress, a major debate took place over whether to direct the FCC to conduct auctions for the spectrum allocated for DTV. The FCC estimated the commercial value of the DTV spectrum to be between $11 billion to $70 billion. No legislation was enacted, however, and the FCC did not obtain the authority to auction the DTV licenses. In 1997, the FCC adopted rules to implement the Telecommunications Act, and granted DTV licenses to some 1600 full power incumbent television broadcasters. The DTV licenses consist of 6 megahertz (MHZ) of unused spectrum within the VHF and UHF frequency bands. Because DTV signals cannot be received through the existing analog television broadcasting system (known as NTSC) the FCC decided to phase in DTV over a period of years, so that consumers would not have to immediately purchase new digital television sets or converters. Thus, broadcasters were given 6 MHZ of new spectrum for digital signals, while retaining their existing 6 MHZ for analog transmission so that they can simultaneously transmit NTSC and DTV signals to their broadcasting market areas. The simultaneous broadcasting ("simulcasting") of the same programs in both digital and analog modes was intended to allow viewers who have not yet purchased DTV sets or converters to continue to receive television programming during the transition to DTV. The ruling required television stations receiving the DTV licenses to build their DTV facilities according to a schedule determined by the size of their markets. The FCC has granted extensions to licensees unable to meet the schedule due to unforeseeable or uncontrollable circumstances, such as an inability to secure tower locations for new antennas. The FCC set a target date of 2006 for broadcasters to cease broadcasting the analog signal and return their existing analog television spectrum licenses to be auctioned for other commercial purposes. During the 105 th Congress, the Balanced Budget Act of 1997 ( P.L. 105 - 33 ) made the 2006 reversion date statutory, providing that a "broadcast license that authorizes analog television service may not be renewed to authorize such service for a period that extends beyond December 31, 2006." However, the act required the FCC to grant extensions for reclaiming the analog television licenses in the year 2006 from stations in television markets where any one of the following three conditions exist: if one or more of the television stations affiliated with the four national networks are not broadcasting a digital television signal; if digital-to-analog converter technology is not generally available in the market of the licensee; or if at least 15% of the television households in the market served by the station do not subscribe to a digital "multi-channel video programming distributor" (including cable or satellite services) and do not have digital TV sets or converters. In the 109 th Congress, the 2006 deadline for the digital transition was extended. The Deficit Reduction Act of 2005 ( P.L. 109 - 171 ), signed by the President on February 8, 2006, sets a "hard" digital transition deadline of February 17, 2009. Meanwhile, since the beginning of the digital transition, the FCC has continued to monitor the status of the DTV conversion of both commercial and noncommercial broadcast stations. On August 6, 2007, the FCC released the final assignment of digital television channels—to be used post DTV transition—for over 1,800 stations. On December 31, 2007, the FCC released the Third Periodic Review of the Commission's Rules and Policies Affecting the Conversion to Digital Television. In this Report and Order, the FCC adopted procedures and rule changes necessary to ensure that broadcasters meet the statutory transition deadline and complete construction of their final, post-transition facilities while maintaining the best possible television service to their viewers." Full-power television stations are required to file status reports with the FCC detailing their transition status, additional steps necessary, and a time line for making those steps in order to meet the February 17, 2009 deadline. The nationwide buildout of digital television is a complex and multifaceted enterprise. A successful buildout requires: the development by content providers of compelling digital programming; the delivery of digital signals to consumers by broadcast television stations, as well as cable and satellite television systems; and the widespread purchase and adoption by consumers of digital television equipment. Digital programming is created with digital cameras and other digital production equipment. Digital content tends to favor more "visual" types of programming—such as sports events or movies—which take full advantage of the high-definition viewing experience. The amount of available digital programming is gradually becoming widespread among broadcast and cable networks. Currently, there are three ways digital programming is being delivered to consumers. Digital signals are: (1) broadcast over the airwaves; (2) transmitted over channels provided by satellite television systems; and (3) provided via digital cable service in a growing number of markets. According to the National Association of Broadcasters (NAB), as of January 10, 2008, there were 1,626 stations (both commercial and public) broadcasting digital signals in 211 markets. This represents about 95% of the nation's approximately 1,700 full-power television stations. The 211 markets currently receiving digital transmissions cover over 99% of U.S. TV households. Television stations must construct new facilities and purchase new equipment in order to transmit digital signals. According to NAB, costs range from $8-$10 million to fully convert a station to digital operation. NAB has estimated that the total cost of the transition for broadcasters is $10 to $16 billion. As of October 10, 2007, the FCC has granted a construction permit or license to 1,706 stations, about 99% of the total number of DTV allotments. Approximately three-quarters of the 1,240 full-power commercial stations did not meet the May 1, 2002 conversion deadline. A total of 843 commercial stations requested from the FCC an extension of the May 2002 deadline in order to complete construction of their DTV facilities. So far, 772 have been granted and 71 have been admonished. Of those stations granted extensions, 602 filed requests for second extensions. Of this number, 535 extension requests have been granted, 67 have been dismissed, and the rest remain pending. A third extension was requested by 141 stations; 104 extensions were granted, action was deferred for 30 satellite stations, and 7 stations were admonished. Meanwhile, 214 noncommercial educational stations requested extension of the May 1, 2003 buildout deadline. The FCC has granted all of those extension requests; 134 stations filed for second extensions with 129 granted. Satellite television is currently provided to over 22 million American households. Two major companies offer direct broadcast satellite (DBS) television service in the United States: Echostar's DISH Network and Hughes' DirecTV. Satellite TV customers need added equipment (a slightly bigger satellite dish and either a set-top box or built-in satellite HDTV reception capability) in order to receive high-definition programming on their digital televisions. Initially, cable companies had been reluctant to carry channels of digital and high definition programming (thereby displacing some existing channel offerings) until more consumers had the digital television equipment necessary to view digital programming. The reluctance of cable companies to carry digital programming has changed, however, as cable providers in most markets have begun to carry digital or high-definition channels. According to the National Cable & Telecommunications Association (NCTA), as of March 2007, consumers in 209 (out of 210) local TV markets are served by at least one cable provider that offers high definition programming. Cable systems providing HDTV pass 100 million U.S. television households (out of a total 110 million) and reach all 100 of the biggest TV markets. DTV products are now available from multiple manufacturers offering varying features and technical characteristics. Over the past several years, prices for DTV monitors and receivers have dropped markedly. As the market for DTVs expands, prices are expected to decrease further. According to the Consumer Electronics Association (CEA), approximately 50% of U.S. households owned a digital television by the end of 2007. The average retail price of DTVs was projected to be $819 in 2007, a $224 drop from 2006. The goal of the FCC and Congress is to complete the transition to DTV as quickly as possible, so that NTSC (analog) spectrum can be reclaimed and reallocated for other purposes. Some of the NTSC spectrum will be auctioned for commercial wireless services, and some of it will be used for new public safety services (the FCC has already designated some of the analog TV spectrum for public safety use). The key issue for Congress and the FCC has been: what steps, if any, should be taken by government to further facilitate a timely, efficient, and equitable transition to digital television? To address this question, Congress and the FCC have confronted a highly complex policy landscape, involving different industries, technologies, and interests, including content providers, commercial and noncommercial television broadcasters, cable and satellite television providers, consumer electronics manufacturers and retailers, and consumers. The following sections in this report—on activities and issues in the 108 th , 109 th , and 110 th Congresses—discuss issues that have been primary considerations in the Congressional debate on the digital television transition. Additionally, Appendix A provides background information on a complex array of policy issues related to the digital television transition. These include digital "must carry," mandating digital tuners, copyright protection technology, cable/DTV interoperability, digital conversion of public broadcasting stations, digital conversion of low power television stations, public interest obligations of DTV broadcasters, and others. A number of bills were introduced into the 108 th Congress, relating in some way to digital television. Some urged Congress to require broadcasters to return the analog spectrum on "a date certain." Under this approach, spectrum would be freed up for other uses. Among legislation in the 108 th Congress, the HERO Act ( H.R. 1425 and within 9/11 Commission omnibus bills H.R. 5024 , H.R. 5040 , and S. 2774 ) would have prohibited any delay in reassigning the 24 MHZ for public safety purposes, and required those frequencies to be operational by January 1, 2007. During March and April 2004, another digital transition proposal was informally circulated by the Media Bureau of the FCC. Under this proposal, the transition deadline would be moved from 2006 to 2009. Cable and satellite providers would be required to carry a broadcaster's digital signal only, but could—if the broadcaster so chooses—down-convert the digital signal to an analog signal that cable or satellite customers could watch on their analog televisions. Under this scenario, according to the Media Bureau proposal, cable and satellite TV households watching down-converted digital signals on their analog sets would be counted toward the 85% statutory threshold required in order for broadcasters to return to the government their valuable analog spectrum, which can then be auctioned and/or assigned for other purposes. The commercial broadcasting industry expressed strong opposition to the Media Bureau's proposal. According to the commercial broadcasters, the proposal would discourage the development of digital television services (such as HDTV and multicasting) and remove the incentive for consumers to purchase DTVs. Additionally, they argue, if analog spectrum is reclaimed under the Media Bureau proposal, TV households that are exclusively "over-the-air"—many of whom are economically disadvantaged—would lose their television service altogether unless they purchased DTVs, converter boxes, or cable or satellite television subscriptions. In response to these criticisms, Kenneth Ferree, former head of the Media Bureau, argues that the development of digital services will not be adversely impacted because market forces will ensure that popular stations will likely be carried by cable and satellite TV providers in both digital and analog form by 2009. Additionally, suggests Ferree, economically disadvantaged over-the-air households could receive federal subsidies (derived from reclaimed spectrum auction proceeds, for example) for purchasing converter boxes, thereby ensuring that these households will continue to receive television service. During the summer of 2004, Congress held three hearings on the digital television transition. On June 2, 2004, the House Energy and Commerce Committee, Subcommittee on Telecommunications and the Internet, held a hearing on the Ferree proposal—"Advancing the DTV Transition: An Examination of the FCC Media Bureau Proposal." A June 9, 2004 hearing held by the Senate Committee on Commerce, Science and Transportation—entitled, "Completing the Digital Television Transition,"—also examined the Ferree proposal and other digital transition issues including the possibility of consumer subsidies for converter boxes. Finally, the House Subcommittee on Telecommunications and the Internet held another hearing on July 21, 2004, looking specifically at lessons learned from Berlin, Germany, which successfully underwent a transition to digital television in 2003. The hearing, entitled, "The Digital Television Transition: What We Can Learn from Berlin," featured the release of a General Accountability Office (GAO) report entitled, German DTV Transition Differs From U.S. Transition in Many Respects, but Certain Key Challenges Are Similar . The GAO identified three elements responsible for Berlin's successful digital transition: implementing extensive consumer education, providing subsidies to low-income households for converter boxes, and setting a near-term, widely recognized shut-off date for analog TV service. On July 22, 2004, the National Commission on Terrorist Attacks Upon the United States (the 9/11 Commission) released its final report. The Commission recommended that Congress support legislation "which provides for the expedited and increased assignment of radio spectrum for public safety purposes." In response to this recommendation, on September 21, 2004, Senator John McCain introduced S. 2820 , the SAVE LIVES Act. S. 2820 would change the digital transition deadline from December 31, 2006 to December 31, 2008. Spectrum for public safety would be freed for use by first responders, and other spectrum would be available for commercial uses. Proceeds from the auctioning of commercial spectrum would be credited to a Digital Transition Consumer Assistance Fund. The Fund would be used to establish a $1 billion digital transition program, administered by the Secretary of Commerce, which would subsidize consumers who continue to rely exclusively on over-the-air broadcasts with analog televisions. The program would give priority to low-income households, and would provide assistance for purchasing digital-to-analog converter boxes or other technologies which would allow consumers to continue receiving television signals. S. 2820 also required labeling of analog televisions (with the label stating it is unable to receive digital signals without a converter box), directs the Department of Commerce (in consultation with the FCC) to submit a report to Congress recommending a consumer education program on the digital transition, and requires the FCC to issue final decisions on its proceedings regarding DTV must-carry and public interest obligations. During the September 22, 2004 markup of S. 2820 in the Senate Committee on Commerce, Science and Transportation, an amendment was offered by Senator Conrad Burns which sets a digital transition deadline (December 31, 2007) only for spectrum that has been designated for public safety, and provides that the FCC may waive the deadline in a given market "to the extent necessary to avoid consumer disruption while ensuring the ability of relevant public safety entities to use such frequencies." The Burns amendment was subsequently adopted by the Committee. On September 29, 2004, Senator McCain offered a modified version of S. 2820 as an amendment to the National Intelligence Reform Act of 2004 ( S. 2845 ). As in Committee, Senator Burns offered a modifying amendment to the McCain amendment. At the request of Senator McCain, the Senate approved by unanimous consent the McCain amendment as modified by the Burns amendment. The final version adopted into S. 2845 sets the digital transition deadline of December 31, 2007 only for spectrum that has been designated for public safety. Language regarding the FCC's authority to waive the deadline to avoid consumer disruption was modified to read: "only if all relevant public safety entities are able to use such frequencies free of interference by December 31, 2007, or are otherwise able to resolve interference issues with relevant broadcast licensee by mutual agreement." The Senate passed S. 2845 on October 6, 2004. Other provisions of S. 2820 relevant to digital television are retained within the Senate-passed version of S. 2845 . However, the sections regarding the Digital Transition Consumer Assistance fund and the $1 billion in consumer digital transition subsidies are moot, because the legislation limits the digital transition deadline only to public safety spectrum and does not authorize auctions of commercial spectrum currently used for analog television broadcasts. Also, labeling requirements would only go into effect if the FCC acts to set a hard deadline for the return of analog spectrum. The House-passed version of S. 2845 (passed on October 16, 2004) contained a nonbinding provision (Section 5011) expressing the "sense of the Congress" that the 85% penetration test should be eliminated and that broadcasters should be required to cease analog transmissions by December 31, 2006 in order that analog spectrum can be returned for public safety and commercial uses. The conference report version of S. 2845 contained a digital television provision similar to the House language. Section 7501 states that it is the sense of Congress that "Congress must act to pass legislation in the first session of the 109 th Congress that establishes a comprehensive approach to the timely return of analog broadcast spectrum as early as December 31, 2006" and that any delay in the adoption of such legislation will "delay the ability of public safety entities to begin planning to use this needed spectrum." The Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108 - 458 ) was signed into law on December 17, 2004. During the first session of the 109 th Congress, lawmakers debated when and how a "hard date" for the DTV transition might be implemented, thereby freeing reclaimed analog spectrum. Policy questions included should the then-existing statutory digital transition deadline of December 31, 2006, be implemented by modifying or removing the 85% digital penetration threshold requirement, or would a later and redefined transition deadline be more appropriate? Should the reclaiming of analog spectrum for public safety uses be singularly designated, or should it be included as part of a comprehensive approach to returning all of the analog spectrum? Appendix B in this report provides a listing of DTV-related legislation introduced into the 109 th Congress. Aside from ensuring that consumers enjoy the benefits of digital television, reclaiming the analog spectrum was a prime motivation in the desire of Congress and the FCC to complete the digital transition as soon as possible. A portion of reclaimed analog spectrum will be allocated for first responder communications, while the rest will be auctioned to the private sector for development and use of innovative telecommunications technologies such as wireless broadband. Budgetary considerations were also an important factor. Auctioning the analog spectrum could raise revenues in the billions of dollars. Estimates of possible auction revenues varied, from $10 billion to $28 billion to $50 billion. All or part of these auction proceeds could be used to reduce the federal budget deficit. A key issue in the debate was addressing the millions of American over-the-air households whose existing analog televisions will require converter boxes in order to receive digital signals when the analog signal is turned off. Many policymakers asked whether should some form of financial assistance (subsidies or tax credits, for example) should be provided by the federal government to enable over-the-air households to purchase converter boxes or digital televisions. Should such assistance be provided to low-income households exclusively or to all households? Should subsidies, if warranted, be financed by proceeds garnered by auctioning the analog spectrum? And finally, how much funding would a subsidy program require, and how much revenue is likely to be raised by auctioning the commercial portion of the reclaimed analog spectrum? At the request of the House Committee on Energy and Commerce, the Government Accountability Office (GAO) conducted a television characteristics survey involving 2,471 randomly selected American households. Based on the survey, GAO found that 19% or 21 million households rely exclusively on over-the-air television; 57% or 64 million households rely on cable; and 19% or 22 million have a subscription to DBS (satellite) television. Additionally, GAO found that low-income, non-White, and Hispanic households are more likely to rely on over-the-air television broadcasting. GAO estimated that if a subsidy were needed only for over-the-air households, the cost could range from about $460 million to $2 billion, depending on the cost of the set-top box (from $50 to $100 per box) and whether subsidy recipients are limited to low-income households. Under this scenario, GAO is assuming that cable and satellite providers would convert broadcasters' digital signals to analog at the "head-end," such that cable and satellite TV consumers with analog sets would be able to receive the signal without a converter box. Under a different scenario, GAO assumed that cable and satellite providers would deliver high-definition signals to the home, thereby requiring consumers with analog sets to purchase converter boxes. GAO estimated that if subsidies were available to cable and satellite subscribers as well as to over-the-air households, the cost would range from $1.8 billion to over $10 billion, again depending on the cost of the converter box and the use of means testing. The GAO estimate assumes a subsidy for one converter box per household—it should be noted that the vast majority of television households have more than one over-the-air analog television. Each analog television set would need its own converter box to be able to receive a digital signal. The GAO cost estimates also do not include the cost of implementing a subsidy program, nor do they take into account what form a subsidy might take, be it a voucher, tax credit, rebate, government supplied equipment, or other means. On May 26, 2005, GAO testified before the House Energy and Commerce Committee on the administrative challenges that could arise in implementing a subsidy for DTV equipment. On February 17, 2005, the House Energy and Commerce Committee, Subcommittee on Telecommunications and the Internet, held the first of a series of hearings on the digital transition. At the February 17 th hearing, entitled, "The Role of Technology in Achieving a Hard Deadline for the DTV Transition," witnesses discussed the need for a hard deadline and the possible costs of subsidizing over-the-air analog viewers. Other issues discussed at the February 17 th hearing included whether labels warning of a possible analog signal shut-off should be required on new analog televisions purchased by consumers. Another key issue discussed was whether digital signals should be converted at the cable and satellite providers' head-end, or—alternatively—at the subscriber's home. A second hearing, entitled, "Preparing Consumers for the End of the Digital Transition," was held by the House Subcommittee on Telecommunications and the Internet on March 10, 2005. Witnesses spoke to the importance of educating retailers and consumers about the digital transition, and argued that raising public awareness is difficult without a certain transition deadline. On May 26, 2005, the House Energy and Commerce Committee held a hearing on staff draft DTV legislation. Committee Chairman Joe Barton cited the importance of meeting budget reconciliation targets as a key factor in the Committee's movement of legislation to hasten the DTV transition and raise revenues from auctioning the analog spectrum. While most (but not all) Committee Members and witnesses agreed with the setting of a hard 2008/2009 deadline for the digital transition, there was disagreement over the need for—as well as the size, scope, and mechanics of—a subsidy program for digital-to-analog converter boxes funded with a portion of analog spectrum auction proceeds. On October 27, 2005, the House Energy and Commerce Committee approved the Digital Television Transition Act of 2005 as part of its submission to the House FY2006 budget reconciliation bill. The legislation sets a "hard" DTV transition deadline of December 31, 2008. CBO estimated $10 billion in net receipts from auctioning vacated spectrum currently being used by broadcasters. The legislation would allocate a portion of auction proceeds as follows: $990 million for a digital-to-analog converter box program, $500 million for public safety interoperable communications grants, $30 million for a New York City 9/11 digital transition fund, and $3 million to assist digital conversion of low-power television stations. Remaining auction proceeds would be transferred to the Treasury for budget deficit reduction. The Digital Television Transition Act of 2005 does not contain language addressing the multicast must-carry issue, nor does it address other DTV issues such as the broadcast flag or DTV public interest obligations. On November 3, 2005, the House Budget Committee reported the Deficit Reduction Act of 2005. Subtitle D (sections 3401-3413) is the Digital Television Transition Act of 2005. On November 18, 2005, the House passed the Deficit Reduction Act of 2005 ( H.R. 4241 ). The following is a summary of major provisions. The legislation would shift the deadline for the DTV transition from December 31, 2006 to December 31, 2008. As of January 1, 2009, analog spectrum in the range of channels 52 through 69 would be recovered, and analog television service that is broadcast over the air would cease. The December 31, 2008 deadline would be a hard deadline—the legislation repeals the provision in current law allowing broadcasters to retain their analog spectrum indefinitely if 15% or more of television households are unable to receive digital signals. The legislation also directs the FCC to release final digital channel assignments to all full-power broadcast television stations by December 31, 2006, and to issue six month status reports on coordinating digital allotments with Canada and Mexico. The legislation directs the FCC to conduct auctions for the licenses of recovered analog spectrum reclaimed from analog television service. Auctions will commence no later than January 7, 2008, and the FCC shall deposit auction proceeds no later than June 30, 2008. Recovered analog spectrum is defined as between channels 52 and 69 inclusive (698 through 806 MHZ). This auction authority does not apply to analog spectrum to be made available for public safety services, nor does it apply to spectrum auctioned prior to the date of enactment of the legislation. The legislation directs that $990 million from auction proceeds be placed in a "Digital Television Conversion Fund." This Fund will be used by the National Telecommunications and Information Administration (NTIA) of the Department of Commerce to establish a digital-to-analog converter box program. Under this program, U.S. households may request up to two coupons worth $40 each to be applied toward the purchase of digital-to-analog converter boxes. Coupons may be requested between January 1, 2008 and January 31, 2009. Retailers participating in the program would be required to undergo a certification process in order to be reimbursed by the Department of Commerce. The legislation directs that $500 million be deposited in a "Public Safety Interoperable Communications Fund," which would be used by NTIA to establish a grant program to assist public safety agencies in the acquisition of, deployment of, or training for use of interoperable communications systems. The legislation directs that $30 million be deposited in a "NYC 9/11 Digital Transition Fund," which will reimburse New York City television broadcasters for costs incurred in the design and deployment of a temporary DTV broadcast system which will provide DTV service until a permanent facility is constructed. Finally, the legislation directs $3 million into a "Low-Power Digital-to-Analog Conversion Fund" which will be used to compensate low power television stations (including Class A, translator, or booster television stations) for the cost of a digital-to-analog conversion device. The legislation would require manufacturers to put warning labels on analog televisions that inform consumers that such televisions will not be able to receive broadcast programming after the digital transition unless connected to a digital tuner, a digital-to-analog converter box, or cable, satellite or other multichannel video services. Similar warnings are required to be posted in stores by retailers, and run as public service announcements by broadcasters and cable and satellite providers. Finally, the FCC and the NTIA are required to engage in a public outreach program to educate consumers about the deadline for termination of analog television broadcasting and the options consumers have after such termination to continue to receive broadcast programming. The legislation would move up the deadline by which all televisions with screens of 13 to 24 inches must contain built-in digital tuners. The FCC's current deadline is July 1, 2007; the draft legislation would set an earlier deadline of March 1, 2007. Additionally, the draft legislation prohibits the FCC from further revising its existing schedule for mandatory DTV reception capability. The legislation requires cable operators (with capacities over 550 MHZ) and satellite television providers to offer to their customers broadcaster signals in both digital and analog formats for five years after the transition. The legislation, which allows cable and satellite providers to convert broadcaster signals at the "head-end," would permit these providers to convert digital broadcasts to a standard definition format (which occupies less bandwidth than a high definition signal) if they so choose. On July 12, 2005, the Senate Commerce, Science and Transportation Committee held a hearing on the DTV transition. While consensus emerged on the need for a "hard" deadline for digital conversion, there was considerable disagreement among witnesses over the issue of cable and satellite carriage of multicast broadcast programming and whether Congress should mandate which local broadcast stations might receive "dual carriage" (both digital and analog signals) by cable providers. On October 20, 2005, the Senate Commerce, Science and Transportation Committee approved DTV legislative language intended for the Senate's budget reconciliation bill. Entitled the Digital Transition and Public Safety Act of 2005, the legislation would set a "hard" deadline of April 7, 2009 for the digital conversion. The legislation extends the FCC's auction authority to September 30, 2009, and directs the FCC to commence auctions of the licenses for recovered analog spectrum on January 28, 2008. Auction proceeds would be deposited into a "Digital Transition and Public Safety Fund." The Secretary of Commerce is directed to transfer $5 billion from the Fund to the general fund of the Treasury on October 2, 2009. Remaining money in the Fund would be distributed by the Department of Commerce for a number of purposes, including $3 billion for a program to assist consumers in the purchase of converter boxes, $200 million for a program to assist the digital conversion of low-power and translator television stations, $1.25 billion for a program to facilitate emergency communications, $250 million for a program to implement the ENHANCE 911 Act of 2004, $200 million for a program to provide assistance to coastal States and Indian tribes affected by hurricanes and other natural disasters, and $15 million to be made available under certain conditions to the Department of Transportation's essential air service program. Because the legislation was designed specifically for the budget reconciliation process, no specifics are included on how the converter box subsidy program would be framed or administered. The legislation also does not contain language on the issues of cable carriage of multicasted digital signals and downconverted analog signals. It is anticipated that a separate DTV bill (not attached to the budget reconciliation) may be introduced in the future to address those and other issues not directly related to the budget reconciliation process. On October 26, 2005, the Senate Budget Committee reported S. 1932 , the Deficit Reduction Omnibus Reconciliation Act of 2005. Title III of S. 1932 is the Digital Transition and Public Safety Act of 2005 as approved by the Senate Commerce, Science and Transportation Committee. During Senate consideration of S. 1932 on November 2, 2005, amendments were introduced by Senator Ensign to reduce funding for converter boxes from $3 billion to $1 billion, and by Senator McCain to move forward the transition deadline from April 7, 2009 to April 7, 2008. The Ensign amendment was withdrawn and the McCain amendment was defeated. The Senate passed S. 1932 on November 4, 2005. The budget reconciliation conference report on S. 1932 ( H.Rept. 109 - 362 ) was approved by the House on December 19, 2005, and approved by the Senate on December 21, 2005. However, because the Senate removed three provisions from the conference report (provisions not related to digital television), S. 1932 was returned to the House for final approval. On February 1, 2006, the House again approved S. 1932 , thereby clearing the measure for the President's signature. On February 8, 2006, the President signed S. 1932 into law ( P.L. 109 - 171 ). Title III (the Digital Television Transition and Public Safety Act of 2005) sets the digital transition deadline at February 17, 2009, and allocates up to $1.5 billion for a digital-to-analog converter box program. The act directs that after the digital transition deadline of February 17, 2009, full-power television stations will cease analog broadcasts and operate only on channels 2 through 51. Beginning on January 28, 2008, and ending on June 30, 2008, the FCC (with auction authority extended to 2011) will auction recovered analog spectrum between channels 52 and 69 (except for channels 63, 64, 68, and 69 which are already designated for public safety). Auction proceeds—most recently estimated at $12.5 billion by the Congressional Budget Office —will be deposited in a fund in the U.S. Treasury called the Digital Television Transition and Public Safety Fund. On September 30, 2009, $7.363 billion will be transferred from the Digital Television Transition and Public Safety Fund to the general fund of the Treasury. Of the funds remaining, $990 million will be made available to the National Telecommunications and Information Administration (NTIA) to administer a digital-to-analog converter box program. The $990 million includes up to $100 million for administrative costs, including up to $5 million for consumer education. Between January 1, 2008, and March 31, 2009, the program will supply up to two coupons per requesting household worth $40 each towards the purchase of converter boxes (which are expected to cost $50 to $60 each). The act defines "converter box" to mean a stand-alone device used solely for digital-to-analog conversion. The program may receive additional funding bringing the total up to $1.5 billion (including up to $160 million for administrative costs) if NTIA notifies Congress that additional funding is needed. Other designated uses of auction proceeds are as follows: not to exceed $1 billion through FY2010 to establish a grant program to assist public safety agencies in the acquisition of, deployment of, or training for use of interoperable communications systems. not to exceed $30 million for FY2007-FY2008 to reimburse New York City television broadcasters for costs incurred in the design and deployment of a temporary DTV broadcast system, which will provide DTV service until a permanent facility is constructed. not to exceed $10 million during FY2008-FY2009 to compensate low-power television stations (including Class A, translator, or booster television stations) for the cost of a digital-to-analog conversion device in order to convert the digital signals received from their corresponding full-power television stations and provide analog signals to their customers. not to exceed $65 million during FY2009 to reimburse low-power television stations for equipment to upgrade stations from analog to digital in rural communities. not to exceed $156 million during FY2007-FY2012 for a national alert and tsunami warning program. not to exceed $43.5 million to implement the ENHANCE 911 Act of 2004. not to exceed $30 million for the essential air service program administered by the Department of Transportation. The act provides for additional supplemental license fees to be assessed by the FCC in the aggregate amount of $10 million during FY2006. Additionally, the conferees instruct the FCC to issue a report and order on the digital television table of channel allotments, and to coordinate those allotments with Canada and Mexico to resolve any international interference issues. The Conference Agreement for P.L. 109 - 171 did not retain the provisions in the House bill on "digital-to-analog conversion and must carry" (the "downconversion" issue, which addresses cable and satellite provision of broadcast signals to analog televisions), nor were the House provisions on a comprehensive consumer outreach program retained. Also, like the previous House and Senate versions, P.L. 109 - 171 did not contain language addressing the multicast must-carry issue or other DTV issues such as the broadcast flag or DTV public interest obligations. On May 1, 2006, Senator Stevens introduced S. 2686 , the "Communications, Consumer's Choice, and Broadband Deployment Act of 2006." Title VII of S. 2686 ("Digital Television") contains a number of provisions related to the digital television transition. On June 28, 2006, the Senate Committee on Commerce, Science and Transportation completed its markup of the communications reform bill, H.R. 5252 . Title VII of the Senate Commerce Committee version of H.R. 5252 similarly contains a number of provisions related to the digital television transition, as follows: mandates consumer education requirements for manufacturers, retailers, broadcasters, and the FCC (Sec. 701a); establishes a DTV Working Group on consumer education, outreach, and technical assistance (Sec. 701b); requires all television sets imported or shipped in interstate commerce for sale or resale to the public after March 1, 2007 to be capable of receiving digital signals (Sec. 701c); requires the Department of Commerce, in consultation with the Department of Energy, to set energy standards for digital-to-analog converter boxes (Sec. 701c); requires large cable operators to provide to their customers their local broadcasters' digital signals in both digital and "downconverted" analog formats through February 17, 2014 (Sec. 701d); affirms the authority of the FCC to implement a digital stream requirement for the blind (Sec. 702); requires the FCC to submit a semi-annual report on international coordination with Canada and Mexico of the DTV table of allotments (Sec. 703); permits Spanish-language analog television stations broadcasting within 50 miles of the U.S.-Mexican border to continue analog operation (between channels 2 and 51, and subject to certain conditions) until February 17, 2011 (Sec. 704); gives the FCC statutory authority to proceed with its broadcast flag rule, with certain limitations (Sec.452). H.R. 5252 was reported on September 29, 2006 ( S.Rept. 109 - 355 ). The bill was placed on the Senate Legislative Calendar, but was ultimately not considered by the full Senate. The Deficit Reduction Act of 2005 ( P.L. 109 - 171 ) set a February 17, 2009 deadline for the digital transition and established a digital converter box coupon program to mitigate the switch-over costs to consumers with analog televisions. The preeminent issue for Congress is ensuring that American households are prepared for the February 17, 2009 DTV transition deadline, thereby minimizing a scenario whereby television sets across the nation "go dark." Specifically, Congress is actively overseeing the activities of federal agencies responsible for the digital transition—principally the FCC and the NTIA—while assessing whether additional federal efforts (including enhanced coordination and leadership) are necessary, particularly with respect to public education and outreach. The Congress is also monitoring the extent to which private sector stakeholders take appropriate and sufficient steps to educate the public and ensure that all Americans are prepared for the digital transition. Table 1 shows a listing of hearings held in the 110 th Congress on the DTV transition. Appendix C in this report provides a listing of DTV-related legislation introduced into the 110 th Congress. Other DTV issues—some of which were considered by the 109 th Congress, but remain unresolved—include digital multicast must-carry, downconversion, and the broadcast flag. Additionally, there remain issues related to the auctioning and use of spectrum made available by the digital transition. On July 25, 2006 the National Telecommunications and Information Administration (NTIA) released a Request for Comment and Notice of Proposed Rulemaking (NPRM) to implement and administer a coupon program for digital-to-analog converter boxes. In the NPRM, NTIA proposed that up to two $40 coupons will be available to households with analog televisions that exclusively rely on over-the-air broadcast signals. Cable or satellite television households would not be eligible, even if they also happened to contain over-the-air analog televisions not connected to cable or satellite systems. NTIA proposed that applying households would self-certify that they only receive over-the-air signals using an analog television. NTIA also asked for comments on whether economic need should determine whether a household is eligible for the program, and if so, how economic need should be determined (i.e. "means testing"). In the NPRM, NTIA also asked for comments on consumer education. Given that the Deficit Reduction Act allocates no more than $5 million for consumer education concerning the digital transition and the converter box program, NTIA noted that considering "the costs of media production and paid advertising time, the $5,000,000 limit necessitates that NTIA carefully leverage the program's consumer education spending by collaborating with and complementing the consumer education efforts of broadcasters, equipment manufacturers, retailers, consumer groups and others with a stake in a successful and timely transition to digital television broadcasting." Acknowledging the difficulty in reaching households most likely to rely solely on over-the-air television, NTIA asked for ideas and comments on how best to reach those households. On November 16, 2006, Representative John Dingell and nineteen other Democrats on the House Committee on Energy and Commerce sent a letter to NTIA expressing concerns regarding the converter box program. Specifically, the letter urged NTIA not to restrict eligibility for converter box coupons to exclusively over-the-air households, and instead to make coupons available also to any cable or satellite television households which may contain an over-the-air analog television. The letter also opposed "means testing," arguing that determining economic eligibility imposes too many administrative burdens on consumers; urged performance standards for converter boxes which would ensure picture and audio quality and the ability of converter boxes to be updated, modified or repaired; and stated that $5 million for consumer education was inadequate, urging NTIA to target especially lower income households and other vulnerable groups. On March 12, 2007, NTIA released its final rule implementing the converter box program. The Deficit Reduction Act of 2005 ( P.L. 109 - 171 ) initially allocates $990 million for the converter box program, and may subsequently allocate an additional $510 million (totaling $1.5 billion) if NTIA notifies Congress that additional funding is needed. The final rule states that starting on January 1, 2008, for the initial $990 million program (the "Initial Period"), up to two $40 coupons will be available to any and all requesting U.S. households to be used towards the purchase of up to two digital-to-analog converter boxes. In the event that NTIA determines that the additional $510 million is needed, only exclusively over-the-air households will be eligible for coupons during this "Contingent Period." Households will be required to self-certify that they are exclusively over-the-air and do not subscribe to cable, satellite, or other pay television services. Cable and satellite households that contain extra over-the-air televisions will be eligible for coupons during the "Initial Period" of the program (the first $990 million), but will not be eligible for coupons if there is a second phase or "Contingent Period" of the program (the additional $510 million). The rule also sets forth procedures and requirements for manufacturers and retailers who wish to participate in the converter box program. Manufacturers must submit test results and sample converter boxes to NTIA for approval. Approved devices must meet prescribed technical specifications that are intended to ensure an affordable state-of-the-art converter box. Additional permitted features include a smart antenna interface connector and program guide. Features that would disqualify a converter box from being covered by the coupon program include video recording, playback capability, or other capabilities which allow more than simply converting a digital over-the-air signal. Meanwhile, retailers must receive a certification from NTIA in order to participate in the converter box coupon program. Certified retailers must agree to have systems in place capable of processing coupons electronically for redemption and payment, track every transaction and provide reports to NTIA, train employees on the purpose and operation of the coupon program with NTIA-provided training materials, use commercially reasonable methods to order and manage inventory, and assist NTIA in minimizing incidents of waste, fraud, and abuse, including reporting suspicious patterns of customer behavior. Retailers are not responsible for verifying household eligibility. On August 15, 2007, NTIA announced it had entered into a contract with IBM to run the Digital-to-Analog Converter Box Coupon program. The total award is $119,968,468, which breaks down to $84,990,343 for the initial period and $34,978,125 for the contingent period. The contract performance began immediately and is to close out on September 30, 2009. The IBM-led team will provide services in three areas: consumer education, coupon distribution to consumers and retail store participation, and financial processing to reimburse retailers, to maintain records, and to prevent fraud, waste, and abuse. As of January 1, 2008, consumers may apply to NTIA for up to two converter box coupons, either by logging onto www.dtv2009.gov , or by calling the toll-free number: 1-888-DTV-2009 (1-888-388-2009). NTIA will begin sending out coupons by late February or early March of 2008. Given that coupons are required by statute to expire after 90 days, NTIA has stated its intention not to mail coupons to consumers until converter boxes are available in local retail outlets. With the February 17, 2009 deadline for the digital transition approaching, and with the public launching of the converter box program in January 2008, Congressional concern is focusing on the adequacy of efforts to inform the public of the digital transition. A primary goal is preventing analog over-the-air households from losing television service in the event that these households do not purchase a converter box or take other measures to ensure the ability to receive digital broadcasts after February 17, 2009. A survey conducted by the National Association of Broadcasters (NAB) found that 56% of over-the-air viewers have never seen, heard, or read anything about the digital transition, that only 10% were able to guess the right year when analog broadcasts will cease, and that only 1% to 3% knew that the transition would be complete by February 2009. A subsequent survey conducted by the Association of Public Television Stations (APTS) in August 2007 found that 51.3% of Americans were unaware of the DTV transition. A previous APTS survey in November 2006 found the percentage of Americans unaware of the DTV transition at 61.2%. Two federal agencies—the NTIA and the FCC—are directly engaged in consumer education efforts regarding the digital transition. Currently, the NTIA is statutorily funded (by P.L. 109 - 171 , the Deficit Reduction Act of 2005) at "not more than $5,000,000 for consumer education concerning the digital television transition and the availability of the digital-to-analog converter box program." The NTIA's DTV consumer education efforts are focused on raising awareness of the coupon program, particularly with five target groups most likely to be affected by the digital transition: senior citizens, the economically disadvantaged, rural residents, people with disabilities, and minorities. To reach those groups and the American public in general, the NTIA is pursuing a strategy of leveraging its resources by partnering with private sector stakeholder groups representing those constituencies most at risk. NTIA is also working with the DTV Transition Coalition, a broad-based coalition of business, trade, and industry groups as well as grass roots and membership organizations. In addition to working with private sector groups, NTIA is working with federal government agencies that target economically disadvantaged Americans. Meanwhile, the Administration has requested $1.5 million for the FCC in FY2008 for DTV consumer education; the FY2008 House Financial Services and General Government Appropriations bill ( H.R. 2829 ; H.Rept. 110 - 207 ), passed by the House on June 28, 2007, would provide $2 million. Similar to the NTIA, the FCC is pursuing collaborative partnerships with private and public sector entities to target outreach to vulnerable populations and to raise the general awareness of the American public about the DTV transition. The FCC has become a member of the DTV Transition Coalition, prepared and issued consumer publications and web materials, and is promoting DTV awareness by attending and holding events and conferences. The significant reliance of the FCC and the NTIA on the private sector for DTV public education has led some to question whether the federal government should assume a more proactive role in promoting DTV public education activities. On July 30, 2007, in response to criticisms and suggestions on DTV consumer education raised by a May 24, 2007 letter from the House Energy and Commerce Committee, the FCC released a Notice of Proposed Rule Making (NPRM) on a DTV Consumer Education Initiative. The NPRM requests public comments on a number of proposals to raise awareness among the public of the DTV transition, including broadcaster public service announcements, broadcaster consumer education reporting, multichannel video programming distributor (MVPD) customer bill notices, consumer electronics manufacturer notices, consumer electronics retailer reporting on its staff training, and other proposals. Meanwhile, in testimony before the Senate Special Committee on Aging, the Government Accountability Office (GAO) stated that difficulties remain in implementing consumer education programs. GAO testified that because private sector DTV outreach efforts are voluntary, government cannot be assured of their extent and that "given the different interests represented by industry stakeholders, messages directed at consumers vary and might lead to confusion." As requested by the House Committee on Energy and Commerce, GAO is performing an ongoing assessment of public and private sector DTV consumer education programs and is planning a series of consumer surveys leading up to the transition date. A major component of any DTV public education campaign is likely to be the airing of public service announcements (PSAs). The National Association of Broadcasters (NAB) is preparing PSAs to be delivered to local broadcasters by December 2007. It will be up to local broadcasters to decide when and how often to air the PSAs. On October 15, 2007, the NAB announced a $697 million consumer education campaign, including DTV spots, crawls, and 30 minute educational programs. Meanwhile, in September 2007, the National Cable & Telecommunications Association (NCTA) began running on cable channels a $200 million English and Spanish language advertising campaign on the digital transition; NCTA will continue the advertising spots through February 2009. In its NPRM, the FCC states its belief that PSAs are the most effective and efficient way to reach over-the-air television viewers about the digital transition. The FCC is proposing to require television broadcast licensees to conduct on-air consumer education efforts and is asking for comments on the content of such PSAs, when and how often they should be run, whether similar requirements should be imposed on all broadcasters, and other related questions. Digital multicasting refers to the ability of broadcasters to divide their 6 MHZ of digital spectrum into separate and discrete streams of content. Thus, for example, a broadcaster could transmit alternate channels of programming—such as weather, news, or foreign language, for example—in addition to its primary digital video broadcast. On February 10, 2005, the FCC affirmed its prior decision that cable operators are not required to carry more than a single digital programming stream from any particular broadcaster. At issue is whether "must carry" requirements should be expanded such that cable operators would be required to carry any or all additional multicasted channels transmitted by commercial broadcasters. Commercial broadcasters argue that their incentive to develop additional digital programming streams is diminished if they have no guarantee that cable systems will carry that programming. Cable providers counter that their decision whether or not to carry additional programming streams from a broadcaster should be dictated by the market, rather than mandated. In the 109 th Congress, H.R. 5252 , as reported by the Senate Committee on Commerce, Science and Transportation, did not explicitly address multicast must-carry, and to date, no multicast must-carry legislation has been introduced. However, FCC Chairman Kevin Martin has publicly stated his support for requiring multicast must-carry, and suggested the possibility of reconsidering the FCC's 2005 decision (which was issued under the previous FCC Chairman, Michael Powell). Two of the FCC Commissioners who voted against multicast must-carry, Michael Copps and Jonathan Adelstein, stated that they may be willing to reexamine the issue if public interest obligations of broadcasting multicast signals are also addressed. An attempt to require multicast must-carry at the FCC's June 2006 meeting was withdrawn by Chairman Martin when it became clear that the order lacked votes necessary for passage. A related issue is the extent to which cable providers may be permitted or required to carry downconverted analog signals after the digital transition takes place. Many cable households will likely continue to use analog televisions which cannot receive a digital signal. Cable companies might offer or lease converter boxes to these customers, or customers may be required to purchase their own converter box. As an alternative, it is possible that cable providers might seek authority from Congress to "downconvert" the digital signal of selected local broadcast stations to analog format. To serve customers with digital televisions, cable providers would continue to provide digital signals as well (in other words, "dual carriage"). Under this scenario, a key issue is whether (and if so, how) Congress should mandate which local broadcast stations would receive the benefit of "dual carriage" to cable customers. In the 109 th Congress, H.R. 5252 , as reported by the Senate Committee on Commerce, Science and Transportation, contained language that would require satellite carriers and cable operators with capacities of greater than 550 megahertz to offer, through February 17, 2014, must-carry locally broadcast digital signals in formats viewable on both analog and digital televisions. Cable operators with capacities of 550 megahertz or less would be required only to offer those signals in analog format through February 17, 2014, while maintaining the option of offering digital signals as well. Cable operators and satellite carriers would have the option of providing standard definition digital signals in lieu of high definition signals, and would be allowed to perform conversions at any location, from the cable head-end or local receive facility, to the customer premises. The provision in H.R. 5252 allowing cable operators and satellite carriers to provide digital signals in a standard definition format was opposed by broadcasters and the consumer electronics industry. They argued that permitting conversions of broadcasters' signals to a standard definition format removes the incentive for consumers to purchase high definition television sets, while also giving cable and satellite providers the opportunity to offer their own programming in a higher quality format (i.e. high definition) than what they might offer for broadcasters' digital programming. Cable companies asserted that the legislation provides a seamless digital transition for the majority of consumers who have not yet purchased high definition sets. On April 25, 2007, the FCC adopted a Second Further Notice of Proposed Rulemaking (NPRM) asking for comment on proposals to ensure all cable subscribers, including those with analog TV sets, can view must-carry television stations on cable systems after the transition to digital television occurs on February 17, 2009. In the NPRM, the FCC pointed out that about 50% of all cable subscribers (approximately 32 million households) are analog cable subscribers. Additionally, many digital cable subscribers have one or more television sets that only receive analog cable service. By statute, cable operators must ensure that all subscribers are able to view all must-carry local broadcast stations. In the NPRM, the FCC proposes that cable operators must either: (1) carry the signals of all must-carry stations in an analog format to all analog cable subscribers, or (2) for all-digital systems, carry those signals only in digital format, provided all subscribers have the necessary equipment to view the broadcast. The FCC also reaffirmed that cable systems must carry high definition broadcast signals in HD format, and asked for comment on whether the Commission should move from a subjective to an objective measure of what constitutes "material degradation." On September 11, 2007, the FCC adopted rules intended to ensure that cable customers continue to receive local TV stations after the transition. Specifically, the FCC will require cable operators to comply with a "viewability requirement" by choosing to either (1) carry the signal in analog as well as digital formats (dual carriage), or (2) carry the signal in a digital only format, provided that all subscribers have set-top boxes which will enable them to view digital broadcasts on their analog TVs. The viewability requirement extends to February 2012, at which time the FCC will reassess the need for the requirement. Small cable companies—which had sought an exemption—may request a waiver of the viewability requirement. Many content providers (e.g., movie studios and broadcast networks) may be reluctant to provide high quality digital content to households until they are assured that technologies are in place to prevent consumers from making unauthorized copies and Internet transmissions of copyrighted digital content. Two of these technologies currently under consideration are the "broadcast flag" and technology to "plug" what is commonly referred to as the "analog hole." The "broadcast flag" applies only to content that is broadcast over-the-air. The "analog hole"problem applies to all digital content, whether it is transmitted over-the-air, by cable, or by satellite. For further explanations of these technologies, see the section, "Copyright Protection Technologies" in Appendix A of this report. On November 4, 2003, the FCC adopted a rule which gives broadcasters the option of inserting a "broadcast flag" into their over-the-air broadcast transmissions. By July 1, 2005, all consumer electronics devices capable of receiving an over-the-air DTV signal would have been required to be manufactured to incorporate content protection technologies that would limit the redistribution of digital television content when the broadcast flag is recognized. However, on May 6, 2005, the U.S. Circuit Court of Appeals for the District of Columbia struck down the FCC's broadcast flag rules. The Court ruled that the FCC has no authority to regulate consumers' use of televisions and other devices which receive broadcast transmissions. With the FCC's broadcast flag rule negated by the Court, Congressional policymakers are considering whether to introduce legislation mandating a broadcast flag. In the 109 th Congress, discussion draft legislation released by the House Committee on the Judiciary, Subcommittee on Courts, the Internet and Intellectual Property, the Broadcast Flag Authorization Act, would give the FCC authority to proceed with the broadcast flag rule. On November 3, 2005, the Committee heard witnesses in support and opposition to the draft legislation. On January 24, 2006, broadcast flag draft legislation (which would also give the FCC authority to proceed with the broadcast flag rule) was discussed at a hearing held by the Senate Committee on Commerce, Science and Transportation. Another hearing addressing the broadcast flag issue was held by the House Committee on Energy and Commerce on June 27, 2006. H.R. 5252 , as reported by the Senate Commerce, Science and Transportation Committee, would give the FCC statutory authority to proceed with its broadcast flag rule. The legislation provided that within 30 days after enactment, the FCC shall initiate a further proceeding for the approval of digital output protection technologies and recording methods for use in distance learning activities. The FCC's authority is not limited with respect to approving technologies that allow for the redistribution of digital broadcast content within the home or similar environment. Finally, a broadcast flag could not be used to restrict the distribution of news and public affairs programming of which the primary commercial value depends on "timeliness." The FCC would allow broadcasters to determine whether that "timeliness" criteria is met. Such determination by broadcasters would be subject to FCC review under certain conditions. Meanwhile, on November 3, 2005, the House Committee on the Judiciary heard witnesses in support and opposition to draft legislation that would require consumer electronics devices (such as digital video recorders) to incorporate technology designed to prevent unauthorized copying and distribution of digital content obtained through the analog hole. The draft legislation was the basis for the Digital Transition Content Security Act of 2005 ( H.R. 4569 ), introduced by House Judiciary Committee Chairman James Sensenbrenner and Ranking Member John Conyers on December 16, 2005. Appendix A. Background on Selected Policy Issues Digital "Must Carry" Under the "must carry" provisions of the Cable Television Consumer Protection and Competition Act of 1992, cable TV providers are required to transmit local analog programs to their customers. This decision was based on the reasoning that since cable TV has a predominant position in the market, "without mandatory carriage provisions, the economic viability of local broadcast television and its ability to produce quality local programming would be jeopardized." The commercial broadcasters (primarily the smaller networks and independent stations, represented by the Association of Local Television Stations, but also the National Association of Broadcasters) believe that the same principles and conclusions of the 1992 Act should apply to DTV services, leading to mandatory carriage of the DTV programming by cable operators. Broadcasters argue that because most Americans receive their TV via cable, the carriage of DTV programming by cable providers is essential for consumers to purchase DTV receivers. The cable companies (led by the National Cable Television Association, NCTA) oppose any "must carry" requirements for cable operator carriage of DTV programming, arguing that it would be an unlawful taking of their property, and that they should be able to decide what content they provide on their own networks. NCTA points out that, unlike the commercial broadcasters who were given free spectrum licenses for DTV, cable operators must build their own infrastructure to be able to transmit DTV signals. Cable operators say they will carry commercial broadcasters' DTV programming as soon as consumer demand warrants it. Cable television services provide a finite number of channels to consumers, and any mandate to provide DTV programming would require cable companies to remove other non-broadcast channels. Many cable operators are investing in the upgrades needed to provide DTV, although the video transmission standards adopted by cable operators may not be the same as those used by the broadcasters. This could mean that different home equipment may be necessary for cable services than for over-the-air TV reception. In addition, HDTV programming will require cable operators to build a more robust transmission (i.e., greater bandwidth) capability than is required by SDTV, and some cable operators may want to offer SDTV but not HDTV services. The cable industry also contends that mandating carriage of all DTV broadcast transmissions will financially devastate many smaller cable operators. Responding to the debate between the broadcast and cable industries over whether cable TV providers should be required to transmit DTV programming, in July 1998 the FCC initiated a proceeding on the matter. On January 22, 2001, the FCC announced its adoption of rules for cable carriage of digital TV signals. Most notably, the FCC ruling did not require cable systems to simultaneously carry both the analog and digital signals ("dual carriage") of local TV stations. The FCC tentatively concluded that "such a requirement appears to burden cable operators' First Amendment interests more than is necessary to further a substantial governmental interest." While not approving a dual carriage mandate, the FCC did rule that a digital-only TV station, whether commercial or non-commercial, can immediately assert its right to carriage on a local cable system. Additionally, a TV station that returns its analog spectrum and converts to digital operations must be carried by local cable systems. Cable systems must carry "primary video," defined as a "single programming stream and other program-related content." The FCC continued to examine the must-carry issue through 2004. Of particular interest was how must-carry rules would ultimately apply to "digital multicasting," which refers to the ability of broadcasters to divide their 6 MHZ of digital spectrum into separate and discrete streams of content. At issue is whether cable operators should be required to carry any or all additional multicasted channels transmitted by commercial broadcasters as part of their 6 MHZ digital allotment. On January 31, 2005, the National Cable Television Association (NCTA) and the Association of Public Television Stations (APTS) announced an agreement under which cable companies would provide dual-carriage (both analog and digital) of at least one public television station in a market during the transition, as well as carrying up to four multicasts of public stations after the transition. Under the agreement, APTS will no longer lobby the FCC or Congress for government must-carry mandates. On February 10, 2005, the FCC affirmed its prior decision that cable operators are not required to carry more than a single digital programming stream from any particular broadcaster. The FCC also affirmed the previous tentative conclusion not to impose a dual carriage requirement on cable operators. Mandating Digital Tuners After the digital transition, existing analog television sets will not be able to receive digital signals unless they are attached to a converter box. However, it is possible to manufacture analog televisions with a digital tuning capability already built in. Such televisions would not require a separate converter box in order to receive over-the-air broadcasted digital signals. On August 8, 2002, the FCC adopted a phase-in plan requiring most new television sets to contain digital tuners by 2007. Specifically, the FCC's Second Report and Order and Second Memorandum Opinion and Order (FCC 02-230) requires all television sets with screen sizes of at least 13 inches, and all television receiving equipment (such as video cassette recorders and DVD players/recorders to include DTV reception capability according to the following schedule: Receivers with screen sizes 36 inches and above —50% of a responsible party's units must include DTV tuners effective July 1, 2004; 100% of such units must include DTV tuners effective July 1, 2005. Receivers with screen sizes 25 to 35 inches —50% of a responsible party's units must include DTV tuners effective July 1, 2005; 100% of such units must include DTV tuners effective July 1, 2006. Receivers with screen sizes 13 to 24 inches —100% of all such units must include DTV tuners effective July 1, 2007. TV Interface Devices VCRs and DVD players/recorders, etc. that receive broadcast television signals—100% of all such units must include DTV tuners effective July 1, 2007. The FCC's phase-in plan was opposed by the Consumer Electronics Association (CEA), consumer groups, and antitax groups. The CEA, citing the "scant percentage of households relying on over-the-air television reception" argued that the mandate is a "multi-billion dollar TV tax on American consumers," and called instead for an FCC mandate on cable-DTV compatibility standards. This position was countered by the National Association of Broadcasters, who argued that the mandate is necessary to hasten the DTV transition and ensure the survival of free over-the-air broadcasting, which NAB says is currently received by roughly one third of all TV sets in use. Subsequently, the agreement between the consumer electronics and cable industries on a cable-DTV interoperability standard dampened CEA's opposition to the digital tuner mandate, because the circuitry enabling "plug and play" compatibility between digital televisions and cable systems could be modified to receive digital over-the-air signals at an incremental cost. However, in November 2004, the CEA, along with the Consumer Electronics Retailers Coalition (CERC), petitioned the FCC to eliminate the deadline of July 1, 2005 for digital tuners in 50% of televisions in the 25 to 36 inch (mid-sized) screen size range. Alternatively, CEA and CERC proposed that the digital tuner deadline for all (100%) of televisions in that size range be moved up from July 1 to March 1, 2006. On February 14, 2005, the FCC announced a Notice of Proposed Rulemaking to consider whether to adjust the schedule by which televisions with screen sizes of 25 to 36 inches are required to contain digital tuners. On June 9, 2005, the FCC denied the CEA and CERC petition to eliminate the deadline of July 1, 2005 for 50% of televisions in the 25 to 36 inch screen size range to have digital tuners. At the same time, the FCC did agree to move up the digital tuner deadline for mid-size televisions from July 1 to March 1, 2006. The FCC also proposed to move up the date by which all televisions with screen sizes over 13 inches must have digital tuners, from July 1, 2007 to December 31, 2006; and asked for comments on whether digital tuner requirements should be extended to televisions with screen sizes smaller than 13 inches. On November 3, 2005, the FCC announced its decision to require all sets shipped in interstate commerce or imported into the United States (including sets with screen sizes smaller than 13 inches) to contain digital tuners by March 1, 2007. While newly manufactured or imported sets must have a digital tuner, retailers are permitted to sell analog-only television sets from existing inventory. On April 25, 2007, the FCC adopted a rule requiring retailers to put a label on all analog-only televisions which informs the consumer that the television will require a converter box after February 17, 2009. The FCC is monitoring compliance with the labeling rule, and has levied over $3 million in fines, in the aggregate, against retailers who fail to display required labels. Copyright Protection Technology Many content providers (e.g., movie studios and broadcast networks) are reluctant to provide high quality digital content to DTV owners until they are assured that interoperability standards and technology licensing agreements are in place to prevent consumers from making unauthorized copies and Internet transmissions of digital content. In 1998, five consumer electronics manufacturing companies—Hitachi, Intel, Matsushita, Sony, and Toshiba—formed an entity called the Digital Transmission Licensing Administrator (DTLA, also known as "5C") to license a jointly developed Digital Transmission Content Protection (DTCP) technology. DTCP is designed to protect audiovisual and audio content against unauthorized interception or retransmission in the digital home environment. On July 17, 2001, two major studios—Warner Bros. and Sony Pictures Entertainment—announced a licensing agreement to adopt DTCP. The agreement is designed to permit the studios to protect prerecorded media, pay-per-view, and video-on-demand transmissions against unauthorized copying, and to protect all content against unauthorized Internet retransmission, while assuring consumers' ability to continue customary home recording of broadcast and subscription programming. Broadcast Flag While DTCP protects content delivered to the home via cable or satellite, the technology does not protect over-the-air broadcast content. Other major studios have been reluctant to sign licensing agreements with DTLA until broadcast content can also be protected. Additionally, broadcast networks (ABC, CBS, and Fox) have opposed the 5C standard, arguing that the technology's inability to encrypt over-the -air broadcasts will cause high quality content to migrate toward cable and satellite exclusively. A week after the 5C agreement with Sony Pictures and Warner Bros. was announced, the five other major studios (Disney, Paramount, Fox, Universal, and MGM) submitted a proposal to DTLA which would require digital broadcast content to be encrypted with a "broadcast flag" preventing Internet distribution or retransmission of digital content broadcast over-the-air. On June 3, 2002, a group of engineers from the motion picture and technology industries released a detailed "broadcast flag" proposal. While the proposal is strongly supported by the content industry, the technology industry remains divided, with some companies supporting and others opposing this particular proposal. Some consumer groups have also expressed opposition. Those supporting a broadcast flag (such as the Motion Picture Association of America and other content providers) argue that the protections against piracy offered by a broadcast flag are crucial to ensure that content providers make high-value programming available over the digital airwaves. Supporters also argue that a broadcast flag will not prevent consumers from making physical copies of DTV programs, or from distributing such copies within a person's home digital network. Opponents of a broadcast flag (many consumer electronics and high tech companies, as well as consumer groups) assert that because electronic devices will have to be meet certain specifications in order to process the broadcast flag, the innovation and functionality of consumer electronics equipment will be adversely affected. Additionally, they argue, because the broadcast flag would effectively ban any retransmission not approved by content providers, legitimate consumer rights (e.g. "Fair Use") would be compromised. On August 9, 2002, the FCC issued a notice of proposed rulemaking (FCC 02-231, MB Docket 02-230) in the matter of digital broadcast copy protection. Noting that the lack of digital broadcast copy protection is a significant impediment to the DTV transition, the FCC solicited public comment on whether the FCC can and should mandate the use of a copy protection mechanism for digital broadcast television. The comment period closed on February 18, 2003; over 6000 comments were received, most from individual citizens. On November 4, 2003, the FCC adopted a rule which gives broadcasters the option of inserting a "broadcast flag" into their over-the-air broadcast transmissions. By July 1, 2005, all consumer electronics devices capable of receiving an over-the-air DTV signal would have been required to be manufactured to incorporate content protection technologies that will limit the redistribution of digital television content when the broadcast flag is recognized. Before DTV devices can be manufactured, however, content protection technologies must be approved. The FCC set forth an "interim procedure" whereby parties would certify that their content protection technology meets FCC criteria. After a period of public comment, the FCC would determine whether or not to approve that particular technology. The FCC issued a Further Notice of Proposed Rulemaking in order to formulate a permanent approval procedure for content protection technology. On August 4, 2004, the FCC adopted a Report and Order approving thirteen digital output protection technologies and recording methods. On February 22, 2005, the U.S. Circuit Court of Appeals for the District of Columbia heard an appeal filed in March 2004 by library and consumer groups objecting to the FCC rule mandating that copy protection technology be included in digital televisions and related electronics by July 1, 2005. On May 6, 2005, the Court struck down the FCC's broadcast flag rules. The Court ruled that the FCC has no authority to regulate consumers' use of televisions and other devices which receive broadcast transmissions. With the FCC's broadcast flag rule negated by the Court, the 109 th Congress considered legislation mandating a broadcast flag. In the 109 th Congress, H.R. 5252 , as reported by the Senate Commerce, Science and Transportation Committee, would have given the FCC statutory authority to proceed with its broadcast flag rule. The legislation provided that within 30 days after enactment, the FCC shall initiate a further proceeding for the approval of digital output protection technologies and recording methods for use in distance learning activities. The FCC's authority is not limited with respect to approving technologies that allow for the redistribution of digital broadcast content within the home or similar environment. Finally, a broadcast flag could not be used to restrict the distribution of news and public affairs programming of which the primary commercial value depends on "timeliness." The FCC would allow broadcasters to determine whether that "timeliness" criteria is met. Such determination by broadcasters would be subject to FCC review under certain conditions. H.R. 5252 was not enacted by the 109 th Congress. Analog Hole Another copyright protection issue of concern to content providers is what is commonly referred to as the "analog hole." In the foreseeable future, many consumers will continue to use analog televisions. In order to display the content carried by digital signals, analog televisions will be equipped with a digital tuner (a set-top box) which converts the signal from digital to analog. At this point, the digital signal, even if content protected, is converted into an unprotected analog form which could then be easily converted into a similarly unprotected digital form subject to the unauthorized copying and Internet transmission the content providers are seeking to prevent. During the 109 th Congress, discussion draft legislation released by the House Committee on the Judiciary, Subcommittee on Courts, the Internet and Intellectual Property, the Analog Content Protection Act, would require devices (such as digital video recorders or PC-based tuners) to recognize an analog rights signaling mechanism called "CGMS-A plus Veil" (Analog Copy Generation Management System coupled with the Veil Technologies Rights Assertion Mark). On November 3, 2005, the Committee heard witnesses in support and opposition to the draft legislation. The draft legislation was the basis for the Digital Transition Content Security Act of 2005 ( H.R. 4569 ), introduced by House Judiciary Committee Chairman James Sensenbrenner and Ranking Member John Conyers on December 16, 2005. Cable/DTV Interoperability Standards Interoperability standards between digital televisions and cable systems are necessary in order for consumers to be able to watch digital programming over their cable systems. Traditionally, interoperability has been achieved via the proprietary set-top box leased to the subscriber by the local cable company. Given the absence of a national interoperability standard, consumers had been unable to purchase DTV products from consumer electronics stores which can be directly connected to cable systems without the use of a set-top box. Two separate entities—the consumer electronics industry (including manufacturers and retailers) and the cable system operators—have embarked on an often contentious process of determining the specific technical details of how DTV devices might achieve nation-wide compatibility and interoperability with cable systems. Section 304 of the Telecommunications Act of 1996 directed the FCC to adopt regulations to assure the commercial consumer availability of "navigation devices" (i.e. set-top boxes, remote control units) without jeopardizing the rights of a cable provider to protect its signal from theft. Currently, proprietary set-top boxes are "integrated" with two overall functions: security and navigation (i.e. allowing the subscriber to flip from channel to channel). A 1998 order adopted by the FCC (FCC 98-116) required the cable operators to separate the security functions from non-security functions and to make available (by July 1, 2000) modular security components to the consumer electronics industry. Allowing time for transition, the FCC order permitted cable operators to continue to provide integrated set-top boxes through January 1, 2005. After that date, the sale or lease of new integrated boxes would be prohibited. This deadline was subsequently extended to July 1, 2006, and again extended to July 1, 2007. On February 22, 2000, the Consumer Electronics Association (CEA) and the National Cable Television Association (NCTA) announced a voluntary agreement on a set of technical requirements that permit the direct connection of digital television receivers to cable television systems. In January 2002, CableLabs (a research organization of the cable industry) published specifications for the OpenCable Applications Platform (OCAP), which would serve as a uniform interoperability cable/DTV standard. However, consumer electronics manufacturers and retailers and the cable industry continued to disagree over the pace and specific technical details (including copy protection requirements) of how interoperability should be implemented. On December 19, 2002, the cable and consumer electronics industries announced they had reached an agreement on a cable compatibility standard for an integrated, unidirectional digital cable television receiver. The two industry groups filed a Memorandum of Understanding (MOU) with the FCC, outlining the agreement. According to the MOU, the industries will continue to negotiate a "bidirectional" standard that would enable consumers to receive advanced services (such as video on demand) without the need for an external navigation device. On January 7, 2003, the FCC issued a Further Notice of Proposed Rulemaking (FCC 03-3) seeking comment on the MOU and proposing FCC rules necessary to implement the industry agreement. Opposition to the agreement's "encoding rules" was expressed by several organizations, including the Motion Picture Association of America, makers of personal video recording technology (TiVo), and consumer groups. On September 10, 2003, the FCC adopted a Second Report and Order which adopted, with certain modifications, the MOU agreement between the cable and consumer electronics industries. The new rules allowed for the manufacture of "plug and play" television sets that would receive one-way digital signals (from the cable company to the consumer) without the need for a set-top box. However, consumers would have to obtain from their cable operator a security card (a "POD" or "CableCARD") that must be inserted into the TV set. A set-top box would still be required for two-way services such as video on demand or pay-per-view. Finally, the Order initiated a subsequent proposed rulemaking (Second Further Notice of Proposed Rulemaking) to examine remaining issues. Under the current FCC rule, after July 1, 2007, the security of the unidirectional digital signal must be protected by a CableCARD (supplied by the cable provider) which can be inserted into the "plug and play" television set, and allow consumers to view scrambled programming. New set-top boxes provided by cable operators to their customers can no longer be "integrated," that is, they must operate in conjunction with a CableCARD. In its ruling setting the July 1, 2007 deadline for integrated set-top boxes, the FCC stated that it would entertain requests for waivers of the prohibition. As the July 1, 2007 deadline approached, many cable providers sought waivers from the FCC, urging that the July 1, 2007 deadline be extended by two years. Cable providers argued that imposing the ban would raise the costs to consumers of leasing the new CableCARD enabled boxes (without adding any new functionality) and divert industry resources from developing low-cost digital set-top boxes needed for the digital transition. Cable companies also argued that next-generation network architect security ("downloadable security") will likely be available in 2008 or 2009, rendering CableCARD technology obsolete. The consumer electronics industry, on the other hand, argued that if the July 1, 2007 deadline was extended, the value of CableCARD technology to consumers would be further diminished, thereby making it more likely that consumers would not purchase "plug and play" digital sets with integrated tuners, and continue to opt for sets which rely on the set-top boxes supplied by cable providers. Ultimately, the FCC granted some waivers for small cable operators experiencing difficulty obtaining new equipment, as well as for operators pledging an all-digital conversion by February 17, 2009. Large cable operators—such as Comcast and Time Warner—have not been granted waivers, and must comply with the July 1, 2007 deadline. Meanwhile, because CableCARDs do not provide signal security for two-way bidirectional signals (used for pay-per-view or video-on-demand, for example), the cable and consumer electronics industry continue to negotiate on a standard for bidirectional navigation devices. On June 29, 2007, the FCC released a Third Further Notice of Proposed Rulemaking seeking comment on industry-proposed standards to ensure bidirectional compatibility of cable television systems and consumer electronics equipment. The FCC is also seeking comment on whether such a proposed rule should apply to other non-cable providers such as direct broadcast satellite (DBS) or Internet protocol (IP)-based video services. Digital Conversion of Public Broadcasting Stations The FCC set a deadline of May 1, 2003 for public television stations to convert to digital. Unlike commercial broadcasters, public television broadcasters were not opposed to an early deadline for returning analog spectrum, provided that a mechanism was put in place which would ensure that converter boxes are made available to exclusively over-the-air households. Public broadcasting stations view digital television as an opportunity to enhance and expand services to their local communities. For example, public television stations are using multicast channels to provide programming streams dedicated to formal and children's education, workforce development, public affairs and local issues, and addressing underserved communities. Stations are also conducting pilot programs, whereby datacasts are used to establish Homeland Security public safety networks, including public alert systems and closed networks used by public safety and emergency management agencies. According to the Corporation for Public Broadcasting (CPB), as of January 2007, 340 public television stations (out of a total of 349) were on the air with a digital signal. Stations are currently at different stages of the digital transition, some with high definition production capacity and/or multicasting, while others struggle to maintain a single digital broadcast service that meets FCC requirements. CPB estimates that public television stations need $400 million to fully complete the digital transition. Raising money for the digital conversion is a challenge for many public television stations, especially those in small markets. In 1997, the Corporation for Public Broadcasting and other public television stakeholders estimated the cost of digital conversion for public television stations at $1.7 billion. In 2002, GAO reported that digital conversion would cost each station approximately $3 million. Public broadcasters have sought a substantial federal contribution for digital conversion. There are three federal programs which provide funding to public television stations for digital conversion. Those programs are: 1) the Public Telecommunications Facilities Program (PTFP), a grant program administered by the National Telecommunications and Information Administration (NTIA) at the Department of Commerce; 2) the Digital Distribution Fund at the CPB, and 3) the Public Television Station Digital Transition Grant Program at the Rural Utilities Service (RUS), U.S. Department of Agriculture. Table A -1 shows funding histories for each of these programs. PTFP funding is used to help public television stations pay for the new equipment and physical infrastructure required for digital conversion (e.g. transmitters, translators, and production equipment). The PTFP, which has provided matching grants for public broadcasting equipment for over 40 years, began to fund digital conversion in FY1998. For FY2008, as in previous years, the Administration requested no funding for PTFP in FY2008. On June 29, 2007, the Senate Appropriations Committee approved a bill ( S. 1745 ; S.Rept. 110 - 124 ) providing $20 million to PTFP in FY2008. On July 12, 2007, the House Appropriations Committee approved a bill ( H.R. 3093 ; H.Rept. 110 - 240 ) providing $21.728 million. The House passed H.R. 3093 on July 26, 2007. The Senate passed H.R. 3093 on October 16, 2007. The Consolidated Appropriations Act, 2008 ( P.L. 110 - 161 ) provided $18.8 million for PTFP. The Digital Distribution Fund at the Corporation for Public Broadcasting (CPB) provides matching grants to public television stations for the purchase of digital transmission equipment. The Administration requested $30.6 million for CPB's digital conversion program in FY2008. As in previous Administration budget proposals, the $30.6 million would be taken from advance appropriations previously enacted. On June 7, 2007, the House Appropriations Subcommittee on Labor-HHS-Education approved $29.7 million in "new money" for digital conversion ( H.R. 3043 ; H.Rept. 110 - 231 ). The House passed H.R. 3043 on July 19, 2007. On June 20, 2007, the Senate Appropriations Committee approved a bill ( S. 1710 ; S.Rept. 110 - 107 ) that would also provide $29.7 million. The Senate passed H.R. 3043 on October 23, 2007. The Conference Report ( H.Rept. 110 - 424 ), agreed to by the House on November 6, 2007, would provide $29.7 million. The Consolidated Appropriations Act, 2008 ( P.L. 110 - 161 ) also provided $29.7 million for digital conversion. The Public Television Station Digital Transition Grant Program at the Rural Utilities Service (RUS) provides funding to public televison stations serving rural areas for the purchase or lease of digital broadcasting equipment. The Administration requested no funding for the RUS digital conversion program in FY2008. On July 19, 2007, the Senate Appropriations Committee approved a bill ( S. 1859 ; S.Rept. 110 - 134 ) providing $10 million for public broadcasting digital conversion in rural areas. The Committee noted that FY2008 is the last appropriation that can effectively make funding available before the transition deadline and that "future funding is not anticipated." The House Agriculture Appropriations Act ( H.R. 3161 ; H.Rept. 110 - 258 ), approved by the House Appropriations Committee on July 19, 2007, included no funding for digital conversion. The House passed H.R. 3161 on August 2, 2007. The Consolidated Appropriations Act, 2008 ( P.L. 110 - 161 ) provided $5 million for public broadcasting digital conversion in rural areas. Meanwhile, the Farm, Nutrition, and Bioenergy Act of 2007 ( H.R. 2419 ), passed by the House on July 27, 2007, contains a provision (section 6028, "Assistance for Rural Public Television Stations") which gives the Secretary of Agriculture the authority to provide grants to "noncommercial education television broadcast stations that serve rural areas for the purposes of developing digital facilities, equipment, and infrastructure to enhance digital services to rural areas." The Senate farm bill, passed by the Senate on December 14, 2007, contains a provision (section 6302, "Telemedicine, Library Connectivity, Public Television, and Distance Learning Services in Rural Areas,") which would authorize grants to rural public television stations for digital conversion. Satellite Television and "Digital White Areas" Under current law, satellite television providers are permitted to provide distant network signals (from "out of market" network affiliates) only to subscribers living in "white areas"—meaning they receive inadequate analog television broadcast signals from their local broadcasters. Legislation was introduced into the 108 th Congress ( H.R. 4501 / H.R. 4518 / S. 2644 ) which would explore the possibility of creating "digital white areas" such that some subscribers may be eligible for distant network digital signals via their satellite dish if they cannot receive local digital TV signals. In November 2004, Congress passed the Satellite Home Viewer Extension and Reauthorization Act (SHVERA) as part of the FY2005 Consolidated Appropriations Act ( P.L. 108 - 447 ). SHVERA provides limited authority for satellite companies to offer "distant digital signals" if certain conditions are met. For more information on this issue, see CRS Report RS21990, Satellite Television and " Digital White Areas " : Provisions of the 2004 Satellite Home Viewer Extension and Reauthorization Act , by [author name scrubbed] (pdf). Low Power TV Low Power Television (LPTV) was created by the FCC in 1982 to serve rural areas and individual communities within larger urban areas. LPTV stations may not exceed 3 kilowatts for VHF channels or 150 kilowatts for UHF channels, and must not cause interference in the reception of full service television stations. Concerns have arisen that many LPTV stations will lose their licenses in the transition to DTV. While the FCC's February 1998 modification to its table of allotments for DTV licensees did provide for some LPTV licensees to be relocated to new frequencies, many would still lose their licenses under FCC digital transition plans. To provide some relief for LPTV licensees, the Community Broadcasters Protection Act of 1999 was enacted as part of the Intellectual Property and Communications Omnibus Reform Act of 1999 ( P.L. 106 - 113 ). This law established a "class A" status to qualifying LPTV licensees, giving them a measure of protection from full-power TV stations in the transition to DTV. The act directs that class A licensees be accorded primary status as television broadcasters, prescribes the criteria LPTV stations must meet to be eligible for class A status, and outlines the interference protection class A stations must provide to other television stations. To implement the act, in April 2000, the FCC established rules for class A LPTV licensees, to facilitate the acquisition of capital for LPTV stations to continue to provide free, over-the-air programming to their communities. In accordance with the 1992 Cable Act (47 USC 534), cable television providers are required to transmit to their audiences the locally-generated programming of all full-power TV broadcasters that request carriage, a provision known as "must-carry." Under the 1992 act, some LPTV stations are entitled to "must-carry"status if they meet certain criteria. The FCC's April 2000 ruling did not address the question of whether class A licensees should be entitled to the "must-carry" provision, as are full-power broadcast TV stations. A petition filed with the FCC argued that class A licenses should be granted the same "must-carry" status as full-power broadcasters. The FCC subsequently ruled that class A stations do not have the same must carry rights as full service television stations. On August 6, 2003 the FCC adopted a Notice of Proposed Rulemaking to seek comment on rules for digital low power television and digital television translator stations. On September 9, 2004, the FCC adopted rules to allow for the digital conversion of LPTV and translator stations. While requiring the conversion to digital operation, the FCC did not set a digital transition deadline for LPTV and translator stations. The final transition date—on which analog operations will cease—will be considered in the FCC's Third DTV periodic review proceeding. The Conference Report accompanying the Deficit Reduction Act of 2005 ( P.L. 109 - 171 ; H.Rept. 109 - 362 ) clarified that "only full-power stations, not low-power stations must cease analog broadcasting by February 18, 2009." Low-power stations may continue analog broadcasts after that date, subject to future decisions by the FCC on how to complete the digital transition for low-power stations. The conference report stated that low-power stations (other than Class A stations) may continue broadcasting above channel 51 subject to FCC decisions "so long as those stations' use of those channels is secondary to the use of those channels by the auction winners and public safety officials." P.L. 109 - 171 also provides funding not to exceed $10 million during FY2008-2009 (starting October 1, 2007) to compensate low-power television stations (including Class A, translator, or booster television stations) for the cost of a digital-to-analog conversion device in order to convert the digital signals received from their corresponding full-power television stations and provide analog signals to their customers. In no case shall the compensation for a single digital-to-analog converter device exceed $1000. Additionally, funding not to exceed $65 million during FY2009 (starting October 1, 2008) will be available to reimburse low-power television stations for equipment to upgrade stations from analog to digital in rural communities. Both grant programs are administered by the National Telecommunications and Information Administration of the Department of Commerce. On October 29, 2007, NTIA announced the start of the LPTV Digital-to-Analog Conversion grant program that will help low-power television stations continue analog broadcasts. The program will provide funds to eligible low-power stations that must purchase a digital-to-analog conversion device to convert the incoming digital signal of a full-power television station to analog for transmission on the low-power station's analog channel. Applications are being accepted between October 29, 2007, and February 17, 2009. The Low-Power Television and Translator Upgrade Program, which will reimburse the costs of upgrading LPTV and translator analog stations to digital, will be announced at a future date. A growing issue of concern to LPTV and Class A stations is the capability of digital-to-analog converter boxes to pass through broadcasted analog signals in addition to receiving and converting digital signals. LPTV stations are not subject to the February 17, 2009 digital conversion deadline, and will continue to broadcast analog signals. A household that receives both full-power and LPTV broadcast signals, and that installs a converter box in order to receive the full-power station's digital signal, would not be able to receive the LPTV station's analog signal unless the converter box is equipped with an analog signal pass through capability. NTIA permits but does not require manufacturers to install an analog signal pass through capability in certified converter boxes, arguing that such a requirement could raise the cost of the boxes and pose possible interference problems for the digital signal. The Community Broadcasters Association (CBA), representing LPTV and Class A stations, has filed a complaint against the FCC asserting that the NTIA-certified converter boxes violate the All-Channel Receiver Act if they block reception of analog over-the-air television broadcast signals. Fees for Ancillary or Supplemental Services The Telecommunications Act ( P.L. 104 - 104 ) states that if a DTV licensee offers ancillary or supplemental services for which they receive a subscription fee or other compensation, the FCC "shall establish a program to assess and collect from the licensee...an annual fee or other schedule or method of payment..." The act further states that the collection of fees "shall be designed (I) to recover for the public a portion of the value of the public spectrum resource made available for such commercial use, and (ii) to avoid unjust enrichment through the method employed to permit such uses of that resource." Congress is overseeing the FCC's actions regarding implementation of this law. Public interest groups have also maintained pressure on the FCC to establish a fee program, arguing that commercial broadcasters should compensate the American people for the use of the DTV spectrum, and that fees should be required out of fairness to those who paid for spectrum at FCC auctions (such as licensees for personal communications services). In November 1998, the FCC adopted rules to require broadcasters to pay 5% of their gross revenues from ancillary or supplementary uses of DTV spectrum for which they charge subscription fees or other specified compensation. These include subscription video, software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, and audio signals. Home shopping channels and "infomercials" are not subject to fees because the FCC did not consider them new services. The FCC has initiated a separate proceeding to determine how much non-commercial stations can use the DTV spectrum for revenue-generating services, and whether they should have to pay spectrum fees. Some consumer groups say that the FCC's spectrum fees are not heavy enough on commercial broadcasters, arguing that most revenue will come from home shopping and infomercials. They also warn that public broadcasters should not be over-regulated, arguing that too heavy a burden placed on public broadcasters could impair their long-term viability. On October 11, 2002, the FCC ruled that noncommercial stations are required to use their entire digital capacity primarily for nonprofit, noncommercial, educational broadcast services. However, the FCC also ruled that the statutory prohibition against advertising on noncommercial broadcasts does not apply to any ancillary or supplementary services presented on an excess DTV channels that does not constitute broadcasting. The FCC further ruled that public stations must pay a fee of five percent of gross revenues generated by ancillary or supplementary services provided on their DTV service. Public Interest Obligations of DTV Broadcasters In March 1997, President Clinton established an Advisory Committee on Public Interest Obligations of DTV Broadcasters, to make recommendations on how DTV licensees should compensate the public for their licenses. Committee members were selected from government, the broadcasting industry, academia, and consumer interest organizations. After a series of public meetings in 1997 and 1998, the Committee submitted a set of recommendations to Vice President Gore in December 1998. The recommendations consist of mostly voluntary actions by broadcasters, including providing five minutes per night of air time for candidate-centered discourse in the 30 days prior to an election. Some panel members wanted to recommend mandating the free air time as well as other Committee proposals. The White House referred the report to the FCC, which on December 15, 1999, opened a Notice of Inquiry (NOI) proceeding to solicit public comment on public interest obligations of TV broadcasters as they transition to DTV (MM Docket No. 99-360). After reviewing public comment, the FCC, in September 2000, issued the DTV Public Interest Form Notice of Proposed Rulemaking (NPRM) which sought to require television broadcasters (both digital and analog) to disclose on a quarterly standardized form how they are serving the public interest. Also in September 2000, the FCC issued the Children ' s DTV Public Interest NPRM (MM Docket No. 00-167), which focused on the obligation of broadcasters to provide educational and informational programming for children, and the requirement that licensees limit advertising in children's programs. The FCC has not yet issued any decisions in those proceedings. Given the significant amount of time that has passed, the Second Periodic Review of FCC rules and policies affecting DTV conversion, issued on January 27, 2003, has asked for further comment on the public interest obligation issue. On August 4, 2004, the FCC adopted a Report and Order (FCC-04-192) which implements several steps identified in the Second Periodic Review. However, no action was taken regarding public interest obligations. On September 9, 2004, the FCC adopted a Report and Order addressing children's programming obligations for digital television broadcasters. The FCC issued guidelines on the obligation to provide educational programming for children and the requirement that children are protected from excessive and inappropriate commercial messages. Specifically, the Order increases the required amount of core educational programming proportionally to the amount of increased free video programming offered by the broadcaster on multicast channels. Regarding commercial limitations, the Order concludes that commercial limits apply to all digital programming directed at children 12 and under, whether the programming is provided on a free or pay multicast channel. Two bills introduced into the 109 th Congress—but not enacted—addressed the issue of public interest obligations of DTV broadcasters. H.R. 2359 , introduced on May 12, 2005, by Representative Watson, sought to establish minimum public interest requirements for multicast digital television channels. S. 616 , introduced on May 12, 2005 by Senator Rockefeller, sought to require broadcasters providing digital television multicasts to increase educational and informational programming for children. Hearings held in the 110 th Congress have addressed the issue of public interest obligations of DTV broadcasters. On February 1, 2007, the Senate Committee on Commerce, Science and Transportation held a hearing on the communications marketplace at which all five FCC Commissioners testified. In response to questions on public interest obligations of broadcasters, two opposing views emerged. According to Commissioner Michael Copps: [W]e have to really get serious about determining what those public interest obligations are going to be. We're going into the Digital Age now. We're giving the right to use that spectrum to broadcast six—or, if you have a duopoly, 12—program streams in the community. And we've done well on the mechanics of that, but the big question is, what do the American people have a right to expect from them? Can't they get more community affairs, local affairs and the things you're talking about? . . . We ought to complete the proceedings that have already been begun. We've had, since 1999, pending a proceeding on the public interest obligations of DTV broadcasters. And we've done the children's programming out of that, but all the other things are lying fallow, so we really need to tee that up and get done with that. So, I absolutely share your sense of urgency. There's no higher priority, I think, that the commission has. On the other hand, FCC Chairman Kevin Martin expressed reservations on placing certain obligations on broadcasters: Well, you know, I guess I would say I'm hesitant to actually put specific requirements on the type of programming that they've got to put on. There have been a lot of proposals that have been put forth—for example, that we should be requiring individual broadcasters to put free air time—a specific amount of free air time available to political candidates. And there've been those who have come forward with this repeatedly in the context of the digital transition, saying we should make digital television broadcasters provide free air time to political candidates. And I'm hesitant about saying that we're going to require broadcasters to provide that kind of free air time. Similarly, in response to questions from the House Energy and Commerce Committee, both Commissioners Copps and Adelstein called on the FCC to move forward on the DTV public interest obligation proceedings. However, at the FCC oversight hearings held by the House Energy and Commerce Committee on March 14, 2007, FCC Chairman Martin maintained that many of the rules that were part of that proceeding (such as children's programming) have already been addressed by the FCC. Chairman Martin stated that the "one issue that's remaining is whether we're going to require minimum quantities of certain kinds of broadcasting. I'm not convinced that that's necessary." Tower Siting One obstacle to the broadcasters' ability to offer DTV services has been the opposition from state and local communities over the building of new signal transmission towers. In most cases, DTV antennas can be built on top of existing towers used for analog TV broadcasting. If new towers are required, however, they must be constructed before the stations can transmit DTV signals. In August 1997, the FCC released an NPRM (FCC 97-182) to consider the preemption of state and local zoning restrictions on the siting, placement, and construction of DTV broadcasting facilities. In its January 18, 2001 Report and Order, the FCC concluded that "while some stations are facing problems with tower availability and/or local zoning issues, such problems do not seem to be widespread at this time." Appendix B. Legislation in the 109 th Congress Related to Digital Television H.R. 1646 (Harmon). Homeland Emergency Operations Response Act. Prohibits any delay in reassigning 24 MHZ in the upper 700 MHZ band (currently occupied by television broadcasters) for public safety purposes, and requires those frequencies to be operational by January 1, 2007. Introduced April 14, 2005; referred to Committee on Energy & Commerce. H.R. 2354 (Sensenbrenner). TV Consumer Choice Act. Prohibits the FCC from requiring digital tuners in television receivers. Introduced May 12, 2005; referred to Committee on Energy and Commerce. H.R. 2359 (Watson). Digital Television Accountability and Governance Enhancement Act of 2005 (DTV-AGE Act). Establishes minimum public interest requirements for multicast digital television channels. Introduced May 12, 2005; referred to Committee on Energy and Commerce. H.R. 2512 (Regula). Digital Opportunity Investment Trust Act. Establishes a Digital Opportunity Investment Trust fund, part of which would provide Public Television Digital Educational grants to noncommercial educational television stations. Introduced May 19, 2005; referred to Committee on Energy and Commerce and to Committee on Education and the Workforce. H.R. 3032 (Gene Green). TV Truth Act of 2005. Requires manufacturers and retailers to provide disclosure to consumers that analog televisions will no longer receive broadcast transmissions after the public broadcast spectrum changes to digital. Introduced June 22, 2005; referred to Committee on Energy and Commerce. H.R. 4569 (Sensenbrenner). Digital Transition Content Security Act of 2005. Requires certain analog conversion devices to preserve digital content security measures. Introduced December 16, 2005; referred to Committee on Judiciary. H.R. 5252 (Barton). Communications Act of 2006. Senate Commerce Committee version contains a number of provisions related to the digital television transition, including mandating DTV consumer education, requiring large cable operators to provide to their customers their local broadcasters' digital signals in both digital and "downconverted" analog formats through February 14, 2014, and giving the FCC statutory authority to proceed with its broadcast flag rule, with certain limitations. Introduced May 1, 2006; passed by House June 8, 2006. Reported by Senate Committee on Commerce, Science and Transportation, September 29, 2006 ( S.Rept. 109 - 355 ) and placed on the Senate Legislative Calendar. H.R. 5264 (Engel). Digital Television Consumer Education Act. Directs manufacturers, retailers, and broadcasters to implement consumer education measures regarding the digital transition. Establishes a DTV Transition Federal Advisory Committee to lead the effort to educate the public about the digital television transition. Introduced May 2, 2006; referred to Committee on Energy and Commerce. S. 616 (Rockefeller). Indecent and Gratuitous and Excessively Violent Programming and Control Act of 2005. Requires broadcasters providing digital television multicasts to increase educational and informational programming for children. Introduced March 14, 2005; referred to Committee on Commerce, Science, and Transportation. S. 1023 (Dodd). Digital Opportunity Investment Trust Act. Establishes a Digital Opportunity Investment Trust fund, part of which would provide Public Television Digital Educational grants to noncommercial educational television stations. Introduced May 12, 2005; referred to Committee on Health, Education, Labor, and Pensions. S. 1268 (McCain). Spectrum Availability for Emergency Response and Law Enforcement to Improve Vital Emergency Services Act (SAVE LIVES Act). Designates digital transition date as December 31, 2008, and authorize $468 million—drawn from spectrum auction proceeds—to supply digital-to-analog converter boxes to over-the-air households with incomes not exceeding 200% of the poverty level. Introduced June 20, 2005; referred to Committee on Commerce, Science and Transportation. S. 1600 (Snowe). Digital Translator and Low Power Television Transition Act. Amends the Communications Act of 1934 to ensure full access to digital television in areas served by low-power television. Introduced July 29, 2005; referred to Committee on Commerce, Science and Transportation. S. 1932 (Gregg). Deficit Reduction Omnibus Reconciliation Act of 2005. Title III is the Digital Transition and Public Safety Act of 2005, which sets a digital transition deadline of February 17, 2009, and allocates up to $1.5 billion for a program to assist consumers in the purchase of converter boxes. Passed Senate, November 3, 2005. House agreed to conference report ( H.Rept. 109 - 362 ), December 19, 2005. Senate agreed to conference report with amendments, December 21, 2005. House agreed to amended conference report, February 1, 2006. P.L. 109 - 171 signed by President, February 8, 2006. S. 2686 (Stevens). Communications, Consumer's Choice, and Broadband Deployment Act of 2006. Contains a number of provisions related to the digital television transition, including mandating DTV consumer education, requiring large cable operators to provide to their customers their local broadcasters' digital signals in both digital and "downconverted" analog formats through February 14, 2014, and giving the FCC statutory authority to proceed with its broadcast flag rule, with certain limitations. Introduced May 1, 2006; referred to Committee on Commerce, Science and Transportation. See H.R. 5252 for further action. Appendix C. Legislation in the 110 th Congress Related to Digital Television H.R. 608 (Barton). Digital Television Consumer Education Act of 2007. Requires the FCC to create a DTV public education program, to convene a DTV Advisory Group to coordinate consumer outreach, and to report to Congress every six months on the progress of consumer education efforts. Requires NTIA to report to Congress every 90 days on the progress of the converter box coupon program. Requires retailers, cable and satellite operators, and broadcasters to take various measures to inform the public about the digital transition. Introduced January 22, 2007; referred to Committee on Energy and Commerce. H.R. 2566 (Engel). National Digital Television Consumer Education Act. Requires TV retailers and distributors to place signs next to all analog TV displays with an advisory that a set-top box is necessary after February 17, 2009, to continue using the TV. Also requires broadcasters to air Public Service Announcements for more than a year before the transition to inform the public about the change and the set-top box subsidy program. Introduced June 5, 2007; referred to Committee on Energy and Commerce. H.R. 2829 (Serrano). Financial Services and General Government Appropriations Act, 2008. House Appropriations Committee report H.Rept. 110 - 207 , passed by the House on June 28, 2007, would provide $2 million to the FCC for DTV consumer education. Senate Appropriations Committee report ( S.Rept. 110 - 129 ) does not address DTV. Placed on Senate Legislative Calendar, July 13, 2007. H.R. 2917 (Butterfield). Transition Education Accountability Report Act of 2007. Requires the FCC to submit a report to Congress describing the measures taken by the FCC, NTIA, and other federal agencies to inform the public of the transition to digital television. Introduced June 28, 2007; referred to Committee on Energy and Commerce. H.R. 3862 (Wynn). Preparing America's Seniors for the Digital Transition Act of 2007. Establishes an interagency federal taskforce to educate older Americans on the DTV transition. Requires retailers, cable and satellite operators, and broadcasters to take various measures to inform the public about the digital transition. Directs the FCC to award grants for DTV public education. Requires modifications in the digital-to-analog converter box program. Requires the NTIA and the FCC to provide 90-day progress reports to Congress. Introduced October 16, 2007; referred to Committee on Energy and Commerce. S. 2125 (Kohl). Preparing America's Seniors for the Digital Television Transition Act of 2007. Establishes an interagency federal taskforce to educate older Americans on the DTV transition. Requires retailers, cable and satellite operators, and broadcasters to take various measures to inform the public about the digital transition. Directs the FCC to award grants for DTV public education. Requires modifications in the digital-to-analog converter box program. Requires the NTIA and the FCC to provide 90-day progress reports to Congress. Introduced October 2, 2007; referred to Committee on Commerce, Science and Transportation. S. 2507 (Hutchison). DTV Border Fix Act of 2007. Provides for television broadcast stations along the Mexican border to continue analog broadcasts through 2014, subject to certain conditions and limitations. Introduced December 18, 2007; referred to Committee on Commerce, Science and Transportation. | Digital television (DTV) is a new television service representing the most significant development in television technology since the advent of color television. DTV can provide movie theater quality pictures and sound, a wider screen, better color rendition, multiple video programming or a single program of high definition television (HDTV), and other new services currently being developed. The nationwide deployment of digital television is a complex and multifaceted enterprise. A successful deployment requires the development by content providers of compelling digital programming; the delivery of digital signals to consumers by broadcast television stations, as well as cable and satellite television systems; and the widespread purchase and adoption by consumers of digital television equipment. The Telecommunications Act of 1996 (P.L. 104-104) provided that initial eligibility for any DTV licenses issued by the Federal Communications Commission (FCC) should be limited to existing broadcasters. Because DTV signals cannot be received through the existing analog television broadcasting system, the FCC decided to phase in DTV over a period of years, so that consumers would not have to immediately purchase new digital television sets or converters. Thus, broadcasters were given new spectrum for digital signals, while retaining their existing spectrum for analog transmission so that they can simultaneously transmit analog and digital signals to their broadcasting market areas. Congress and the FCC set a target date of December 31, 2006, for broadcasters to cease broadcasting their analog signals and return their existing analog television spectrum to be auctioned for commercial services (such as broadband) or used for public safety communications. However, the Balanced Budget Act of 1997 (P.L. 105-33) allowed a station to delay the return of its analog spectrum if 15% or more of the television households in its market did not subscribe to a multi-channel digital service and did not have digital television sets or converters. Given the slower-than-expected pace at which digital televisions have been introduced into American homes, and given the impetus to reclaim analog spectrum for commercial uses and public safety, the 109th Congress enacted the Deficit Reduction Act of 2005 (P.L. 109-171), which established a "date certain" digital transition deadline of February 17, 2009. A key issue in the Congressional debate over the digital transition continues to be addressing the millions of American over-the-air households whose existing analog televisions will require converter boxes in order to receive digital signals when the analog signal is turned off. P.L. 109-171 established a digital-to-analog converter box program—administered by the National Telecommunications and Information Administration (NTIA) of the Department of Commerce—that will partially subsidize consumer purchases of converter boxes. Specifically, Congress is actively overseeing the activities of federal agencies responsible for the digital transition—the FCC and the NTIA—while assessing whether additional federal efforts are necessary, particularly with respect to public education and outreach. This report will be updated as events warrant. |
On December 8, 2004, the President signed into law P.L. 108-447 ( H.R. 4818 ), the FY2005 Consolidated Appropriations Act, within which Foreign Operations is included as Division D. As enacted, the measure provides $19.64 billion for Foreign Operations after adjusting for a required 0.8% across-the-board rescission. Although this is $1.68 billion, or nearly 8% below the President's request, Congress increased amounts passed earlier by the House ($19.39 billion) and the Senate ($19.61 billion). The conference agreement is about $2.3 billion (+13%) more than the "regular" FY2004 Foreign Operations level, but far less than the $38.78 billion total appropriation in FY2004 that included $21.2 billion for Iraq reconstruction and other supplemental needs. For the "core" development and child survival accounts, including the Global AIDS Initiative, P.L. 108-447 provides $4.36 billion (after adjusting for the 0.8% across-the-board rescission), about $675 million higher than FY2004 and $160 million more than the request. Within these totals, H.R. 4818 provides $2.28 billion for the President's Emergency Plan for AIDS Relief (PEPFAR) (after applying the rescission), roughly $80 million higher than the request and the House-passed level, but $139 million less than passed by the Senate. (Funding for international HIV/AIDS included in other appropriation bills brings the total to $2.92 billion, $100 million more than the request.) On family planning and reproductive heath matters, the conference on H.R. 4818 sets bilateral assistance at $441 million, between House and Senate-passed amounts. The bill includes $34 million for the U.N. Population Fund (UNFPA), subject to the "Kemp-Kasten" conditions, but drops the Senate language amending Kemp-Kasten that may have narrowed the grounds on which the Administration could deny funding to the organization. Conferees also deleted the Senate-proposed revision to the President's so-called "Mexico City" conditions on bilateral family planning assistance in a way that may have reversed the policy restrictions. For specific countries, P.L. 108-447 provides $404 million for relief and peace and security activities in Sudan, $85 million for Haiti, and $980 million for Afghanistan. The Sudan amount is in addition to $95 million emergency funding for the Darfur region approved by P.L. 108-287 , the FY2005 Defense appropriation bill. The largest reduction in the enacted appropriation falls on the Millennium Challenge Account—reduced by $1 billion from the President's $2.5 billion request. The final level, however is $250 million and $380 million than amounts recommended earlier by the House and Senate, respectively, coming only after strong pressure from the White House. The measure further reduces funding for the Export-Import Bank, debt reduction, the Peace Corps, and multilateral development bank contributions, among other accounts. The annual Foreign Operations appropriations bill is the primary legislative vehicle through which Congress reviews and votes on the U.S. foreign assistance budget and influences major aspects of executive branch foreign policy making generally. It contains the largest share—about two-thirds—of total international affairs spending by the United States. 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 Peace Corps and the Inter-American and African Development Foundations. Foreign Operations also includes resources for the two newest Administration initiatives: the Millennium Challenge Corporation (MCC) and the Global AIDS Initiative managed by the State Department's HIV/AIDS Coordinator. Most humanitarian aid activities are funded within Foreign Operations, including USAID's disaster/famine program and the State Department's refugee relief support. Foreign Operations 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 programs administered largely by the State Department, in conjunction with USAID and the Pentagon. Most recently, Foreign Operations has funded reconstruction programs in both Afghanistan and Iraq. U.S. contributions to the World Bank and other regional multilateral development banks, managed by the Treasury Department, and voluntary payments to international organizations, handled by the State Department, are also funded in the Foreign Operations bill. Finally, the legislation includes appropriations for three export promotion agencies: the Overseas Private Investment Corporation (OPIC), the Export-Import Bank, and the Trade and Development Agency. For two decades, the Foreign Operations appropriations bill has been the principal legislative vehicle for congressional oversight of foreign affairs and for congressional involvement in foreign policy making. Congress has not enacted a comprehensive foreign aid authorization bill since 1985, leaving most foreign assistance programs without regular authorizations originating from the legislative oversight committees. As a result, Foreign Operations spending measures developed by the appropriations committees increasingly have expanded their scope beyond spending issues and played a major role in shaping, authorizing, and guiding both executive and congressional foreign aid and broader foreign policy initiatives. It has been largely through Foreign Operations appropriations that the United States has modified 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 utilized foreign aid as a tool in the global war on terrorism since the attacks of September 11, 2001, and launched Afghan and Iraqi reconstruction operations. The appropriations measure has also been a key instrument used by Congress to apply restrictions and conditions on Administration management of foreign assistance, actions that have frequently resulted in executive-legislative clashes over presidential prerogatives in foreign policy making. President Bush submitted his FY2005 federal budget request to Congress on February 2, 2004, including funding proposals for Foreign Operations Appropriations programs. House and Senate Appropriations Committees held several hearings on the FY2005 request. The House Foreign Operations Subcommittee marked up its draft legislation on June 23, followed by full Committee approval on July 9. H.R. 4818 passed the House, amended, on July 15. The Senate Appropriations Committee reported its bill, S. 2812 , on September 16, which was debated and amended on September 23. The Senate passed H.R. 4818 , after substituting the text of S. 2812 , as amended. Conferees reached agreement November 19 on the Foreign Operations measure, together with eight other pending appropriation bills for FY2005. H.R. 4818 , originally the Foreign Operations measure, became the vehicle for the omnibus Consolidated Appropriations Act, 2005. Foreign Operations is included as Division D of the act. The President signed the measure on December 8. Arguably, from the end of World War II until the early 1990s, the underlying rationale for providing foreign aid was the same as that for all U.S. foreign policy—the defeat of communism. U.S. aid programs were designed to promote economic development and policy reforms, in large part to create stability and reduce the attraction to communist ideology and to block Soviet diplomatic links and military advances. Other security assistance activities provided defense equipment and training to American allies and friendly states, some of which faced Soviet or Soviet-proxy threats. Aid programs also were used to help the U.S. gain access to military bases around the world in order to forward deploy American forces. Foreign aid programs also supported a number of secondary U.S. policy goals, such as reducing high rates of population growth, promoting wider access to health care, expanding the availability of basic education in the developing world, advancing U.S. trade interests, and protecting the environment. If these secondary goals were also achieved, U.S. aid programs could be promoted as delivering "more bang for the buck." With the end of the Cold War, the United States launched expansive aid programs in Russia and many eastern-bloc states that were previously those that U.S. assistance tried to combat. While these and other new elements of American foreign aid emerged, no broad consensus developed over what should be the new overarching rationale for U.S. aid programs. Throughout the 1990s, policymakers and Congress explored a number of alternative strategic frameworks around which to construct a revised foreign assistance policy rationale. Not only did a policy consensus fail to emerge, but efforts to overhaul the largely Cold War-based foreign aid legislation also did not succeed. During this period, the Clinton Administration emphasized the promotion of "sustainable development" as the new, post-Cold War main strategy of those parts of the foreign aid program under the aegis of the U.S. Agency for International Development (USAID). Economic assistance supported six inter-related goals: achievement of broad-based, economic growth; development of democratic systems; stabilization of world population and protection of human health; sustainable management of the environment; building human capacity through education and training; and meeting humanitarian needs. Early in the Bush Administration these goals were modified around three "strategic pillars" of 1) economic growth, agriculture, and trade; 2) global health; and 3) democracy, conflict prevention, and humanitarian assistance. More recently, a USAID White Paper on American foreign aid identified five "core" operational goals of U.S. foreign assistance: Promoting transformational development, especially in the areas of governance, institutional capacity, and economic restructuring; Strengthening fragile states; Providing humanitarian assistance; Supporting U.S. geostrategic interests, particularly in countries such as Iraq, Afghanistan, Pakistan, Jordan, Egypt, and Israel; and Mitigating global and international ills, including HIV/AIDS. Perhaps the most defining change in U.S. foreign aid policy came following the September 11, 2001, terrorist attacks in the United States when American foreign assistance has taken on a more strategic sense of importance and has been cast frequently in terms of contributing to the global war on terrorism. In September 2002, President Bush released his Administration's National Security Strategy that established global development, for the first time, as the third "pillar" of U.S. national security, along with defense and diplomacy. Also in 2002, executive branch foreign assistance budget justifications began to underscore the war on terrorism as the top foreign aid priority, highlighting amounts of U.S. assistance to about 30 "front-line" states in the terrorism war—countries that cooperated with the United States in the war on terrorism or faced terrorist threats themselves. The substantial reconstruction programs in Afghanistan and Iraq—which total more in FY2004 than the combined budgets of all other aid programs—are also part of the emphasis on using foreign aid to combat terrorism. At roughly the same time that fighting terrorism became the leading concern of American foreign aid, the Bush Administration announced other significant initiatives that have defined and strengthened two additional key foreign assistance goals: promoting economic growth and reducing poverty, and combating the global HIV/AIDS pandemic. The Millennium Challenge Corporation (MCC) is a new aid delivery concept, authorized by Congress and established in early 2004, that is intended to concentrate significantly higher amounts of U.S. resources in a few low- and low-middle income countries that have demonstrated a strong commitment to political, economic, and social reforms. If fully funded, $5 billion will be available by FY2006 to support these "best development performers" in order to accelerate economic growth and lower the number of people living in absolute poverty. Addressing global health problems has further become a core U.S. aid objective in recent years. Congress created a separate appropriation account for Child Survival and Health activities in the mid-1990s and increased funding for international HIV/AIDS and other infectious disease programs. President Bush's announcement at his 2003 State of the Union message of a five-year, $15 billion effort to combat AIDS, malaria, and tuberculosis has added greater emphasis to this primary foreign assistance objective. Beyond these recently emerging foreign aid goals, other prominent objectives that have continued since the early 1990s have included supporting peace in the Middle East through assistance to Israel, Egypt, Jordan, and the Palestinians; fostering democratization and stability for countries in crisis, such as Bosnia, Haiti, Rwanda, Kosovo, and Liberia; facilitating democratization and free market economies in Central Europe and the former Soviet Union; suppressing international narcotics production and trafficking through assistance to Colombia and other Andean drug-producing countries; and alleviating famine and mitigating refugee situations in places throughout the world. As shown in the Figure 1, Foreign Operations funding levels, expressed in real terms taking into account the effects of inflation, have fluctuated widely over the past 29 years. After peaking at over $34 billion in FY1985 (constant FY2005 dollars), Foreign Operations appropriations began a period of decline to a low-point of $14.1 billion in FY1997, with only a brief period of higher amounts in the early 1990s due to special supplementals for Panama and Nicaragua (1990), countries affected by the Gulf 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 influence overseas events, Clinton Administration officials and other outside groups vigorously campaigned to reverse the decade-long decline in the foreign policy budget. Foreign aid spending increased slightly in FY1998, but beginning the following year and continuing to the present, Foreign Operations appropriations have trended upward due in large part to the approval of resources for special, and in some cases unanticipated foreign policy contingencies and new initiatives. While funding for regular, continuing foreign aid programs also rose modestly during this period, supplemental spending for special activities, such as Central American hurricane relief (FY1999), Kosovo emergency assistance (FY1999), Wye River/Middle East peace accord support (FY2000), a counternarcotics initiative in Colombia and the Andean region (FY2000 and FY2002-FY2004), aid to the front line states in the war on terrorism and Iraq-war related assistance (FY2003-FY2004), was chiefly responsible for the growth in foreign aid appropriations. While Foreign Operations appropriations had been rising for five consecutive years, amounts approved in FY2003 and FY2004 reached unprecedented levels over the past 40 years. Regular appropriations approved in these two years were roughly on par with amounts of the previous few years. But substantial supplementals of $7.5 billion and $21.2 billion, respectively, for assistance to the front line states in the war on terrorism and Afghanistan and Iraq reconstruction, have pushed spending upward. The regular Foreign Operations bill, signed by the President on January 23, 2004, combined with an earlier Iraq supplemental approved in November 2003 ( P.L. 108-106 ) and subsequent emergency relief for Darfur, Sudan ( P.L. 108-287 ), brought FY2004 appropriations to $39.4 billion (constant FY2005 dollars), the highest level, in real terms, since the early 1960s. The enacted level for FY2005 of $19.74 billion, while less than the previous two years, is the largest Foreign Operations appropriation, in real terms, than all other years in over a decade. Moreover, the FY2005 total is likely to grow when Congress considers supplemental funding for tsunami disaster relief and possibly additional Iraq reconstruction needs. Supplemental resources for Foreign Operations programs, which in FY2004 exceeded regular Foreign Operations funding, have become a significant channel of funding for U.S. international activities. Due to the nature of rapidly changing overseas events and the emergence of unanticipated contingencies to which it is in the U.S. national interest to respond, it is not surprising that foreign aid and defense resources from time to time are the major reason for considering and approving supplemental spending outside the regular appropriation cycle. Supplementals have provided resources for such major foreign policy events as the Camp David accords (FY1979), Central America conflicts (FY1983), Africa famine and a Middle East economic downturn (FY1985), Panama and Nicaragua government transitions (FY1990), the Gulf War (FY1991), and Bosnia relief and reconstruction (FY1996). But after a period of only one significant foreign aid supplemental in eight years, beginning in FY1999 Congress has approved Foreign Operations supplemental appropriations exceeding $1 billion in each of the past six years. Relief for Central American victims of Hurricane Mitch, Kosovo refugees, and victims of the embassy bombings in Kenya and Tanzania in FY1999 totaled $1.6 billion, and was followed in FY2000 by a $1.1 billion supplemental, largely to fund the President's new counternarcotics initiative in Colombia. As part of a $40 billion emergency supplemental to fight terrorism enacted in September 2001, President Bush and Congress allocated $1.4 billion for foreign aid activities in FY2001 and FY2002. Another $1.15 billion supplemental cleared Congress in FY2002 to augment Afghan reconstruction efforts and assist other "front-line" states in the war on terrorism. Until FY2003, these additional resources accounted for between 7% and 11% of total Foreign Operations spending. The $7.5 billion Iraq War supplemental for FY2003, however, went well beyond these standards, representing nearly one-third of the FY2003 Foreign Operations budget, and was surpassed, as noted above, only by FY2004 supplemental appropriations, which more than doubled the Foreign Operations budget for the year. Usually, Appropriations Committees begin markups of their spending bills only after Congress has adopted a budget resolution and funds have been distributed to the Appropriations panels under what is referred to as the Section 302(a) allocation process, a reference to the pertinent authority in the Congressional Budget Act. Following this, House and Senate Appropriations Committees separately decide how to allot the total amount available among their 13 subcommittees, staying within the functional guidelines set in the budget resolution. This second step is referred to as the Section 302(b) allocation. Foreign Operations funds fall within the International Affairs budget function (Function 150), representing in most years about 65% of the function total. Smaller amounts of Function 150 are included in four other appropriation bills. How much International Affairs money to allocate to each of the four subcommittees with jurisdiction over the International Affairs programs, and how to distribute the funds among the numerous programs are decisions exclusively reserved for the Appropriations Committees. Nevertheless, overall ceilings set in the budget resolution can have significant implications for the budget limitations within which the House and Senate Foreign Operations subcommittees will operate when they meet to mark up their annual appropriation bills. On May 19, 2004, House and Senate conferees agreed to a budget framework for FY2005 ( S.Con.Res. 95 ) that included $821 billion in discretionary budget authority. The discretionary budget authority target for the International Affairs function, out of which Foreign Operations programs receive their funding, was $29.28 billion, $2.2 billion or 7% less than the President's request. If the conference recommendations were followed during the appropriation process, it was likely that the Administration's proposal for Foreign Operations could not be fully met. The House and Senate Appropriations Committees, however, can choose to allocate the $29.28 billion among the four subcommittees proportionally different than what the President proposed or to alter the overall amount for foreign policy activities. Depending on other competing priorities, the final allocations can diverge significantly from those assumed in the budget resolution. Complicating decisions related to the 302(b) allocation process was the lack of a final vote on the FY2005 budget resolution's conference agreement. The House passed the measure on May 19 (216-213) and "deemed" the $821 billion discretionary budget authority cap included in the budget resolution as guidance for the Appropriations Committee. The resolution, however, remained pending in the Senate where disagreements focused on the size of the deficit, budget enforcement mechanisms, and extending existing tax cuts, matters unrelated to international affairs funding issues. While Congress can, and did proceed with consideration of appropriation bills without finalizing the budget resolution, the lack of broad consensus on overall spending levels can make it more difficult to pass each of the 13 appropriation measures. On June 2, the House Appropriations Committee released its 302(b) allocations, providing $19.39 billion for Foreign Operations. The amount is $1.93 billion, or 9.1% less than the President's request. The Senate Appropriations Committee announced its subcommittee allocations on September 8, making available the identical amount for Foreign Operations as approved by the House panel. The reduction for Foreign Operations in both houses was the largest for any of the 13 subcommittees when compared to the Administration's recommendation. As approved in H.R. 4818 , the omnibus Consolidated Appropriation Act, 2005, the final total amount for Foreign Operations exceeds the level previously allocated for the bill. This is largely the result of a White House-congressional agreement to add funds for the Millennium Challenge Account and to include $93 million in "emergency" funding—an amount that does not count against the allocation cap—for relief and peacekeeping activities in the Darfur region of Sudan. The final regular Foreign Operations measure provides $19.64 billion. This compares with the $19.39 billion allocated under the earlier 302(b) allocations for Foreign Operations. On February 2, 2004, President Bush asked Congress to appropriate $21.32 billion for FY2005 Foreign Operations. The budget proposal was $2.05 billion, or 10.6% higher than Foreign Operations appropriations for FY2004, excluding funds approved for Iraq reconstruction. (Including Iraq reconstruction funds, the FY2005 request is significantly smaller than the FY2004 total of $38.7 billion.) Foreign Operations, together with requests for Defense and Homeland Security, were areas proposed for the largest growth in spending under the FY2005 appropriation request. Despite the large overall increase for Foreign Operations, much of the added funding was concentrated in a few areas. The FY2005 budget continued to highlight foreign aid in support of the war on terrorism as the highest priority, with a one-third increase for anti-terrorism programs. In addition, two recently launched foreign aid initiatives—the Millennium Challenge Corporation (MCC) and the President's Emergency Plan for AIDS Relief (PEPFAR)—were slated for significant funding increases. The MCC would grow from $994 million in FY2004—its first year of operation—to $2.5 billion for FY2005. PEPFAR, also in its first year, would rise from $1.6 billion in FY2004 to $2.2 billion in the FY2005 request. (Additional PEPFAR funds were proposed in the Labor/HHS appropriation measure, bringing the total FY2005 PEPFAR request to $2.82 billion.) After failing to win congressional approval the past two years for a new Complex Foreign Crises contingency fund, the White House again proposed $100 million. The FY2005 request further included substantial increases for the Peace Corps and for debt reduction, primarily for the Democratic Republic of the Congo. Combined, funding for these major elements of the Foreign Operations request totaled $5.23 billion, or nearly 75% higher than for FY2004. By contrast, the $16.1 billion proposed for all other Foreign Operations activities was $183 million, or 1.1% less than FY2004 amounts. Since the terrorist attacks in September 2001, American foreign aid programs have shifted focus toward more direct support for key coalition countries and global counter-terrorism efforts. In total, Congress has appropriated approximately $40.74 billion in FY2002-FY2004 Foreign Operations funding to assist the approximately 30 "front-line" states in the war on terrorism, implement anti-terrorism training programs, and address the needs of post-conflict Iraq and other surrounding countries. Roughly half of all Foreign Operations appropriations the past three years has gone for terrorism or Iraq war-related purposes. The FY2005 budget continued the priority of fighting terrorism with $5.3 billion, or 25% of Foreign Operations resources assisting the front-line states. This total was down slightly from the roughly $5.7 billion appropriated for FY2004, although FY2004 included a sizable supplemental for Afghanistan and a few other front-line states. Anti-terrorism training and technical assistance programs also would rise by 33% above FY2004 levels. There were no funds requested, however, for Iraq reconstruction. The largest funding increase for FY2005 was for the Millennium Challenge Corporation (MCC), a new government entity established on February 2, 2004. The MCC is designed to radically transform the way the United States provides economic assistance, concentrating resources on a small number of "best performing" developing nations. The request for FY2005 was $2.5 billion with a promise that the MCC will grow to $5 billion by FY2006 and remain at least at that level in the future. Congress appropriated $994 million for the MCC's first year of operations in FY2004, below the President's $1.3 billion request. The Administration said that the added MCC funding would be in addition to, and not a substitute for, existing U.S. economic aid. A number of international development advocates, however, remain concerned that given the tight budget environment, trade-offs between regular economic programs and the MCC might be required. The MCC's Board of Directors announced on May 6 that 16 countries had qualified for FY2004 MCC resources and will be invited to submit program proposals. The selection for FY2005 took place on November 8, adding one additional country. In his January 2003 State of the Union address, President Bush pledged to substantially increase U.S. financial assistance for preventing and treating HIV/AIDS, especially in the most heavily affected countries in Africa and the Caribbean. The President promised $15 billion over five years, $10 billion of which would be money above and beyond current funding. Most, but not all PEPFAR funds are included in the Foreign Operations bill; the balance is provided in the Labor/HHS appropriation measure. For FY2005, the President requested in total $2.8 billion for this international HIV/AIDS initiative—$2.2 billion in Foreign Operations—up from the $2.4 billion enacted for FY2004 ($1.6 billion in Foreign Operations). Some observers continued to express concern that the FY2005 request, like FY2004, fell short of the anticipated $3 billion per year implied in the President's speech. Some further questioned the Administration's proposal that only $200 million of the total would go to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Congress boosted the President's $200 million request in FY2004 for the Global Fund to $550 million, although $87.7 million could not be transferred because of a congressional requirement that the U.S. contribution cannot exceed one-third of total donations to the fund. The $401 million request for the Peace Corps—30% more than in FY2004—was an effort to continue the President's long-term plan of having 14,000 Americans serving in the Peace Corps by FY2007. While supportive of the multi-year initiative, Congress has not fully funded the phased-in expansion the past two years. The FY2005 request would keep the President's program on pace for the 14,000 volunteer level in FY2007. The Administration proposed to establish within the Executive Office of the President a $100 million contingency fund allowing the United States to respond quickly to unforseen complex foreign crises. The resources would not be used to address victims of natural disasters, but rather would support peace and humanitarian intervention in conflict situations, including acts of ethnic cleansing, mass killing, or genocide. In the past, Congress has been reluctant to approve this type of contingency fund over which it can apply little oversight. The Administration had asked lawmakers to launch the Complex Crisis Fund with $150 million as part of the FY2003 Iraq War supplemental. Congress, however, chose to defer consideration of establishing the Fund until the FY2004 appropriation cycle, in which the funding was also denied. The Administration proposed to double the amount enacted for debt reduction in FY2004. There were three components to the request: $105 million to cancel a portion of bilateral debt owed by the Democratic Republic of the Congo under the Heavily Indebted Poor Country (HIPC) initiative; $75 million as a contribution to the HIPC Trust Fund to make up for unanticipated shortfalls in implementing the program; and $20 million for the Tropical Forestry Conservation debt relief activity. Congress approved in FY2004 the same amounts for the HIPC Trust Fund and the Tropical Forestry Conservation program, but rejected debt relief funding for the Congo. Beyond these specific and prominent issues, the Foreign Operations proposal for FY2005 sought to increase aid activities in a few areas while cutting resources for several programs. Significant appropriation increases included: Export-Import Bank resources would increase from $39 million to $167 million, allowing the Bank to guarantee about $11.98 billion in loans, compared to an estimated level of $11.5 billion in FY2004. Foreign Military Financing funds would increase by about $400 million, or 9%, largely due to increases proposed for Israel and Pakistan, Poland, and the Philippines. Contributions to the World Bank and other international financial institutions would grow by $110 million, or 8%, covering all scheduled U.S. payments to the multilateral development banks, plus clearing $59 million of U.S. arrears owed to these institutions. For a few Foreign Operations accounts, comparisons between FY2005 and FY2004 were affected by amounts approved in FY2004 supplemental spending. In these cases, the FY2005 request was less than totals provided in FY2004, but higher than levels enacted in the regular Foreign Operations bill. In other words, supplemental spending approved in P.L. 108-106 , largely for Iraq and Afghanistan reconstruction, pushed FY2004 amounts higher than the FY2005 submission. The Economic Support Fund —economic aid to strategically important countries—was set at $2.5 billion for FY2005, 18% less than the FY2004, but 19% higher than provided in the regular Foreign Operations measure. Likewise, International Narcotics and Law Enforcement spending of $359 million proposed for FY2005 was 13% less than FY2004 totals, but nearly 50% more than enacted in the regular appropriation. For several other Foreign Operations accounts, the FY2005 submission represented a reduction below amounts approved in FY2004 in which supplemental appropriations were not a factor. Assistance to Former Soviet states and Eastern Europe , collectively, would decline by $65 million, or 6% from FY2004 levels. The request reflected a reorientation in the former Soviet aid account to focus more on Central Asian states, linked to the war on terrorism, and to continue the process of graduating Russia and Ukraine from U.S. aid roles. Assessing the Administration's request for bilateral development and health assistance was complicated due to the addition of a new "core" development aid account for international HIV/AIDS funding and the transfer of resources into this new account from the Child Survival/Health line item. Collectively, the three "core" bilateral development aid accounts—Development Assistance, Child Survival/Health, and the Global AIDS Initiative—would increase in FY2005 by about $500 million, or 14%. But because HIV/AIDS resources would grow by roughly $600 million, the FY2005 request for most other development and health activities was below FY2004 enacted amounts. Further complicating comparisons between FY2005 and FY2004 was the Millennium Challenge Corporation (MCC) that may add considerable amounts of bilateral development aid resources for non-HIV/AIDS programs once MCC "compacts" are signed and funded. In short, overall development aid spending, including the MCC, rose about 43% under the FY2005 request, although the impact on specific development programs could not be determined due to the uncertainty over how MCC allocations would affect specific sectors. At the country level, however, it was clear that nations which had been named as HIV/AIDS focus countries or are selected for MCC support—27 countries in all—would see a sharp increase in bilateral development assistance from the United States. Uganda and Zambia, for example, two HIV/AIDS focus countries, were projected to receive in FY2005 double and triple the amounts of U.S. assistance provided in FY2003, respectively. Mozambique, a nation that was also an HIV/AIDS focus country and had qualified to submit an MCC program proposal, could also see U.S. aid triple between FY2003 and FY2005. But for the more than 40 other bilateral development aid recipients, levels would remain mostly unchanged under the FY2005 budget, and in some cases decline from FY2003 and FY2004 amounts. While Iraq is the largest current recipient of U.S. assistance, Israel and Egypt remain the largest regular U.S. aid recipients, as they have been for many years. In the aftermath of the September 11 terrorist attacks, the war in Iraq, and the initiation of the President's Emergency Program for AIDS Relief (PEPFAR), foreign aid allocations have changed in several significant ways. The request for FY2005 continued the patterns of aid distributions of the past two years, with the new feature of several PEPFAR countries joining the list of top recipients. Table 5 lists those nations that have received an average of more than $100 million from the United States in FY2004 and requested or earmarked for FY2005. Countries are listed in the order of the combined amounts for those two years. Since September 11, the Administration has used economic and military assistance increasingly as a tool in efforts to maintain a cohesive international coalition to conduct the war on terrorism and to assist nations which have both supported U.S. forces and face serious terrorism threats themselves. Pakistan, for example, a key coalition partner on the border with Afghanistan, had been ineligible for U.S. aid, other than humanitarian assistance, due to sanctions imposed after India and Pakistan conducted nuclear tests in May 1998 and Pakistan experienced a military coup in 1999. Since lifting aid sanctions in October 2001, the United States has transferred over $1.9 billion to Pakistan. Jordan, Turkey, Indonesia, the Philippines, and India also are among the top aid recipients as part of the network of "front-line" states in the war on terrorism. Another major cluster of top recipients are those in the Andean region where the Administration maintains a large counternarcotics initiative that combines assistance to interdict and disrupt drug production, together with alternative development programs for areas that rely economically on the narcotics trade. A new dimension in U.S. aid allocations—the impact of the President's international HIV/AIDS initiative—can also be seen in amounts allocated for FY2004 and proposed for FY2005. Uganda, Ethiopia, Kenya, Zambia, South Africa, and Nigeria, all PEPFAR focus countries, are now among the leading recipients of U.S. assistance. This list will further change once the Administration announces aid packages for Millennium Challenge Account qualifying countries, perhaps adding several additional countries that receive more than $100 million in U.S. assistance. Missing, or falling at the bottom of the list of top recipients, are several countries in the Balkans and the former Soviet Union—Serbia and Montenegro, Kosovo, Russia, Ukraine, Armenia, and Georgia—which have seen levels decline in recent years. Turkey, a leading recipient in most years over the past 25 years, also falls well down the list as a result of a congressionally-directed reduction in military aid. The House began consideration of the FY2005 foreign aid budget request on June 23 when the House Foreign Operations Subcommittee approved a $19.39 billion measure, $1.93 billion, or 9% below the President's $ 21.32 billion request. The full House Appropriations followed by reporting the bill ( H.R. 4818 ) on July 13 without making funding changes to the Subcommittee's draft. The House approved H.R. 4818 on July 15 (365-41) after adopting several amendments, none of which altered the overall amount provided in the bill. The House-passed measure was about $2 billion higher than the FY2004 regular Foreign Operations spending bill, excluding supplemental appropriations, but only $115 million larger than total Foreign Operations for FY2004, when just Iraq reconstruction funds are excluded. (FY2005 totals for Foreign Operations were augmented by an emergency-designated $95 million in P.L. 108-287 , the DOD appropriation bill for FY2005, providing additional humanitarian aid to refugees in the Darfur region of Sudan; and $100 million for hurricane relief aid for Caribbean nations approved in P.L. 108-324 , the FY2005 supplemental measure.) H.R. 4818 , as passed by the House, fully funded the $2.2 billion request for the President's Emergency Plan for AIDS Relief (PEPFAR). (Funding for international HIV/AIDS included in other appropriation bills brought the Administration's total FY2005 request to $2.8 billion.) Included in the PEPFAR appropriation was $400 million for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (Global ATM Fund), $300 million more than the President's request. (The President requested an additional $100 million for the Global ATM Fund in the Labor/HHS/Education appropriation.) The bill further required the same allocations for malaria and tuberculosis programs as provided in FY2004, reversing a proposal to reduce both activities in the President's request. In other key decisions concerning bilateral development assistance, H.R. 4818 : provided $4.34 billion for the three " core " bilateral development aid accounts , up by $138 million from the request, and by nearly $650 million from FY2004 levels. increased basic education programs to $400 million, almost 20% more than the request and the earmark for FY2004. restored funding for vulnerable children programs to $28 million from the Child Survival account, the same as FY2004 but $18 million more than proposed for FY2005. set trade capacity building funds at $517 million across the entire bill, $194 million of which would come from the Development Assistance account. directed the Administration to restore proposed development assistance cuts to countries in Africa. On population aid issues, the bill set bilateral family planning assistance at $432 million, $33 million above the request, and funding for the U.N. Population Fund (UNFPA) at $25 million. UNFPA contributions, however, would be subject to restrictions that resulted in a U.S. suspension of UNFPA support in FY2002 and FY2003. During the July 9 markup, the House panel defeated an amendment (26-32) by Representative Lowey that would have provided $25 million for UNFPA programs only in Iraq, Afghanistan, Tanzania, Jordan, Kenya, and Pakistan. None of the funds would have been available for UNFPA activities elsewhere, including those in China, where evidence of coercive family planning practices prompted the Administration to deny funding to UNFPA the past three years. The State Department announced on July 16, 2004, that once again it had found UNFPA to be in violation of the "Kemp-Kasten" provision in the Foreign Operations spending bill. The House proposal further included $105 million for the U.N. Development Program (UNDP), $15 million more than requested, and $125 million for UNICEF, $5 million more than proposed. For selected countries, H.R. 4818 provided amounts at or above the President's request, with a reduction proposed for Turkey: Israel— $2.58 billion, as requested. Egypt —$1.84 billion, as requested. Afghanistan —$977 million, $48 million more than requested. Jordan —$460 million, as requested. Cyprus— $13.5 million, as requested. Turkey —no funding for the $50 million economic aid request. Lebanon— $35 million in economic aid, $3 million above the request. East Timor —$22 million in economic aid, up from $13.5 million proposed. Indonesia —military training (IMET) funds may be provided if the Secretary of State determines that Indonesia is cooperating in the FBI's investigation of the August 2002 murders of two Americans and an Indonesia. Sudan —$311 million, with no funds available for the government in Khartoum until it takes steps to resolve the crisis in Darfur. Pakistan —$150 million in military aid, half the amount requested, but with an authority to allow a transfer of an additional $150 million from other accounts. Cuba Democracy Program —$9 million, as requested. Haiti —$74.5 million in economic aid, $50 million higher than the request. The President did not request additional reconstruction funds for Iraq and H.R. 4818 did not include any further appropriations. The House proposal, however, authorized the United States to take the lead in a multilateral effort to cancel a significant amount of Iraq's outstanding debt and to use previously appropriated Iraq reconstruction funds to cover the cost of any such debt relief. The bill further reconstituted the Coalition Provisional Authority Inspector's General office that has been monitoring Iraq reconstruction resources. The CPA IG expired with the transfer of authority in Iraq on June 28 and the Administration had planned on merging these oversight responsibilities into the State Department's Office of Inspector General. The House measure would place the Iraq reconstruction IG in the Department of State, but as a entity reporting directly to the Secretary of State. Further, the House bill made the Secretary of State responsible for oversight of all Iraq reconstruction activities, replacing the CPA. The largest reduction recommended by the H.R. 4818 was to cut by half—to $1.25 billion—the President's request for the Millennium Challenge Corporation (MCC). The MCC received a $994 million appropriation for FY2004, with an Administration plan to expand the program to $2.5 billion in FY2005 and $5 billion in FY2006. A reduction like that proposed by the House would likely result in smaller and/or fewer grants being awarded to MCC qualified countries. Other accounts reduced by House action, when compared with the President's request, included: Peace Corps —$330 million (-$71 million). Emergency fund for Complex Crisis —no funding provided. International Narcotics/Law Enforcement —$329 million (-$30 million). Non-Proliferation/Anti-Terrorism —$382 million (-$33 million). Debt reduction —$105 million (-$95 million). Most of the reduction would be taken from the $105 million request for the costs to cancel debt for the Democratic Republic of Congo. World Bank, International Development Association (IDA) —$850 million (-$211 million). This action would deny the Administration $200 million pledged to IDA if the World Bank successfully implemented certain management reforms. During House debate on July 15, Members considered a number of amendments, some controversial and strongly opposed by the Administration. Of particular concern to the Administration was a proposal by Representative Lantos to shift $570 million in military aid funds for Egypt to economic assistance. Proponents of the amendment argued that external security threats facing Cairo did not warrant such a large—$1.3 billion—annual military aid package from the United States, and that economic challenges confronting Egypt were of more immediate concern. In a letter to House Members, Secretary of State Powell expressed strong opposition, arguing that U.S. military support of Egypt is a "cornerstone" of the Camp David Accords and contributes to regional peace, efforts to combat terrorism, U.S.-Egyptian military cooperation. The reduction of U.S. military grants that are anticipated to be used for the purchase of previously ordered American-made defense items might result in the cancellation of some prior contracts by Egypt, according to the Secretary. The House defeated the Lantos amendment 131-287. Among other amendments considered, the House approved proposals that: banned the use of funds by any U.S. government official to request the United Nations assess the validity of U.S. elections (Representative Buyer; 243-161); prohibited Export-Import Bank support for any entity or its corporate parent is incorporated or chartered in Bermuda, Barbados, the Cayman Islands, Antigua, or Panama (Representative Sanders; 270-132); banned Economic Support Fund (ESF) assistance to countries that are party to the International Criminal Court (ICC) and do not sign an Article 98 agreement with the United States pledging American soldiers serving in their country will not be surrendered to the ICC. Current law prohibits U.S. military aid to such countries, although with a waiver that has been used by President Bush for reasons of national interest and for countries that are in the process of considering the ratification of Article 98 agreements. The ESF ban linked to Article 98 agreements did not include a waiver authority. (Representative Nethercutt; 241-166); prohibited funds in the bill for assistance to Saudi Arabia. H.R. 4818 included $25,000 in military training funds for the Saudis. The Administration expressed strong opposition to the amendment (Representative Weiner; 217-191). barred the use of funds to send more than 50 U.S. government employees to a conference outside the United States (Representative Garrett; voice vote); prohibited the use of funds for any contract that contravenes the Small Business Act (Representative Kilpatrick; voice vote); restricted the use of funds for Turkey in contravention of existing law concerning the prevention and punishment of genocide (Representative Schiff; voice vote); In addition to the Lantos amendment, the House also rejected proposals that would: cut funding to the World Bank's International Development Association by $359 million, transferring $290 million of the funds to USAID child survival and maternal health programs. The reduction for the World Bank equaled the amount of a recent Bank loan to Iran, opposed by the Administration and congressional proponents of the amendment (Representative Sherman; (111-312); cut funding to the World Bank's International Development Association by $425 million, transferring $250 million of the funds to the Millennium Challenge Corporation and $90 million to the Global AIDS Initiative (Representative Kennedy; 133-288); add $5 million for agriculture, irrigation, and rural infrastructure programs in Africa (Representative Jackson-Lee; 164-243). An amendment by Representative Farr to limit the number of U.S. military personnel in Colombia to 550 or less was offered but withdrawn. The Senate Appropriations Committee reported its Foreign Operations bill ( S. 2812 ), on September 15, 2004, legislation amended and passed by the full Senate as H.R. 4818 on September 23. The measure totaled $19.6 billion, $1.7 billion, or 8%, below the President's $21.32 billion request for FY2005. The Senate bill included $19.39 billion in discretionary budget authority, representing the measure's funding allocation, plus $225 million in "emergency" appropriations for global HIV/AIDS programs and to strengthen the African Union's peacekeeping mission in Darfur, Sudan. H.R. 4818 , as passed by the Senate, was about $2.2 billion higher than the FY2004 regular Foreign Operations spending measure, excluding supplemental appropriations, but only $340 million larger than total Foreign Operations for FY2004, when Iraq reconstruction funds are excluded. (FY2005 totals for Foreign Operations were augmented by an emergency-designated $95 million in P.L. 108-287 , the DOD appropriation bill for FY2005, providing additional humanitarian aid to refugees in the Darfur region of Sudan; and $100 million for hurricane relief aid for Caribbean nations approved in P.L. 108-324 , the FY2005 supplemental measure.) The Senate bill included $2.42 billion for the President's Emergency Plan for AIDS Relief (PEPFAR), $220 million higher than the request. Funding for international HIV/AIDS included in S. 2810 , the Departments of Labor-HHS-Education appropriation bill, brought the Senate-recommended level to over $3.1 billion. The Administration total request was about $2.8 billion. Included in the Senate-passed PEPFAR appropriation was $400 million for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, $300 million more than the President's request. Another $150 million for the Global ATM Fund was included in S. 2810 , bringing the total in both bills to $550 million. Key funding levels for other bilateral development assistance, the Senate measure: provided $4.46 billion for the three " core " bilateral development aid accounts (including "emergency"-designated funds), up by $411 million from the request, and by nearly $1 billion from FY2004 levels. set basic education programs at $335 million, slightly below the $338 million request. restored funding for vulnerable children programs to $30 million from the Child Survival account, $19 million more than proposal for FY2005. increased by about 75%—to $275 million—funds for other infectious diseases, including malaria and tuberculosis, above the request. S. 2812 earmarked $200 million for other infectious diseases from regular Child Survival/Health account funds, plus an additional $75 million of the "emergency" designated money for malaria control programs. On population aid and reproductive heath matters, the Senate bill set bilateral family planning assistance at $450 million, $50 million above the request. The Senate further included $34 million for the U.N. Population Fund (UNFPA). S. 2812 , however, modified two controversial provisions associated with family planning funding that could have had the effect of reversing current Administration policy. The first amended the "Kemp-Kasten" restrictions that resulted in the withholding of U.S. funds to UNFPA the past three years. The amendment would have narrowed somewhat the grounds on which the Administration could find UNFPA in violation of the restrictions by stating that an organization must directly support coercive abortions or involuntary sterilizations in order to be denied U.S. support. The Senate measure further added new text stating that no organization could be denied funds solely because the government of a country engages in coercive practices. S. 2812 also revised the President's so-called "Mexico City" policy that prohibits foreign non-governmental organizations (NGOs) from receiving U.S. funds if they perform or promote abortion as a method of family planning, whether or not such activities are supported with U.S.-provided resources. The Senate language stipulated that foreign NGOs could not be declared ineligible for U.S. aid for conducting any health or medical services with non-U.S. government funds so long as the practices did not violate laws in the country in which the services were provided or would not violate U.S. law. The provision (Sec. 599C of S. 2812 ) further provided that foreign NGOs would not be subject to conditions associated with the use of non-U.S. government funds for advocacy and lobbying activities that were more restrictive than those applied to American NGOs. The President did not request additional reconstruction funds for Iraq and the Senate bill did not include any further appropriations. The Senate proposal, however, authorized the use of $360 million from previously appropriated Iraq reconstruction funds to cancel about $4 billion, or roughly 95% of debt owed by Iraq to the United States. The authority to use $360 million was requested on September 14 as part of a larger package to transfer $3.46 billion approved last year for water and electrical projects in Iraq in order to augment resources for security and law enforcement, oil production, employment generation, election support, and other development activities. Because Congress placed limits on how much of the $18.4 billion Iraq reconstruction supplemental ( P.L. 108-106 ) could be re-programmed for other purposes, the Administration also sought changes in existing transfer authorities. Changes to re-allocation limits recommended in the Senate's version of H.R. 4818 would have permitted some, but not all of the Administration's proposed reprogramming. Specifically, the Senate bill increased from 10% to 20% the amount that any particular program sector could be reduced in order to add resources to another activity. The White House proposed, however, to transfer nearly 45% of the original amount of funds for water and sewage provided in P.L. 108-106 . H.R. 4818 , as passed by the Senate, provided over $615 million for humanitarian and other relief assistance to the Darfur region of Sudan, plus $75 million for the rapid expansion of the African Union's monitoring and peacekeeping mission in Darfur. The latter funds, designated as emergency spending, were added during floor debate as an amendment offered by Senator Corzine. The Administration's request had assumed roughly $394 million for relief aid, drawn from the refugee and disaster aid accounts. Senate increases in these humanitarian aid accounts, plus authority to transfer up to $150 million from unspent Iraq reconstruction funds supporting relief efforts in Darfur, raised the estimated total for the region in the Senate bill to $690 million—$615 million for humanitarian programs $75 million for peacekeeping. These funds were in addition to $95 million emergency Sudan funding approved earlier in P.L. 108-287 , the Defense Department appropriation bill for FY2005. Beyond Sudan, S. 2812 provided funding at or above the President's request, in a number of cases: Egypt —$1.84 billion, as requested. Israel— $2.58 billion, as requested. Jordan —$460 million, as requested. Lebanon— $35 million in economic aid, $3 million above the request. Armenia —$86 million, $19 million above the request. Cyprus— $13.5 million, as requested. Georgia —$121 million, $13 million more than proposed. Russia —$93 million in economic aid, $13.5 million higher than requested. East Timor —$22 million in economic aid, up from $13.5 million proposed. Indonesia —supported the $152 million request, but endorsed increased spending for economic, political, and social reforms and to counter the activities of Islamic extremists in the country. Military training (IMET) funds could be provided if the Secretary of State determined that Indonesia was cooperating in the FBI's investigation of the August 2002 murders of two Americans and an Indonesian. Mongolia —endorsed the $13 million request. Philippines —$55 million in military financing, $25 million higher than proposed. Afghanistan —$929 million, as requested. Pakistan —endorsed the full $700 million economic and military aid request; provided authority for use of up to $200 million of economic aid for cancelling debt owed by Pakistan. Kenya —$10 million in ESF assistance, $2 million above the request, in support of anti-corruption programs. Liberia —$70.5 million, $38 million more than requested, adding $30 million to help rebuild the Liberian military and $8 million for various development activities. Sierra Leone —$12.3 million, an increase of $4 million from the request. Somalia —$5 million in economic aid, $4 million more than proposed. Sudan —See above. Haiti —$92.5 million, $65.5 million higher than the request. The largest reduction recommended by the Senate was to cut by more than half—to $1.12 billion—the President's $2.5 billion request for the Millennium Challenge Corporation. The MCC received a $994 million appropriation for FY2004, with an Administration plan to expand the program to $2.5 billion in FY2005 and $5 billion in FY2006. As with a similar House-passed reduction for the MCC, the size of this cut would have likely resulted in smaller and/or fewer grants being awarded to MCC qualified countries. Other accounts reduced by Senate action, when compared with the President's request, included: Export-Import Bank —$157 million (-$10 million). USAID operating expenses —$600 million (-$23 million). Peace Corps —$310 million (-$91 million). Emergency fund for Complex Crisis —$20 million (-$80 million). International Narcotics/Law Enforcement —$329 million (-$30 million). Debt reduction —$95 million (-$105 million). World Bank, International Development Association (IDA) —$820 million (-$241 million). African Development Fund —$75 million (-$43 million). On November 18, 2004, Congress approved the Foreign Operations conference report (Division D of H.R. 4818 ). The President signed the measure on December 8 ( P.L. 108-447 ). As passed, the act provides $19.64 billion after adjusting for a required 0.8% across-the-board rescission. Although this is $1.68 billion, or nearly 8% below the President's request, P.L. 108-447 increases amounts passed earlier by the House ($19.39 billion) and the Senate ($19.61 billion). Additional funds were added for the Millennium Challenge Account and $93 million was designated as an "emergency" appropriation for relief and peacekeeping support in the Darfur region of Sudan. The emergency funds do not count against the regular Foreign Operations allocation. The enacted level is about $2.3 billion (+13%) more than the "regular" FY2004 Foreign Operations level, but far less than the $38.78 billion total appropriation in FY2004 that included $21.2 billion for Iraq reconstruction and other supplemental needs. (FY2005 totals for Foreign Operations were augmented by an emergency-designated $100 million for hurricane relief aid for Caribbean nations approved in P.L. 108-324 , the FY2005 Military Construction and supplemental measure.) (Unless noted otherwise, amounts for specific programs and countries discussed below are the levels specified in the Foreign Operations division D of H.R. 4818 , and are subject to an across-the-board reduction of 0.8%, as also provided in H.R. 4818 .) The Foreign Operations portion of P.L. 108-447 provides $2.28 billion for the President's Emergency Plan for AIDS Relief (PEPFAR) (after applying the rescission), roughly $80 million higher than the request and the House-passed level, but $139 million less than passed by the Senate. (Funding for international HIV/AIDS included elsewhere in P.L. 108-447 as part of other appropriation bills brings the total to $2.92 billion, $100 million more than the request.) Although both House and Senate bills required that $400 million of the total HIV/AIDS funding in Foreign Operations be provided to the Global Fund for HIV/AIDS, Tuberculosis, and Malaria, the conference agreement includes $250 million. This level will be supplemented with the carry-forward of $87.8 million from FY2004 and $100 million from the Labor/HHS/Ed appropriation measure, thus bringing the total U.S. contribution to the Global Fund to $487.8 million in FY2005, less the 0.8% rescission. The carry-forward appropriations could not be transferred to the Global Fund in FY2004 due to a congressionally-added requirement that U.S. support to the Fund could not exceed one-third of total contributions from all donors. Without the authority to use these funds in FY2005, the $87.8 million would have become available for bilateral HIV/AIDS programs. For other key bilateral development assistance programs, P.L. 108-447 : provides $4.36 billion for the three " core " bilateral development aid accounts (after adjusting for the 0.8% across-the-board rescission), about $675 million higher than FY2004 and $160 million more than the request. sets basic education programs at $396.8 million, after making the rescission deduction, 17% more than the $338 million request. restores funding for vulnerable children programs to $30 million from the Child Survival account, $19 million more than proposed for FY2005. increases by about one-third—to $198.4 million (rescission adjusted)—funds for other infectious diseases, including malaria and tuberculosis, above the request. The enacted measure does not include the $75 million added by the Senate in emergency-designated appropriation for malaria, although the final text of H.R. 4818 provides $90 million for malaria programs, 50% higher than requested. As passed, H.R. 4818 sets bilateral family planning aid assistance at $441 million, a level between House and Senate-passed amounts. The bill includes $34 million for the U.N. Population Fund (UNFPA), subject to the Kemp-Kasten conditions, but drops the Senate language amending Kemp-Kasten that might have narrowed the grounds on which the Administration could deny funding to the organization. Conferees also deleted the Senate proposed revision to the President's so-called "Mexico City" conditions on bilateral family planning assistance in a way that may have reversed the policy restrictions. P.L. 108-447 provides $404 million for relief and peace and security activities in Sudan, including the Darfur region. This level falls between the $311 million and over $690 million included in House and Senate-passed bills, respectively. Although the enacted agreement deletes the Senate proposal to provide $75 million in emergency funding for the African Union's peacekeeping mission in Darfur and authority to transfer up to $150 million from unspent Iraq reconstruction funds for relief efforts in the region, the conferees intend that $75 million of the total be used in support of African Union operations in Darfur. Previously, Congress approved an additional $95 million in emergency Sudan funding in P.L. 108-287 , the Defense Department appropriation bill for FY2005. The conference agreement, to a greater extent than previous Foreign Operations measures, sets out specific country allocations from several economic and military aid accounts. In most cases, conference allocations match the President's request, although with some modifications, higher and lower, than proposed. H.R. 4818 further specifies that funding for Africa that is drawn from the Development and Child Survival accounts should be restored to levels provided in FY2004, rather than the lower amounts proposed for FY2005. Selected country aid levels include: Egypt —$1.84 billion, as requested, but with the addition of Senate-proposed language that democracy and governance programs in Egypt shall not subject to the approval of the government. Iraq —no funding, as proposed; see discussion, however, under the Continuing Resolution section. Israel— $2.58 billion, as requested. Jordan —$460 million, as requested. Lebanon— $35 million in economic aid, $3 million above the request. Saudi Arabia —bans aid ($25,000 requested) unless the President certifies that the Saudis are cooperating in efforts to combat terrorism and that U.S. assistance will help in that effort. The House had passed a similar aid prohibition, but without a Presidential waiver. Armenia —$86 million, $19 million above the request. Cyprus— $13.5 million, as requested. Georgia —$110 million, $2 million more than proposed. Russia —$90 million in economic aid, $10.5 million higher than requested. Turkey —deletion of $50 million in requested military aid. East Timor —$22 million in economic aid, up from $13.5 million proposed. Indonesia —$138 million estimated available in economic and military aid, a reduction of about $14 million from the request. Conferees dropped $10 million for police training in Indonesia and conditioned the transfer of military aid (FMF) on a Secretary of State certification that the Indonesian military was supporting counter-terrorism activities and addressing several human rights problems. Military training (IMET) funds are conditioned on Indonesia's cooperation with the FBI's investigation of the August 2002 murders of two Americans and an Indonesian. Philippines —$129 million, as proposed. Afghanistan —$980 million, about $50 million above the request. Pakistan —$700 million, as proposed, although the total would include the transfer of $150 million from prior-year economic and military aid funds. Haiti —$85 million, $60.5 million higher than the request. The largest reduction in P.L. 108-447 falls on the Millennium Challenge Account—reduced by $1 billion from the President's $2.5 billion request. The final level, however is $250 million and $380 million more than amounts recommended earlier by the House and Senate, respectively, coming only after strong pressure from the White House. The $1 billion cut from the request, however, will strain MCC operations to fully fund programs in 17 countries that are potentially eligible in FY2004 and FY2005. Other accounts reduced in the enacted measure, when compared with the President's request, include: Export-Import Bank —$100 million (-$67 million), although conferees noted that with large prior-year balances remaining, Exim Bank operations should continue at anticipated levels. USAID operating expenses —$618 million (-$5.4 million). Peace Corps —$320 million (-$81 million). Emergency fund for Complex Crisis —$0 (-$100 million). International Narcotics/Law Enforcement —$329 million (-$30 million). Debt reduction —$100 million (-$100 million). World Bank, International Development Association (IDA) —$850 million (-$211 million). African Development Fund —$106 million (-$12 million). The approved legislation retains similar text as passed by the House barring ESF assistance to countries that have not signed an Article 98 agreement with the United States. Such Article 98 agreements pledge that the country will not surrender American soldiers serving in their country to the International Criminal Court. The conference measure, however, adds certain waiver authorities so that fewer countries will be affected by the aid restriction. NATO members, major non-NATO allies, a group that includes Jordan, and Taiwan are specifically exempted. Critics of the amendment when it passed the House in July were especially concerned about the status of Jordan, a key Arab state receiving substantial amounts of ESF assistance, but has not ratified an Article 98 agreement. The enacted bill further stipulates that this restriction will not affect a country's eligibility to receive Millennium Challenge Account funding. Bolivia, Lesotho, and Mali are potential MCA recipients, but do not have a ratified Article 98 agreement. Even with these exemptions, several countries, including Cyprus, Ecuador, and Peru, might face ESF aid suspension due to this provision. With the beginning of the new fiscal year on October 1, Foreign Operations, along with several other funding measures, operated through November 20 under the terms of H.J.Res. 107 , a Continuing Resolution. In addition to temporarily funding Foreign Operations programs for the next seven weeks, the Continuing Resolution enacted into law several provisions that had been pending in House and/or Senate-passed versions of H.R. 4818 . The most significant was the approval of a September 14 request by the White House to re-allocate $3.46 billion of the $18.4 billion Iraq reconstruction aid package passed by Congress last year ( P.L. 108-106 ). In this earlier appropriation measure, Congress had limited the extent to which the Administration could shift funds among major reconstruction sectors. Among other changes, the President proposed adding $1.8 billion for security and law enforcement, $360 million to cover the costs of cancelling about $4 billion of Iraqi debt owed the United States, and $180 million more for governance and election support programs. Offsetting these additions, the re-allocation called for reductions in the electrical and water sectors. House- and Senate-passed versions of H.R. 4818 had authorized the use of funds for debt relief, and the Senate measure, which was approved after the September 14 re-allocation request, accommodated some, but not all, of the re-allocation proposal. The Continuing Resolution effectively approved the Administration's full request, including the debt relief authorization and the re-allocation of funds. In other Foreign Operations-related matters addressed in H.J.Res. 107 , the Continuing Resolution: increased USAID operating expenses for managing the Iraq reconstruction operation from $29 million in P.L. 108-106 to $119 million; authorized the Overseas Private Investment Corporation to operate in Iraq; and allowed the Millennium Challenge Corporation to extend assistance in FY2005 to countries that narrowly missed qualifying for the program in hopes of strengthening their chances for selection in the future. Existing law approved this authority only for FY2004. While the Foreign Operations appropriations bill can include virtually any foreign policy issue of interest to Congress, the annual debate usually focuses on several major policy and spending issues. For FY2005, substantial debate focused on the following. Since the September 11, 2001, terrorist attacks and the initiation of military operations in Afghanistan and Iraq, combating global terrorism has become one of the top priorities of American foreign assistance. Secretary of State Powell has continued over the past two years to emphasize at numerous congressional hearings that fighting terrorism is the most important objective of the Foreign Operations budget requests. Although there is disagreement regarding the extent to which foreign aid can directly contribute to reducing the threat of terrorism, most agree that economic and security assistance aimed at reducing poverty, promoting jobs and educational opportunities, and helping stabilize conflict-prone nations can indirectly address some of the factors that terrorists use in recruiting disenfranchised individuals for their cause. 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 and Afghanistan, to bolster efforts of a coalition-partner government, to counter domestic dissent and armed attacks by extremist groups, and to promote better health care, education, and employment opportunities to its people. Security assistance can finance the provision of military equipment and training to nations facing threats from their own internally-based terrorist movements. As illustrated in Table 6 , the United States provided through FY2004 more than $19.4 billion to 26 so-called "front-line" states in the global war on terrorism since the September 11, 2001 terrorist attacks. ("Front-line" states are those nations cooperating with the United States in the global war on terrorism or are facing terrorist threats themselves.) When combined with roughly $21 billion appropriated for Iraq reconstruction assistance enacted in FY2003 and FY2004 supplementals, total funding for bilateral terrorism-related country assistance is more than $40 billion. This is slightly more than half of the nearly $79 billion approved by Congress for worldwide Foreign Operations spending since September 11. For FY2005, the Administration requested $5.45 billion for the "front-line" states. Based on passage of the FY2005 appropriation, the estimated level for this year will be slightly less, largely due to reductions in aid to Turkey. Although 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 amounts allocated since September 11 are in sharp contrast to the $3.4 billion provided to these 26 countries prior to the attacks in regular FY2001 appropriations. The FY2005 proposal, for example, was 60% higher than foreign aid allotted prior to September 11. Additional economic and military assistance has been particularly evident in a few countries, including Jordan, Pakistan, Afghanistan, Turkey, the Philippines, Kyrgystan, Tajikistan, Uzbekistan, Oman, Yemen, and Djibouti. For FY2005, Pakistan, the Philippines, Georgia, Indonesia, and Morocco are scheduled to receive the largest increases among the front-line states. Congress has been supportive of additional foreign aid resources aimed at countering terrorism. Nevertheless, some warn that the United States needs to be cautious about the risks of creating a close aid relationship with governments that may have questionable human rights records, are not accountable to their people, and are possibly corrupt. Some Members have been especially critical of Administration efforts to include in aid proposals for "front-line" states legislative language that would waive all existing restrictions and prohibitions on the transfers. Instead, these critics argue, the Administration should specifically identify any obstacles to proceeding with a country aid program and seek a congressional waiver for those particular problems. For example, in late 2001 the Administration wanted to provide Pakistan with $600 million in fast-disbursing economic aid. Instead of providing 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 missile proliferation, whose leaders came to power through a military coup, and which were behind in debt payments to the United States. Beyond substantial amounts of bilateral aid for "front-line" states, the Foreign Operations appropriation bill funds several global programs specifically aimed at anti-terrorism efforts overseas. Since FY1984, the State Department has maintained the ATA program designed to maximize international cooperation in the battle against global terrorism. Through training, equipment transfers, and advice, the ATA program is intended to strengthen anti-terrorism capabilities of foreign law enforcement and security officials. Since its initiation in 1984, over 23,000 officials from 112 countries have participated in ATA projects. ATA funding is included within the Foreign Operations account of Non-proliferation, Anti-terrorism, Demining, and Related Programs (NADR). Resources for the ATA program rose sharply following September 11, growing from $38 million in FY2001 to $96 million in regular FY2004 funding. (Congress further provided $35 million in FY2004 supplemental appropriations for expansion of ATA programs in Afghanistan, including protection of Afghan President Karzai.) For FY2005, the State Department sought $128.3 million for ATA programs, up one-third from regular FY2004 levels. Most of the new request—$105 million—would continue on-going training programs for officials from the "front-line" states, an Afghan Presidential Protection activity, and special programs in Pakistan and Indonesia. New for FY2005, in-country programs were proposed for Colombia, Malaysia, Kenya, the Philippines, and the tri-border region of Brazil, Paraguay, and Argentina. As one response to the 1998 bombings of American embassies in East Africa, the State Department launched the TIP, an activity intended to restrict the ability of terrorists to cross international borders, launch attacks, and escape. TIP strengthens border security systems in particularly vulnerable countries by installing border monitoring technology, training border security and immigration officials in its use, and expanding access to international criminal information to participating nations. Like ATA, funds for TIP are part of the NADR account in the Foreign 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 the global counterterrorism campaign. The $4 million TIP budget doubled for FY2001 following September 11, and grew to $14 million in FY2002. The TIP annual budget fell back to $5 million the past two years, the same amount requested for FY2005. Following the September 11 attacks, the United States began to conduct Senior Official Policy Workshops and multilateral conferences in order to better respond to terrorist incidents involving weapons of mass destruction overseas. With $3 million from emergency FY2002 supplemental spending, the State Department conducted workshops in 18 countries as well as several regional conferences. Congress did not approve any additional resources the past two years, but the Administration sought $500,000 in FY2005 to continue conferences and other bilateral engagements with allies in the war on terrorism. In December 2001, an interagency review group identified 19 countries where a significant terrorist financing threat existed, and with $3 million allocated from the Emergency Response Fund, launched a training and technical assistance program. The State Department allocated $10 million out of the FY2002 supplemental appropriation to expand the program, complemented with Treasury Department contributions of about $5 million each of the past two years. State Department funds are included in the Foreign Operations NADR account while Treasury Department resources are drawn from the Technical Assistance program, also funded in Foreign Operations. Counterterrorism financing activities would expand significantly under the FY2005 request, with $7.5 million proposed from the State Department's NADR budget and approximately $8.5 from Treasury's Technical Assistance program. Annual Foreign Operations spending bills routinely include general provisions prohibiting U.S. assistance to countries engaged in terrorist activities or providing certain types of support to terrorist groups. Included in the FY2004 funding measure were two: Sec. 527 prohibited bilateral U.S. assistance to any country that the President determines grants sanctuary from prosecution to any individual or group which has committed an act of international terrorism or otherwise supports international terrorism. The President could waive the restrictions for national security 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 has determined is headed by a terrorist supporting government. The President could waive the requirement if it is important to U.S. national interests. Despite these restrictions, however, certain types of humanitarian foreign assistance can be provided "notwithstanding" other provisions of law, which would override the terrorism restrictions. Disaster and refugee relief, child survival and HIV/AIDS programs, emergency food and medicine, and demining operations are among the categories of U.S. assistance that could potentially be provided to a country that would otherwise be ineligible. In general, Congress, with slight reductions, supported funding levels proposed by the Administration under the objective of fighting the war on terrorism. The conference agreement on H.R. 4818 itemizes amounts for the largest accounts out of which most aid for the "front-line" states is drawn—Economic Support Fund (ESF), aid to Eastern Europe (SEED), support for the former Soviet Union (FSA), and Foreign Military Financing (FMF). Conferees set levels for "front-line" states $58 million below requested amounts. Most of the reduction comes from the elimination of $50 million in economic aid proposed for Turkey. Conferees also cut direct FMF funding for Pakistan from $300 million requested to $150 million, although with the authority to transfer up to an additional $150 million from prior year funds. These decisions track generally with recommendations made in the House-passed version of H.R. 4818 , which also reduced amounts for Turkey and Pakistan, with a transfer authorization for the latter. The Senate-passed measure, on the other hand, proposed increasing military aid totals for several East Asia and Pacific "front-line" states to over twice as much as proposed by the executive branch. For example, under the Senate plan the Philippines would have received $55 million in FMF assistance, compared with $30 million proposed. Indonesia, which was not slated by the Administration for FMF aid in FY2005, would have received $6 million, under certain conditions. The conference agreement sets Philippine FMF at $30 million and Indonesia FMF at $1 million, subject to restrictions. H.R. 4818 , as passed by Congress on November 20, also funds each terrorism-specific program, as noted in Table 2 , at or near the requested level. The conference agreement reduces Anti-Terrorism Assistance to $120 million, an amount between House- and Senate-passed levels, but increases Treasury Department budget for combating terrorist financing to $10 million, as recommended by the House. The conference agreement also continues for FY2005 two standard Foreign Operations provisions that ban, with a Presidential waiver, bilateral U.S. assistance to countries that grant sanctuary from prosecution terrorist individuals or groups, or otherwise supports international terrorism. (Sec. 527). The approved measure further prohibits aid, which can be waived, to a government providing lethal military equipment to a country that the Secretary of State has determined is headed by a terrorist supporting government. (Sec. 542). The conference agreement also retains, with modifications, two terrorism-related provisions added during House floor debate and opposed by the Administration in their original form. The first, which had been sponsored by Representative Nethercutt and approved 241-166 during debate in July, prohibits Economic Support Fund (ESF) assistance to countries that are party to the International Criminal Court (ICC) and do not sign an Article 98 agreement with the United States pledging that American soldiers serving in their country will not be surrendered to the ICC. Current law (the American Servicemembers' Protection Act; Title II of P.L. 107-206 ) prohibits U.S. military aid to such countries, although with a waiver that has been used by President Bush for reasons of national interest and for countries that are in the process of considering the ratification of Article 98 agreements. The Nethercutt amendment did not include waivers regarding ESF aid cut-offs. The conference measure, however, inserts waivers, exempting NATO members, major non-NATO allies, a group that includes Jordan, and Taiwan. Critics of the amendment when it passed the House in July were especially concerned about the status of Jordan, a key Arab state receiving substantial amounts of ESF assistance, but has not ratified an Article 98 agreement. The conference agreement further stipulates that this restriction will not affect a country's eligibility to receive Millennium Challenge Account funding. Bolivia, Lesotho, and Mali are potential MCA recipients, but do not have a ratified Article 98 agreement. Even with these exemptions, several countries, including Cyprus, Ecuador, and Peru, might face ESF aid suspension due to this provision. The second provision included by conferees bars any aid for Saudi Arabia unless the President certifies that the Saudis are cooperating in efforts to combat terrorism and that U.S. assistance will help in that effort. The House had passed a similar aid prohibition, sponsored by Representative Weiner and approved 217-191, but without including a Presidential waiver. H.R. 4818 includes $25,000 in military training funds for the Saudis, a token amount that allows the Saudis to purchase additional military training under the International Military Education and Training (IMET) program. Supporters of the amendment argued that given Saudi Arabia's oil revenues and their view that the Saudi government is not a reliable partner in the war on terrorism, the United States should not be providing any form of foreign assistance. Opponents of the amendment as originally drafted, including the Administration, contended that this largely symbolic cut-off of foreign aid would undermine counter-terrorism cooperation with the Saudis and more general Middle East peace efforts. In a speech on March 14, 2002, President Bush outlined a proposal for the United States to increase foreign economic assistance beginning in FY2004 so that by FY2006 American aid would be $5 billion higher than three years earlier. The funds, referred to as the Millennium Challenge Account (MCA), is managed by a new Millennium Challenge Corporation (MCC) providing assistance through a competitive selection process, to developing nations that are pursing political and economic reforms in three areas: Ruling justly—promoting good governance, fighting corruption, respecting human rights, and adhering to the rule of law. Investing in people—providing adequate health care, education, and other opportunities promoting an educated and healthy population. Fostering enterprise and entrepreneurship—promoting open markets 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 following World War II and the Latin America-focused Alliance for Progress in the early 1960s. It would also represent a fundamental change in the way the United States invests and delivers economic assistance. 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, and where governments are committed to implementing reform measures in order to achieve such goals. The MCC differs in several fundamental respects from past and current U.S. aid practices: the size of the $5 billion commitment; the competitive process that will reward countries for past actions measured by 16 objective performance indicators; the pledge to segregate the funds from U.S. strategic foreign policy objectives that often strongly influence where U.S. aid is spent; and the requirement to solicit program proposals developed solely by qualifying countries with broad-based civil society involvement. The new initiative, which Congress authorized in January 2004 (Division D of P.L. 108-199 ), would phase in over a three-year period, beginning in FY2004. During the first year, MCC participation was limited to the 74 poorest nations with per capita incomes below $1,415 and that are eligible to borrow from the World Bank's International Development Association. The list expanded in FY2005 to include all countries with a per capita income below $1,465 (adding another 13 nations). Beginning in FY2006 and beyond, all lower-middle income countries with per capita incomes below roughly $3,035 may compete for MCC resources. Country selection is based largely, but not exclusively, on the nation's record measured by 16 performance indicators related to the three categories of good governance, economic freedom, and investing in people. Countries that score above the median on half of the indicators in each of the three areas qualify. Emphasizing the importance of fighting corruption, the indicator for corruption is a "pass/fail" test: should a country fall below the median on the corruption indicator, it will be disqualified from consideration unless other, more recent trends suggest otherwise. (See table below for a complete list of the 16 performance indicators.) Administration officials, since announcing the MCC initiative in 2002, said that the selection process would be guided by, but not necessarily bound to the outcomes of the performance indicators. Missing or old data, general trends, and recent steps taken by governments might also be taken into account when annual decisions are made. Eligibility to receive MCA assistance, however, does not necessarily result in an aid grant. Once selected, countries are required to submit program proposals—referred to as MCA Compacts—that have been developed through a broad-based, national discussion that includes input from civil society. The focus of program submissions may vary among countries in size, purpose, and degree of specificity, and will be evaluated by the Corporation for, among other things, how well the Compact supports a nation's economic growth and poverty reduction goals. Only those Compacts that meet the MCC criteria will be funded. It is expected that successful Compacts will support programs lasting three to five years, providing a level of resources roughly equivalent to the largest providers of assistance in the country. This will most likely result in a significant increase of U.S. economic assistance to MCA participant countries. To manage the new initiative, the Administration proposed, and Congress authorized, the creation of a Millennium Challenge Corporation (MCC), an independent government entity separate from the Departments of State and the Treasury, and from the U.S. Agency for International Development (USAID). The MCC plans for an eventual staff of about 200, drawn from various government agencies, non-governmental organizations, and the private sector, and led by a CEO confirmed by the Senate. A Board of Directors, chaired by the Secretary of State and composed of the Secretary of the Treasury, the USAID Administrator, the U.S. Trade Representative, and the Corporation's CEO, oversees operations of the MCC and makes the country selections. Four additional Board members, two of which have yet to be submitted for confirmation to the Senate, are drawn from lists submitted by Congressional leaders. For FY2004, the Administration sought $1.3 billion for the MCA's first year, a level reduced by Congress to $994 million. The FY2005 budget proposed $2.5 billion, with a commitment for a $5 billion program in FY2006. The passage of legislation on January 23, 2004 authorizing and funding the MCC for FY2004 (Division D of P.L. 108-199 ) launched a period of at least 90 days during which the new Corporation would form, issue required reports, consult with Congress and the public, and select first year participant countries. Within 10 days of enactment, the Board of Directors held its initial meeting to establish the program, and over the following weeks the Corporation identified "candidate" countries for FY2004, published the criteria and methodology to be used for country selection, solicited public comments, issued guidelines for Compact proposals, and, on May 6, 2004, selected 16 countries to participate in the MCA's first year of operations. This was followed on November 10 with the selection of FY2005 eligible MCA countries, an action that added one new participant to the FY2004 list. An additional 13 countries have also been named as threshold nations—those that just missed qualifying as eligible countries. Continuing implementation matters that will unfold in the months ahead will include the relationship of MCC programs with those operated by USAID, how the Corporation and USAID will support threshold countries to better prepare for future performance reviews, and the awarding of MCA grants—in the form of Compacts—to MCA eligible countries. On February 2, 2004, the Board of Directors met, agreed to Corporation by-laws, and approved Under-Secretary of State Larson as the interim CEO. Subsequently, the President nominated Paul Applegarth to be the permanent MCC CEO, an individual confirmed by the Senate on May 5. CEO Applegarth has held various international and development positions over the past 30 years, primarily in the private sector. Most recently, he was the Managing Director of Emerging Markets Partnership, serving as the COO of Emerging Africa Infrastructure Fund in 2002. Also on February 2, the MCC Board issued a list of 63 "candidate" countries that would be reviewed for possible selection as MCA participants in FY2004. These countries, according to authorizing legislation, must be eligible for assistance from the World Bank's International Development Association, have a per capita income of $1,415 or less, and not be otherwise ineligible to receive U.S. assistance. The latter condition eliminated twelve countries—Burma, Burundi, Cambodia, Central African Republic, Cote d'Ivoire, Guinea-Bissau, Liberia, Serbia, Somalia, Sudan, Uzbekistan, and Zimbabwe—that were statutorily barred from receiving American aid. Pursuant to reporting requirements set in the MCC legislation, the Corporation on March 5, 2004, sent to Congress an overview of the criteria and methodology that would be used to determine the eligibility of the 63 candidate countries in FY2004. The report suggested that there would be relatively few and only minor changes to the criteria and methodology that had been outlined 15 months earlier. The same 16 performance indicators, as listed in Table 8 below, would be utilized. In a few cases, data sources shifted from international institutions to national governments. This was especially true in cases where existing data for an indicator were old or incomplete. Although the Corporation did not alter any of the original 16 performance indicators, it attempted to address additional criteria added by Congress in P.L. 108-199 through the use of supplemental data and qualitative information. While the legislative authorities broadly match criteria proposed by the Administration, lawmakers included four additional matters on which to evaluate a country's performance. These relate to the degree to which a country: recognizes the rights of people with disabilities; supports a sustainable management of natural resources; respects worker rights; and makes social investments, especially in women and girls. Given the range and diversity of suggestions offered throughout the public and congressional debate of the MCC, many observers were surprised that the Corporation did not propose more substantive changes to the criteria and methodology. Some questioned how seriously the Administration considered alternative approaches and whether the Corporation would be open to future revisions. (During the public comment period and at congressional oversight hearings, some suggested that existing data sources needed to be refined or new surveys created in order to specifically measure a country's commitment on the four criteria added by Congress. After further study of the criteria and methodology, the Corporation announced on August 26, 2004, a revised set of performance indicators that will be used for the FY2005 selection process. The MCC will lower the inflation rate threshold from 20% to 15%, making it somewhat more difficult to pass this test (only 6 of the 63 candidate countries failed this test for FY2004). An indicator measuring girls' primary education completion rates will replace a broader measure used in FY2004 that did not disaggregate primary education graduation by gender. As noted above, including the means to measure country performance on key women and girls issues is one of the requirements added by Congress during deliberation on MCC authorizing legislation. The Corporation, further indicated that it will explore additional criteria and methodology changes for FY2006. Under consideration are options to: lower the inflation level to 10%. identify a measurement related to natural resource management; the MCC has created a working group to study possibilities. review other possible indicators that would better measure trade barriers that are linked with economic growth. develop a more comprehensive indicator than the current Days to Start a Business to gauge a government's commitment to entrepreneurship and private-sector ownership. consider additional gender-relation indicators. On May 6, the MCC Board of Directors determined that 16 countries would be eligible for FY2004 MCA funding and invited each to submit program proposals: As expected, the selection process raised a number of questions and concerns. The Administration had previously said that the Board would be guided by, but not entirely bound to, the outcome of the performance indicator review process; that Board members could apply discretion in their selection. Performance trends, missing or old data, and recent policy actions might come into play during selection deliberations, officials noted. The final selection reflected decisions that both strictly followed the performance indicator outcomes and applied Board discretion to take into account other factors. Ten of the countries complied with the stated criteria: performing above the median in relation to their peers on at least half of the indicators in each of the three policy clusters and performing above the median on corruption. The Board also examined whether a country performed substantially below average on any single indicator and whether their selection was supported by supplemental information. Each of the ten countries also passed these additional tests. For ten other countries, however, some discretion was applied by the Board. In three cases—Cape Verde, Lesotho, and Sri Lanka—the countries met the criteria but fell significantly below average on one indicator, yet were still selected by the Board due to recent policy changes or positive trend lines. For three others—Bolivia, Georgia, and Mozambique—the Board deviated from a strict application of the selection criteria because of evidence that the governments were taking corrective actions in the deficient areas. On the other hand, the MCC Board chose not to select four countries that technically met the performance criteria but fell substantially below the median on one or more indicator. In each of these cases, the Board did not believe that the government was taking any action to improve its performance. Although Bhutan, Mauritania, and Vietnam passed the corruption hurdle and half of the "ruling justly" indicators, they scored very low on the measurements for Political Rights and Civil Liberties, and in Vietnam's case, on the Voice and Accountability indicator. A fourth country—Guyana—was also not selected despite passing the necessary hurdles. It scored particularly low on the Fiscal Policy measurement. It has been long assumed by MCC officials and close observers of the MCA initiative that when the country selections were announced, there would be disagreements and possible surprises in the final list, especially if the Board exercised its discretionary authority as it did for FY2004 participants. Representative Lowey, for example, expressed her view at a May 13 House Appropriations Committee hearing that East Timor, which failed to pass the "economic freedom" hurdle in part due to missing data on two of the indicators, should have been selected. CEO Applegarth responded that East Timor is a new nation and that it was premature to conclude that it was a "high-performing" country. He acknowledged, however, that East Timor should be given close consideration in the future if the current trend lines continue. Besides East Timor, some suggested that Kenya should have been included because of its new government's commitment to education and anti-corruption efforts. USAID Administrator Natsios acknowledged at the hearing that Albania was a "close call," failing because it scored slightly below the median on corruption. Like Albania, Malawi and Moldova would have qualified on the basis of performance if not for slightly failing scores on corruption. Several small island states, including Kiribati, Sao Tome, and Tonga, were not selected even though the absence of data for several categories may have played a role. Despite these questions over specific country eligibility, the selection process appeared to have satisfied two major concerns that have been consistently expressed over the past year. Based on earlier analysis, some argued that Africa would be under-represented in the final selection process, with perhaps as few as three regional states participating. In fact, eight, or half of the first year qualifying nations, were from Africa. Selection of countries that would give the appearance of geostrategic considerations was a concern of many who view the absence of security-related factors from MCA decision-making as one of the most attractive features of the initiative. Had the Board used its discretionary powers to select Indonesia, for example, some critics would have likely charged that the decision stemmed more from Jakarta's role in the war on terrorism than on strict policy performance. Indonesia passed all necessary hurdles except for corruption. Meeting on November 8, the MCC Board of Directors made its selection of FY2005 eligible countries: The Board chose one new country for FY2005—Morocco—while 15 of the 16 nations included for FY2004 were determined eligible again for FY2005. Cape Verde was not selected due to the fact that its per capita GNI exceeded the $1,465 ceiling. Cape Verde, however, remains eligible for MCA support using FY2004 funds. Board selections represent both a high degree of continuity between FY2004 decisions as well as a sharp difference in the degree to which it applied its discretionary authority for qualifying or denying countries for FY2005. The fact that each country (except Cape Verde) selected for FY2004 MCA participation was also declared eligible for FY2005 should not be surprising, given the nature of the MCA concept. The Board identified in May 2004 what it determined to be the 16 "best performers" based on the assumption that these countries had, and would continue to express, a strong commitment to the types of economic, governance, and social policy reforms measured by the MCC. Absent a substantial negative development since May, there was a presumed expectation that these same countries would score well in a subsequent performance comparison with their income peers. Moreover, except in some extreme situations, evidence of a slide in policy performance as measured through the various data sources would likely lag behind the actual policy shift and not be reflected in the immediate data updates. In addition, two other factors that may not apply in future years seem to have affected the outcome for FY2005. First, with the selection dates for FY2004 and FY2005 coming only six months apart—rather than one year, as should be the case in the future—it was likely that the data would indicate less change than might be the case if the comparisons occurred over a longer period. Between May and November, several of the data sources upon which the 16 performance indicators are based did not update or revise their figures. As a result, the review of countries for FY2005 was based on much of the same data and rankings as had been the case for the FY2004 selection. Moreover, the addition of 13 new countries for consideration in the FY2005 round had the effect for at least six of the indicators of lowering the median against which countries were compared. Because of this, if a country scored well—above the median—in the FY2004 selection decision, it was likely that it would score the same or better in the review for FY2005 where medians declined. For example, in May Bolivia fell exactly at the median on the corruption indicator. But in November, when the median for corruption dropped somewhat after new countries were added, Bolivia scored above the median even though Bolivia's score on corruption did not change. This phenomena is unlikely to be repeated again to the same extent since countries in the low-income group will be added or subtracted only if their economy grows beyond the per capita income ceiling or U.S. foreign aid sanctions are applied or lifted since the last review. The net effect is that the core set of low-income countries competing for MCA selection is unlikely to change as much as it did in FY2005, thereby reducing the extent to which the median will be altered simply because of the addition of new countries. Despite the degree of continuity between FY2004 and FY2005 in the selection of eligible countries, the MCC Board departed somewhat from the previous round by not selecting a large number of countries that technically met the MCA performance criteria. Many observers may raise questions over the FY2005 selections regarding the countries that were not selected rather than those that were. As noted above, in May 2004, the Board chose not to select four countries—Bhutan, Guyana, Mauritania, and Vietnam—although each passed the minimum number of indicators. The Board decided to exclude these four because they scored "substantially below" the median on one or more measurements, although without defining precisely what represented a mark "substantially below" the median. For FY2005, the Board did not select 10 countries that met the criteria, including three of the four left out of the FY2004 round (Mauritania did not meet the minimum qualifications). In addition, for FY2005 Burkina Faso, China, Djibouti, Egypt, Nepal, the Philippines, and Swaziland met the minimum standards but were not selected. Thus far, the Corporation has offered little explanation as to why these countries were not chosen. It appears, however, that scoring "substantially below"—perhaps in the lowest 25 th percentile—has become a de-facto criteria for exclusion. For example, the Corporation's CEO Paul Applegarth commented that the Philippines, a country that passed 13 of the 16 indicators, did not qualify because Manilla scored "substantially below" the median on tests for health expenditures and fiscal policy, and that more recent trends indicated the fiscal policy situation was deteriorating further. Each of the other nine nations that met the minimum qualifications but were not selected also had one score in the 25 th percentile, although the Corporation has not commented on whether this was the reason for not choosing them. Another possible reason for limiting the number of qualifying countries in the FY2005 round might be due to anticipated funding reductions. The Administration had requested combined FY2004/FY2005 appropriations of $3.8 billion, but may have available 25%-30% less, depending on the outcome of congressional debate on the FY2005 budget. Corporation officials have said that reduced funding would lead to fewer countries assisted and/or smaller grants per country, a situation that would be complicated further by qualifying additional nations. Instead, the Board of Directors invited three of these 10 countries to participate in the Threshold Program, intended to help "near-miss" nations take steps to strengthen areas that would help them qualify for full MCA assistance in the future. Burkina Faso, Guyana, and the Philippines may now apply for Threshold Program assistance. Another Board departure in the FY2005 selection process was to avoid using its discretionary authority to qualify countries that did not meet the minimum performance indicators. In May, the Board chose three nations—Bolivia, Georgia, and Mozambique—that did not pass the so-called "hard-hurdle" of corruption. The latter two again qualified despite falling below the median on corruption, while Bolivia did not require an exemption after the median dropped below its score with the addition of new countries. For FY2005, five nations—Malawi, Moldova, Paraguay, Tanzania, and Ukraine—passed the required number of performance indicators, except corruption. Although Malawi, Paraguay, and Tanzania are Threshold Countries, none of the five were chosen for full MCA status. In order to encourage non-qualifying countries to improve in weak areas, the United States will help governments that are committed to reform to strengthen performance so that they would be more competitive for MCA funding in future years. Congress provided in authorizing legislation that not more than 10% of MCA appropriations ($99.4 million in FY2004) could be used for such purposes, stating that the funding could be made available through USAID. The MCC set aside up to $40 million for countries that just missed qualifying for FY2004 funding and will announce an amount for FY2005 following enactment of new appropriations. The Corporation has made two announcements regarding the selection of Threshold Countries. On September 30, the Corporation named seven participants: Albania, East Timor, Kenya, Sao Tome and Principe, Tanzania, Uganda, and Yemen. Five weeks later, on November 8, the MCC added six more nations for FY2005: Burkina Faso, Guyana, Malawi, Paraguay, the Philippines, and Zambia. According to the Threshold Program Policy guidance issued by the Corporation, the program will assist countries make policy reforms and institutional changes in areas where they failed to meet the MCA performance criteria. If the Corporation, in consultation with USAID, determines that the concept paper shows sufficient commitment to reform and a promise of success, the country will prepare a Threshold Country Plan that specifically establishes a program schedule, the means to measure progress, and financing requirements, among other considerations. USAID is charged with overseeing the implementation of Threshold Country Plans, including working with countries to identify appropriate implementing partners such as local, U.S., and international firms; NGOs; U.S. government agencies; and international organizations. Like regular MCA Compacts, funding is not guaranteed for each country selected for the Threshold Program, but will be based on the quality of the Country Plan. As noted above, how USAID would participate in the MCA initiative has been a continuing concern of Congress and various policy analysts. Legislation authorizing the MCC requires the Corporation's CEO to coordinate with USAID and directs the Agency to ensure that its programs play a primary role in helping candidate countries prepare for MCA consideration. Corporation and USAID officials have said there will be close collaboration between the two entities, although the precise nature of the relationship has yet to be made public. USAID maintains missions in 14 of the 17 eligible countries might be expected to support MCC programs, through contracting, procurement, and monitoring tasks. Another question is how USAID will adjust its own programs in MCA countries, especially where the Agency maintains relatively small activities in relation to other donors. Since the goal is to provide resources that will make MCA programs among the largest aid operations in a country, it is likely that USAID spending will fall well below amounts provided through MCC Compacts. For example, in Mongolia, where U.S. aid programs have totaled $10-$12 million annually in recent years, the United States was the fourth largest bilateral donor in 2002, representing less than a quarter of the size of Japan's economic aid disbursements. In Ghana, Senegal, and Sri Lanka, USAID maintains larger programs but spends far less than other countries and multilateral agencies. Like other issues involving USAID, this question remains under review. USAID Administrator Natsios told the House Appropriations Committee on May 9, 2004, that the Agency would not withdraw from or cut programs in MCA countries, but would not increase spending either. He said, however, that USAID would work to ensure that its programs operate in an integrated way with MCA-funded activities. As mentioned above, Congress appropriated $994 million for FY2004 MCC programs and considered a $2.5 billion request for FY2005. This was by far the largest increase sought by the Administration in the Foreign Operations appropriations proposal and viewed by many observers as one of the most vulnerable items in an increasingly difficult budget environment. A growing concern raised by some Members of Congress was whether sufficient funds would be available to support MCC programs in every country selected, especially if the Board continues to make exceptions and qualifies more countries than meet the strict criteria. Representative Kolbe, chairman of the House Foreign Operations Subcommittee, speculated at a May 9 hearing that, based on recent Board decisions, by 2006 as many as 40 countries might have qualified. This, he believed, could not be fully supported with likely funding levels and might raise country expectations that could not be met, thereby undermining program incentives. MCC officials point out that qualification for the program does not mean that a government will receive funding. That decision will be based on the quality of the Compact proposals and it is possible that the Corporation will not finalize agreements with all eligible countries. A March 2004 GAO report estimated that the MCC could adequately fund 8-13 Compacts with an appropriation of $3.5 billion (the combined FY2004 enacted and FY2005 amounts). This suggests that, even if Congress fully funds the pending proposal, the Corporation will not be able to support programs in all 16 countries approved for FY2004 and those selected for FY2005. If Congress reduces the $2.5 billion request, the MCC may face increasing difficulties funding Compacts of a sufficient size that will have a meaningful impact on a country's economic growth and poverty reduction goals. This may lead to further congressional examination of the Board's selection process and consideration of ways to limit the number of countries selected in the future. Foreign Operations bills passed in both the House and Senate ( H.R. 4818 ) made substantial reductions to the President's MCC request for FY2005. The bill, as approved by the House, reduced by half the President's $2.5 billion proposal. In cutting the MCC proposal, the House Appropriations Committee noted that its decision resulted solely from the constrained budget environment in FY2005 and the need to address other Administration and Congressional priorities. The executive branch, in its Statement of Administration Policy on H.R. 4818 issued prior to House debate, expressed its "disappointment" over the level of MCC funding and urged Congress to increase resources. During floor consideration on July 15, the House defeated (41-379) an amendment by Representative Paul to eliminate all MCC appropriations. The House Committee, in its report on H.R. 4818 , also expressed concern over Corporation plans to enter into multi-year Compacts without committing total funding for these programs in the year the Compact is signed. This, the Committee believed, would obligate future Congresses to fund prior year contracts. Consequently, the bill requires the MCC to only sign Compacts for which complete funding is available from existing appropriations. The House Committee also recommended that Compacts be limited to a 3-4 year period rather than a 3-5 year duration envisioned by the MCC. The Senate measure proposed a more significant cut to the President's MCC request—to $1.12 billion. Despite the reduction, the Senate Appropriations Committee noted its strong support for the program and re-emphasized some aspects of the MCC set out in authorizing legislation. The Senate panel requested a report on how the MCC will monitor and evaluate program Compacts, recommended that the Corporation use funds to identify a source of data to measure country performance with respect to people with disabilities, and urged the MCC to use the expertise of higher education institutions and to eliminate from Compact proposals elements that would have an adverse environmental impact. The Senate Committee further noted that rural electrification should be regarded as a significant part of a country's rural development goal. Following strong pressure from the White House to increase MCC funding above House- and Senate-passed levels, conferees settled on $1.5 billion for the MCC in FY2005. Like the House bill, the conference agreement requires that the MCC fully fund multi-year compacts selected in FY2004 and FY2005. The measure further amends MCA authorizing legislation, adding a more specific definition of the performance criteria related to "investing in people." In the future, this category will extend to government policies promoting health, education, and other factors contributing to the well-being and productivity of its citizens, including access to affordable housing. The combination of a reduced appropriation and the requirement for funding FY2004 and FY2005 compacts with existing appropriations may significantly limit the number and/or size of program proposals the Corporation can support in the first two years. A continuing source of disagreement between the executive branch and Congress is how to allocate the roughly $3 billion "core" budget for USAID development assistance and global health programs. Among the top congressional development aid funding priorities in recent years have been programs supporting child survival, basic education, and efforts to combat HIV/AIDS and other infectious diseases. The Administration has also backed these programs, but officials object to congressional efforts to increase funding for children and health activities when it comes at the expense of other development sectors. More recently during the FY2003 and FY2004 budget cycles, some Members of Congress argued that it has been the executive branch that has added funds for Administration priorities by cutting 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 for other aid sectors, such as economic growth and the environment, have been substantially reduced. This was more problematic during the mid-to-late 1990s when world-wide development aid funding fell significantly. In more recent years, and especially for FY2003 and FY2004, Congress increased overall development assistance so that both congressional and executive program priorities could be funded without significant reductions for non-earmarked activities. Nevertheless, Administration officials continue to argue that such practices undermine their flexibility 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, and Conflict Prevention and Developmental Relief. The Administration further introduced a new initiative—the Global Development Alliance (GDA)—in an effort to expand public/private partnerships in development program implementation. Under the initiative, USAID identifies good development opportunities being conducted by private foundations, non-governmental organizations, universities, and for-profit organizations, and provides parallel financing to leverage resources already committed to these activities. USAID officials envisioned that the agency would become much more of a coordinating and integrating institution to expand and enhance development efforts of these non-governmental development partners. Although it started out as a much more ambitious project—USAID requested $160 million for FY2002—the GDA has received relatively modest funding allocations, with a high of $20 million in FY2002, declining to $15 million in FY2004. USAID seeks $10 million for FY2005. Underscoring the importance of the debate over funding allocations of development aid resources has been an elevation by the Administration of the value of foreign economic assistance as an instrument of U.S. foreign policy since the terrorist attacks of September 11, 2001. Congress has approved two Presidential foreign aid initiatives—the Millennium Challenge Account (MCA) and the President's Emergency Program for AIDS Relief (PEPFAR)—that are increasing funding significantly for development assistance programs. Moreover, the President's September 2002 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 FY2005, the President proposed another substantial increase in overall development assistance, although the programs were configured differently than they have been in the past and the additional resources were heavily concentrated in a few activities where about 30 countries would receive the greatest benefits. Although development activists, including numerous non-governmental organizations (NGOs), strongly support these rising foreign aid budgets, they have also raised questions about the degree of resource concentration and whether the Administration is committed to a broad-based, worldwide development strategy. While country participants in the two new foreign aid initiatives—PEPFAR, which concentrates resources in 15 "focus" countries, and the MCA, for which 17 have been selected in FY2004 and FY2005—are likely to see development aid from the United States grow significantly, the outlook for the other 30-40 recipients of American economic assistance is a projection of flat or slightly lower levels of aid. The Administration further has said that MCA funding would be in addition to, not a substitute for continuing "core" development activities. Critics have charged that the FY2004 and FY2005 budget requests violated that pledge by cutting amounts for "core" programs. Development activists and policy analysts have further expressed concern regarding the recent diffusion of development aid policy implementation among multiple agencies. To some, this raises questions over the ability to coordinate foreign aid activities, present a coherent policy approach, and design an overall development assistance strategy. (See, for example, testimony on evolving U.S. foreign aid policy before the House International Relations Committee on February 26, 2004.) A number of analysts note that large segments of policy making and implementation responsibilities have shifted from USAID, the principal American aid agency for over 40 years, to a new State Department office that will coordinate PEPFAR, and to the Millennium Challenge Corporation that was established in February 2004 and manages MCA resources. For "core" development assistance—programs that match the current structure of USAID's "strategic pillars" and Foreign Operations appropriation accounts for Development Assistance and Child Survival and Health Program Fund—the Administration proposed $2.75 billion, as shown in Table 9 . This represented a $455 million, or 14% reduction from amounts for FY2004. This comparison on its own, however, is somewhat misleading. It does not reflect the large amount of funds—$1.45 billion—requested for the State Department's Global AIDS Initiative office, a large portion of which in previous years would have been counted within USAID "core" development aid budget. It also does not include the $2.5 billion request for the Millennium Challenge Corporation. Adding these amounts to the traditional USAID "core" accounts, the total development aid request for FY2005 was $6.7 billion, or 43% higher than FY2004. Perhaps a more informative analysis of the FY2005 proposal is to look below the total figures and compare funding levels recommended for individual components of development assistance. This comparison, as illustrated in Table 2 , presents a mixed picture of the FY2005 budget proposal. Under the category of Economic Growth, Agriculture, and Trade, funding for agriculture and environment would decline in FY2005. Basic education programs have been an especially high priority for Congress during the past decade. The Administration's proposal would cut basic education slightly from current the development assistance budget, and overall, taking into consideration other economic aid accounts, proposed $314 million, or $10 million less than enacted for FY2004. The category for Democracy, Conflict, and Humanitarian programs was also reduced slightly for FY2005. Under the third category of Global Health, which corresponds to the Foreign Operations appropriation account of Child Survival and Health, the FY2005 request was mixed. Although HIV/AIDS funding was reduced by over $300 million, this cut was more than compensated by a $1.45 billion proposal for the State Department's Global AIDS Initiative. The Administration, however, proposed a sizable reduction in the U.S. contribution to the Global Fund to Fight AIDS, Tuberculosis, and Malaria—$400 million in FY2004 to $100 million in FY2005—for funds drawn from Foreign Operations. For all other programs under the Global Health category, the FY2005 represented a reduction. Sizable cuts were proposed for vulnerable children activities and for other infectious diseases, including malaria and tuberculosis. Family planning and reproductive health were also reduced, representing the first time the Bush Administration had proposed a funding level less than its budget request the previous year. Across all Foreign Operations accounts, including Child Survival, Economic Support Fund, East Europe, and former Soviet states, the FY2005 request was $399.2 million, down about $30 million from estimates for FY2004. In his three previous budget submissions, President Bush had requested $425 million for family planning activities. By far, the largest growth area for development assistance was for HIV/AIDS prevention, treatment, and care programs ( Table 3 ). Resources requested under the Foreign Operations bill for HIV/AIDS in FY2005, including funds for malaria and tuberculosis, totaled $2.2 billion, a 37% increase over $1.6 billion appropriated for FY2004. Moreover, the Administration sought another $623 million for international HIV/AIDS from non-Foreign Operations accounts, most importantly for the Centers for Disease Control and Prevention funded under the Labor/HHS/Education appropriation bill. The total request across all appropriation measures for FY2005 was $2.82 billion. A contentious issue that has arisen during congressional debates in the past two years has been the President's proposal for an annual $200 million contribution to the Global Fund to Fight AIDS, Tuberculosis, and Malaria—$100 million each from Foreign Operations and Labor/HHS/Education. For FY2003, Congress increased the U.S. contribution to $350 million and subsequently authorized "up to" $1 billion for FY2004 in P.L. 108-25 , the United States Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003. The FY2004 appropriation for the Global Fund was $550 million, while the President proposed $200 million in FY2005. Following recommendations made earlier in House- and Senate-passed FY2005 Foreign Operations bills, the conference agreement on H.R. 4818 boosts the President's request for the two "core" development aid accounts, increases spending for HIV/AIDS programs beyond the executive's recommendation, but reduces sharply the proposed Millennium Challenge Account budget. As shown in Table 11 , in total, the final Foreign Operations measure cuts the President's overall $6.7 billion request by about $850 million, or 12.6%. The $1 billion reduction to the MCA appropriation makes up most of the cut, but is off-set by nearly $120 million increases for each of the Child Survival/Health and Development Assistance accounts (+8% and +9%, respectively). The Global AIDS Initiative—those HIV/AIDS funds managed by the State Department's Special Coordinators Office—also falls by $75 million from the request, a level, however, that is more than off-set with HIV/AIDS funding increases in the Child Survival/Health and other Foreign Operations accounts. As approved, the conference agreement provides $2.28 billion in Foreign Operations for the President's Emergency Plan for AIDS Relief (PEPFAR) (rescission-adjusted), roughly $80 million higher than the Administration's request and with a somewhat different allocation of funds among various HIV/AIDS accounts and activities. This is slightly higher than the level passed earlier by the House but less than the $2.42 billion approved by the Senate. The Senate level had included $150 million in "emergency"- designated appropriations that conferees did not adopt. Much attention throughout the debate centered on the level of funding for the U.S. contribution to the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (Global ATM Fund). The President proposed a total of $200 million—$100 million each from Foreign Operations and Labor/HHS/Ed funding measures. House- and Senate-passed bills had provided $500 million and $550 million respectively, with $400 million coming from the Foreign Operations bill in each case. Conferees, however, lowered these amounts for the Global ATM Fund to a total level of $435 million, made up from the following sources: $248 million from FY2005 Foreign Operations (rescission adjusted) $99.2 million from FY2005 (Labor/HHS/Ed (rescission adjusted) $87.8 million carry-over from unspent FY2004 Foreign Operations The carry-over funds from FY2004 were available because, under law, the Administration could not transfer last year the full $546.7 million appropriation. Congress has set a cap on the total U.S. contribution that cannot exceed more than one-third of total transfers from all donors. For FY2004, this limited the U.S. payment to the Global Fund to $459 million. Another element of the PEPFAR initiative is support for bilateral malaria and tuberculosis programs, funding for which the Administration proposed cutting from $155 million last year to $104 million in FY2005. The conference agreement on H.R. 4818 rejects the President's recommendation, increasing appropriations to $170 million. Earlier, the House had proposed at least the same amount as provided in FY2004 for malaria and tuberculosis, while the Senate had included $$175 million. As detailed in Table 12 , total funding in FY2005 for all PEPFAR components proposed in four appropriation measures (Foreign Operations, Labor/HHS/Ed, Agriculture, and Defense) is $2.92 billion, 24% higher than last year and 3.5% more than the President's $2.82 billion request. The total is adjusted for the 0.8% rescission and includes the $87.8 million carry-over from FY2004 for the Global Fund. In other key decisions concerning bilateral development assistance, House and Senate measures provide amounts shown in Table 13 . The House Appropriations Committee also addressed in its report on H.R. 4818 the Administration's concern that earmarks reflecting congressional priorities, particularly among health and education programs, reduced flexibility in providing sufficient resources for other development activities, especially in the area of economic growth. The House panel said it regards economic growth as USAID's most important long-term goal, and that while the Committee continues to recommend higher spending for health programs in the near-term, it encourages USAID to increase funds for economic growth activities. U.S. population assistance and family planning programs overseas have sparked continuous controversy during Foreign Operations debates for nearly two decades. For FY2005, the Administration requested $399.2 million for bilateral international reproductive health and family planning programs, an 8% decrease from the $432 million FY2004 appropriation. The request also proposed $25 million, placed in "reserve" as part of the Foreign Operations spending bill's International Organizations and Programs account, that could be made available to the U.N. Population Fund (UNFPA). UNFPA could receive the funds, however, only if the President determines that the organization meets certain conditions. Although funding considerations have at times been heatedly debated by Congress, the most contentious family planning issues addressed in nearly every annual congressional consideration of Foreign Operations bills have focused on two matters: whether the United States should contribute to the U.N. Population Fund (UNFPA) if the organization maintains a program in China where allegations of coercive family planning have been widespread for many years, and whether abortion-related restrictions should be applied to bilateral USAID population aid grants (commonly known as the "Mexico City" policy). The most contentious issue usually concerns the abortion restriction question, but most recent attention has focused on UNFPA and a White House decision in July 2002 to block the $34 million U.S. contribution to the organization. During the Reagan and George H.W. Bush Administrations, the United States did not contribute to UNFPA because of concerns over practices of forced abortion and involuntary sterilization in China where UNFPA maintains programs. In 1985, Congress passed the so-called Kemp-Kasten amendment which has been made part of every Foreign Operations appropriation since, barring U.S. funds to any organization that supports or participates "in the management" of a program of coercive abortion or involuntary sterilization. In 1993, President Clinton determined that UNFPA, despite its presence in China, was not involved in the management of a coercive program. From 1993 through the end of the decade, in most years Congress appropriated about $25 million for UNFPA, but added a directive that required that the amount be reduced by however much UNFPA spent in China. Consequently, the U.S. contribution has fluctuated between $21.5 million and $25 million. For FY2002, President George W. Bush requested $25 million for UNFPA. Congress provided in the FY2002 Foreign Operations bill "not more than" $34 million for UNFPA. While members of the Appropriations Committees said it was their intent to provide the full $34 million, the language allowed the President to allocate however much he chose, up to a $34 million ceiling. The White House placed a hold on UNFPA funds in January 2002 because new evidence suggested that coercive practices were continuing in Chinese counties where UNFPA concentrates its programs. A September 2001 investigation team, sponsored by the Population Research Institute, concluded that a consistent pattern of coercion continued in "model" UNFPA counties, including forced abortions and involuntary sterilizations. Refuting these findings, a UNFPA-commissioned review team found in October 2001 "absolutely no evidence that the U.N. Population Fund supports coercive family planning practices in China or violates the human rights of Chinese people in any way." (See House International Relations Committee hearing, Coercive Population Control in China: New Evidence of Forced Abortion and Forced Sterilization , October 17, 2001. See also testimony of Josephine Guy and Nicholaas 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 supports involuntary activities and whether UNFPA should operate at all in a country where such conditions exist. Given the conflicting reports, the State Department sent its own investigative team to China for a two-week review of UNFPA programs on May 13, 2002. The team, which was led by former Ambassador William Brown and included Bonnie Glick, a former State Department official, and Dr. Theodore Tong, a public health professor at the University of Arizona, made three findings and recommendations in its report dated May 31, 2002. Findings: There is no evidence that UNFPA "knowingly supported or participated in the management of a program of coercive abortion or involuntary sterilization" 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 socioeconomic change. Recommendations: The United States should release not more than $34 million of previously appropriated funds to UNFPA; Until China ends all forms of coercion in law and practice, no U.S. government funds should be allocated to population programs in China; and Appropriate resources, possibly from the United States, should be allocated to monitor and evaluate Chinese population control programs. 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 to recommend that they be re-directed to other international family planning and reproductive health activities. The State Department's analysis of the Secretary's determination found that even though UNFPA did not "knowingly" support or participate in a coercive practice, that alone would not preclude the application of Kemp-Kasten. Instead, a finding that the recipient of U.S. funds—in this case UNFPA—simply supports or participates in such 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, a practice that in some cases coerces women to have abortions they would not otherwise undergo. The State Department analysis concluded that UNFPA's involvement in China's family planning program "allows the Chinese government to implement more effectively its program of coercive abortion." (The full text of the State Department's analysis is online at the State Department's website, http://www.state.gov/g/prm/rls/other/12128.htm . The State Department's assessment team report is also online, 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 by persons in around 140 countries where UNFPA operates, but also because of the possible application of the determination for other international organizations that operate 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 its funding. Presumably, this could have been made available to UNFPA if it was found not to be in violation of Kemp-Kasten. Following several legislative attempts to reverse the Administration's denial of UNFPA—in both FY2002 supplemental appropriations and regular FY2003 Foreign Operations measures—Congress approved in P.L. 108-7 , the Consolidated Appropriations Act for FY2003, a provision allocating $34 million to UNFPA, the same as in FY2002, so long as several conditions were met. The most significant requirement was that the President must certify that UNFPA is no longer involved in the management of a coercive family planning program. Following the July 2002 determination, the Administration transferred to USAID $34 million from FY2002 appropriations and $25 million from FY2003 that would have otherwise been provided to UNFPA in order to fund USAID bilateral family planning programs for which UNFPA has no involvement. The State Department's justification of its September 25, 2003 letter to Congress regarding the FY2003 resources noted that the "factual circumstances" do not support making a determination that UNFPA no longer supports or participates in the management of a program of coercive abortion or involuntary sterilization. Section 572 of the FY2003 Foreign Operations Appropriations required the President to issue such a statement before restoring U.S. funding to UNFPA. These transferred funds, however, remained unspent due to "holds" placed on them by Members of Congress. The intent in placing the "holds" by some Members was to keep the money available for UNFPA in the event that circumstances changed and the Administration would make UNFPA eligible once again. In the FY2004 Foreign Operations enacted bill (Division D of P.L. 108-199 ), Congress earmarked $34 million for UNFPA, subject, however, to the Kemp-Kasten conditions. The conference agreement further directed how the previously withheld money would be disbursed, thereby resolving a long-standing dispute over whether to commit these resources to other development programs or place them in a reserve account in case UNFPA again became eligible for U.S. support. The FY2004 appropriation specified that the $34 million withheld in FY2002 shall be used for family planning programs in twelve countries, including Congo, Ethiopia, Uganda, Haiti, and Russia. The $25 million in FY2003 funds that was earmarked for, but not transferred to, UNFPA would be made available for vulnerable children and for a new initiative within the Child Survival and Health account assisting young women, mothers, and children who are victims of trafficking in persons. On July 16, 2004, the State Department announced that it had again found UNFPA to be in violation of the Kemp-Kasten amendment and would not provide the $34 million designated in the FY2004 appropriation measure. In a statement, the Department said that the United States has been urging UNFPA and China to modify the organization's program in a manner that would permit U.S. support to resume. The State Department found that no key changes had occurred in UNFPA's programs that would permit a resumption of U.S. funding under the conditions of the Kemp-Kasten provision. The debate over international family planning policy and abortion began nearly three decades ago, in 1973, when Congress added a provision to the Foreign Assistance Act of 1961 prohibiting the use of U.S. appropriated funds for abortion-related activities and coercive family planning programs. During the mid-1980s, in what has become known as the "Mexico City" policy (because it was first announced at the 1984 Mexico City Population Conference), the Reagan Administration, and later the George H. W. Bush Administration, restricted funds for foreign non-governmental organizations (NGOs) that were involved in performing or promoting abortions in countries where they worked, even if such activities were undertaken with non-U.S. funds . Several groups, including International Planned Parenthood Federation-London (IPPF-London), became ineligible for U.S. financial support. In some subsequent years, Congress narrowly approved measures to overturn this prohibition, but White House vetoes kept the policy in place. President Clinton in 1993 reversed the position of his two predecessors, allowing the United States to resume funding for all family planning organizations so long as no U.S. money was used 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 Foreign Operations spending measures. The House position, articulated by Representative Chris Smith (N.J.) and others, supported reinstatement of the Mexico City policy restricting U.S. aid funds to foreign organizations involved in performing abortions or 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 City policy, favoring a position that left these decisions in the hands of the Administration. Unable to reach an agreement satisfactory to both sides, Congress adopted interim arrangements during this period that did not resolve the broad population program controversy, but permitted the stalled Foreign Operations measure to move forward. The annual "compromise" removed House-added Mexico City restrictions, but reduced population assistance to $385 million, and in several years, "metered" the availability of the funds at a rate of one-twelfth of the $385 million 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 President Clinton agreed to a modified version of abortion restrictions, marking the first time that 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 for FY2000, P.L. 106-113 ). Because the President could waive the restrictions for $15 million in grants to organizations that refused to certify, there was no major impact on USAID family planning programs in FY2000, other than the reduction of $12.5 million in population assistance that the legislation required if the White House exercised 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 Operations measure, none of the $425 million appropriation could be obligated until after February 15, 2001. Subsequently, on January 22, 2001, two days after taking office, President Bush issued a Memorandum to the USAID Administrator rescinding the 1993 memorandum from President Clinton and directing the Administrator to "reinstate in 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 funds should 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 secretary stated that President Bush was "committed to maintaining the $425 million funding level" for population assistance "because he knows that one of the best ways to prevent abortion is by providing quality voluntary family planning services." The press secretary further emphasized that it was the intent that any restrictions "do not limit organizations from treating injuries or illnesses caused by legal or illegal abortions, for example, post abortion care." On February 15, 2001, the day on which FY2001 population aid funds became available for obligation, USAID issued specific policy language and contract clauses to implement the President's directive. The guidelines are nearly identical to those used in the 1980s and early 1990s when the Mexico 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 are unsure of the full implications of the restrictions and do not want to risk losing eligibility for USAID funding. This, they contend, will lead to higher numbers of unwanted pregnancies and possibly more abortions. Opponents also believe the new conditions undermine relations between the U.S. Government and foreign NGOs and multilateral groups, creating a situation in which the United States challenges their decisions on how to spend their own money. They further argue that U.S. policy imposes a so-called "gag" order on the ability of foreign NGOs and multilateral groups to promote changes to abortion laws and regulations in developing nations. This would be unconstitutional if applied to American groups working in the United States, 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 is fungible; organizations receiving American-taxpayer funding can simply use USAID resources for permitted activities while diverting money raised from other sources to perform abortions or lobby to change abortion laws and regulations. The certification process, 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 Senate FY2004 Foreign Operations appropriations bill ( S. 1426 ), none has passed either the House or Senate, and no measure has been enacted into law. The Conference agreement on H.R. 4818 provides $441 million for bilateral family planning/reproductive health programs, between levels passed earlier by the House ($432 million) and the Senate ($450 million). The approved amount for FY2005 is $42 million, or about 10% higher than the Administration's request. Conferees further earmarked $34 million for UNFPA—$25 million drawn from the International Organizations and Programs (IO&P) account and $9 million drawn from the Child Survival/Health account. The entire $34 million is subject to Kemp-Kasten restrictions. If the President determines that UNFPA is ineligible for U.S. funding under Kemp-Kasten, the conference agreement directs the Administration to transfer the $25 million IO&P account funds to the Child Survival/Health account for USAID-managed family planning, maternal and reproductive health programs. Conferees further specified that FY2004 funds previously earmarked for UNFPA be spent on anti-trafficking programs ($12.5 million) and family planning and maternal and reproductive health activities ($12.5 million). After declaring UNFPA ineligible for FY2004 funds, the Administration had signaled that it would re-program the entire $25 million for anti-trafficking programs. Previously, House- and Senate-passed Foreign Operations bills had provided $25 million and $34 million, respectively, for UNFPA. The Senate measure also directed that the $25 million withheld from UNFPA for FY2004 shall be available for USAID bilateral family planning/reproductive health activities in 15 specific nations. In addition, a floor amendment sponsored by Senators Leahy and Bingaman specified that if UNFPA is not eligible for U.S. funds in FY2005, the $34 million earmark may not be available for any other purpose unless specified in subsequent legislation. An earlier attempt in the House, sponsored by Representative Lowey, to make the UNFPA contribution available only for programs in Iraq, Afghanistan, Tanzania, Jordan, Kenya, and Pakistan, countries which restrict or prohibit abortion, was defeated by the House Appropriations Committee (26-32). Conferees also rejected two Senate provisions that were strongly opposed by the Administration and which in previous years prompted veto threats by the President. The first provision passed by the Senate but dropped in conference amended the Kemp-Kasten language in a way that would narrow somewhat the grounds on which the Administration could find UNFPA in violation of the restrictions. The Senate text stated that an organization must directly support coercive abortions or involuntary sterilizations in order to be denied U.S. support, adding the word "directly" to the condition. The amendment further included new text stating that no organization can be denied funds solely because the government of a country engaged in coercive practices. This presumably was an indirect reference to China, intending to establish a policy that UNFPA could be declared ineligible for U.S. funding exclusively because of coercive practices by Chinese family planning officials. The second Senate amendment would have revised the President's "Mexico City" policy that prohibits foreign non-governmental organizations (NGOs) from receiving U.S. funds if they perform or promote abortion as a method of family planning, whether or not such activities are supported with U.S.-provided resources. The Senate-passed language stipulated that foreign NGOs could not be declared ineligible for U.S. aid for conducting any health or medical services with non-U.S. government funds so long as the practices did not violate laws in the country in which the services were provided or would not violate U.S. law. The provision further provided that foreign NGOs would not be subject to conditions associated with the use of non-U.S. government funds for advocacy and lobbying activities that were more restrictive than those applied to American NGOs. It is generally assumed that the Mexico City policy ban on advocacy and lobbying would be found to be a constitutional violation of the right of free speech if it were to be applied to a U.S. NGO. The conditions in Afghanistan for reconstruction represent a challenging mix of ongoing security concerns, infrastructure destruction, and humanitarian needs that require a robust and sustained intervention. While the hunt for Al Qaeda forces within Afghanistan continues, transitional and reconstruction assistance are well underway. So far, the international community has continued to provide large amounts of aid and resources for the reconstruction effort. A long-term commitment will likely be necessary to ensure that a stable, democratic Afghanistan emerges. The outcomes of international donors conferences since January 2002 indicate a continued, strong willingness on the part of the international community to assist in the restoration of Afghanistan. However, reconstruction costs are estimated by some to be more than $15-$30 billion over the next decade. The 9/11 Commission Report praises the U.S. efforts in Afghanistan thus far, but emphasizes the need for a sustained, long-term commitment by the United States and the international community to Afghanistan's stability and security. Recognizing that Afghanistan remains vulnerable to illicit drug production and terrorism, the Commission is far-reaching in its recommendations, which include a call for greater security and participation by international forces, more effective, robust counternarcotics activities, and increased flexibility in allocating money for relief and reconstruction. Key developments since September 11, 2001 and the collapse of the Taliban focus on three main pillars: First, the development of plans for security including military operations by U.S. and other coalition forces in Afghanistan; the presence of an International Security Assistance Force (ISAF); the establishment and training of an Afghan National Army and a police force; the demobilization of private militias; and the formation of provincial reconstruction teams. Second, establishing the political framework through the Bonn Conference and Afghanistan Interim Administration (AIA), the loya jirga and Islamic Transitional Government of Afghanistan (ITGA), the constitutional loya jirga and approval of a new constitution, presidential and parliamentary elections, and renewed diplomatic ties with the international community. Third, the creation of a strategy for reconstruction beginning with the Tokyo Reconstruction Conference in January 2002. The current operating environment continues to highlight the importance of these three themes and the work that remains to be done to assure Afghanistan's recovery. The most serious challenges facing Afghanistan today are the lack of security and growing trafficking in narcotics. An ongoing insurgency involving remnants of the Taliban, particularly in the southeast, has created insecurity and slowed reconstruction there. Moreover, former commanders maintain control over their own areas throughout the country and continue fighting with their rivals, making difficult the extension of control by the national government, the provision of aid, and progress on reconstruction. With an estimated half of its GDP ($2.3 billion) generated through drug trafficking, there are growing concerns that Afghanistan could become a "narco state." Under Operation Enduring Freedom (OEF) in Afghanistan, the United States has approximately 17,000 troops and the coalition is contributing another 2,000 troops. The ISAF, created by the Bonn agreement, has around 9,000 troops from 26 nations as well as 10 non-NATO countries. ISAF force levels increased from 6,400 to help secure the October 9, 2004 elections, with 2,500 additional troops sent from Spain and Italy. The supplementary Italian troops are currently attached to the NATO Response Force (NRF) but the NRF as an entity will not deploy. NATO assumed command of ISAF in August 2003. The core of ISAF is the Kabul Multinational Brigade which is now led by "Eurocorps," a rapid response force within NATO composed of forces from France, Germany, Spain, Belgium, and Luxembourg. Because of ongoing threats to Afghanistan's internal security, there were calls for ISAF expansion and deployment to other cities. In October 2003, the U.N. Security Council formally backed an expansion of ISAF outside of Kabul by adopting Resolution 1510. U.S. forces, with other nations, are continuing to train a new Afghan National Army (ANA) that it is hoped will ultimately allow the Kabul government to maintain security on its own and enable foreign forces to depart Afghanistan. The targeted size of the army is 70,000, but it is expected to take a number of years to achieve full strength. The ANA had 15,000 troops deployed in time for the presidential elections on October 9, 2004. The ANA has established a presence in 16 of Afghanistan's 34 provinces. With the continued fighting and insecurity, the Japan and U.N.-led process of demobilization and integration of up to 100,000 private militiamen has also been slow. Estimates of the number of fighters to be disarmed under the program has varied over time. In June 2004, regional leaders identified about 60,000 total to be demobilized. Just prior to the elections, about 15,000 had been disarmed. A related program is the surrender and cantonment of heavy weapons. The United States and Germany are training a national police force (as of October numbering about 28,000 trained nationwide) while the United Kingdom has taken the lead on reducing narcotics production and trafficking. 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 "provincial reconstruction teams" (PRTs), composed of U.S. combat and civil affairs officers. The PRT is a military-run enclave established to create stability, promote reconstruction, and extend the reach of the central government. The U.S. PRTs are intended to have 50-100 military personnel, interagency civilian representatives and a representative from the Interior Ministry of the central government. Under the Coalition, the United States operates thirteen PRTs in Gardez, Ghazni, Herat, Parwan, Qandahar, Jalalabad, Khost, Qalat, Asadabad, Tarin Kowt, Lashkar Gah, Sharana, and Farah. Also under the coalition, New Zealand is leading a PRT in Bamiyan. Germany took over the first ISAF PRT (from the United States) in Konduz in February 2004 with a heavier military presence of more than 250 military personnel. NATO expressed an intent to take over another 5 PRTs in the North and Northeast of the country and made specific commitments at the June 2004 Istanbul summit. Germany has set up an ISAF PRT in Faizabad (to operate as a satellite to the PRT in Konduz). The U.K.-led PRT in Mazar, which originally operated under the coalition/OEF, is now part of ISAF (as of July 2004) and has added three satellites in Sari Pol, Samangan, and Shebergan. With support from Norway and Finland, the UK has also established a new ISAF PRT in Meymaneh; another is to be set up in Baghlan and led by the Netherlands. In total, there are three new ISAF/NATO PRTs (over the existing Konduz and Mazar PRTs) and several new satellites, with approximately 500 additional personnel. Although NATO nations appear committed to the Afghanistan mission, personnel and equipment shortages plague the organization's ability to build up its presence in Afghanistan. The new pledges for ISAF operations to address staffing and equipment shortages, originally announced in December 2003, have not yet been met, although the first military transport plan for ISAF, contributed by Portugal, arrived in late July 2004. The United States is focused on PRTs in the South and East. U.S. plans call for up to 34 Coalition or ISAF PRTs (one in each province), with the possibility of satellite PRTs within some provinces. Regional Development Zones (RDZs) grouping several PRTs are also under discussion. The PRT concept has received mixed reviews from the aid community. Some organizations see a positive impact on security and as a result, an increase in reconstruction activity in the PRT area of operation. Others accept the PRT concept as a practical reality of providing assistance in Afghanistan, albeit with some concerns about the civil-military relationship. And still others do not want to associate with any military force because doing so might compromise their neutrality and impartiality and increase the possibility of a targeted attack. Factional fighting and increased criminal activity have undermined relief and reconstruction operations. In some cases, where operations were directly targeted, this has led to the temporary suspension of U.N. activities or withdrawal of aid agencies from certain areas. The Afghan Nongovernmental Organization Security Office (ANSO) keeps a database to record national security incidents and to provide more effective, timely information and situation 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 the international community. The road map of the political transition was laid out in a United Nations-sponsored conference of major Afghan factions held in Bonn, Germany, in late November 2001. The transitional government appears stable, but there are major tensions within factions of the national government and between the central government and provincial leaders. The Constitutional Loya Jirga adopted a new constitution in January 2004. Karzai sought to hold timely national elections to validate his leadership and counter charges that he sought to monopolize power. Northern Alliance leaders sought simultaneous parliamentary elections so that a parliament could serve as a check on presidential authority. In keeping with the Bonn agreement, national elections were scheduled for June 2004. After several postponements, the presidential election took place on October 9, 2004, and the parliamentary elections are expected to take place in April 2005. A joint Afghan-United Nations Committee (with the U.N. Assistance Mission in Afghanistan—UNAMA) registered voters through the Joint Election Management Body (JEMB), an Afghan-U.N. Committee established in July 2003. As of the close of the registration process in September 2004, UNAMA reported that 10.5 million voters had registered, a number equal to the original assessment of the number of eligible voters. About 42% of those registered were women. Early on the pace of registration was greatly affected by insecurity, particularly in the southeast. The registration rates then took a sharp jump, increasing concerns that some Afghans may have registered more than once. On May 25, 2004, President Karzai endorsed the major election law to govern the elections. Eighteen candidates were certified by the JEMB to run in the presidential elections. Apparently Afghan refugees in Pakistan and Iran were registered and included in the national elections. Fears of election-related violence and voter intimidation by factional commanders made election security a key concern of the United States and international community. Election security missions involved the Coalition, ISAF, the ANA, and Afghan national police force. On October 9, 2004, the vote was conducted under tight security and observed by about 400 international monitors from the Organization for Security and Cooperation in Europe (OSCE) and other groups, such as the International Republican Institute (IRI). There were only minor, scattered insurgent attacks during the voting—far less violence than was expected—and turnout was reported to be heavy and the voting orderly. Fears of widespread intimidation of voters by factional militiamen were not realized, although there were some reports of such activity on election day. The major threat to the election was an announcement on election day by 15 challenging candidates that they would boycott the results due to widespread fraud—primarily an alleged failure of indelible ink to prevent multiple voting. After a day of discussions and refutations by some of the international observers, most of the challengers—including the most prominent challenger Yunus Qanooni—agreed to drop their objections and allow an independent commission to investigate the alleged irregularities. On November 3, Karzai was declared the winner with 55.4% of the vote, thereby avoiding a runoff. In parts of the country, humanitarian and reconstruction assistance still operate on parallel tracks. Highlights of the progress on reconstruction achieved in Afghanistan so far include the return of 3 million refugees, the enrollment of 2.9 million children in school, the participation of some women in the workforce and politics, and the completion of Phase I of the Kabul-Kandahar highway, just to name a few. The United Nations High Commissioner for Refugees (UNHCR) continues to assist refugees and the internally displaced, although some have raised concerns that the infrastructure may not yet be able to support this many returnees. Apart from security problems, the current operating environment presents a number of other urgent challenges. The collapsed infrastructure, rugged terrain and extreme weather are significant factors with regard to access, food aid, health care, and basic logistics. Reconstruction efforts must be understood in the context of the differences among the regions and the political and security situation throughout the country. The international recovery and reconstruction effort is immense and complicated, involving the Afghan government, numerous U.N. agencies, bilateral donors, many international organizations, and countless non-governmental organizations (NGOs). Intended outcomes of the reconstruction process identified by the international community and the Afghan government include political stability and security, access to basic services, and adequate standard of living for the Afghan people, economic growth, and, in the long term, independence from foreign aid. So far, the international community has continued to provide significant amounts of aid and resources for the reconstruction effort. Among contributions by other countries, Italy is providing advice on judicial reform and the United States, Japan and Saudi Arabia have together been financing the rebuilding of the Kabul-Qandahar-Herat major roadway. Discussions continue about how to assess the progress, pace, and effectiveness of reconstruction efforts, and whether sufficient aid is available. Some experts are concerned about absorption capacity and whether additional funds can be allocated quickly and effectively. Others argue that the lack of human capacity combined with insufficient security, rather than the amount of funding, are the main obstacles. Since September 11, the United States has provided nearly $3.3 billion for reconstruction efforts in Afghanistan, making Kabul one of the largest recipients of American foreign aid. At the International Conference on Reconstruction Assistance to Afghanistan held in Tokyo in January 2002, the U.S. pledged $297 million, drawn from existing sources—either from the $40 billion Emergency Terrorism Response supplemental ( P.L. 107-38 ) that was passed shortly after the September 11 attacks or from regular FY2002 appropriations. The sixty-one countries and twenty-one international organizations represented at Tokyo pledged $4.5 billion, with some states making pledges over multiple years and commitments to be carried out in different time frames. Since the Tokyo pledging conference, through supplemental and regular appropriation bills, Congress has approved about $3 billion for Afghanistan, with most coming in three emergency supplemental measures for FY2002-2004. The Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 , S. 2712 ), signed by the President on December 4, 2002, authorized U.S. reconstruction efforts with $3.3 billion over four years. Included was $2 billion for humanitarian, reconstruction, and enterprise fund assistance through FY2006 and $300 million in drawdown from U.S. military stocks of defense articles and equipment for Afghanistan and other countries and organizations participating in restoring Afghan security. The legislation also included a Sense of Congress that calls for an expanded International Security Assistance Force with an authorization of an additional $1 billion over two years. For FY2005 appropriations, the Administration requested $929 million for Afghanistan, plus an additional $300 million for military drawdowns. The appropriations request covered several categories of aid: Development programs would remain at FY2004 levels in FY2005, with resources targeting agriculture ($45 million), private sector growth and investment ($31 million), environment ($28 million), primary education ($24 million), child and maternal health ($13 million), reproductive health ($7 million), and democracy building ($20 million) programs. The Administration said that a significant amount of these funds would support activities benefitting women and girls. Economic Support Fund assistance, requested at $225 million, would support infrastructure repair and rehabilitation, as well as technical aid for strengthening governmental institutions. Counter-narcotics and Law Enforcement programs totaling $90 million would emphasize three areas: continued training of the national and border control police; improving the judicial sector; and counter-narcotics law enforcement, poppy eradication, alternative development. Anti-terrorism/Demining funds for FY2005 ($17.5 million) would continue to finance President Karzai's protective detail, strengthen border control capabilities, and remove landmines in new areas of Afghanistan. Military assistance, proposed at $401 million in FY2005, roughly the same as FY2004, would continue efforts to train and equip the Afghan National Army (ANA). Peacekeeping funds ($24 million) would pay the salaries of ANA soldiers while in training and upon graduation. The conference agreement on H.R. 4818 provides at total of $980 million for Afghanistan in FY2005, about $50 million more than proposed by the Administration and recommended by the Senate. The figure is slightly higher than the House-passed level of $977 million. Other provisions included in the approved Foreign Operations measure: $2 million for the Independent Human Rights Commission and other human rights groups (proposed by the Senate); $2 million for reforestation activities (proposed by the Senate); $50 million for Afghan women and girls (proposed by the Senate; the House proposed $60 million); $2 million for medical, rehabilitation, reconstruction, and other aid to Afghan communities and families that have suffered loses due to military operations (similar to Senate proposal); members of the Afghan National Army should be vetted for involvement in terrorism, human rights violations, and drug trafficking. On related legislation regarding bills to reform the intelligence community and implement the 9/11 Commission recommendations, the House and Senate are considering amendments to the Afghanistan Freedom Support Act ( P.L. 107-327 ) approved in 2002. Among other changes, H.R. 10 requires the President within six months of enactment to submit to Congress a five-year strategy for development and security needs in Afghanistan. The House bill further adds a new title to the 2002 Afghanistan reconstruction authorization Act, regarding counter-narcotics efforts in the country. S. 2774 , also requires a five-year strategy report, plus revises and adds aid authorization levels for FY2005. In total, the bill authorizes $2.4 billion for Afghanistan, including $500 million in development aid, $550 million in security-related economic support, $882 million in military assistance, $410 million in counter-narcotics and anti-terrorism funding, and $60 million for peacekeeping purposes. These authorization amounts are more than two and one-half times greater than the approved FY2005 appropriation for Afghanistan. Following years of authoritarian rule and economic sanctions, the United States and the international community agreed in the spring of 2003 that efforts should be made to introduce economic reform and democratic government to post-war Iraq. The best available estimates of the eventual cost of this Iraq reconstruction are provided in an October 2003 World Bank and U.N. Development Group needs assessment of 14 sectors of the Iraqi government and economy. Prepared for the benefit of the international donors conference held in Madrid on October 23-24, 2003, it established the targets by which the adequacy of available resources will be judged. The World Bank/U.N. assessments put the cost of reconstruction for the 14 sectors at $36 billion over four years, a figure that does not include $19.4 billion estimated by the Coalition Provisional Authority (CPA) for security, oil, and other sectors not covered by the Bank/U.N. assessments. Total World Bank/CPA projected reconstruction costs through 2007 amount to $55 billion. Several potential "spigots" are available to fund Iraq reconstruction. U.S. foreign aid appropriations were provided in FY2003 and FY2004 in two emergency supplemental bills specifically for Iraq. International donors have also made aid contributions. Iraqi funds, mostly derived from oil export profits, have been employed largely to cover the "normal" operating costs of the Iraqi government, but, where sufficient amounts are available, have been used to address reconstruction needs. Additionally, the reduction or rescheduling of Iraqi debt repayments makes further resources available. In the FY2003 Emergency Supplemental ( P.L. 108-11 ), signed on April 16, 2003, $2.48 billion was appropriated for a special Iraq Relief and Reconstruction Fund (IRRF) for the purpose of aid efforts in a wide range of sectors, including water and sanitation, food, electricity, education, and rule of law. The legislation gave the President control over the Fund, and amounts could be transferred only to the Department of State, the Agency for International Development (USAID), the Department of the Treasury, the Department of Defense, and the Department of Health and Human Services, subject to the usual notification procedures. The FY2004 Emergency Supplemental ( P.L. 108-106 ), signed on November 6, 2003, added $18.4 billion to the IRRF and allowed funds to go directly to the CPA in addition to the above named agencies. While earlier funds had been used to support a broad range of humanitarian and reconstruction efforts, the FY2004 appropriation was largely intended to have an immediate impact on the two greatest reconstruction concerns raised since the occupation of Iraq began—security and infrastructure. The reconstruction funds were provided entirely as grants, after the Administration threatened to veto any measure that provided aid in the form of loans. The legislation established an Inspector General office to monitor the use of funds by the CPA, and included extensive reporting requirements regarding expenditures, projects, and other sources of revenue. The bill also provided $983 million for operating expenses of the CPA. Exceptions to the rule of full and open competition for contracts have to be justified and notified to Congress. On September 14, 2004, the Administration asked Congress to approve a significant re-allocation of $3.46 billion of the $18.4 billion (see " Reconstruction Priorities " below). Because the desired changes were greater than the supplemental's restriction on how much a specific sector—such as security or health—could be increased (no more than 20%) or decreased (no more than 10%) from the original congressional allocation, a simple notification to the appropriations committees was insufficient. Congress, in passing on September 29, 2004, H.J.Res. 107 , the Continuing Appropriations Act for FY2005 ( P.L. 108-309 ), approved the Administration's re-allocation proposal. (See Table 17 , below, for specific details on sector re-allocations.) Although the IRRF accounts for most U.S. reconstruction aid to Iraq, funds have been drawn from other accounts for related purposes. Department of Defense appropriations were used to cover the FY2003 operational expenses of the CPA and have gone to pay part of the costs for repair of Iraq's oil infrastructure, for training of the Iraqi army, and towards the Commanders Emergency Response Program (CERP). In addition to drawing from the IRRF, USAID has used its own funds to pay for humanitarian programs in Iraq. The FY2005 Defense Appropriations, signed into law ( P.L. 108-287 , H.R. 4613 ) on August 5, makes available up to $300 million in additional funding for the CERP. On June 28, 2004, the Coalition Provisional Authority (CPA), the agency established to temporarily rule Iraq and implement reconstruction programs, was dissolved as Iraq regained its sovereignty. The United States is continuing to provide an assistance program and, to the extent possible, policy guidance to the Iraqi government through its U.S. embassy under Ambassador John Negroponte. The embassy is expected to employ about 1,000 U.S. and 700 Iraqi staff. A temporary Iraq Reconstruction Management Office (IRMO) has been created within the U.S. embassy to supplant CPA assistance efforts. It is being headed by Ambassador William B. Taylor, Jr., the former Coordinator of U.S. Assistance to Afghanistan and, before that, Europe and Eurasia. The CPA's Program Management Office (PMO), although changing its name to the Project and Contracting Office (PCO), continues to be responsible for program management and contracts and remains within the Department of Defense, but will report to the Department of State as well as to the Department of the Army. It is now headed by Charles Hess, the former PCO deputy. Immediate overall responsibility for management of U.S. military activity in Iraq belongs to General George Casey, Jr.. As commander of the multinational forces in Iraq, Casey is responsible for establishing a new relationship between coalition forces and the new Iraqi government and providing training and support to Iraqi security forces. He also serves as principal military adviser to the U.S. Ambassador. With the dissolution of the CPA which was under the Secretary of Defense, the Secretary of State assumes responsibility for assistance. Within the State Department, Robin Raphel is the coordinator for Iraq reconstruction. The post of CPA Inspector General, created under the FY2004 Emergency Supplemental legislation, has been redesignated the Special Inspector General for Iraq Reconstruction (SIGIR) by the recently enacted DOD Authorization for FY2005 ( P.L. 108-375 ). The SIGIR is currently Stuart Bowen, Jr. The SIGIR office has about 83 employees examining a range of issues, including the extent and use of competition in contracting; efficient and effective contract management practices; and charges of criminal misconduct. The SIGIR issued his first report to Congress on March 30, 2004. The DOD Authorization extends the SIGIR beyond its originally mandated December 2004 expiration and grants operational authority until 10 months after 80% of the reconstruction funds have been obligated. The SIGIR reports to both the Secretary of Defense and State. Among the key policy objectives laid out by the Bush Administration in conjunction with the war in Iraq was the economic and political reconstruction of the country. Discussion and debate within the United States government and abroad have been ongoing regarding the strategy to reach these ends utilizing reconstruction aid funds and the effectiveness of aid implementation. With the dissolution of the CPA, U.S. influence in post-occupation Iraq is no longer based on dictate, but on persuasion by Ambassador Negroponte with leverage provided by the security support of the U.S. military and billions of dollars in reconstruction aid. U.S. efforts to "remake" Iraq have been facilitated in part by the presence of U.S. advisers attached to each of the Iraqi ministries to provide technical expertise. With ministries now sovereign, U.S. advisers, in the words of one Iraqi government official, have become "consultants." Reportedly, about 150 Americans remain attached to Iraqi ministries. Reconstruction priorities have changed over time. The CPA's reconstruction priorities were reflected in the FY2004 supplemental appropriation approved by Congress in October 2003. By the time of the transition, about 22% of total funds were targeted on improving the security capabilities of the Iraqi government, including training and equipment for police, army, and customs personnel. About 67% of funds were aimed at improvements in infrastructure—including electricity, oil production, water and sewerage, transportation, and telecommunications—in order to stabilize the country by creating jobs and stimulating the economy. Technical assistance and small-scale grants in such areas as democratization, civil society, microenterprise, education, economic policy, and health account for the remainder of the appropriated FY2004 funds (about 10%). The November 2003 agreement to accelerate the hand-over of sovereignty to Iraqis led the Administration to revise plans in January 2004 for the use of appropriations. With the exception of the oil sector where emergency supply efforts were cut by nearly $200 million, the broad categories of assistance were largely unaffected. However, a number of funding changes were made within sectors. The most significant change was an increase in the democratization effort—from $100 million to $458 million—reflecting the more intensive plan to prepare Iraqis to take over. Increases were made as well in funding for border enforcement (from $150 to $300 million) and the civil defense corps (from $76 to $200 million). In addition, roughly a third of the total appropriation—$5.8 billion, mostly intended for electric power and water and sanitation rehabilitation—was extended out to FY2005. By April 2004, the CPA had slightly revised its allocations, including adding $184 million for administrative expenses for operating costs of the post-June 28 U.S. Mission in Iraq (taken from the water resources sector) and estimating a more rapid spending plan, now leaving $4.6 billion for FY2005. The main July 2004 allocation was a restoration of some water funding, and a decision to prorate all sectors equally to derive funding to cover each agency's program implementation costs. The September 14, 2004 Administration-proposed re-allocation of resources, approved by Congress on September 29 in P.L. 108-309 , reflects a review conducted by the Iraq Reconstruction and Management Office and the U.S. Embassy country team after the State Department took charge of Iraq non-military policy on June 28. The review identified security needs, increased oil production, greater employment, and democracy as the highest priorities, while suggesting that many large-scale infrastructure projects were too slow and dependent on an improved security situation to have an immediate impact. Security—mostly training and equipping Iraqi forces—increases by $1.8 billion. Efforts to increase oil production capacity gains $450 million. Employment creation—a combination of USAID labor-intensive projects and increased funding for the CERP—receives an additional $280 million. Democracy programs geared toward assisting the pending elections grow by $180 million. General development programs—mostly conducted by USAID in the areas of economic reform, private sector development, and agriculture—increase by $380 million. Presumably to demonstrate U.S. commitment to debt reduction prior to a Paris Club discussion of the Iraq issue, the re-allocation draws on $360 million to subsidize U.S. forgiveness of as much as $4 billion in bilateral Iraqi debt to the United States. In all, these sectors gained $3.46 billion of the $18.44 billion FY2004 supplemental appropriation. That amount was drawn from three sectors to which the funds had originally been allocated—purchases of already refined imported oil (-$450 million), water and sewerage (-$1.935 billion), and electricity (-$1.074 billion). Most of the re-allocated funds—$2.7 billion—came out of amounts that had been set aside for obligation in FY2005. Therefore, existing contracts are not affected by the re-allocation. Following this re-allocation, reconstruction aid priorities in Iraq, as determined by the State Department, puts 33% of total FY2004 funds into security (versus 22% previously), 16% into democratization and traditional development sectors (10% before), and 51% into economic infrastructure (67% previously). As shown in Table 17 above, Congress, in H.J.Res. 107 , the FY2005 Continuing Resolution, approved the Administration's re-allocation request. A wide range of reconstruction project work is underway. For a variety of reasons, not least of which is the poor security situation, these efforts have produced a somewhat mixed picture. The Iraqi government appears to be a functioning concern, with ministries restocked with equipment following the massive looting that occurred after the initial invasion. Health facilities are being rehabilitated, healthcare providers trained, and children immunized. Neighborhood councils have been established in 445 locations throughout the country. More than 2,000 grassroots projects have been conducted through USAID grants ($151 million) provided to hundreds of community action groups. School materials have been provided, schools inventoried, and thousands of schools renovated. A broad range of economic policy reform efforts have been initiated. Business centers have been set up throughout the country and a micro-loan program established. A registration process for the January elections is moving forward. Positive claims for the success of reconstruction programs during the past 20 months, however, have been countered by reports of slow and ineffective implementation. Few of the 2,300 construction projects identified by the Project and Contracting Office appear to have been completed. Objectives in critical sectors, such as oil production and electric power generation, have not been met. Electric power in September hovered just above the 100,000 Megawatt Hour level compared to 95,600 MW before the war (it is currently at 79,000 due to Fall maintenance needs)—the goal has been 120,000. Oil production reached a post-war peak in late September at 2.67 million barrels/day—2.5 million barrels/day is the rate before the war—and the goal is 2.8-3.0 million by December. Most of the Iraqi police have not yet been trained. The one consistent bright spot among reconstruction claims—a successful health program—is now marred by reports that acute malnutrition among children has nearly doubled since the coalition invasion in 2003. A particular congressional concern has been the rate of implementation. One Administration argument for the $18.4 billion appropriated in November 2003 was the need to demonstrate progress so as to employ Iraqis and win their hearts and minds. However, as of end of March 2004, only about $2.2 billion of that $18.4 billion had been obligated, let alone expended. As of November 17, $8.9 billion (48%) had been obligated, and $1.8 billion (10%) expended. Among reasons for the slow progress were pressures to employ open and competitive bidding for most of the new reconstruction contracts, last year's inter-agency disputes over control of the funds, and a variety of federal regulations. Security concerns, however, have been chiefly responsible for delaying reconstruction further. To speed up the reconstruction process, in April CPA Ambassador Bremer initiated the Accelerated Iraqi Reconstruction Program (AIRP) which utilizes Iraqi DFI funds ($383 million) to get work underway in ten cities. The AIRP effort is coordinated with the use of CERP funds (see below). The recent re-allocation of reconstruction funds is, in part, intended to speed up implementation, including the expanded use of smaller projects. Further, Ambassador Negroponte has argued for greater flexibility in the application of federal acquisition regulations. The FY2004 Defense Authorization ( P.L. 108-375 ) would permit such regulations to be waived for the CERP program (sec. 1201 (c)). While most reconstruction activities provide needed infrastructure and services, some far-reaching economic and political policy reforms promoted by the CPA stirred controversy in Iraq, especially as they were viewed as imposed by an occupying administration. For example, in a move to establish an open and free market economy and obtain revenue to meet development needs, Ambassador Bremer approved new laws in September 2003 abolishing all curbs on foreign direct investment except in natural resources. According to the Financial Times , the reforms were "near universally unpopular," Iraqi businessmen and unions fearing they would be unable to compete. Such laws and regulations could face resistance and reversal under the new sovereign government, although the interim constitution requires approval of a majority of the government's ministers, president, and vice-presidents to overturn existing laws. According to the press, CPA Administrator Bremer issued 97 legal orders in the last two weeks of the occupation. On the other hand, as a result of the continuing instability and the accelerated agreement to turn over sovereignty, some controversial positions which were favored by Ambassador Bremer and his staff—privatization of state-owned business, elimination of crop subsidies, and an end to the Oil for Food program's free food baskets—were put off entirely. Iraqi government officials would, reportedly, have preferred that the CPA bear the burden of such potentially destabilizing decisions rather than leave them to a new Iraqi government. A new reconstruction concern is the effort to rapidly rehabilitate areas, such as Fallujah, which have been the scene of intense military operations against insurgent forces. U.S. officials argue that the post-battle reconstruction effort is as important as the military effort to insure long-term Iraqi government control of these cities. Nevertheless, some observers have criticized the glacial pace of the rehabilitation effort in Najaf. In the case of Fallujah, according to State Department officials, humanitarian supplies were pre-positioned and assessments were made of how to restore essential services—electric power and water—prior to the completion of the military operation. These basic assistance efforts will be followed by small projects to repair clinics and schools. Then larger projects—many already planned but put on hold during the long period of insurgent domination in the city—will be implemented. Officials estimated a combined Iraqi-U.S. aid effort of perhaps $100 million to reconstruct Fallujah. Drawn from DFI Iraqi seized assets and oil profits and Department of Defense operational funds rather than reconstruction appropriations, the CERP contributes to the reconstruction effort by providing "walking around money" for the roughly 1,600 U.S. military civil affairs officers throughout Iraq. Until the recent FY2005 DOD appropriation of up to $300 million in additional funds for the CERP, roughly $685 million—$546 million from Iraqi resources—had been made available for this purpose. Provided in the form of small grants—over 34,512 such projects totaling $578 million as of early October—the CERP supports a wide variety of reconstruction activities at the village level from renovating health clinics to digging wells to painting schools. In lieu of civilian government or NGO aid personnel, who are not present in most of the country, commanders identify local needs and dispense aid with few bureaucratic encumbrances. The grants have been credited with helping the military better exercise their security missions, while at the same time meeting immediate neighborhood development needs. In an effort to stimulate employment, the State Department re-allocation of assistance increases CERP funding by $86 million. Dozens of U.S. and international companies and NGOs are participating in the reconstruction of Iraq. (Many contractors are also participating in military support operations—these are not discussed in this report). In connection with implementation of the FY2004 Supplemental, the CPA set up an Iraq Program Management Office (PMO). In post-occupation Iraq, it is now called the Project and Contracting Office (PCO). The PCO coordinates infrastructure construction and monitors contracting and expenditures in six sectors—transport and communications; electricity; buildings/health; security/justice; public works/water resources; and oil. It more generally manages and oversees use of the non-construction funds as well. The PCO has largely supplanted government agencies traditionally responsible for reconstruction program contracting as it implements the bulk of the FY2004-funded programs. The main contracting agencies implementing FY2003 programs are the Army Corps of Engineers, responsible for oil well repair and maintenance; the Department of State, handling police training; and the Agency for International Development (USAID), managing the widest range of economic, social, and political development programs. Using FY2003 funds, USAID has awarded $1.8 billion in contracts and grants in seaport and airport administration, capital construction, theater logistical support, public health, primary and secondary education, personnel support, local governance, agricultural development, and higher education. Utilizing FY2004 funding, it is responsible for $2.3 billion to date, including a $1.8 billion construction project contracted to Bechtel. USAID will continue to be responsible for most activities related to social services, civil society, and policy reform. Continuing security concerns in the unpredictable Iraqi environment pose problems for firms interested in reconstruction work. A firm's security plans are a factor in awarding contracts. As noted earlier, a substantial proportion of contract costs are being diverted to providing security to employees. One concern of contractors has been the legal status of workers in the post-occupation period, especially with regard to efforts to protect themselves from attack. Prior to the turn-over of sovereignty, CPA Administrator Bremer signed an order providing legal immunity to contractors while they are in the course of performing work in support of Iraq reconstruction efforts. Seeking to encourage economic growth and decrease unemployment, the CPA made special efforts to insure that Iraqi business had an opportunity to participate in contracts, including putting contract solicitations on its website and appointing business liaison representatives. The extent to which firms plan to utilize Iraqi services has been a factor in the awarding of new contracts. Although U.S. government requirements could be waived for Iraqi contractors, most work for Iraqi business has come in the form of subcontracts. The PCO claims that over 315 Iraqi firms are currently working on U.S.-funded reconstruction projects, and that roughly 73,000 Iraqis are employed. An Administration decision applied to the FY2003 reconstruction contracts to waive the normal competitive bidding requirements and request bids from specific companies which were seen to have preexisting qualifications received considerable attention by the business community in 2003. U.S. officials explained then that only a few select firms possessed the particular skills that would qualify them for the job specifications for Iraq reconstruction, and that time and security clearances were also critical factors. Other U.S. firms and foreign entities potentially excluded by "buy America" provisions of law, they noted, could participate as sub-contractors to the selected American firms. Most FY2004-funded contracts are being competitively solicited, and the FY2004 supplemental contains a provision requiring notification and justification to Congress of any waiver of competitive rules. On December 5, 2003, Deputy Secretary of Defense Paul Wolfowitz issued a determination and findings report, essentially limiting eligibility for prime contracts using FY2004 funds to U.S. firms and those of 62 countries—including Iraq, coalition partner, and force contributing nations. His rationale for barring other countries' firms, including Germany and France, was that it was "necessary for the protection of the essential security interests of the United States." Countries excluded from prime contracts could still participate as sub-contractors. In what has been interpreted as an effort to gain greater international cooperation on Iraq as well as a mark of State Department control over Iraq policy following the June 28 transition, Administration officials indicated in mid-2004 that the limitation on country eligibility would be reversed. The closed bidding and lack of transparency in early contracting and later reports suggesting that U.S. and Iraqi funds are being squandered disturbed a number of legislators. The FY2004 supplemental established an Inspector General for the CPA. The CPA Inspector General has issued a number of audits and launched dozens of investigations. In particular, it was the sole source contract for oil well repair ("Restore Iraqi Oil"—RIO project) provided to Kellogg Brown and Root (KBR), a subsidiary of Halliburton, whose former chief executive is Vice-President Cheney, that was the focus of media attention, raising concerns of favoritism and reinforcing suspicions that the war was fought for oil. The repair work for this contract, conducted by KBR for the Army Corps of Engineers, was valued at $2.5 billion to March 2004. In summer 2003, the Corps announced that remaining oil repair work would be competitively bid. However, KBR continued to carry out work orders on a non-competitive basis pending a decision, finally reached on January 16, 2004, on two new contracts collectively worth up to $2.0 billion. One of the new contracts—worth up to $1.2 billion—was awarded to KBR. KBR has also been the focus of two DOD audits—one related to its work providing logistics support to the U.S. military under its competitively-bid LOGCAP contract and the other for the importation of fuel for use by Iraqis under the RIO project. In the latter case, KBR is suspected of overcharging by $61 million. Former KBR staff have come forward with accusations of wasteful spending. State Department documents reportedly suggest that U.S. diplomats pressured KBR to use the more expensive Kuwaiti contractor for fuel imports. There have been dozens of reports and articles during the past year that have sought to analyze, criticize, and recommend action regarding the progress of reconstruction aid. Two of the most recent ones are indicative of the others. Reconstructing Iraq , a September 2004 report from the International Crisis Group, examines the gamut of mistakes that many agree were made prior to and during the occupation. These include the lack of a reconstruction plan; the failure to adequately fund reconstruction early on; unrealistic application of U.S. views to Iraqi conditions by, for example, emphasizing privatization policy; the organizational incompetence of the CPA; shifting deadlines, such as the November decision to end the occupation seven months later; and the inadequate utilization of Iraqis both in making policy and in implementing reconstruction projects. The report draws on these failures to inform its recommendations for the future. Recommendations for the U.S. government include the suggestion that staff with expertise in post-conflict situations be utilized and encouraged to serve in Iraq longer than six months; that Iraqis representing a range of views participate in design and implementation of U.S. reconstruction projects; that development of the Iraqi private sector be emphasized through greater use of Iraqis as subcontractors; and that prime contractors be required to employ Iraqis as much as possible. Progress or Peril? Measuring Iraq ' s Reconstruction from the Center for Strategic and International Studies (September 2004 and updated on November 12) uses polling and personal interviews to attempt to measure the status of reconstruction from the Iraqi point of view. It finds that security is the predominant issue in Iraqi minds, and that governance is a largely negative picture. It suggests that U.S. efforts are too focused on national level politics and that efforts to support local political bodies are not backed by sufficient funding. A lack of economic opportunity fuels anger and security problems, and the level of social services is also undermining public confidence. An improvement in social well-being—health and education—the only bright spot that the original report highlights, is less positively portrayed in the update. The healthcare system is now viewed as deteriorating. Recommendations include accelerating training of security forces, increasing more direct assistance to Iraqis, giving priority to Iraq's employment crisis, supporting the return of the U.N. to provide election assistance, giving precedence to aid for Iraq's judicial sector, supporting the development of more responsive Kurdish regional governments, mobilizing the Iraqi silent majority to counter the insurgents, and giving Iraqis a stake in the country's oil wealth. H.R. 4818 , passed by the House on July 15, did not include additional Iraq reconstruction funding, consistent with Administration plans. The House measure, however, addressed several other Iraq reconstruction issues: provided authority for the United States to take the lead in a multilateral effort to cancel a significant amount of Iraq's outstanding debt. H.R. 4818 further permits the Administration to draw on the $18.439 billion Iraq Relief and Reconstruction Fund, appropriated last year, to cover U.S. costs of canceling Iraq's debt. reconstituted the Coalition Provisional Authority Inspector's General office that has been monitoring Iraq reconstruction resources as a separate unit within the State Department. The CPA IG expired with the transfer of authority in Iraq on June 28 and the Administration had planned on merging these oversight responsibilities into the State Department's Office of Inspector General. The House measure would have placed the Iraq reconstruction IG in the Department of State, but as an entity reporting directly to the Secretary of State. transferred from OMB to the Secretary of State responsibility for preparing and submitting to Congress the Section 2207 quarterly reports on the status of Iraq reconstruction activities. expressed disappointment over the slow pace of World Bank project disbursement in Iraq and directed the Treasury Secretary to report by January 1, 2005, on the status of such disbursements and the deployment of personnel to staff the Bank's offices in Iraq. The Administration, in its Statement of Administration Policy on H.R. 4818 , expressed several concerns regarding Iraq reconstruction provisions in the bill. The letter from OMB said the Administration opposes placement of the CPA IG responsibility under the direction of the Secretary of State. It noted that the Departments of State and Defense, USAID, and the CPA IG had reached an agreement that would assure effective oversight of the reconstruction funds, and that the House language would not be consistent with that arrangement. The Administration further expressed concern that its proposal to permit greater flexibility in the use of the reconstruction funds—to shift resources from one purpose to another in larger degrees than allowed in the FY2004 supplemental appropriation—was not included in H.R. 4818 . The Senate measure, S. 2812 , reported after the Administration submitted its re-allocation proposal on September 14, approved the use of $360 million for cancelling roughly $4 billion (or 90%) of Iraqi debt owed to the United States. The measure also allowed greater flexibility in transferring funds among program sectors, although not to the extent necessary to fully implement Administration re-allocation recommendations. In several ways, Iraq reconstruction provisions approved in House and Senate versions of H.R. 4818 were overtaken by more recent legislative action. On September 29, Congress cleared H.J.Res. 107 , a Continuing Resolution for FY2005. The measure enacted into law some elements included in H.R. 4818 and proposed by the Administration. Specifically, H.J.Res. 107 : approved sector funding re-allocations, as proposed by the Administration on September 14 (see Table 16 , above for details); authorized $360 million for the costs of canceling roughly $4 billion in Iraqi debt owed to the United States; and transferred responsibility for submitting a quarterly report ("section 2207 report") on the use of Iraq reconstruction funds from OMB to the Department of State. Also, in the Defense Department Authorization bill for FY2005 (Sec. 1059B of H.R. 4200 , as cleared by Congress on October 9), Congress extended CPA-IG by re-designating the office as the Special Inspector General for Iraq Reconstruction and granting operational authority until 10 months after 80% of the reconstruction funds have been obligated. 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 & Reconstruction Assistance , by [author name scrubbed] et al. CRS Report RL31687, The Millennium Challenge Account: Congressional Consideration of a New Foreign Aid Initiative , by [author name scrubbed]. Foreign Operations Programs CRS Report RS20329, African Development Bank and Fund , by [author name scrubbed] (pdf). 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 [author name scrubbed]. CRS Report RS21437, The Asian Development Bank , by [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 Shayerah Ilias. CRS Report RL31712, The Global Fund to Fight AIDS, Tuberculosis, and Malaria: Background , by [author name scrubbed]. CRS Report RL33485, U.S. International HIV/AIDS, Tuberculosis, and Malaria Spending: FY2004-FY2008 , by [author name scrubbed]. CRS Report RL32714. International Disasters and Humanitarian Assistance: U.S. Governmental Response, by [author name scrubbed]. CRS Report RL30830, International Family Planning: The " Mexico City " Policy , by [author name scrubbed]. CRS Report RL30932, Microenterprise and U.S. Foreign Assistance , by [author name scrubbed] (pdf). CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative Issues , by [author name scrubbed]. CRS Report RS21168, The Peace Corps: Current Issues , by [author name scrubbed]. CRS Report RL34317, Trafficking in Persons: U.S. Policy and Issues for Congress , by [author name scrubbed] and [author name scrubbed]. 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 Health FY2003 Budget , by [author name scrubbed]. Country and Regional Issues CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed]. CRS Report RL32489, Africa: Development Issues and Policy Options , by [author name scrubbed] (pdf). CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues, by Raymond Copson. CRS Report RL32337, Andean Counterdrug Initiative (ACI) and Related Funding Programs: FY2005 Assistance , by [author name scrubbed]. CRS Report RS21865, Assistance to Afghan and Iraqi Women: Issues for Congress , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report RL33479, Burma-U.S. Relations , by [author name scrubbed]. CRS Report RL32250, Colombia: Issues for Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21686, Conditions on U.S. Aid to Serbia , by [author name scrubbed]. CRS Issue Brief IB93087. Egypt-United States Relations, by Clyde Mark. CRS Report RL32407. The Greater Middle East Initiative: An Overview, by Jeremy Sharp. CRS Report RL32294, Haiti: Developments and U.S. Policy Since 1991 and Current Congressional Concerns , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21751, Humanitarian Crisis in Haiti: 2004 , by [author name scrubbed]. CRS Report RL33376, Iraq ' s Debt Relief: Procedure and Potential Implications for International Debt Relief , by [author name scrubbed]. CRS Report RL31833, Iraq: Reconstruction Assistance , by [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 RS21457, The Middle East Partnership Initiative: An Overview , by [author name scrubbed]. CRS Report RS21353, New Partnership for Africa ' s Development (NEPAD) , by [author name scrubbed]. 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] and [author name scrubbed]. CRS Issue Brief IB98043. Sudan: Humanitarian Crisis, Peace Talks, Terrorism and U.S. Policy , by [author name scrubbed]. CRS Report RS22370, U.S. Foreign Aid to the Palestinians , by [author name scrubbed]. CRS Report RL32260, U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2009 Request , by [author name scrubbed]. CRS Report RL32487, U.S. Foreign Assistance to Latin America and the Caribbean , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL31785, Foreign Assistance to North Korea , by [author name scrubbed]. CRS Report RS21834. U.S. Assistance to North Korea: Fact Sheet , by Mark Manyin. CRS Report RL31362, 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 FY2009 Request , by [author name scrubbed]. African Development Bank http://www.afdb.org/ 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/en/default.asp 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/ | 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 policy making generally. It contains the largest share—about two-thirds—of total U.S. international affairs spending. Funding for Foreign Operations programs have been rising for five consecutive years, although amounts approved in FY2003 and FY2004 have reached unprecedented levels over the past 40 years. Substantial supplementals in both years for assistance to the front line states in the war on terrorism and Afghanistan and Iraq reconstruction, have pushed spending upward. The regular Foreign Operations bill, signed by the President on January 23, 2004, combined with an earlier Iraq supplemental approved in November 2003 (P.L. 108-106), bring current year appropriations to $39.4 billion (constant FY2005 dollars), the highest level, in real terms, since the early 1960s. For FY2005 President Bush asked Congress to appropriate $21.32 billion. The budget proposal was $2.05 billion, or 10.6% higher than Foreign Operations appropriations for FY2004, excluding funds approved for Iraq reconstruction. Despite the large overall increase for Foreign Operations, much of the added funding was concentrated in a few areas. The FY2005 budget blueprint continued to highlight foreign aid in support of the war on terrorism as the highest priority. Two recently launched foreign aid initiatives—the Millennium Challenge Corporation (MCC) and the President's Emergency Plan for AIDS Relief (PEPFAR)—were slated for significant funding increases. The MCC would have grown from $994 million in FY2004 to $2.5 billion for FY2005. PEPFAR would have risen from $1.6 billion in FY2004 to $2.2 billion in the FY2005 request. (Additional PEPFAR funds were proposed in the Labor/HHS appropriation measure, bringing the total FY2005 PEPFAR request to $2.82 billion.) The FY2005 request further included substantial increases for the Peace Corps and for debt reduction. The FY2005 Foreign Operations debate included a discussion of several major policy issues, including foreign aid as a tool in the global war on terrorism, the Millennium Challenge Account, programs to combat HIV/AIDS, international family planning programs, and Afghan reconstruction. Although no additional funds were sought for Iraq reconstruction, attention also focused on implementation efforts for the roughly $23.8 billion appropriated in FY2003/ 2004. On November 18, Congress approved the Foreign Operations conference report (Division D of H.R. 4818; P.L. 108-447). As passed, the measure provides $19.64 billion after adjusting for a required 0.8% across-the-board rescission. Although this is $1.68 billion, or nearly 8% below the request, Congress increased amounts passed earlier by the House and Senate, adding additional funds for the Millennium Challenge Account and emergency appropriations for the Darfur region in Sudan. This report will be updated to reflect congressional action on the legislation. |
Medicaid is a means-tested entitlement program that finances the delivery of primary and acute care services, as well as long-term services and supports. It is a federal-state program, and participation in Medicaid is voluntary for states, though all states and the District of Columbia choose to participate. In order to participate in Medicaid, the federal government requires states to cover certain mandatory populations and benefits, but the federal government also allows states to cover optional populations and services. Due to this flexibility, there is substantial variation among the states in terms of factors such as Medicaid eligibility, covered benefits, and provider payment rates. Medicaid is jointly financed by the federal government and the states. States incur Medicaid costs by making payments to service providers (e.g., for doctor visits) and performing administrative activities (e.g., making eligibility determinations), and the federal government reimburses states for a share of these costs. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP). The FMAP varies by state and is inversely related to each state's per capita income. For FY2015, FMAP rates range from 50% (13 states) to 74% (Mississippi). Historically, Medicaid eligibility has generally been limited to certain low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, starting January 1, 2014, states have the option to extend Medicaid coverage to most non-elderly, nonpregnant adults with income up to 133% of the federal poverty (FPL). This expansion of Medicaid eligibility is one of a number of changes the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended) made to the Medicaid program, and it is referred to as the ACA Medicaid expansion. This report provides an overview of the ACA Medicaid expansion, and the impact of the Supreme Court decision on the ACA Medicaid expansion. Then, the report describes who is covered under the expansion, the expansion rules, and how the expansion is financed. In addition, enrollment and expenditure estimates for the ACA Medicaid expansion are provided. Finally, the report reviews state decisions whether or not to implement the ACA Medicaid expansion, and the implications of those decisions on certain individuals, employers, and hospitals. A common misconception about the Medicaid program is that all low-income individuals are eligible for Medicaid. Instead, only certain low-income individuals are eligible for Medicaid coverage. To qualify, an individual must meet both categorical (i.e., must be a member of a covered group, such as children, pregnant women, parents with dependent children, the elderly, or individuals with disabilities) and financial eligibility requirements. In addition, individuals need to meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. The federal Medicaid statute (Title XIX of the Social Security Act) defines a number of distinct population groups as being potentially eligible for Medicaid coverage. Some of these populations are mandatory eligibility groups that states must cover if they choose to participate in Medicaid, while others are optional eligibility groups that states are allowed to cover if they choose to do so. In addition, states are able to provide Medicaid coverage to additional populations not listed as a mandatory or optional coverage group in statute through Section 1115 demonstration waivers. Due to optional eligibility groups and the Section 1115 demonstration waivers, Medicaid eligibility varies significantly from state to state. The bars in Figure 1 show the federally mandated Medicaid income eligibility levels for the major population groups that were in effect prior to the implementation of the ACA Medicaid expansion. The text in Figure 1 indicates the number of states in January 2013 using optional eligibility groups and Section 1115 waivers to provide Medicaid coverage to individuals with incomes above the federally mandated level and the highest income eligibility level for each population. The ACA Medicaid expansion provides states with the option to increase Medicaid eligibility to 133% of FPL for non-elderly, nonpregnant adults. As shown in Figure 1 , prior to the ACA, Medicaid income eligibility levels for parents with dependent children were low relative to the income eligibility levels for children and pregnant women, and adults without dependent children were not eligible for Medicaid in most states. For this reason, 70% of low-income children had Medicaid coverage, while 30% of low-income, non-elderly adults had Medicaid coverage. In addition, the uninsured rate for low-income, non-elderly adults was 42%, which was more than twice the national average of 18%. The primary goals of ACA are to increase access to affordable health insurance for the uninsured and to make health insurance more affordable for those already covered. The ACA Medicaid expansion is one of the major insurance coverage provisions included in the law, but the ACA Medicaid expansion is just one of a few Medicaid eligibility expansions included in the ACA. The ACA Medicaid expansion (as initially enacted) established 133% of FPL as the new mandatory minimum Medicaid income eligibility level for most non-elderly, nonpregnant adults. The law also specified that an income disregard in the amount of 5% of FPL be deducted from an individual's income when determining Medicaid eligibility based on the modified adjusted gross income (MAGI). Thus, the upper income eligibility threshold for individuals in this new eligibility group is effectively 138% of FPL. This ACA Medicaid expansion was effective January 1, 2014 (or earlier at state option). The Supreme Court decision in National Federation of Independent Business (NFIB) v. Sebelius made the ACA Medicaid expansion optional rather than mandatory. In states that adopt the ACA Medicaid expansion, the three major groups of individuals gaining Medicaid coverage are adults without dependent children, parents with dependent children, and adults with disabilities. States that implement the ACA Medicaid expansion are required to follow the ACA Medicaid expansion rules. The federal government funds a vast majority of the cost for the ACA Medicaid expansion. Originally, it was assumed that all states would implement the ACA Medicaid expansion in 2014 as required by statute because implementation was required in order for states to receive any federal Medicaid funding. However, with respect to Medicaid, the Supreme Court decision in NFIB addressed the issue of whether withholding Medicaid reimbursement to a state unless that state complies with the expansion of its Medicaid program exceeds Congress's enumerated powers under the Spending Clause and/or violates the Tenth Amendment. On June 28, 2012, the Supreme Court issued its decision in NFIB , and the Supreme Court held that the ACA Medicaid expansion violated the Constitution. The Supreme Court decision held that the federal government could not withhold payment for a state's entire Medicaid program for failure to implement the ACA Medicaid expansion. However, the federal government could withhold the funding for the ACA Medicaid expansion if a state did not implement the expansion. As a result, the Supreme Court's ruling in NFIB effectively made state participation in the ACA Medicaid expansion voluntary. The federal government cannot terminate federal Medicaid matching funds for a state's pre-ACA Medicaid program if a state doesn't implement the ACA Medicaid expansion. After the Supreme Court ruling, the Centers for Medicare and Medicaid Services (CMS) issued guidance to states specifying that states have no deadline for deciding when to implement the ACA Medicaid expansion. Also, the guidance said states that decide to implement the expansion have the ability to end the ACA Medicaid expansion at any point in time. The three major categories of non-elderly adults that would receive Medicaid coverage under the ACA Medicaid expansion are adults without dependent children, parents with dependent children, and adults with disabilities. Prior to the implementation of the ACA Medicaid expansion, only a few states provided Medicaid coverage to adults without dependent children, and in general, the Medicaid income eligibility level for parents and adults with disabilities was significantly lower than 133% of FPL (i.e., the ACA Medicaid expansion eligibility level). Prior to the ACA, adults without dependent children were not included in the federal statute as either a mandatory or an optional Medicaid coverage group. However, states were able to provide Medicaid coverage to these adults through Section 1115 demonstration waivers or state‐funded programs. As of January 2013, eight states (Arizona, Colorado, Connecticut, Delaware, Hawaii, Minnesota, New York, and Vermont) and the District of Columbia provided full Medicaid coverage to adults without dependent children, and only two of these states and the District of Columbia covered adults without dependent children up to at least 133% of FPL. In addition, 18 states provided Medicaid coverage with limited benefits to adults without dependent children. For most states, a significant portion of the population that would gain Medicaid coverage through the implementation of the ACA Medicaid expansion would be adults without dependent children. See Figure A-1 for state-by-state Medicaid income eligibility levels for non-elderly adults without dependent children as of January 1, 2014. Under Section 1931 of the Social Security Act, states are required to provide Medicaid coverage for parents (and their dependent children), at a minimum, at the Aid to Families with Dependent Children (AFDC) eligibility levels in place on July 16, 1996. This federally mandated eligibility threshold varies by state but averages 41% of FPL. Section 1931 of the Social Security Act also gives states the option to cover parents with incomes above the 1996 minimum levels and most states do. As of January 2013, 12 states provided full Medicaid coverage for parents of dependent children with incomes at or above 133% of FPL, and 13 states provided Medicaid coverage with limited benefits to parents of dependent children with incomes of 133% of FPL or higher. In most states, the ACA Medicaid expansion would provide Medicaid coverage to a significant number of parents with dependent children. See Figure A-2 for state-by-state Medicaid income eligibility levels for parents with dependent children as of January 1, 2014. The major Medicaid eligibility pathway for non-elderly, disabled individuals is based on the program rules for the Supplemental Security Income (SSI) program. Federal law requires states to provide Medicaid coverage to recipients of SSI. The income eligibility threshold for SSI translates to 74% of FPL in 2014. However, Section 209(b) of the Social Security Amendments of 1972 (P.L. 92-603) gave states the option to use Medicaid eligibility criteria for adults with disabilities with income and resources thresholds that are more restrictive than SSI but no more restrictive than those in effect on January 1, 1972. Therefore, in 209(b) states, receipt of SSI does not guarantee eligibility for Medicaid. States also have the option to provide Medicaid coverage to non-elderly adults with disabilities through other optional eligibility pathways, such as the poverty level, medically needy, and special income level. Prior to the ACA Medicaid expansion, all states had Medicaid income eligibility thresholds for non-elderly adults with disabilities below 133% of FPL. As a result, the implementation of the ACA Medicaid expansion would provide a significant increase in the Medicaid income eligibility level for non-elderly adults with disabilities. See Figure A-3 for state-by-state Medicaid income eligibility levels for non-elderly adults with disabilities as of January 1, 2014. The requirements for the ACA Medicaid expansion vary from other aspects of the program. If a state accepts the ACA Medicaid expansion funds, it must abide by the new expansion coverage rules. For instance, MAGI counting rules are used for determining eligibility for the ACA Medicaid expansion population, and individuals covered under the ACA Medicaid expansion are required to receive alternative benefit plan (ABP) coverage. As of January 1, 2014, the MAGI counting rules are used in determining eligibility for most of Medicaid's non-elderly populations, including the ACA Medicaid expansion. MAGI is defined as the Internal Revenue Code's adjusted gross income (AGI, which reflects a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments) increased (if applicable) by tax-exempt interest and income earned by U.S. citizens or residents living abroad. Under the MAGI counting rules, the state looks at the individual's MAGI, deduct 5%, which the law provides as a standard disregard, and compare that income to the MAGI income standards set by each state in coordination with CMS. The ACA mandates the individuals gaining Medicaid coverage through the ACA Medicaid expansion receive Medicaid benefits through ABPs, which are a Medicaid benefit structure that has different requirements than the traditional Medicaid benefits. In general, ABP coverage may be less generous than traditional Medicaid coverage but more generous than most private health insurance coverage. ABPs may cover fewer benefits than traditional Medicaid, but there are some requirements, such as coverage of family planning and transportation services that private insurance generally does not cover. As a result, an adult with disabilities may have access to different coverage through the ACA Medicaid expansion eligibility pathway (i.e., eligible for Medicaid based solely on their low-income status) than the adults with disabilities that have Medicaid coverage through the SSI eligibility pathway (i.e., eligible for Medicaid based on being low-income and disabled). However, during the application process, states must identify those who are medically frail and offer them a choice of ABP or traditional Medicaid benefits as their ABP coverage. The ACA provides different federal Medicaid matching rates for the individuals that will gain Medicaid coverage through the ACA Medicaid expansion. The federal government's share of most Medicaid expenditures is determined according to the FMAP rate, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA adds a few FMAP exceptions for the ACA Medicaid expansion: the "newly eligible" FMAP rate, the "expansion state" FMAP rate, and the additional FMAP increase for certain expansion states. The "newly eligible" FMAP rate is used to reimburse states for the Medicaid expenditures for "newly eligible" individuals who gained Medicaid eligibility due to the ACA Medicaid expansion. The "newly eligible" individuals are defined as non-elderly, nonpregnant adults with family income below 133% of FPL who would not have been eligible for Medicaid in the state as of December 1, 2009 (or were eligible under a waiver but not enrolled because of limits or caps on waiver enrollment). States will receive 100% FMAP rate (i.e., full federal financing) for the cost of providing Medicaid coverage to "newly eligible" individuals, from 2014 through 2016. For "newly eligible" individuals, the FMAP rate will phase down to 95% in 2017, 94% in 2018, 93% in 2019, and 90% afterward ( Table 1 ). Federal statute specifies the "newly eligible" FMAP rate for each year, which means the "newly eligible" FMAP rates are available for these specific years regardless of when a state implements the ACA Medicaid expansion. For instance, if a state implements the ACA Medicaid expansion in 2018, then that state will receive a "newly eligible" FMAP rate of 94% in 2018, 93% in 2019, and 90% afterward. As mentioned earlier, prior to the ACA, some states used Section 1115 waivers to provide Medicaid coverage to adults without dependent children and to parents with incomes above the threshold for the Section 1931 pathway. As a result, these states have few or no individuals who will qualify for the "newly eligible" FMAP rate. As of 2014, these states receive an increased FMAP rate, which is referred to as the "expansion state" FMAP rate. This definition of expansion state was established prior to the Supreme Court decision making ACA Medicaid expansion optional for states. In this context, expansion state refers to states that had already implemented (or partially implemented) the ACA Medicaid expansion at the time the ACA was enacted. Specifically, "expansion states" are defined as those that, as of March 23, 2010 (ACA's enactment date), provided health benefits coverage meeting certain criteria statewide to parents with dependent children and adults without dependent children up to at least 100% of FPL. As of early December 2013, the Centers for Medicare and Medicaid Services (CMS) determined the following states met the definition of "expansion state" and would be eligible for the "expansion state" FMAP rate if the state implements the ACA Medicaid expansion: Arizona, Delaware, District of Columbia, Hawaii, Maine, Massachusetts, Minnesota, New York, Pennsylvania, Vermont, and Washington. The "expansion state" FMAP rate is available for individuals in "expansion states" that have implemented the ACA Medicaid expansion who were eligible for Medicaid on March 23, 2010 and are in the new eligibility group for non-elderly, nonpregnant adults at or below 133% of FPL. The formula used to calculate the "expansion state" FMAP rates is based on a state's regular FMAP rate, so the "expansion state" FMAP rates varies from state to state until CY2019, at which point the "newly eligible" FMAP rates and the "expansion state" FMAP rates will be equal (see Table 1 ). "Expansion states" are not excluded from receiving the "newly eligible" FMAP rates. Populations in an "expansion state" that meet the definition for the "newly eligible" FMAP rate will receive the "newly eligible" FMAP rate. For example, an "expansion state" that prior to the ACA provided Medicaid coverage to non-elderly adults without dependent children and parents with dependent children up to 100% of FPL, will receive the higher "newly eligible" FMAP rate for individuals between 100% and 133% of FPL if it implements the ACA Medicaid expansion. Also, "expansion states" will receive the "newly eligible" FMAP rate for individuals who received limited Medicaid benefits prior to the expansion. In addition, "expansion states" that provided state-funded health benefits coverage will receive the "newly eligible" FMAP rate for individuals previously covered by the state-only program. During 2014 and 2015, an FMAP rate increase of 2.2 percentage points is available for "expansion states" that (1) the Secretary of the Department of Health and Human Services (HHS) determines will not receive any FMAP rate increase for "newly eligible" individuals and (2) have not been approved to use Medicaid disproportionate share hospital (DSH) funds to pay for the cost of health coverage under a waiver in effect as of July 2009. The 2.2 percentage point increase is applied to the state's regular FMAP rate and is applied to those individuals who are not "newly eligible" individuals. Vermont is the only state that has been confirmed as meeting the criteria for the additional FMAP increase for certain "expansion states." The ACA Medicaid expansion is expected to significantly increase Medicaid enrollment and federal Medicaid expenditures. In terms of enrollment, the Congressional Budget Office (CBO) estimates the insurance coverage provisions from the ACA will increase Medicaid and the State Children's Health Insurance Program (CHIP) enrollment of non-elderly individuals by 13 million in FY2024. A vast majority of the increase in enrollment for Medicaid and CHIP is due to the ACA Medicaid expansion, but enrollment is also impacted by other provisions, such as the expansion of Medicaid eligibility for foster care children and children ages six to 18. Figure 2 shows the year-by-year estimates of the effects of the ACA insurance coverage provisions on Medicaid and CHIP enrollment. Even without all states participating in the ACA Medicaid expansion, the ACA insurance coverage provisions are expected to increase Medicaid and CHIP enrollment for non-elderly individuals by more than 25% in each year after FY2015. Regardless of whether a state decides to implement the ACA Medicaid expansion or not, all states are expected to experience an increase in Medicaid enrollment due to the "woodwork" effect. This is the term for uninsured individuals who without the expansion are eligible for Medicaid but decide to enroll in Medicaid due to increased media attention and outreach efforts associated with the ACA. The impact of the woodwork effect depends on the percentage of a state's population that is eligible but not enrolled in Medicaid. Nationally, an estimated 7.3 million to 9.0 million uninsured children and adults were eligible but not enrolled in Medicaid prior to the implementation of the expansion. Actual enrollment for the ACA Medicaid expansion is not currently available. CMS has been reporting monthly Medicaid and CHIP enrollment numbers since October 2013, but this enrollment data does not break out the enrollment for the ACA Medicaid expansion. The data provides the aggregate enrollment for Medicaid and CHIP enrollees receiving comprehensive coverage on a state-by-state basis. However, the preliminary July 2014 data is the first month for which all states reported enrollment data and states are still transitioning to the standardized reporting specifications. Both of these considerations limit the conclusions that can be drawn from the monthly enrollment data. According to this data, among the 49 states reporting enrollment data for both September 2014 and the baseline period (i.e., July 2013 through September 2013), approximately 9.2 million additional individuals were enrolled in Medicaid and CHIP in September 2014 compared with the average monthly enrollment for the baseline period, which is almost a 16% increase. For states that had implemented the ACA Medicaid expansion, Medicaid and CHIP enrollment increased by more than 23%, whereas states that had not implemented the expansion reported an increase of approximately 6% over the same period. CMS is working on Medicaid enrollment reports that will specify the number of individuals that are newly eligible due to the ACA Medicaid expansion and plans to release these enrollment reports "soon." Figure 3 shows the annual estimated federal budgetary effect of the ACA insurance coverage provisions on Medicaid and CHIP outlays compared to estimated Medicaid and CHIP outlays without the ACA insurance coverage provisions. Most of the federal expenditures for the Medicaid and CHIP insurance coverage provisions are due to the ACA Medicaid expansion, but these expenditures also include other provisions, such as the expansion of Medicaid eligibility for foster care children and children ages six to 18. From FY2015 through FY2024, CBO estimates the ACA Medicaid and CHIP insurance coverage provisions will increase federal Medicaid and CHIP outlays by almost 23%. The federal government will be covering a vast majority (94%) of the cost of the ACA Medicaid and CHIP insurance coverage provisions. CBO estimates these provisions will increase federal Medicaid and CHIP outlays by a total of $792 billion from FY2015 through FY2024, while states' cost of these provisions is estimated to be $46 billion over the same period of time. The potential impact of the ACA Medicaid expansion varies significantly from state to state. Medicaid enrollment and expenditures are estimated to increase at varying rates from state to state due to the current variation in states' Medicaid income eligibility levels for non-elderly adults and state demographics. See Table B-1 for state-by-state estimates of the potential impact of the ACA Medicaid expansion on Medicaid expenditures and enrollment. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia included the expansion as part of their Medicaid programs. Michigan implemented the expansion on April 1, 2014, and New Hampshire implemented the expansion on July 1, 2014. Pennsylvania received approval for a Section 1115 waiver to implement the ACA Medicaid expansion beginning on January 1, 2015. See Figure 4 for a map of the states that have and have not decided to implement the ACA Medicaid expansion as of December 2014. In six of the states that have not expanded (Indiana, Montana, Tennessee, Utah, Virginia, and Wyoming), the ACA Medicaid expansion is currently being debated. Although there are some exceptions, most of the states that have implemented the ACA Medicaid expansion tend to have low rates of uninsured individuals (relative to the national average) and traditionally have provided Medicaid coverage to more non-elderly adults through relatively higher Medicaid income eligibility levels. Also, in general, the states that have not implemented the ACA Medicaid expansion have relatively higher rates of uninsured and traditionally have covered fewer non-elderly adults under Medicaid. Because states are able to implement or discontinue the expansion at any time, the status of the ACA Medicaid expansion in states remains uncertain. State laws must be enacted and funds appropriated to implement or discontinue a Medicaid expansion decision. As a result, states' decisions regarding the expansion generally occur during the legislative sessions, which typically occur during the first half of the calendar year. In response to a budget survey, Medicaid officials in several states noted that implementing the ACA Medicaid expansion would be debated during their state's next legislative session. Even states that have already implemented the expansion could debate the issue. For instance, in Arkansas, state law requires the legislature to approve the ACA Medicaid expansion annually and the expansion received just enough votes to pass last year. States have chosen not to implement the ACA Medicaid expansion for various reasons, including because they view the expansion as unaffordable to the state and the Medicaid program as "broken." However, the ACA Medicaid expansion became more politically feasible for some states with CMS's approval of Arkansas's proposal to implement the ACA Medicaid expansion using the "private option," which provides premium assistance for Medicaid enrollees to purchase private health insurance through the health insurance exchange. Most states implementing the ACA Medicaid expansion will do so through an expansion of their current Medicaid program. However, some states are implementing the expansion through alternative models, such as premium assistance through the "private option" and health savings accounts. Four states (Arkansas, Iowa, Michigan, and Pennsylvania) have received approval for Section 1115 waivers to implement their ACA Medicaid expansions. Arkansas and Iowa have been approved to use the "private option," and Michigan received approval to use health savings accounts. In addition, Iowa, Michigan, and Pennsylvania received approval to charge premiums in excess of what is allowed under Medicaid state plans, and in each of these states, the cost-sharing requirements can be reduced through healthy behaviors. Iowa and Pennsylvania also received waivers from being required to provide nonemergency medical transportation services for the first year. State decisions not to implement the ACA Medicaid expansion could have implications for low-income individuals, large employers with low wage workers, and hospitals. The decision for a state to opt out of the ACA Medicaid expansion is expected to increase the number of individuals in that state receiving premium tax credits and cost-sharing subsidies through the health insurance exchanges and create a coverage gap for individuals not eligible for those credits and subsidies. In addition, a state's decision not to implement the expansion may increase the number of ACA employer penalties in that state and make the Medicaid DSH reduction lower for that state. Even if a state does not implement the ACA Medicaid expansion, some of the individuals that would have been covered by the Medicaid expansion may still gain health insurance coverage under the ACA health insurance coverage provisions. The ACA provides premium tax credits to individuals with household income between 100% and 400% of FPL who do not have access to minimum essential coverage, and these individuals with income between 100% and 250% of FPL could be eligible for cost-sharing subsidies. As a result, most uninsured individuals with incomes between 100% and 133% of FPL living in states that decide not to implement the ACA Medicaid expansion may become eligible for premium tax credits and cost-sharing subsidies to purchase insurance through the health insurance exchanges. However, most uninsured individuals with incomes under 100% of FPL living in states that decide not to implement the ACA Medicaid expansion will likely remain uninsured, because these individuals are not eligible for premium tax credits or the cost-sharing subsidies to purchase health insurance through the exchanges. However, legal permanent residents within their first five years in the country are eligible for premium tax credits with incomes ranging from zero up to 400% of FPL. For this reason, after the Supreme Court decision, some states were initially interested in implementing a partial ACA Medicaid expansion rather than the full Medicaid expansion. Under the partial Medicaid expansion, Medicaid eligibility would be increased to all non-elderly individuals up to 100% of FPL rather than to 133% of FPL, because premium tax credits and cost-sharing subsidies would be available to individuals above 100% of FPL. However, CMS informed states that the 100% federal funding for 2014 through 2016 would not be available to states that implement a partial expansion. CMS said if states wish to implement the partial expansion, they could do so and receive their regular federal Medicaid matching rate through 2016, and at that point, CMS will consider Section 1115 Medicaid demonstrations with the enhanced federal matching rates. The ACA was supposed to provide health coverage for all low income individuals by providing Medicaid coverage to the individuals with the lowest incomes and providing premium tax credits and cost-sharing subsidies for coverage through the exchanges to low-income individuals with incomes above Medicaid eligibility levels. However, the Supreme Court's decision making the Medicaid expansion optional for states has created a coverage gap in states that have not implemented the Medicaid expansion. Nearly 5 million uninsured adults were estimated to be in the coverage gap resulting from states' decisions not to implement the ACA Medicaid expansion, which means these 5 million individuals have incomes above their states' Medicaid eligibility levels and below the lower income limit for premium tax credits and cost-sharing subsidies for exchange coverage. Figure A-1 , Figure A-2 , and Figure A-3 show as of January 1, 2014, the coverage gaps in states for adults without dependent children, parents, and adults with disabilities (respectively). Large employers with low-wage workers in states that do not implement the ACA Medicaid expansion might have greater exposure to employer penalties included in the ACA when the penalty goes into effect in 2015. The ACA imposes penalties on "large" employers if at least one of their full-time employees obtains a premium credit through the exchange. Individuals who are not offered employer-sponsored coverage and who are not eligible for Medicaid or other programs may be eligible for premium tax credits for coverage through an exchange. As mentioned above, to receive premium tax credits, individuals must have income of at least 100% and up to 400% of FPL. In states that do not implement the ACA Medicaid expansion, large employers with low income workers could be at greater risk of paying the ACA employer penalty. That is because more low-income workers could qualify for premium tax credits. The Medicaid statute requires states to make DSH payments to hospitals treating large numbers of low-income patients. This is 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 are generally lower than the rates paid by Medicare and private insurance. The federal government provides each state an annual DSH allotment, which is the maximum amount of federal matching funds that each state can claim for Medicaid DSH payments. The ACA included a provision directing the Secretary of HHS to make aggregate reductions because the ACA health insurance coverage provisions would reduce the need for Medicaid DSH payments. The ACA Medicaid DSH reductions have been amended a few times since the ACA, but under current law, the Medicaid DSH allotments will be reduced for the years FY2017 through FY2024. Hospitals in states that are not expanding Medicaid are concerned because Medicaid DSH allotments will be reduced without regard to whether or not states implement the expansion. If a state implements the expansion, uncompensated care for hospitals should decline along with the DSH allotments (though not proportionally). However, if a state chooses not to implement the expansion, the demand for uncompensated hospital care is expected to persist but the amount of Medicaid DSH payments hospitals receive to subsidize such care may be reduced. As a result, hospitals have been encouraging states to implement the ACA Medicaid expansion in order to reduce uncompensated care for hospitals. Even though Medicaid provider rates are generally lower than the rates paid by private insurance or Medicare, hospitals are likely better off with payment for a Medicaid patient than no payment for an uninsured patient. Appendix A. States' Current Medicaid Income Eligibility Levels The three major categories of non-elderly adults that would receive Medicaid coverage under the ACA Medicaid expansion are adults without dependent children, parents with dependent children, and adults with disabilities. Prior to the implementation of the ACA Medicaid expansion, only a few states provided Medicaid coverage to adults without dependent children, and in general, the Medicaid income eligibility level for parents and disabled adults was significantly lower than 133% of FPL (i.e., the ACA Medicaid expansion eligibility level). State-by-state Medicaid income eligibility levels and private health insurance exchange eligibility for subsidized coverage for non-elderly adults without dependent children, parents with dependent children, and non-elderly adults with disabilities as of January 1, 2014 are provided in Figure A-1 , Figure A-2 , and Figure A-3 (respectively). These figures show the coverage gaps in states, which means individuals with incomes that fall in the coverage gap do not have access to full Medicaid coverage or exchange subsidized coverage. States that have implemented the ACA Medicaid expansion do not have coverage gaps, while most states that have not implemented the expansion have coverage gaps for all three populations. Figure A-1 shows the coverage for adults without dependent children. Most states that have implemented the ACA Medicaid expansion provide Medicaid eligibility up to 133% of FPL (effectively 138% of FPL with the 5% income disregard). Of the states that have implemented the expansion, only the District of Columbia and Minnesota have higher income eligibility levels at 210% of FPL (effectively 215% of FPL) and 200% of FPL (effectively 205% of FPL), respectively. Except for Wisconsin, the states that have not implemented the expansion do not have Medicaid coverage for adults without dependent children. Wisconsin provides Medicaid coverage to adults without dependent children up to 95% of FPL (effectively 100% of FPL). Figure A-2 shows the coverage for parents with dependent children. All states provide Medicaid coverage to this population through the mandatory Medicaid eligibility pathway of Section 1931 coverage, which requires states to provide Medicaid coverage for parents (and their dependent children), at a minimum, at the Aid to Families with Dependent Children (AFDC) eligibility levels in place on July 16, 1996. Section 1931 of the Social Security Act also gives states the option to cover parents with incomes above the 1996 minimum levels and most states do. Under Section 1931 coverage, parents receive traditional Medicaid coverage. The income eligibility level for Section 1931 coverage is less than 133% of FPL for most states. For states that have implemented the ACA Medicaid expansion and did not have Medicaid coverage for parents up to 133% of FPL (effectively 138% of FPL), parents with incomes above the pre-expansion level up to 133% of FPL (effectively 138% of FPL) receive coverage under the expansion rules (e.g., alternative benefit plan coverage). Except for Maine and Wisconsin, the states that have not implemented the expansion have coverage gaps for parents with dependent children between the upper bound of their Section 1931 coverage and 100% of FPL when most of these parents are eligible for subsidized coverage through the exchange. Maine and Wisconsin provide Medicaid coverage to parents with dependent children up to 100% of FPL (effectively 105% of FPL) and 95% of FPL (effectively 100% of FPL), respectively. Figure A-3 shows coverage for adults with disabilities. All states provide Medicaid coverage to adults with disabilities through mandatory Medicaid coverage for recipients of SSI or through optional eligibility pathways, such as Section 209(b), poverty level, medically needy, and special income level. Under these eligibility pathways, adults with disabilities receive traditional Medicaid benefits. In all states, the Medicaid income eligibility levels for adults with disabilities under these eligibility pathways are significantly less than 100% of FPL. For states that have implemented the ACA Medicaid expansion, adults with disabilities with incomes above the pre-expansion level up to 133% of FPL (effectively 138% of FPL) receive coverage under the expansion rules (e.g., alternative benefit plan coverage). The states that have not implemented the expansion have coverage gaps for adults with disabilities between the upper bound of their Medicaid coverage for adults with disabilities and 100% of FPL when most of these adults are eligible for subsidized coverage through the exchange. Appendix B. Estimates of State-by-State Impact of ACA Medicaid Expansion The potential impact of the ACA Medicaid expansion varies significantly from state to state. In terms of expenditures, while the federal government will be funding a vast majority of the ACA Medicaid expansion, the estimated state share of the ACA Medicaid expansion expenditures range from states that already provide Medicaid coverage to the expansion population saving money to states with the largest coverage gains seeing increases to state Medicaid expenditures. Medicaid enrollment is estimated to increase at varying rates from state to state due to the current variation in states' Medicaid income eligibility levels for parents and childless adults. Table B-1 shows the estimated state-by-state impact of the ACA Medicaid expansion on Medicaid expenditures and enrollment for 2022 if a state chooses to implement the expansion. According to the data in this table from an Urban Institute analysis, if all states chose to implement the ACA Medicaid expansion, Medicaid expenditures for 2022 would be $122.8 billion ($117.4 billion in federal funds and $5.4 billion in state funds) higher than if no states chose to implement the expansion. Also, if all states chose to implement the expansion, Medicaid enrollment would be 15.5 million higher in 2022 than if no states chose to implement the expansion. | Historically, Medicaid eligibility has generally been limited to certain low-income children, pregnant women, parents of dependent children, the elderly, and individuals with disabilities; however, as of January 1, 2014, states have the option to extend Medicaid coverage to most non-elderly, low-income individuals. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) established 133% of the federal poverty level (FPL) (effectively 138% of FPL with an income disregard of 5% of FPL) as the new mandatory minimum Medicaid income eligibility level for most non-elderly individuals. 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. If a state accepts the ACA Medicaid expansion funds, it must abide by the expansion coverage rules. For instance, modified adjusted gross income (MAGI) counting rules are used for determining eligibility for the ACA Medicaid expansion population, and individuals covered under the ACA Medicaid expansion are required to receive alternative benefit plan (ABP) coverage. The ACA provides different federal Medicaid matching rates for the individuals who receive Medicaid coverage through the ACA Medicaid expansion. The federal government's share of most Medicaid expenditures is determined according to the federal medical assistance percentage (FMAP) rate, but exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA adds a few FMAP exceptions for the ACA Medicaid expansion: the "newly eligible" FMAP rate, the "expansion state" FMAP rate, and the additional FMAP increase for certain expansion states. Due to these ACA FMAP rates, the federal government pays for a vast majority of the cost of the ACA Medicaid expansion. On January 1, 2014, when the ACA Medicaid expansion went into effect, 24 states and the District of Columbia had included the ACA Medicaid expansion as part of their Medicaid programs. Michigan and New Hampshire implemented the expansion on April 1, 2014, and July 1, 2014 (respectively). Pennsylvania recently received approval to implement the ACA Medicaid expansion beginning on January 1, 2015. Most states implementing the ACA Medicaid expansion will do so through an expansion of their current Medicaid program. However, some states are implementing the expansion through an alternative method, such as the "private option" (i.e., premium assistance to purchase health insurance through the health insurance exchanges under the ACA) and health savings accounts. State decisions not to implement the ACA Medicaid expansion could have implications for low-income individuals, large employers with low-wage workers, and hospitals. For example, most uninsured individuals with incomes under 100% of FPL will likely remain uninsured, and large employers with low-wage workers might have greater exposure to employer penalties included in the ACA. Also, Medicaid disproportionate share hospital (DSH) allotments will be reduced by the same across the nation whether or not states implement the expansion. |
Federal courts may not order a defendant to pay restitution to the victims of his or her crimes unless authorized to do so. Two general statutes authorize restitution. One, 18 U.S.C. 3663, permits it for certain crimes. The second, 18 U.S.C. 3663A, requires it for other crimes. In addition, several individual restitution statutes authorize awards for particular offenses. In addition, federal courts may order restitution pursuant to a plea agreement or as a condition of probation or supervised release. Section 3664 supplies the procedure under which the restitution orders are imposed. In the case of mandatory restitution, federal courts must order victim restitution when sentencing a defendant for a felony that constitutes either (1) a crime of violence; (2) an offense against property, including fraud or deceit proscribed in Title 18; (3) maintaining a drug-involved premise; (4) animal enterprise terrorism; (5) failure to provide child support; (6) human trafficking; (7) sexual abuse; (8) child pornography; (9) stalking or domestic violence; (10) copyright infringement; (11) telemarketing fraud; or (12) amphetamine or methamphetamine offenses. The various federal restitution statutes address three questions: Who qualifies as a victim? What crimes trigger restitution authority? What type of injuries or losses does restitution cover? As originally cast, §3663 authorized restitution for "any victim" of any crime proscribed in title 18 of the United States Code , but did not define the term "victim." The Supreme Court read the statute narrowly and concluded that restitution might only extend to harm attributable to the crime of conviction. Congress endorsed this view almost immediately with a more explicit statement of §3663's coverage. It replicated and enlarged that statement when it enacted §3663A six years later. Sections 3663 and 3663A authorize restitution orders for the benefit of the victims of the crime of conviction, and now expressly define the term "victim" (i.e., "a person directly and proximately harmed as a result of the commission of an offense for which restitution may be ordered"). A victim is also someone harmed by a scheme, conspiracy, or pattern of activity that is an element of the crime of conviction. And, a victim may be someone whom the government and the defendant agree in a plea bargain is entitled to restitution. Harm is directly caused by the defendant's offense of conviction when the harm would not have occurred but for that misconduct. Directly caused harm is proximately caused when there is no attenuation between the crime and the harm; when the harm and but-for misconduct are closely, not remotely, related in time and fact. The presence of an intervening cause of the harm may suggest a want of either direct causation, or proximate causation, or both. The presence of an intervening cause will defeat an assertion of direct and proximate harm unless intervening cause is related to or a foreseeable consequence of the offense of conviction. As the Supreme Court explained in the context of one of the specialized restitution statutes, As a general matter, to say one event proximately caused another is a way of making two separate but related assertions. First, it means the former event caused the latter.... Every event has many causes, however, and only some of them are proximate.... So to say that one event was a proximate cause of another means that it was not just any cause, but one with a sufficient connection to the result. The idea of proximate cause.... is a flexible concept, that generally refers to the basic requirement that there must be some direct relation between the injury asserted and injurious conduct alleged.... Proximate cause is often explicated in terms of foreseeability or the scope of the risk created by the predicate conduct. A requirement of proximate cause thus serves, inter alia, to preclude liability in situations where the causal link between conduct and result is so attenuated that the consequence is more aptly described as mere fortuity. The definition of a victim for purposes of restitution under §§3663 and 3663A expands when the crime of conviction has as an element a conspiracy or a scheme or pattern of misconduct. In the case of conspiracy, a defendant may be compelled to make restitution both for the harm caused by his or her own misconduct and for the harm caused by the foreseeable misconduct of his or her coconspirators. As for the scheme and pattern exception, most federal crimes do not list schemes or patterns among their elements, although the mail fraud, wire fraud, and racketeering statutes do. In such cases, restitution may include the losses incurred from a different episode of the scheme than the one mentioned in the indictment. Yet the scheme must be the same; victims entitled to restitution do not include those harmed by an otherwise identical scheme but different in time or place than the crime of conviction. The courts are divided over which statutes qualify as "scheme, conspiracy or pattern" laws. Some say the scheme or pattern must be an element of the crime of conviction; it is not enough that the defendant's crime involves contrivance or repeated related criminality. Others say it is enough; the statute proscribing the crime of conviction need not use the words "scheme," or "conspiracy," or "pattern." Sections 3663 and 3663A describe, with somewhat overlapping grants of authority, the circumstances under which representatives and others may stand in the shoes of a victim. A court may also order restitution pursuant to a plea bargain for "victims" who would not otherwise qualify. Although a victim must be a "person" and governmental entities are ordinarily not considered persons, state, local, and federal governmental entities are entitled to restitution orders when they otherwise qualify as victims of a crime under §§3663 and 3663A. On the other hand, although the courts enjoy authority to order restitution paid to family members on behalf of the victims of crime, it is unclear whether the victimization of one member of a family constitutes victimization of its other members sufficient to warrant a restitution order for the benefit of a victim's family members in their own name. Although §§3663 and 3663A employ the same definition of victim, they do not authorize restitution for the same crimes. The list of crimes for which §3663 permits restitution supplements the list for which §3663A demands restitution. The mandatory restitution of §3663A applies upon conviction for (1) a crime of violence, as defined in §16; (2) an offense against property under 18 U.S.C., or an offense against property under §416(a) of the Controlled Substances Act (21 U.S.C. 856(a), including any offense committed by fraud or deceit; (3) an offense described in §1365 (relating to tampering with consumer products); or (4) an offense under §670 (relating to the theft of medical products). Section 16 describes a crime of violence as either "(a) an offense that has as an element the use, attempted use, or threatened use of physical force against the person or property of another, or (b) any other offense that is a felony and that, by its nature, involves a substantial risk that physical force against the person or property of another may be used in the course of committing the offense." The controlled substance offense that carries with it a restitution requirement under §3663A (21 U.S.C. 856) consists of maintaining a place where controlled substances are manufactured, stored, or used. The property damage/fraud predicate in §3663A must involve a violation proscribed under title 18 of the United States Code rather than an offense found in another title. Yet, the general conspiracy provision in title 18 can provide the necessary basis for a mandatory restitution order when the defendant is convicted of conspiracy to commit property damage in violation of a federal law found outside of title 18. The product tampering offense consists of tampering with a product or its labeling that affects interstate or foreign commerce or spreading false rumors that such a product is contaminated. Section 670 outlaws the theft of, or unlawful trafficking in, pre-retail medical products. Three qualifications temper the mandatory restitution requirements facing defendants convicted of the predicate offenses listed in §3663A(c)(1)(A). First, there must be an identifiable victim who has suffered a physical injury or a pecuniary loss. Second, in the case of the property damage/fraud predicates, restitution need not be ordered when the number of victims makes an order impractical. Third, again in the case of property damage/fraud predicates, restitution need not be ordered when the complexity that restitution would introduce into the sentencing process would represent an undue burden. A few other federal statutes authorize restitution. Numbered among these provisions are: (1) 18 U.S.C. 43 (animal enterprise); (2) 18 U.S.C. 228(d) (restitution child support cases); (3) 18 U.S.C. 1593 (restitution in cases under chapter 77 relating to peonage, slavery, and trafficking in persons); (4) 18 U.S.C. 2248 (restitution in cases under chapter 109A relating to sexual abuse); (5) 18 U.S.C. 2259 (restitution in cases under chapter 110 relating to sexual exploitation of children); (6) 18 U.S.C. 2264 (restitution in cases under chapter 110A relating to domestic violence and stalking); (7) 18 U.S.C. 2323(c) (restitution in copyright infringement cases); (8) 18 U.S.C. 2327 (restitution in telemarketing fraud cases); and (9) 21 U.S.C. 853(q) (restitution in controlled substances cases involving amphetamine and methamphetamine offenses). All but the animal enterprise statute, require it. Most apply the procedures that govern §§3663 and 3663A to a narrower range of crimes but a wider range of losses than §§3663 and 3663A and their attendant enforcement procedures might otherwise permit. Section 3663 authorizes restitution when the defendant has been convicted of a crime proscribed under title 18 of the United States Code . It comes into play when the mandatory restitution statutes do not control. It also authorizes restitution when the defendant is convicted of any of several trafficking offenses under the Controlled Substances Act, or of any of a few air safety prohibitions. In addition, as mentioned earlier, a court may also order restitution consistent with a plea agreement or as a condition of probation or supervised release, even with respect to crimes for which restitution is not authorized under §§3663 or 3663A. Restitution is a creature of statute. A court may order reimbursement only for those losses authorized by statute. Sections 3663 and 3663A recognize three categories of reimbursable losses: property losses, losses relating to bodily injuries, and losses relating to participation in the investigation or prosecution of the victimizing offense. Sections 3663 and 3663A have essentially identical restitution provisions: both call for the return of the property, if that provides full victim restitution. If not, restitution takes the form of compensatory payments. As a general rule, victims are entitled only to be made whole; unlike the sentencing guidelines which calculate sentence enhancements based on both actual and intended losses, the restitution statutes permit awards only for actual losses. It is often not the fact of a reimbursable loss, but its measure, that challenges the courts. Nevertheless, the types of reimbursable property losses contemplated by §§3663(b)(1) and 3663A(b)(1) include things like the salary of a faithless employee, or the insurance replacement costs of a stolen car, or the losses visited upon a loan guarantor by a mortgage fraud scheme. Circumstances dictate whether attorneys' fees qualify as reimbursable property losses. The strongest arguments for recovery seem to attend those cases in which the scurrilous litigation is an integral part of the crime of conviction. On the other hand, the courts seem less receptive when restitution is sought as a property loss under either §3663(b)(1) or §3663A(b)(1) in order to compensate a victim for the costs of civil litigation filed against the offender. Section 3663, unlike its counterpart, permits the court to order those convicted of crime-assisting identity theft or aggravated identity theft to pay for the costs incurred by their victims to remedy the actual or intended harm associated with the offense. Section 3663(c) also authorizes community restitution in the form of awards apportioned between state victim assistance agencies and state agencies dedicated to the reduction of substance abuse. The court may order restitution in certain drug trafficking cases where there are no identifiable victims, capped by the amount of the fine that the court may impose for commission of the offense. Moreover, at least one court has held that the section authorizes restitution only in those cases where the court actually imposes a fine as well; if the court fails to impose a fine, it may not order community restitution. Section 3663 expressly provides for restitution for the remedial effects of the victims of identity theft committed in relation to other offenses and for state agencies in certain drug trafficking cases if there are no other identifiable victims. Section 3663A has no comparable provision. The individual restitution sections fall within two categories. One group focuses on restitution for the victims of crimes involving property damage or loss; the other on restitution for the victims of crimes involving personal injury. Among the first group, only the copyright infringement statute adopts by cross reference the mandatory restitution provisions of §3663A. Each of the others follows the same general pattern as §3663A but adds at least one unique feature of its own. The child support restitution section, 18 U.S.C. 228(d), adopts the procedures of §3663A upon conviction for interstate evasion of child support orders. The amount of restitution that must be awarded is determined by reference to a state court support order or by other governing state law and, as such, may include the interest on overdue support payments and support owed after children have reached their majority. The peonage restitution section, 18 U.S.C. 1593, uses the common definition of "victim" and affords victims of human trafficking offenses a wide range of compensation that, unlike §§3663 and 3663A, includes the economic benefits derived from the victim's services and a catch-all clause ensuring compensation for predicate crime-related injuries and losses. The telemarketing fraud restitution statute, 18 U.S.C. 2327, originally enacted two years before the passage of the mandatory restitution provisions of §3663A, once had highly individualistic features. It has since been amended so that its provisions more closely track those of the general restitution provisions for losses caused by predicate crimes. The methamphetamine statute, 21 U.S.C. 853(q), covers the cleanup cost of closing down illicit amphetamine and methamphetamine production sites. At one time, the section applied only to those convicted of manufacturing offenses and consequently reached convictions for attempted manufacture but not for possession with intent to distribute. The USA PATRIOT Improvement and Reauthorization Act amended the section so that it now authorizes restitution upon conviction for offenses involving possession, possession with intent to distribute, or manufacture of amphetamine and methamphetamine. The animal enterprise interference section, 18 U.S.C. 43(c), permits a sentencing court to order a defendant convicted of violating its proscriptions to pay restitution for specific kinds of damage (i.e., the cost of repeating disrupted experiments, the loss of farm income, and the costs of economic disruption). Sections 3663 and 3663A have parallel provisions governing the restitution for personal injuries that permit or, in the case of §3663A, require compensation for medical expenses, lost income, rehabilitation, and funeral expenses in the event the victim is killed. The medical expenses covered by a restitution order may include those paid on the victim's behalf by a third party, and may include the costs of psychiatric and psychological treatment when the victim has suffered a physical injury. Restitution for lost income extends to both past and future lost income. Prior to passage of the general mandatory restitution authority in §3663A, Congress authorized restitution for three related small sets of offenses. Those authorizations, found in 18 U.S.C. 2248, 2259 and 2264, require the courts to order restitution following conviction for an offense proscribed in chapters 109A (sexual abuse), 110 (sexual exploitation of children), and 110A (domestic violence and stalking), respectively. Other than their designation of predicate offenses, the sections are identical. They each: (1) insist on restitution of the "full amount of the victim's losses;" (2) define "victims" in much the manner of §§3663 and 3663A; (3) supply a list of losses for which restitution must be ordered; (4) make it clear that neither the defendant's poverty nor victim compensation from other sources absolves the court of its obligation to order restitution; and (5) otherwise adopt the procedural mechanisms used for restitution under Section 3663A. Unlike §§3663 and 3663A, the three sections on their face do not require bodily injury of the victim as a precondition for the award of the cost of psychiatric treatments. They also have a catch-all clause that has no counterpart in either §§3663 or 3663A. On the other hand, unlike §§3663 and 3663A, they do not authorize payments to third parties to reimburse them for crime-related treatment of a victim. Sections 3663 and 3663A cover a victim's lost income, as well as necessary child care expenses, transportation costs, and other expenses associated with his or her participation in the investigation and prosecution of the crime, regardless of whether the resulting injury is to person or to property. A number of courts seem to share the view of that "investigation costs—including attorneys' fees—incurred by private parties as a direct and foreseeable result of the defendant's wrongful conduct may be recoverable" under §§3663(b)(4) or 3663A(b)(4). At least one appellate court, however, has concluded that those sections do not permit "restitution for the costs of an organization's internal investigation, at least when (as here) the internal investigation was neither required nor requested by the criminal investigators or prosecutors." The sections mention child care, attendance at judicial proceedings, and other matters that bespeak a human victim, but the courts have made it clear that corporations and other legal entities are likewise entitled to restitution under the provisions. Governmental entities may be entitled to restitution awards when they are the victims of a qualifying offense, but not for the costs of investigating and prosecuting the offense. Awards for investigative and prosecutorial participation have included relocation expenses for threatened victims; compensation for wages lost while the victim assisted in the investigation; and attorneys' fees related to the recovery of the victim of international parental kidnapping. Except to the limited extent otherwise provided in the individual authorization statutes, §3664 supplies the procedure that governs the issuance of restitution orders. Upon conviction of a defendant, the court directs the probation service to investigate and prepare a report identifying each victim of the offense and the extent of their injuries, damages, or losses. Prosecutors are to provide the probation officer with pertinent information. The officer is also to ask victims to detail the extent and specifics of their predicate crime-related losses. The defendant is obliged to give the officer a complete description of his or her financial situation. The probation officer's report is presented to the court, the defendant, and the prosecutor. The court resolves contested restitution issues by a preponderance of the evidence following a hearing, at which the prosecution bears the burden of establishing the existence and extent of the victim's losses, and the defendant bears the burden on questions regarding his or her finances and the extent to which the defendant has compensated the victim for the losses. The court may conduct a hearing or task the probation officer to secure additional information and resolve disputes. Section 3664 is precise when it describes how the court must frame the restitution order. The order must envision full compensation for the losses of each victim without regard to the financial circumstances of the defendant. In its calculation of the manner and schedule of payment for each victim, however, the court is to consider the defendant's assets, anticipated future income, and other financial obligations. Compensation may be made in a lump sum, in-kind payments, installments, or any combination of such methods of payment. In-kind payments may take the form of a return of lost property, replacement in-kind or otherwise, or personal services. When the defendant's financial condition precludes any alternative, the order may call for nominal periodic payments. Several courts have emphasized the importance of the court's close attention to the restitution payment schedule by prohibiting sentencing courts from initially ordering that restitution be paid immediately when it is readily apparent that the defendant is unable to do so, thereby effectively leaving the task of establishing a payment schedule to the probation officer or the Bureau of Prisons. When it sets the restitution owed by the defendant, the court may not take into account the fact that a victim may have been compensated by insurance or any other alternative form of compensation of his or her injury, loss, or damage. The amount of a restitution order may later be reduced to account for compensatory damages for the same loss recovered in a civil action. When the government and the probation officer have been unable to determine the full extent of victim losses within 10 days of sentencing, they are obligated to inform the court. The court is then to set a date, no later than 90 days after sentencing, for the final determination of victim losses. Thereafter, victims have a limited option to present claims for restitution relating to undiscovered losses. The Supreme Court resolved a circuit split over how these provisions should be applied, particularly in cases where the time lines have not been observed. The Court held in Dolan that a sentencing court may determine the extent of a victim's losses and order restitution after the expiration of the statutory 90-day deadline, as long as the defendant was aware beforehand that the court intended to order restitution. Victims may assign their right to receive restitution payments to Crime Victims Fund, but the courts are divided over whether the court may order restitution to be paid to the Crime Victims Fund on its own initiative if the victim refuses to accept it. Should the court determine that more than one defendant contributed to the victim's loss, it may apportion restitution accordingly or it may make the defendants jointly and severally liable. When defendants are made jointly and severally liable, each is liable for the entire amount, but the victim is entitled to no more than what is required to be made whole, regardless of what portion each of the defendants ultimately contributes. There had been a difference of opinion over whether joint and severable liability may be imposed other than with respect to co-defendants. The Supreme Court has recently provided some clarification as to how courts should deal with restitution when those who are not co-defendants are responsible for a substantial portion of the victim's losses. The defendant in the case viewed child pornography of which the victim was the subject. To hold the defendant liable for all of the victim's losses attributable to production, distribution, and viewing of the material might contravene the proscriptions of the Eighth Amendment's excessive fines clause, the Court suggested. Rather, it held that the defendant's restitution order should be calculated to reflect his relative contribution to the harm caused. Section 3664(i) declares that when it comes to restitution, the United States is to be served last. The provision is cited most often to confirm that under the appropriate circumstances, the government and its departments and agencies may be considered victims for restitution purposes. When the government is not a victim, the defendant is not entitled to have the restitution award offset by the value of any forfeited property, except to the extent a governmental victim shares in the proceeds of the confiscation. Section 3664(j) permits a court to order restitution to third parties who, as insurers or otherwise, have assumed some or all of the victim's losses, although in such cases, the victim must be fully compensated first. It also permits a court to reduce an earlier restitution order by any amounts that the victim later receives in the course of related federal or state civil litigation. The victim, the defendant, or the government may petition to have a restitution order amended to reflect the defendant's changed economic circumstances. The changed economic circumstances envisioned in §3664(k) do not include anticipated future changes or a later, better-informed understanding of the defendant's financial condition at the time of sentence. Nor does the section provide defendants with a mechanism with which to later challenge the legality of their restitution orders. There are several means to enforce a restitution order. Section 3664(m) declares that restitution orders may be enforced in the manner for the collection of fines or "by all other available and reasonable means." When restitution is a condition of probation or supervised release, failure to make restitution may provide the grounds for revocation. Moreover, a restitution order operates as a lien in the name of the United States on the defendant's property that remains in effect for 20 years. The government may also use garnishment and the other collection mechanisms of the Federal Debt Collection Procedures Act (FDCPA) to enforce a restitution order. A victim may use a restitution order to secure a lien in his own name against the defendant's property to ensure the payment of restitution. In addition, the victims' rights provisions of 18 U.S.C. 3771 entitle a victim to "full and timely restitution as provided in law," a right, enforceable in the face of legally insufficient restitution order through a liberalized form of mandamus in some circuits. In most instances, a victim may also sue the defendant based on the conduct that led to the conviction and the issuance of the restitution order. During the course of such civil litigation, the defendant may be precluded from denying the facts that formed the basis of the conviction. Section 3664(o) provides that the court's restitution order constitutes a final order notwithstanding the fact it may later be corrected, modified, or appealed under various court rules and statutory provisions. This does not mean that the district court may later reduce a restitution order in the absence of specific authority. Nor does it convey appellate rights upon third parties who claim a right to restitution for expenses necessarily incurred on behalf of a victim. In a criminal law context, the lower federal courts have generally taken the view that the death of a defendant at any time prior to the determination of his or her final direct appeal abates all underlying proceedings; appeals are dismissed as moot, convictions are overturned, indictments are dismissed, and abated convictions cannot be used in related civil litigation against the estate–all as if the defendant was never criminally charged. It might seem from this that a restitution order would abate as well, but there is no consensus among the lower federal courts on the issue. | Federal courts may not order a defendant to pay restitution to the victims of his or her crimes unless authorized by statute to do so. Several statutes supply such authorization. For instance, federal courts are statutorily required to order victim restitution when sentencing a defendant either for an offense against property, including fraud or deceit, proscribed in Title 18 of the United States Code or for a crime of violence. The obligation exists even if the defendant is indigent, and restitution must take the form of in-kind, lump sum, or installment payments. Federal courts are permitted, but not required, to order victim restitution when sentencing a defendant for any offense proscribed in Title 18 for which restitution is not required. Federal courts are permitted to order victim restitution when sentencing a defendant for various controlled substance and aviation safety offenses. In addition, a federal court may order restitution pursuant to a plea bargain or as a condition of probation or supervised release. As a general rule, restitution is available only to victims who have suffered a physical injury or financial loss as a direct and proximate consequence of the crime of conviction, and only to the extent of their losses. Several provisions governing restitution following conviction for particular crimes permit awards for types of losses that might not otherwise be permitted under the general restitution provisions. For example, the Identity Theft Enforcement and Restitution Act of 2008 (18 U.S.C. 3663(b)(6)) authorizes restitution orders to compensate victims for the cost of remediating the intended or actual harm caused by certain identity theft violations. The courts are divided over the extent to which a defendant convicted of possession of child pornography may be ordered to make restitution to the child depicted in the material. When restitution is authorized, a probation officer gathers information from victims, the government, the defendant, and other sources for a report to the court. The parties receive copies of the report and may contest its recommendations. The court has considerable discretion as to the manner and scheduling of restitution payments, but the authority may not be delegated to probation or prison officials. Furthermore, the order must provide for full restitution for all victims unless the sheer number of victims or the complications of a given case preclude such an order. Under the abatement doctrine, when a defendant dies before his or her appeal has become final, the law treats the indictment and conviction as though they had never happened. The conviction is vacated and the indictment dismissed. The courts do not agree on whether the doctrine also reaches unfulfilled obligations under a restitution order. This report is an abridged version of CRS Report RL34138, Restitution in Federal Criminal Cases—without footnotes, citations to most authorities, or appendixes found in the longer report. Related reports include CRS Report RL33679, Crime Victims' Rights Act: A Summary and Legal Analysis of 18 U.S.C. 3771, available in abridged form as CRS Report RS22518, Crime Victims' Rights Act: A Sketch of 18 U.S.C. 3771. |
Under the Higher Education Act (HEA), institutions of higher education (IHEs) must be accredited by an agency or association recognized by the Secretary of the U.S. Department of Education (ED) to participate in HEA Title IV federal student aid programs. While this process is voluntary, failure to obtain accreditation could have a dramatic effect on an institution's student enrollment, as only students attending accredited institutions are eligible to receive federal student aid (e.g., Pell grants and student loans). Accrediting agencies are private organizations set up to review the qualifications of member institutions based on self-initiated quality guidelines and self-improvement efforts. This process and its critical role in determining institutional eligibility to participate in Title IV has sometimes been controversial. As the 110 th Congress considers reauthorizing the HEA, it may consider making changes to the role accreditation plays with respect to federal student aid or to the accreditation process itself, such as the factors accrediting agencies must consider when evaluating an institution. This report provides an overview of some of the possible accreditation issues that Congress may address during the reauthorization process, a discussion of the findings and recommendations regarding accreditation from the Secretary of Education's Commission on the Future of Higher Education's final report, and a brief overview of relevant legislation from the 109 th Congress that addressed accreditation issues. There are several key issues related to accreditation that may arise during the reauthorization of the HEA. These issues include, but are not limited to, the use of accreditation as a gauge of institutional quality, the elimination of accreditation as a prerequisite for participation in HEA Title IV programs, accreditation and distance education, accreditation and transfer of credit, and due process requirements that apply to accrediting agencies. One question that may be raised during the reauthorization process focuses on whether accreditation can be equated with the provision of a quality education. Accreditation is used as an indicator that an institution or program has met at least minimal standards and as evidence of fiscal stability. Nearly all institutions that have lost their accreditation or have been put on probation by their accrediting agency have been cited for fiscal mismanagement or lack of fiscal integrity. Based on testimony provided before the Senate Health, Education, Labor, and Pensions Committee, few institutions have lost their accreditation due to poor educational performance. The accreditation process, while required to assess institutions with respect to student achievement, primarily bases accreditation decisions on the inputs (e.g., curricula and faculty) rather than the outcomes (e.g., graduation rates and job placement rates) of higher education. In light of the increased congressional emphasis on accountability for outcomes in education programs, Congress may revisit the extent to which accrediting agencies focus on student outcomes in making accreditation decisions in order to better gauge the educational quality of institutions granted accreditation. If Congress does decide to require accrediting agencies to increase their focus on outcome measures, there may be a debate about what outcome measures to use and how they should be measured. For example, would student grades be a valid indicator of the quality of an institution? Would students' standardized test scores (e.g., Graduate Record Exam, Graduate Management Admission Test) be a useful indicator of institutional quality? Would graduation rates or job placement rates be valuable measures? Outcomes such as these have various measurement problems, such as grade inflation, possible biases on standardized tests, differences in how graduation rates might be calculated, or which jobs should constitute a successful placement. Another possible issue is the elimination of accreditation as a prerequisite for Title IV institutional eligibility. Some argue that the current accreditation system is a poor indicator of educational quality and, therefore, should have no bearing on institutional eligibility decisions. Others argue that if the accreditation system were eliminated, the federal government would have to develop its own measures of educational quality, a potentially costly and controversial action; or the burden would fall on states, leading to 50 different sets of standards for accreditation. Currently, ED plays an integral role in determining institutional eligibility to participate in Title IV programs through the eligibility and certification process. Some have suggested that it would be appropriate and possible for ED to extend this role to specify student outcome data that institutions must provide and ED would collect. Accrediting agencies and organizations would continue to play a role in evaluating or assisting institutions if the institutions wanted their input. Others have suggested that accrediting agencies continue in their current role, but another organization, such as ED, be responsible for evaluating student outcomes. Detractors of this proposal question whether increased ED involvement or the involvement of any organization trying to impose specific student outcome criteria on institutions would undermine the autonomy of postsecondary institutions. They argue that this autonomy is a critical component to providing high quality education. Another possible issue that may be debated during HEA reauthorization focuses on accreditation and distance education. Key issues center on whether accrediting agencies that accredit distance education programs should meet additional requirements and whether accrediting agencies that evaluate institutions offering distance education programs should be required to examine specific measures related to distance education, such as student achievement for students enrolled in distance education programs. The Deficit Reduction Act ( P.L. 109-171 ) added a new requirement that distance education programs must be evaluated by an accrediting agency recognized by the Secretary of Education as having the evaluation of distance education programs within its scope of recognition. Congressional debate during reauthorization may also focus on the issue of transfer of credit and how to encourage institutions to accept transfer credits, while still recognizing that not all institutions offer the same level of quality education and not all courses may merit recognition of credit. Based on a study of bachelor's degree recipients in 1999-2000, 59% of students attended more than one institution in their pursuit of an undergraduate degree. Currently, when a student transfers from one institution to another, the receiving institution determines which courses taken at another institution will be accepted as credit toward a degree at the new institution. A recent GAO study found that receiving institutions base their decisions on which credits to accept on the type of accreditation held by the sending institution, whether academic transfer agreements have been established with the sending institution, and the comparability of coursework. The study also found that many institutions that are accredited by regional accrediting agencies would not accept credits earned at nationally accredited institutions. The credit review process can be labor intensive and costly, as institutions must evaluate the quality of education received by the student at previous institutions. In addition, for each course that the receiving institution awards transfer credit, students may take one less course at the new institution, translating into a loss of tuition for the new institution. Thus, institutions may not have incentives to recognize transfer credits and may even have disincentives to recognize them. For students, this may result in additional time and money required to complete a degree. Some students may also reach limits on their federal student aid eligibility (i.e., available federal student loans) prior to completing their program of study if credits are not accepted or not accepted in the student's major. For the federal government, this could translate into wasted tax dollars if students using federal student aid to pursue a postsecondary education have to retake courses. Supporters of efforts to establish transfer of credit requirements argue that any institution that is accredited by an agency or association recognized by ED should be acknowledged as providing an education of an acceptable level of quality (or presumably they would not have received accreditation). Opponents of these requirements, however, argue that the federal government should not be involved in determining whether an institution should accept credit for course work from another institution, and that federal recognition of an accrediting agency establishes only a minimum level of quality that some institutions may find unacceptable. In addition, arguments have been made that if institutions are required to analyze each transfer students' courses for course compatibility and quality, as opposed to rejecting transfer credits from institutions holding specific accreditation, it will result in a substantially more costly review process. Another issue that may arise during HEA reauthorization is whether to make changes to the statute's due process requirements. Under Section 496(a)(6) of the HEA, accrediting agencies recognized by ED must meet certain requirements with respect to due process. That is, an accrediting agency is required to implement specific procedures to resolve disputes between the accrediting agency and any institution that is subject to the accreditation process. Under current law, accrediting agencies are required to provide an IHE with, at a minimum, the following: adequate specification of requirements and deficiencies at the institution of higher education or program being examined; the opportunity to have a hearing; the right to appeal any adverse action against it; and the right to be represented by counsel. During the reauthorization process, Congress may consider revisiting statutory language relevant to due process. Some proponents of altering the current due process requirements have, for example, proposed changes that include requiring that hearing records be kept and that IHE appeals be heard by a panel of three outside arbitrators. When considering such proposals, Congress may wish to weigh the benefits that would result from additional protections for IHEs against the administrative burdens for accrediting agencies that would result from additional procedural requirements. Although the due process requirements that apply to accrediting agencies are statutory in nature, the concept of procedural due process has its origins in the U.S. Constitution. Both the Fifth Amendment, applicable to federal agencies, and the Fourteenth Amendment, which incorporates certain guarantees in the Bill of Rights and is applicable to the states, prohibit government action that would deprive any person of "life, liberty, or property, without due process of law." The premise behind due process is that the government, for reasons of basic fairness, must provide certain procedures before taking any of these important interests away from protected parties. The threshold question in a claim alleging a violation of due process rights is whether there has been a deprivation of life, liberty or property. In order to establish a due process violation, a challenger must show (a) a deprivation, (b) of a protected interest and (c) "state action," either federal or action under the color of state law, whichever is applicable. Additionally, the petitioner must show that the action was not a random act but one caused by established procedure. The Supreme Court has stated that due process "is a flexible concept that varies with the particular situation." Thus, the degree of procedural protection afforded is determined on a case-by-case basis, with the amount of procedure due increasing as the importance of the interest at stake becomes greater. For example, in Lassiter v. Dept. of Social Services , the Court held that the termination of parental rights represented a sufficiently high interest such that increased procedural protections were necessary. In Mathews v. Eldridge , the Court established a balancing test to determine the procedural protections required in a particular case: [I]dentification of the specific dictates of due process generally requires consideration of three factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirements would entail. In applying this test, the Court has generally held that due process requires some type of notice and "some kind of a hearing before the State deprives a person of liberty or property," although the litigant is not necessarily entitled to a trial-type hearing similar to those used in judicial trials or formal administrative trial-type hearings. In Goldberg v. Kelly , the Court held that welfare recipients facing termination of their benefits were entitled to nearly all of the rights afforded in a trial-type hearing. In subsequent cases, however, the Court has made it clear that trial procedures are not essential for every governmental decision that might affect an individual and that "something less than a full evidentiary hearing is sufficient prior to adverse administrative action." Other procedures that courts have at times recognized as required by due process include the presentation of evidence and witnesses, legal representation, an impartial decision-maker, a written decision, and administrative and/or judicial review of the agency's action. Ultimately, however, the Court has recognized as constitutionally sufficient many different types of procedures, depending on the nature of the individual and governmental interests at stake, and federal agencies currently provide a wide range of procedural protections. As noted above, constitutional due process requirements apply only to governmental actors, not private entities. Since accrediting agencies are private organizations, the courts have generally held that they are not bound by the Due Process clause of the Constitution. Nevertheless, most courts, reasoning that accrediting agencies serve a quasi-governmental function in their role as the gate-keepers that determine whether IHEs will be eligible to participate in Title IV student financial aid programs, have ruled that accrediting agencies are subject to common law due process principles. Under these principles, courts evaluate whether the decision of an accrediting agency "was arbitrary, capricious, an abuse of discretion, or reached without observance of procedure required by law." In addition to these common law due process requirements, IHEs that wish to contest certain accrediting agency decisions may be protected by the HEA's due process statutory provisions. Under the HEA, "any civil action brought by an institution of higher education seeking accreditation from, or accredited by, an accrediting agency or association recognized by the Secretary ... and involving the denial, withdrawal, or termination of accreditation of the institution of higher education, shall be brought in the appropriate United States district court. It is unclear, however, whether this jurisdictional provision gives IHEs a private right of action to sue accrediting agencies, and courts have split on this question. For example, in Thomas M. Cooley Law School v. American Bar Association , the court noted that "nearly every court to consider the issue in the last twenty-five years has determined that there is no express or implied private right of action to enforce any of the HEA's provisions," and thus held that the HEA's jurisdictional provision did not give the IHE in question the right to enforce the statute's due process provisions by suing its accrediting agency directly. On the other hand, other courts have suggested that the HEA's jurisdictional provision could be interpreted to confer a private right of action on IHEs, but have not definitively ruled on the point. Regardless of how the courts have ruled on the question of whether the statute grants a private right of action to sue accrediting agencies, they have generally noted that the lack of such a right is not significant, given that IHEs still have the ability to sue accrediting agencies under principles of common law due process. A recent court case between Auburn University and its accrediting agency, Southern Association of Colleges and Schools (SACS), provides a good illustration of how courts approach due process disputes between IHEs and their accrediting agencies. In the case, Auburn alleged that SACS violated the HEA, common law due process principles, and the Due Process clause of the Constitution by not following its own procedures for a planned investigation. Although the court declined to rule that accrediting agencies were governmental actors for purposes of applying constitutional due process requirements, the court did find that accrediting agencies, in their role as quasi-governmental entities that act as the gatekeepers to Title IV student financial aid, are subject to common law due process principles. Applying those principles, the court held that "Auburn is entitled to some kind of due process at this stage in the accrediting process." Since the investigation was in an early phase, the court concluded that the university did not require strong due process protection at that stage. As a result, the court allowed discovery on whether the executive director had a conflict of interest under the association's policies, but denied a preliminary injunction. In addition, the court rejected Auburn's HEA claim because, although the court found that the statute's jurisdictional provision might contain an implied private right of action, the lawsuit did not challenge the "denial, withdrawal, or termination of accreditation" as required by the statute. More recently, Edward Waters College (Jacksonville, FL) and Hiwassee College (Madisonville, TN) sued their accrediting agency, SACS, based on the denial of due process. Edward Waters College was found to have plagiarized material on a report due to the accrediting agency. The school, however, claimed that SACS did not provide it with due process when the agency took action to remove the college's accreditation based on this infraction. The case was settled out of court, and Edward Waters College retained its accreditation in exchange for dropping the lawsuit. Hiwassee College is also suing SACS on the grounds that due process was denied when its accreditation status became threatened by issues of fiscal mismanagement. While the case is considered, a federal court has issued an injunction requiring SACS to reinstate the accreditation of Hiwassee College. In September 2006, the Secretary of Education's Commission on the Future of Higher Education (the Commission) released its final report examining the current state of higher education. The report included recommendations for improving access to higher education and making higher education more affordable for students. Included in its examination of higher education and related recommendations were several findings and recommendations specifically related to accreditation. The Commission found that accreditors play a gate-keeping function with respect to federal student aid programs. Despite this public function and increased attention to outcome measures, much of the information collected by accreditors is kept private. The information that is made public tends to focus more on the results of process reviews, rather than providing information about learning outcomes and costs. To meet the needs for increased accountability, quality, and transparency, accreditation must change. They also argued that accreditation and federal and state regulations impede innovation in higher education, which diminishes the ability of IHEs to address national workforce needs and compete globally. In addition, the Commission noted that it needs to be easier for students to transfer between different kinds of institutions. Current institutional policies with respect to the transfer of credit are often not clear and result in lost time and money for students and create the need for additional federal student aid. The Commission also noted that while accreditation once represented a private relationship between an accreditor and an institution, it is now a public policy issue and the process needs to be made more transparent to the public. The Commission made several recommendations regarding changes to the accreditation process. For example, the Commission recommended that accreditation agencies move more quickly to accredit new institutions and new programs at already accredited institutions, and increase their focus on results and quality, rather than prescribing requirements for process, inputs, and governance that perpetuate the current models of evaluation and impede innovation in higher education. The Commission also recommended that accrediting agencies make performance outcomes the priority over measures of inputs or process. Accrediting agencies need to create a framework to align and expand existing standards to permit comparisons across institutions on performance and outcome measures, to encourage innovation and continuous improvement, and to require institutions, based on their specific missions, to move toward world class quality and demonstrate progress in relation to national and international peers. Finally, the overall accreditation process must become more transparent and the final findings of the accreditation process must be made publicly available. Since the release of the Commission's report, the Secretary has continued to focus national dialogue on issues related to accreditation. In November 2006, the Secretary convened representatives from accrediting organizations and other key stakeholders to address the Commission's recommendations. She has also scheduled a Higher Education Summit for March 2007; accreditation will be a key topic considered at the summit. This section provides a brief overview of relevant provisions contained in H.R. 609 , the College Access and Opportunity Act of 2005, and S. 1614 , the Higher Education Amendments of 2005—the primary vehicles for HEA reauthorization in the 109 th Congress. H.R. 609 was passed by the House on March 30, 2006, by a vote of 221-199 ( H.Rept. 109-231 ). S. 1614 was reported by the Senate Health, Education, Labor, and Pensions Committee on November 17, 2005, without a report. A report ( S.Rept. 109-218 ) was subsequently filed on February 28, 2006. It was not considered on the Senate Floor during the 109 th Congress. Both the House and Senate bills would have made several changes related to accreditation issues. For example, both bills would have altered accountability requirements that accrediting agencies must use in evaluating institutions, adding a new requirement that accrediting agencies consider the stated mission of the institution, including religious missions, when applying and enforcing standards to ensure the courses and programs offered by an institution are of sufficient quality to achieve their stated objective. Both bills would have added new requirements related to distance education, including requiring accrediting agencies to have standards that adequately evaluate distance education programs in the same areas as regular classroom-based programs and requiring accrediting agencies to ensure that IHEs had implemented a process whereby the institution could determine that the student who registered for a distance education course or program was the same student who participated in, completed, and received credit for the course. H.R. 609 and S. 1614 would also have prohibited IHEs from denying the transfer of credit based solely on the accreditation held by the sending institution and would have required IHEs to publicly disclose their transfer of credit policies. Finally, both bills would have modified existing due process requirements. For example, both bills would have prohibited the appeals panel from including current members of the accrediting agency's decision-making body that made the adverse decision, and the appeals panel would have been subject to a conflict of interest policy. | Under the Higher Education Act (HEA), institutions of higher education (IHEs) must be accredited by an agency or association recognized by the Secretary of the U.S. Department of Education (ED) to participate in HEA Title IV federal student aid programs. While this process is voluntary, failure to obtain accreditation could have a dramatic effect on an institution's student enrollment, as only students attending accredited institutions are eligible to receive federal student aid (e.g., Pell grants and student loans). Accrediting agencies are private organizations set up to review the qualifications of member institutions based on self-initiated quality guidelines and self-improvement efforts. This report provides an overview of some of the possible accreditation issues that Congress may address during the HEA reauthorization process. For example, as Congress considers reauthorizing the HEA, it may consider making changes to the role accreditation plays with respect to federal student aid or to the accreditation process itself, such as the factors accrediting agencies must consider when evaluating an institution. More specifically, potential issues for consideration include, but are not limited to, the use of accreditation as a gauge of institutional quality, the elimination of accreditation as a prerequisite for participation in HEA Title IV programs, accreditation and distance education, accreditation and transfer of credit, and due process requirements that apply to accrediting agencies. In the 109th Congress, both H.R. 609, the College Access and Opportunity Act of 2005, and S. 1614, the Higher Education Amendments of 2005, the primary vehicles for HEA reauthorization, would have altered accreditation requirements. Most notably, both bills would have added new requirements related to considering the mission of an institution when performing evaluations, outcome measures, distance education, transfer of credit, due process, and accrediting agency operations. HEA reauthorization may also be considered by the 110th Congress. This report will be updated as warranted by legislative action. |
Liberia's president, Ellen Johnson Sirleaf, is currently visiting the United States. Her several-day trip is aimed at deepening her high-level contacts with the Administration of President Barack Obama, Congress, and other U.S. policy makers. Sirleaf, who also maintained warm ties with former President George W. Bush's Administration, is scheduled to meet with President Obama, possibly to be joined by Secretary of State Hillary Rodham Clinton, on May 27. She is expected to update U.S. policy makers, including interested Members, on Liberia's progress since her election, as well as remaining challenges in such areas as security sector reform, anti-corruption efforts, unemployment, economic growth, and legal system capacity building. Her visit is expected to include a Millennium Challenge Corporation (MCC) Threshold Program pre-signing event and a possible U.S. Global Food Security Initiative country program. On March 18, 2010, President Obama extended for 18 months the Deferred Enforced Departure (DED) status of eligible Liberian U.S. resident aliens, which had previously been set to expire on March 31, 2010, allowing them to remain in the United States. DED is a special immigration status that effectively suspends the deportation of eligible U.S. aliens. The presidential directive ordering the extension, which had been sought by some Members, notably from districts with significant populations of Liberian origin, also authorized those eligible to work during the duration of their DED status. In addition, two bills introduced in the 111 th Congress would allow certain Liberian aliens to become permanent U.S. residents. (See " Immigration Issues .") The trial of former Liberian President Charles Taylor, which began in mid-2007, but was beset by procedural delays for a time, is continuing. Cross-examination of defense witnesses by the Prosecutor's Office of the U.S.-backed Special Court for Sierra Leone (SCSL), which began in November 2009, proceeded in early 2010. (See " Taylor Trial .") In her late January 2010 annual address to the Liberian legislature, President Sirleaf announced that she would seek reelection to a second term in 2011, as many observers had expected. Her announcement came in spite of a recommendation by Liberia's Truth and Reconciliation Commission (TRC) in its draft June 2009 final report that Sirleaf, as one of 49 alleged "political leaders and financiers of different warring factions" party to Liberia's civil wars, be "barred from holding public offices" or "elected or appointed" for 30 years. (See " Truth and Reconciliation Commission .") In early 2010, the Unity Party (UP, President Sirleaf's party), the Liberia Action Party (LAP), and the Liberia Unification Party (LUP) were in the process of holding party conventions and were all expected to ratify an April 2009 agreement among them to merge. In mid-2010, a full-fledged Peace Corps Volunteer (PCV) country program for Liberia is scheduled to begin. It will build on the work of a special short-term humanitarian service program that began in October 2008. (See " Peace Corps .") U.S.-Liberia flights by Delta Airlines are slated to begin in mid-2010. The initiation of the new route, originally planned for mid-2009, was delayed when the U.S. Department of Homeland Security (DHS) announced in June 2009 that due to security deficiencies at Liberia's international airport, it would not permit the operation of U.S.-Liberian flights. The Transportation Security Administration (TSA), a DHS unit, is providing Liberia with assistance to enhance aviation security. (See " Air and Communications Links .") In May 2009, a jury acquitted former National Transitional Government of Liberia (NTGL) Chairman Gyude Bryant and four former Liberia Petroleum Refinery Company (LPRC) executives from the NTGL period of corruption charges in a case involving the alleged embezzlement of LPRC assets. Bryant faces a separate corruption case related his tenure as NTGL chairman. (See " Post-NTGL Corruption Trials .") In late 2009, Liberia held a Senatorial by-election to fill a vacancy created by an incumbent's death in which President Sirleaf's Unity Party lost in a run-off against the opposition Congress for Democratic Change (CDC). Although the election reportedly featured a low voter turnout, it was viewed as a dry run of the National Elections Commission's (NEC) operational capability ahead of national elections in 2011 because nearly half of Liberia's electorate was eligible to participate in it. (See " Subsequent Elections .") The Sirleaf government is negotiating or has in recent years entered into several multi-year, large natural resource or agricultural concession deals, collectively worth multiple billions of dollars worth of investment and potential exports, indicating that large foreign investors' confidence in the country's political progress and prospective stability is strong. Sirleaf has cited strong economic growth—which, she said in May 2010, had averaged 7% annually over the past four years, in spite of a period of global recession—as a key benchmark of advances made under her administration. The United States has long-standing ties with Liberia that date back to the founding of the modern Liberian state by "Americo-Liberians," black freemen and former slaves from the Americas who settled in Liberia beginning in 1821. Liberia was also a close U.S. ally, albeit a relatively minor one, during World War II and the cold war, and the country hosted U.S. communications facilities in the 1960s and 1970s, and received extensive U.S. development assistance. The Reagan Administration cultivated ties with the government of President Samuel K. Doe during the first half of the 1980s, although these later soured. The United States also provided meditational support and extensive humanitarian assistance for Liberia during its first and second civil wars. It has also invested substantial amounts of aid in the current United Nations peacekeeping operation in Liberia, as well as substantial post-war rebuilding and development assistance. There has generally been strong congressional support for these efforts. The Administration of former President George W. Bush formed a close and cordial relationship with the Sirleaf government, and similarly close relations have continued under the Obama Administration. Contemporary U.S. relations with and policy developments related to Liberia are discussed in the " U.S. Relations " section of this report. Liberia, a small, poor West African country of about 3.4 million people, is undergoing a post-conflict transition and peace-building process after its second civil war within a decade. The latter conflict burgeoned in 2000, after several minor border incursions in 1999. It pitted the forces of Charles Taylor, elected president in 1997 after Liberia's first civil war (1989-1997), against two armed anti-Taylor rebel groups: Liberians United for Reconciliation and Democracy (LURD) and the Movement for Democracy in Liberia (MODEL). The war led to an extreme deterioration in political, economic, humanitarian, and human rights conditions. It also affected neighboring states, which accepted Liberian refugees and, in some cases, hosted anti-Taylor forces. The Taylor regime also sponsored or facilitated acts of armed aggression against its neighbors, Guinea, Sierra Leone, and Cote d'Ivoire. A peace accord was signed on August 18, 2003, after months of international mediation. It was facilitated by two events: Charles Taylor's resignation of the presidency and departure from Liberia on August 11, after he was granted political asylum in Nigeria; and the early August deployment of an Economic Community of West African States (ECOWAS) military intervention force, the ECOWAS Mission in Liberia (ECOMIL). ECOMIL, with extensive U.S. and U.N. assistance, deployed to Liberia to end heavy fighting and alleviate a worsening humanitarian crisis in the wake of a failed June 2003 cease-fire. It was tasked with monitoring and securing the cease-fire, enabling the delivery of relief aid, and preparing the way for the U.N. Mission in Liberia (UNMIL). UNMIL, first authorized by the U.N. Security Council (UNSC) on September 19, 2003, deployed to Liberia on October 1, 2003, two weeks before the National Transitional Government of Liberia (NTGL) took office on October 14. ECOMIL was dissolved and its military forces absorbed into UNMIL, which carries out diverse peacekeeping, civilian policing, and socioeconomic assistance functions in support of Liberia's transition process. UNMIL provides a military guard force for the Special Court for Sierra Leone, discussed below, for which it assumed responsibility from the U.N. Mission in Sierra Leone (UNAMSIL), upon UNMIL's termination in late 2005. U.S. funding for UNMIL is covered in Table 3 . UNMIL has a current authorized force strength of 14,875 military personnel and 1,240 police. As of late April 2010, it had a total force strength of 9,644, made up of individual police (449 in total, 12.9% female); formed police units (845 in total, 16.2% female); military observers (124 in total, 5.6% female); and contingent military troops (8,226, 1.8% female). As of late April 2010, U.S. personnel deployed with UNMIL included 10 individual police, 3 military observers, and 5 contingent troops. A gradual, phased drawdown of the UNMIL force, guided by progress in implementing a series of benchmarks set out by the Security Council and initiated by a UNSC decision to repatriate 1,000 troops in 2006, is continuing. The benchmarks were first proposed in by the U.N. Secretary-General (UNSG) in 2006 (S/2006/159, March 14, 2006), in response to a September 2005 Security Council request for an UNMIL force drawdown plan, to include specific benchmarks and a schedule for achieving that end. The UNSG found that it was "too early for a major drawdown of UNMIL." He called, instead, for a two-year "consolidation period" during which UNMIL would implement an "adjusted mandate" defined by an 11-point agenda of "priority tasks." These centered on achieving such objectives as maintenance of a stable and secure environment; completion of ex-combatant, refugees, and internally displaced persons reintegration; security sector reform; and consolidation of state authority and governance capacity. Notwithstanding a need to complete these tasks, he proposed that "in the absence of an immediate armed threat within Liberia," the military component of UNMIL be reduced by one infantry battalion in mid-2006 and another infantry battalion in early 2007, and that a drawdown of the Mission, beginning in early 2007, security conditions permitting, ensue. By mid-March 2007, the United Nations was reporting significant progress in meeting key benchmarks, including with respect to police and military training, restructuring and reform; management of natural resources; and the creation of a national security strategy and architecture—though each of these activities faced often considerable challenges. Progress toward ex-combatant reintegration and the consolidation of state authority was slower than planned, however, largely due to resource constraints. Due to these and diverse other reconstruction and development challenges, and notwithstanding areas of progress, in March 2007 U.N. Secretary-General Ban Ki-moon, citing what he called "limited progress made in meeting the benchmarks for the consolidation and drawdown of the Mission," recommended a year-long extension of the UNMIL's existing mandate. Assessments of and adjustments to these and a range of subsequent benchmarks, along with two associated, phased UNMIL force repatriations, have since continued. On September 15, 2009, the Security Council passed Resolution 1885 (S/RES/1885), authorizing a third-phase drawdown, to take place between October 2009 and May 2010. It involves the repatriation of 2,029 military personnel, 3 attack helicopters, and 72 armored personnel carriers. Upon completion of this process, UNMIL's force will include 8,202 military personnel (including 7,952 troops in Liberia and 250 at the Special Court for Sierra Leone), while the UNMIL police component will include about 1,344 personnel (465 police advisers, 843 officers in seven formed police units, 23 corrections officers, and 13 immigration officers). Resolution 1885 also reauthorized UNMIL's mandate through September 30, 2010, and ordered that the post-May 2010 UNMIL force size be maintained until the completion of presidential and legislative elections in late 2011, which it authorized UNMIL to assist in administering. It also permitted UNMIL to reinforce the U.N. Operation in Côte d'Ivoire (UNOCI) on a contingency basis, if needed during anticipated elections in Côte d'Ivoire, or vice versa, should the security situation in Liberia deteriorate. The resolution called the "conduct of free and fair, conflict-free elections ... a core benchmark for UNMIL's future drawdown," among others, such as the further development of "national security and rule of law institutions that are fully independently operational." It also requested that UNMIL submit to the Security Council, in collaboration with the Liberian government, a strategic plan aimed at integrating and consolidating post-conflict peace-building, stability, and development efforts in Liberia. In the meantime, the Security Council remains cautious about the extent of Liberia's post-war evolution. In passing Resolution 1903 (December 17, 2009), which renews or alters a range of Liberia-related sanctions, the Security Council declared that "despite significant progress having been made in Liberia, the situation there continues to constitute a threat to international peace and security in the region." UNMIL has implemented measures to prevent, detect, investigate, and punish acts of sexual exploitation and abuse (SEA), in line with recent reforms and renewed U.N.-wide regulations regarding sexual conduct, following abuses in several U.N. peacekeeping missions around the world, including in Liberia. U.N. Resolution 1626 (2005) bars SEA, and UNMIL has created a mission conduct and discipline team and investigatory capacity to ensure adherence to these rules. In mid-March 2006, five crew members of a UN contractor, who had been under investigation for alleged rapes and the assault of Liberian police officers, left Liberia after being released on bond. According to UNMIL, their departure was "highly regretted and the matter is being brought to the attention of the authorities of the country concerned." There were reportedly 12 alleged SEA incidents reported between January 1, 2009, and August 31, 2009, and six such allegations in the period between August 10, 2009, and February 1, 2010. The August 30, 2003, Comprehensive Peace Agreement (CPA), signed by the three warring factions and 18 political parties, laid out a peace process, provided for the creation of the National Transitional Government of Liberia (NTGL), and allocated leadership positions within it. The NTGL was mandated to reestablish functioning government authority and prepare for national elections that were held in mid-October and November 2005. The elected government of President Sirleaf replaced the NTGL in late January 2006, as described below. The NTGL consisted of an executive branch, presided over by a chairman, Gyude Bryant, and an interim parliament, the National Transitional Legislative Assembly. Bryant, a businessman and church layman who led the Liberian Action Party, oversaw the functions of the central government and various public corporations, agencies, and commissions. Bryant was given the title of NTGL "chairman" to differentiate his unelected NTGL role and authority from that of a constitutionally elected president. The transition faced many challenges, most related to the extremely destructive effects of many years of war in Liberia. Others included the dominant role within the NTGL of the three former armed factions, which were prone to internal rivalries; political discord over the allocation of state positions and resources; very limited state capacities; and reported public sector corruption. Peaceful Senate, House of Representatives, and presidential elections were held on October 11, 2005, and a presidential runoff vote was held on November 8. The 22-candidate presidential poll led to a runoff race. It pitted George Manneh "Oppong" Weah, 39 years of age, a former professional top soccer player whose star status and rags-to-riches history make him a hero to Liberian youth, against Ellen Johnson Sirleaf, then 67 years of age, a Harvard-trained economist and former businesswoman who had served as Liberian finance minister and as a United Nations and World Bank official. On November 15, 2005, the National Elections Commission (NEC) declared Sirleaf the winner of the presidential race, with 59.4% of votes against Weah's 40.6%, making her the first-ever female president of an African country. Despite its declaration in favor of Sirleaf, the NEC subsequently probed and later rejected claims by Weah that the election was fraudulent. A presidential election will next be held in 2011. In contrast to the presidential race, election results for seats in the bicameral legislature were disparate; no party received more than 24% of seats in either chamber, and none dominated in both the Senate and the House of Representatives. The largest party in the 64-member House, in which members serve six-year terms, is Weah's Congress for Democratic Change (CDC), which won 15 seats. The Liberty Party (LP) won nine House seats, while Sirleaf's Unity Party (UP) and the Coalition for Transformation of Liberia (COTOL) each won eight. Seven other parties each won between one and five House seats, and seven independent candidates each won a seat. In the 30-seat Senate, in which members normally serve nine-year terms, COTOL won seven seats and the UP won four; all other parties won between one and three seats. Political party mergers in 2009 and 2010, discussed below, have changed the allocation of seats among parties. Notable among the newly elected legislators were several former Taylor regime officials and leaders of former armed factions or security services. These include senators Jewel Howard-Taylor, a former wife of Charles Taylor (NPP; Bong County); Prince Yormie Johnson (independent, Bong County); and Saye-Taayor Adolphus Dolo (COTOL, Nimba County). Johnson is the former leader of a faction that splintered from Taylor's early in the first civil war, and is infamous for personally presiding over the bloody, videotaped murder of former head of state Samuel Doe. He returned to run in the election from exile in Nigeria, where he had professed to have become a born-again Christian evangelist. Dolo is a former pro-Taylor militia leader, known by the nom de guerre General Peanut Butter, who reportedly committed war-time atrocities and recruited child fighters, and who is said to have aggressively opposed UNMIL peacekeeping activities. In the House, they include Edwin Snowe (independent, Montserrado County); Saah Richard Gbollie (NPP, Margibi County); and Kai G. "White Flower B-50" Farley, (CDC, Grand Gedeh County). Snowe, who was elected speaker of the House in mid-January 2006 but has since stepped down, is a former Taylor in-law. He is also the former head of the Liberian Petroleum and Refining Corporation (LPRC), from which Taylor regime officials reportedly diverted significant amounts of funds, some of which may have benefitted Taylor during his exile in Nigeria. Gbollie is a former Taylor fighter and Taylor administration police official accused of human rights abuses. Farley is an ex-MODEL commander and NTGL official accused of threatening the 2003 peace accord. Jewel Taylor, Dolo, Snowe, and Farley are subject to U.N. travel sanctions. With some mostly minor exceptions, the election was reportedly well-administered. About 1.35 million citizens registered to vote in April and May 2005, in a process that was marred by some minor acts and threats of violence and localized disruptions but was generally peaceful. Attempts by some NTGL ministers to try to run for office in the 2005 election, in violation of the CPA, also sparked controversy. About 1.012 million registered voters (74.9%) participated in the October 11 Senate, House of Representatives, and presidential elections, and over 821,000 (60.7%) voted in the November 8 presidential runoff poll. Results from voter registrations at 2,000 sites guided decision making about the composition of constituencies, the placement of about 2,900 polling places, and the distribution of voter education and polling materials. The large number of presidential candidates (over 50 initially, of whom 22 were ultimately registered) and registered political parties (30) reportedly proved confusing for some voters. Key election issues included national reconciliation and unity, corruption, jobs, general economic growth, and social services and physical infrastructure needs. Polling on both elections dates was peaceful. U.N. Mission in Liberia (UNMIL) elections staff and U.N. agencies provided extensive support to the NEC and other relevant agencies involved in such activities as media outreach and civic education, technical elections tasks, and electoral security coordination, as called for under the CPA. UNMIL aid for the elections reportedly totaled about $8 million, and the European Union pledged $1 million. Most of $10 million in U.S. elections assistance supported the programs of the nonprofit democracy strengthening organizations International Foundation for Electoral Systems (IFES), elections technical assistance; National Democratic Institute (NDI), civic education); and International Republican Institute (IRI), political party training. IRI and NDI, the latter jointly with the Carter Center, deployed teams to monitor the elections, as did the African and European Unions, the U.S. and many other governments, and international organizations. The vote was monitored by at least 29 international organizations or governmental entities (369 individuals), as well as 52 civil society groups (over 3,500 individuals) and a roughly equal number of party observers; and 246 local journalists. Weah, who had claimed to have been cheated in the first round, contested his loss in the second round and called for a re-run of the vote. He pursued his claim though a number of formal channels, but after the NEC dismissed his claim, after meeting with Sirleaf, and under heavy international pressure, in late December 2005 he agreed to drop his claim and accept the poll results. Many observers doubted that systematic or large-scale fraud had marred the election. U.S. officials viewed the process as having been orderly, largely well-administered, and free and fair, and such views were shared by most other governments and international entities that observed the vote. The United States nevertheless called for a probe of Weah's claims and for any contest of results to be carried out peacefully and through established legal channels. In late 2009, a by-election—the fifth to be conducted after the 2005 election—was held to fill a vacancy for the Montserrado County Senate seat created by an incumbent's death. None of 10 participating candidates, five independents and five from political parties, won the 51% of votes necessary to win the election outright. This outcome triggered a run-off election between the top two vote winners, a candidate from President Sirleaf's Unity Party and one from the Congress for Democratic Change (CDC), the largest opposition party. The CDC candidate emerged as the victor during the run-off, garnering 56% of votes cast against 46% for the UP candidate. Although the election reportedly featured a low voter turn-out (20% during the first round and 22.4% during the run-off), nearly half of Liberia's electorate was eligible to participate in it, given that Montserrado is the urban county surrounding Monrovia, where about half of Liberia's population lives. As a result, the election was viewed as a dry-run of the ability National Elections Commission (NEC) to conduct a large election ahead of national elections in 2011. According to IFES, an electoral capacity-building non-governmental organization that is working with the NEC, the "process was seen as void of fraud and recognized as free, fair and transparent." IFES also reported that conduct of the "first round saw some logistical and operational challenges," but "the second round was vastly improved," and the NEC's performance was widely lauded by local election stakeholders and international observers. IFES is providing technical and financial support to the NEC under a five-year U.S. Agency for International Development (USAID)-supported project called Building Sustainable Election Management in Liberia . IFES supported the Montserrado by-election by providing the NEC with election administration materials and technical assistance. President Sirleaf took office on January 16, 2006, and shortly thereafter nominated a cabinet seen as dominated by technocrats, professionals, and former opposition or policy activists. In her inaugural address, she laid out a detailed governance agenda, and launched her tenure with a series of actions to counter corruption. Sirleaf highlighted what she pledged would be "a new era of democracy" defined by political inclusion and toleration, non-violence, and safeguarding and promotion of constitutional and civil liberties and rights. She stressed the need for national reconciliation as an "urgent" and "compelling" task facing her administration. During the first 150 days of her tenure, in coordination with donors, her government also pursued diverse rapid impact projects aimed at showing "quick and visible progress." These were grouped under four (initially five) "major pillars": Security; Economic Revitalization; Basic Services and Infrastructure; and Good Governance. The same pillars continue to define her administration's medium- to long-term development efforts. These are spearheaded by an entity called the Liberia Reconstruction and Development Committee (LRDC), which is composed of four working committees, each of which supports a separate "pillar." Sirleaf is pursuing an economic agenda emphasizing the creation of an investment-friendly climate; the exploitation of Liberia's rich natural resources; land tenure reform focused on increasing agricultural production; job creation, notably for youths; and expanded economic and social infrastructure rehabilitation, particularly in historically economically marginalized areas. The Sirleaf administration has consistently emphasized the importance of laying the groundwork for sustained economic growth and job creation. The latter is viewed as key by many observers, both because formal sector unemployment rates are reportedly high and because unemployment is a potential source of instability. The economic and educational disenfranchisement of Liberia's large youth population is viewed as having fueled Liberia's armed conflicts, and joblessness is a continuing source of popular dissatisfaction. In mid-2007, the United Nations reported that the majority of ex-combatants remained unemployed and that thousands had regrouped in order to illegally exploit diamonds, gold, and plantation-grown rubber. Sirleaf has vowed to take forceful action against corruption, including by requiring all key officials to declare their assets and follow a national code of conduct. She strongly endorsed and promised to "enforce" the Governance and Economic Management Program (GEMAP, discussed below) to deal with "serious economic and financial management deficiencies" and pursue an "integrated capacity building initiative." She also vowed to overhaul the "seriously bloated" civil service, while noting that civil servant pay was poor and in arrears. She promised to institutionalize a meritocratic, performance-based civil service system. Sirleaf declared economic private sector-focused regional integration and security cooperation to be her guiding foreign policy goal. She vowed to maintain strong international bilateral and multilateral partnerships. Notably, given recent regional history, she stated that "no inch of Liberian soil will be used to conspire to perpetrate aggression" against neighboring countries. Her government has also shown itself to be open to new foreign ties. Liberia now has diplomatic relations with Cuba, and it established bilateral relations with China in late 2003, after the departure from power of President Taylor, who had maintained relations with Taiwan. Paying homage to what she said were the special efforts of women in securing her election and the peace that made it possible—even in the face of war-related "inhumanity," "terror," military conscription, forced labor, and rape—Sirleaf vowed in her inaugural address to "empower Liberian women in all areas." She pledged to strengthen laws and law enforcement to protect women against rape, support the education of children, notably of girls, and to provide programs to enable women to play a key role in the economic revitalization process. Sirleaf has nominated women to head multiple key ministries and public agencies. Upon taking office, Sirleaf announced an audit of the previous transitional government and dismissed all transitional government political appointees. She also laid off the entire staff of the Finance Ministry, pending a screening of employees' qualifications and level of probity. In February 2006, she revoked all existing timber concession contracts, which had been widely criticized for being let in a corrupt fashion and for being executed in an environmentally unsustainable manner. This action provided the basis, in part, for the U.N. Security Council's June 2006 lifting of a ban on Liberian timber exports. Sirleaf later initiated reviews of other contracts and concession deals granted by the transitional government. In early June 2006, she fired three sub-cabinet level officials and several mid-level civil servants accused of corruption. Her administration has also publicly released audit reports of several state agencies. In mid-April 2006, in a document entitled 150 Day Action Plan: A Working Document for a New Liberia , the Sirleaf administration laid out a detailed status report on short-term, quick impact policy and project implementation efforts and achievements to date. The document, which was aimed both at increasing government transparency and proving her administration's adherence to Sirleaf's campaign and inaugural pledges, demonstrated that most of her plans were being implemented in a timely manner. The Executive Mansion, the equivalent of the U.S. White House, also releases similar documents pertaining to ongoing LRDC activities. Sirleaf has faced challenges in meeting high voter expectations, for instance, in relation to her election promise to provide public electricity in Monrovia within six months of being elected, despite the complexity and great cost of that undertaking. Many voters appeared to have given the new government a honeymoon period, although expectations remained high following what many saw as disappointing performance by the transitional government. The public remains eager to see rapid job growth and rapid improvements in social services and the construction of physical infrastructure, particularly in support of education, healthcare, and transportation. In various public comments, Sirleaf has assured Liberians that her government is successfully continuing to build the groundwork for sustained growth, but has counseled Liberians to be patient, since many ongoing investments in infrastructure, basic services capacity building, and foreign investment business projects will take time to generate jobs and incomes. Several road building projects are currently underway, and the government is examining options for large-scale electricity generation and long-distance power transmission. Despite the fact that such projects, which are largely donor-financed, may not generate general economic growth for some time, Liberia's economy is growing rapidly. In December 2007, the Economist Intelligence Unit (EIU) reported estimates and projections showing a sharp jump in Liberia's gross domestic product, from 5.3% in 2005, to 7.8% in 2006, to 8.5% in 2007, with rates of 9.5% and 11% projected for 2008 and 2009, respectively. In March 2008, Liberia is expected to publish a Poverty Reduction Strategy Paper (PRSP), which expected to guide economic policy and provide the basis an agreement with the International Monetary Fund (IMF) for a credit and technical assistance program for 2008-2010, as well as ongoing cooperation with the World Bank. Liberia is also in the process of awarding offshore oil exploration contracts. President Sirleaf has also been an active participant in African Union activities, sometimes taking stances at odds with other African leaders (e.g., overtly criticizing the June 2008 elections in Zimbabwe as "not credible" and urging the AU to "declare the results unacceptable") as well as those of ECOWAS and the Mano River Union (MRU). She has been particularly been involved in efforts to strengthen the MRU and in efforts to resolve the political crisis in neighboring Guinea. The general public largely gave Sirleaf a political honeymoon in her first years in office, but she has since been the target of some criticism, both of a routine political nature by opposition parties (including Taylor supporters upset by his SCSL trial) and by some human rights and transparency policy advocates. Although many Liberians and international human rights advocates have praised Sirleaf's strongly stated support for such rights and the rule of law, some criticized her nomination of Kabineh Janneh as a Supreme Court Justice, who was later confirmed in the post. Her administration had also been criticized for not creating an Independent National Commission for Human Rights (INCHR), an institution called for under the 2003 peace agreement. In June 2009, however, the president ratified an amended act passed by the legislature in May 2009, and in mid-August 2009 forwarded to the Senate seven INCHR nominees. Criticism has since shifted to the Senate for failing to confirm the nominees. In 2006, there were several reports of assaults or harassment of journalists by members of the Special Security Service (SSS), a Liberian executive branch security agency, and by regular police. In response, the Press Union of Liberia (PUL) threatened to launch a "news black-out" of coverage of the government. President Sirleaf reportedly responded to the allegations by stating that "those who violate the rights of the Liberian people or journalists for that matter will be dealt with and punished appropriately" and that her "government will not tolerate violation of the rights of people, including journalists." Information Minister Johnny McClain also met with the PUL and reemphasized that the Sirleaf administration "is committed to press freedom and that there is a standing policy of respect and cordiality toward the press." The international press rights advocacy organization Committee to Protect Journalists (CPJ) stated in an open letter to President Sirleaf that it was "troubled" by the alleged attacks on the press and that "despite an Information Ministry statement [ ... ] affirming the government's commitment to press freedom, there has been no evidence of an investigation into these incidents nor any public effort to punish those responsible." The CPJ also stated in an open letter to President Sirleaf that While there is no evidence that these incidents are the result of government policy, your administration has a responsibility to restrain security forces from attacking or harassing journalists who are trying to do their jobs. As an organization of journalists dedicated to defending the rights of our colleagues worldwide, CPJ respectfully urges you to make good on your pledges to uphold press freedom by ensuring a prompt and transparent investigation into these cases. Some critics have alleged that the Sirleaf government, like its predecessors, is corrupt, but the Sirleaf Administration rejects such accusations, citing its record of anti-corruption actions. Given the historically embedded presence of public sector corruption in Liberia, the government' approach to addressing the problem combines a continuing series of law enforcement actions, institutional reforms, and education and training programs. It may, however, face difficulties in prosecuting indictments, given the limited capacity of Liberia. Another challenge is to ensure that it pursues enforcement actions in a professional and apolitical manner, as recent Liberian history has been marked by the use of corruption prosecutions as a tool for achieving political retribution. The Liberian government under the Sirleaf Administration has recorded a number of successes in fighting corruption, but it remains a key, abiding challenge, as President Sirleaf has publicly acknowledged on many occasions. During her May 2010 visit to the United States, she described corruption in Liberia as a "systemic" and "societal" phenomenon attributable to a decades-long, entrenched value system which could be characterized as one of dependency and dishonesty ... [and as] a means of survival for many of the people who did not have jobs, were conscripted into warring factions, who had no skills and had never been to school ... [and] were placed into the civil service. In late August 2008, President Sirleaf signed into law a bill establishing a Liberia Anti-Corruption Commission (LACC). In September 2008, she appointed as its chair Frances Johnson Morris, a former minister of Justice and Commerce and the former head of the National Elections Commission, and a Sirleaf relative. Her Administration has also highlighted reported progress in fighting corruption, for instance by citing the country's rapid positive progress as measured by the World Bank Institute's Worldwide Governance Indicators . The government as also strongly supported the Governance and Economic Management Assistance Program (GEMAP) and the Liberia Extractive Industries Transparency Initiative (LEITI), both discussed below. A government Public Procurement and Concessions Commission (PPCC) is also pursuing a range of efforts to ensure transparency and accountability in government purchases and contracts. Sirleaf has also highlighted increased public sector compensation and ongoing capacity-building in the judicial sector, particularly with respect to increasing the prosecution of corruption-related crime, as key to furthering her Administration's efforts to combat corruption. Despite such efforts, some Sirleaf Administration officials have periodically been accused of corruption. In September 2008, President Sirleaf appointed a special seven-member independent corruption commission, the so-called Dunn Commission, named after its chair, Dr. D. Elwood Dunn. It was charged with investigating allegations that certain current and former Sirleaf Administration officials had received contract renewal bribes from the U.S. head of the Liberian International Ship Corporate Registry (LISCR) aimed at preventing a competitive bid for the work, as well as allegations of other corrupt actions, in several cases associated with former Acting State and Presidential Affairs Minister, Willis Knuckles. The Administration also faced allegations that it had attempted to cover up the issue by bribing journalists not to report the story. The Commission, which hired the James Mintz Group as an expert technical investigator, issued a public report of its findings in January 2009. There have also been a series of other cases of apparent actual or alleged corruption involving top officials, in many cases uncovered by investigations by the independent General Auditing Commission (GAC). Led by Auditor-General, John Morlu, who has publicly criticized the Sirleaf Administration's record on corruption, the GAC has released reports indicating several million dollars worth of unaccounted spending within the Health, Education, Mines and Finance ministries. Prominent cases involving key officials, among others, include the suspension in October 2009, resignation in January 2010, and current prosecution of the former information minister, Lawrence Bropleh, over allegations of his involvement in a "ghost worker" fund diversion scheme; a procurement irregularities case that led to the February 2010 resignation of the then-internal affairs minister, Ambulai Johnson, Sirleaf's brother, and questions over the origins of his personal assets; the September 2009 dismissal of Harry Greaves, a former Sirleaf advisor, as managing director of the Liberian Petroleum Refinery Corporation (LPRC) over a case involving Greaves' alleged involvement in the allocation of a contract to a firm in exchange for compensation more than double as large as the estimated value of the contract by another bidder, and allegations of bribery pertaining to an ensuing investigation of the contract award; and the resignation in 2009 or removal of serving ministers, including Agriculture Minister Christopher Toe, Public Works Minister Luseni Donzo, and Justice Minister Philip Banks, in cases involving alleged fiscal mismanagement, administrative irregularities, or other matters, and there have been allegations of mismanagement and possible corruption regarding the administration of county development funds, of which, as a result, the presidency has taken control. Liberia's security situation has improved markedly since August 2003. It is currently "generally stable, but fragile," and is subject to periodic volatility and localized instability. Public security and police authority are formally entrusted to the Liberia National Police (LNP), who are advised and supported by UNMIL civilian police (CIVPOL). LNP patrols in the capital reportedly increased in the latter half of 2009, leading to a marked decrease in armed robbery, but rates some other serious crimes, including rape, notably of juvenile females, have remained high. Despite increasing LNP capacity, the LNP continues to face serious challenges, and the public often perceives public security as being guaranteed by UNMIL CIVPOL, who earlier during UNMIL's deployment played more direct roles in ensuring that end. The LNP is reportedly making progress in building up its capabilities, but reportedly remains beset by operational deficits and absenteeism, has a limited presence and mobility in many rural areas, and some LNP members reportedly engage in acts of bribery. In addition, the capacity of the judicial sector remains limited, and public confidence in the judicial system is low; according to the State Department, the "Liberian public views the police and other formal justice institutions with fear, skepticism, and mistrust." There have also been clashes between police, other security agency units, and Armed Forces of Liberia (AFL) and. Some AFL members have reportedly violently assaulted or robbed civilians. As a result of public mistrust in the capabilities and of the LNP, other security agencies, and the judicial sector, vigilantism and periodic mob violence present continuing problems. A key post-war source of instability in Liberia, former fighters associated with various armed factions, was largely neutralized in the year after the August 2003 peace agreement was signed. More than 101,000 ex-combatants (22% women and 10.8% children), were demobilized under a disarmament program administered by UNMIL and the NTGL that ended in late 2004. Some demobilized fighters remain a periodic source of sometimes violent protest, mostly related to the status of generalized joblessness among ex-combatants and the demands of those who are owed reintegration job training and subsistence assistance. A small minority of ex-combatants have reportedly turned to crime, including armed robbery and the illegal exploitation of natural resources. Public protests relating to severance and pension payments by former members of the Liberian military and members of security services not included in demobilization programs have generally subsided. Other public security threats include a wave of armed robbery in Monrovia, which the government is attempting to suppress, and periodic civil unrest related to socioeconomic grievances, predominantly involving students, workers, civil servants, and jobless youth. Price increases for rice, fuel, and cement are also sources of public dissatisfaction. In her annual address to the legislature in January 2008, Sirleaf stated that she would temporarily suspend a $2 tax on bags of rice, the Liberian staple food, pending consideration of a legislative tax reform proposal. Periodically, ritual-related killings by so-called "heartmen" provoke public safety fears and sometimes mob violence against alleged perpetrators. Community-level property dispute conflicts have repeatedly occurred throughout Liberia, but notably in Nimba County in northern Liberia between members of the Gio/Mano and Mandingo ethnic groups. Contested claims over home and land occupancy and ownership rights are often at the center of such disputes, which sometimes take on ethnic dimensions. Such disputes often have origins in property occupations and appropriations that occurred as a result of war-time population displacements and movements. Lack of land rights documentation, property fraud, often involving state officials, and the absence of effective dispute resolution mechanisms have aggravated such problems. A Presidential Commission created to probe such disputes in Nimba County recommended that a process of community reconciliation and dispute resolution be pursued, and President Sirleaf ordered that contested properties in Nimba be returned to their legal owners. In addition, an act creating a national Land Commission charged with pursuing reforms in land tenure and ownership policy, laws, and administration, in part to resolve and prevent land conflicts, was signed into law in August 2009. The Commission, which was formed in late 2009 and became operational in early 2010, has a five-year mandate. It is receiving capacity-building assistance from the U.N. Human Settlements Program (UN-HABITAT). Political parties who lost in Liberia's elections and the attendant realignment of Liberian political forces remain a potential source of instability or violent acts. The family of a witness in the SCSL trial of former president Charles Taylor (see " Taylor Trial "), for instance, was reportedly targeted with death threats in early 2008. Prior to his capture, U.N. and U.S. officials and many Members of Congress had been concerned about persistent, credible reports that Taylor had periodically interfered in Liberian affairs from exile in Nigeria through a network of political, military, and business associates, which Taylor denied. These alleged actions were seen as destabilizing and threatening to the consolidation of peace (see section on Taylor below). There had been some speculation that former Taylor administration officials would make large gains in the 2005 elections and that he would be able to use them as proxies to influence the new government. There was no such general outcome, but several close Taylor associates were elected (see " 2005 Post-War Elections "). In July 2007, George Koukou, the transitional government house speaker, Charles Julu, a top military officer under former president Samuel Doe who was accused of wartime human rights abuses, and several associates were arrested and charged with treason for allegedly plotting the ouster of the Sirleaf government. They were acquitted, however, in May 2008. Liberia remains under U.N. sanctions, which were first imposed to counter the Taylor regime's alleged regional destabilization efforts and other activities counter to international law and U.N. policy goals. Under the current sanctions, individuals associated with the Taylor regime's activities remain subject to a U.N. travel ban and, in some cases, asset freezes. Liberia also remains subject to a partial arms embargo. Bans on the export of Liberian timber and diamonds have been lifted. The threat to Liberia from instability in neighboring Côte d'Ivoire, which posed a significant external threat to the stability of Liberia and to sub-regional security for several years, according to United Nations reports, waned after the signing of a political accord in that country. Widespread violent general strikes in neighboring Guinea in early 2007 and political instability in Guinea in 2009, following a coup d'état in late 2008 after the death of then-President Lansana Conté, was also viewed as potential external threat to Liberia. The appointment of a new transitional government in Guinea following the signing of an early 2010 accord, however, appears to have substantially lessened any threat to Liberia. Although there have been currently no specific publicly reported personal security threats against President Sirleaf, the United States provided her with a personal State Department Diplomatic Security team at the start of her tenure and supported training efforts for the Special Security Service, Liberia's presidential and VIP protection service; see below. An electrical fire in the Executive Mansion in July 2006 during a visit by neighboring heads of state highlighted Liberia's general lack of emergency services. Firefighters from UNMIL, the Firestone rubber company, and the international airport, the latter two based about 45 minutes out of the capital, were called in to fight the blaze, since National Fire Service largely lacks the capacity to respond to fires in the capital. That lack of capacity was again illustrated in August 2006, when the U.S. Navy's Apache , an ocean tug boat, helped to extinguish a fire on a commercial freighter in the Port of Monrovia, and later rescued a fishing crew at sea. The Apache crew was in Monrovia to conduct repairs on the city's main commercial pier and survey the harbor. Following the Apache 's departure from Liberia, marine safety experts from the International Maritime Organization (IMO) undertook an assessment of Liberia's search and rescue capabilities. Rubber has traditionally been a key source of state export revenues and employment in Liberia. The presence, however, of ex-combatants on several rubber plantations, some armed, undermined the industry's post-war redevelopment. In the years after the 2003 peace agreement, rubber workers and local residents near plantations reported that former fighters robbed them and coerced them into selling rubber latex at sub-market prices, in the process earning revenues that were reportedly not taxed. Ex-combatant control of plantations also reportedly resulted in unsustainable harvesting practices, various human rights abuses, and environmental degradation. To address this situation, in 2006 the government and armed UNMIL troops took possession of Gutherie, a major rubber tree plantation in western Liberia, from former LURD ex-combatants who had squatted on it, tapping rubber and in some cases controlling local rubber sales. Gutherie was reportedly the site of forced child labor and diverse violent crimes against persons. The repossession was one of the objectives of a joint government-U.N. task force created to make the rubber industry transparent, environmentally sound and sustainable, subject to state governance and regulation, and a source of legal jobs—including for the ex-combatants from whom control of Gutherie was seized. UNMIL plans called for a similar seizure of another key ex-combatant-occupied rubber plantation in the southeast county of Sinoe, though ex-combatants at the plantation reportedly met with local officials and agreed to vacate the site peacefully. In May 2006, the UNMIL Human Rights and Protection Section (HRPS) studied Liberia's rubber sector and published a series of key findings and recommendations pertaining to the sector. Issues that it examined included human rights concerns pertaining to the industry; post-conflict business practices and corruption; the status of and role of commercial rubber concession and management agreements; worker, child, and community rights; implications of plantation agriculture and sectoral industrial practices for the environment; and the rule of law within the rubber sector, including issues relating to ex-combatant occupation of plantations. While the normal peacetime functioning of the rubber sector has largely resumed and the sector has been brought under state regulatory control, in February 2010 UNMIL reported that The situation in and around Liberia's rubber plantations continued to be of concern. Labour disputes, including over salary and severance payments, prompted demonstrations at the Guthrie and Cavalla plantations, with the conflict over control of rubber at Sinoe Plantation continuing to be a major security concern. In addition, in November 2009 the president and general manager of a large-scale rubber plantation and rubber processing firm, who also served as the chairman of Liberia's national Public Procurement and Concession Commission was murdered, "allegedly by disgruntled workers" near the firm's work site. With U.S. assistance, Liberia has created a new military made up of approximately 2,000 initial recruits. The force is commanded, on an interim basis, by officers from other countries in West Africa, including Nigeria, Ghana, and Benin. The recruit pool was drawn from across Liberia and includes members from diverse ethnic groups to ensure ethno-regional balance. A goal that 20% of the total force be female was not met; less than 5% of the force is female. Selection of volunteer enlistees, for purposes of screening out human rights abusers, began in early 2006, and less than 20% of applicants were accepted. Prospective recruits underwent a vetting process administered by U.S. contractors that included reviews of selectees' records by personnel from the U.S. embassy, UNMIL, and other donor governments, and Liberian civil society and government representatives. As of late January 2009, recruiting of 2,057 personnel had been completed, and basic training for all elements was completed in late 2009. As of mid-August 2008, 45 recruits had been commissioned as officers. Despite having received commissions and training, in mid-2008, UNMIL officials viewed the "command effectiveness" of the officer corps as limited and in need of further development. Military restructuring was initially hindered by a need to demobilize and verify the severance pay eligibility of over 13,000 irregular forces and Armed Forces of Liberia (AFL) soldiers. Funds for this purpose were initially scarce, but all irregular and regular forces were demobilized. U.S. assistance for these post-war military security sector reform (SSR) activities was administered by the State Department and carried out primarily by the defense services contractors DynCorp International and Pacific Architects and Engineers (PAE). DynCorp was charged with helping to vet, recruit, and provide basic training and equipment for the new force. It also refurbished and provided operations and maintenance services for two AFL bases, Camp Sandee Ware (formerly known as VOA Camp) and Barclay Training Center (BTC), and provided O&M for the two bases. PAE provided construction services and specialty training, equipment, logistics, and base services. State Department expenditures for U.S. assistance for military SSR and the training of the reconstituted post-war AFL are estimated at $240.56 million through the end of FY2009, when the bulk of new AFL training had been completed. Part of this funding supported base reconstruction and operations and maintenance. Additional funding for these and related purposes may be provided in FY2010 and FY2011, respectively; $5.2. million had been obligated as of early FY2010 (see below). FMF and IMET Defense Security Cooperation Agency (DSCA)- administered assistance programs for Liberia, which are not formally a component of U.S. military reform/restructuring assistance programs, have bolstered and complemented these efforts. U.S. assistance for military restructuring was also accompanied by efforts to help Liberia build the capacity of its Ministry of Defense (MOD) and establish a defense policy framework, although lapses in funding for this effort reportedly resulted in mixed results and a loss of capacity-building opportunities. Two results of these efforts were the approval of a new Liberian national security strategy in January 2008 and the passage in August 2008 of a new national defense act. In early 2010, U.S. assistance for defense sector reform, which is in general facilitated by the existence of a U.S.-Liberia military cooperation agreement, entered a new phase. Initial training of the founding units of the new AFL ended in December 2009, by when the force had achieved operational status and undergone an Army Readiness Training Evaluation Program (ARTEP). The Liberian MOD assumed full formal control of the newly trained force in early 2010. U.S. support to the new AFL has shifted from a program of contractor-based basic training and capacity building to one centering on military-to-military mentoring and advice, bolstered by some continuing assistance in support of AFL base operations and maintenance (O&M) and certain other functions. DynCorp International has been contracted to provide $5.2 million worth of support for electrical power generation, water supply, waste disposal, and vehicle maintenance at two AFL bases during the first half of 2010. The Army Corps of Engineers also tentatively plans to fund the "design, construction, upgrade and revitalization of several arms storage and ammunition storage facilities" at AFL bases. UNMIL troops are also pursuing joint training with specialized AFL units, e.g., engineering, military police, and signal and headquarters staff. The mentoring mission, supported with State Department Foreign Military Financing (FMF) funding under a program dubbed Defense Sector Reform (DSR) Phase I, began in early 2010 and is slated to run for five years. It is being undertaken by a Marine-led team of approximately 60 U.S. Africa Command military personnel drawn predominantly from the Marines but also incorporating members of other services. Their collective deployment and activities are known as Operation Onward Liberty. Activities under the DSR program are vetted and authorized by the U.S. Ambassador to Liberia, Linda Thomas-Greenfield, although day-to-day work is undertaken by the designated AFRICOM officer in charge (a Marine Forces Africa [MARFOAF] officer), who reports to AFRICOM and the Ambassador via the embassy-based DOD Office of Security Cooperation (OSC). The objective of Operation Onward Liberty is to help the Liberian government "build a professional military that is apolitical, subordinate to civilian leadership, and respectful of human rights." Team members will advise AFL units at various command levels as they pursue continued locally led training, particularly at the unit level. Such continuing training is viewed as a critical follow-up to previous basic training; according to the UNSG, "it is assessed that the Armed Forces of Liberia will not be independently operational before 2012, given that the Force's officer corps needs significant additional experience before it is able to take command." The DSR program is to be complemented by a program of assistance by the Defense Department's Defense Institution Reform Initiative (DIRI) that is slated to focus on improving the capacity of the MOD and Liberia's defense policy structure. The DIRI Liberia program is currently being formulated. An initial consultative DIRI team visit to Liberia (part of what DIRI terms its "Requirements Determination") took place in September 2009 and a follow-up program assessment and implementation visit (part of a DIRI "Program Development" process) followed in March 2010. The Liberian MOD has established a Liberian working group to collaborate with the U.S. DIRI team, which DIRI officials interpret as indicating "strong Liberian interest in, and ownership of, the project." A key initial area of planned activity is work to finalize National Defense Strategy (NDS), integrating inter-agency and AFL inputs, "that would empower the Ministry to effectively develop policy, budgets, and resource management plans, and manage logistics, personnel issues, and public relations." A further U.S. DIRI team was slated to take place in mid-April and at six-week intervals thereafter. A longer-term program roadmap, with associated benchmarks, will also be designed and implemented. These activities will be assessed every 12-18 months. While the United States is currently continuing to provide operations and maintenance support to the AFL, as defense sector capacity-building proceeds, the long-term success and sustainability of the effort will increasingly rely on the ability of the Liberian government to adequately manage and fund the new AFL. Funding, in particular, may pose a significant challenge, given Liberia's modest annual national budget. Defense Minister Brownie Samukai, Jr., however, has asserted that the government intends to keep the defense budget at a 9% or less share of the overall national budget, suggesting that the government is taking measures to ensure that defense reform is both adequately funded and fiscally sustainable. Competing development and reconstruction priorities in the long-term, however, may decrease the availability of resources for the defense sector, particularly if advocates of increased social welfare expenditures successfully argue that non-defense investments are more likely to produce larger and more productive, tangible benefits for a larger number of Liberians than the defense sector. While some may contend that Liberia can ill afford to unilaterally fund a national military, the need for continued AFL and MOD professionalization is widely viewed as crucial, for multiple reasons. Prominent among these is a core national defense rationale: Liberia lies within a sub-region that has experienced substantial political instability and cross-border armed conflict in recent decades, and must be able to defend its territorial integrity. Such investments are also seen as being necessitated by a need to prevent a recurrence of the politically destabilizing role that Liberia's military and state security forces have played in the past. Training and constitutionally based military institution-building are seen as necessary in order to ensure that the new AFL does not intervene in civilian politics or engage in other extra-legal activities. While there are no indications that the new AFL—which is explicitly designed to function as an apolitical, professional force—is a likely to reprise such a destabilizing role, there have been occasional problems of AFL absenteeism, rank and file protests about living conditions, and some reports of indiscipline among some AFL members, in some cases of a violent or criminal nature, or involving intoxicants. While the scope of such phenomena have been limited to date and do not threaten state stability, the contemporary history of civil-military relations in the West Africa suggests that, if not addressed, they may have the potential to develop into more serious threats. Military absenteeism and indiscipline, both within Liberia and in the surrounding sub-region, have historically underpinned negative outcomes ranging from military ineffectiveness to abuse of civilians by diverse military units, and military protests over pay and living conditions have spurred state instability and played a causative role in several coups d'état and putsches. It is notable that, as of early 2010, while U.S. defense equipment has been donated to the Liberian MOD, weapons and ammunition reportedly continued to be under U.S. control. In order to protect Liberia's 360 mile coast line and associated 200 nautical mile exclusive economic zone against periodic poaching by foreign trawlers, potential drug trafficking, human trafficking, piracy, and illicit maritime dumping, as well as the need for search and rescue capacities, Liberia is developing a coast guard. The effort is dependent, in large part, on the provision of U.S. training and technical assistance funded primarily with State Department Foreign Military Financing (FMF) funding through Defense Security Cooperation Agency in collaboration with AFRICOM. The field program is coordinated and carried out by the U.S. Coast Guard (USCG), with some assistance from U.S. Navy elements. In August 2008, in response to a 2007 request from the Liberian government and a subsequent request from AFRICOM, and in coordination with the U.S. embassy in Monrovia, a USCG team conducted an in-country technical needs assessment to identify Liberia's potential coast guard needs and capacities. It subsequently produced an assessment report and recommendations based on its findings, which it presented to the U.S. embassy in Monrovia and the Liberian Minister of Defense in early 2009. Following this presentation, the Ministry of Defense (MOD) identified a pool of Liberian Coast Guard (LCG) personnel composed of new AFL members who had already undergone background vetting and basic military training. In February 2009, a delegation of Liberian MOD and U.S. Embassy personnel visited USCG facilities in Washington and Virginia to discuss prospective LCG development plans and to make field visits to small-scale USCG stations viewed as comparable in size and function to future LCG stations. The assessment report, which was comprehensive and included a number of core recommendations, was intended to function as a guideline for the creation of a more detailed LCG development plan. It provided a discussion of common pitfalls often associated with nascent coast guard development efforts, and recommended, in the interest of program sustainability, that Liberia take a staged approach to developing and initiating LCG operations. It urged that Liberia fully construct and staff LCG primary headquarters facilities at Freeport, Monrovia's main port, prior to establishing additional LCG stations, and that the LCG carefully coordinate the timing of training, facilities and infrastructure preparation, and equipment acquisitions. A crucial overarching recommendation was that LCG development be guided by a full-time, well experienced advisor or advisory team. The Liberian government concurred with these recommendations and initiated development of a LCG with a mission to carry out scaled down versions of applicable USCG functions (e.g., law enforcement, fisheries protection, and search and rescue). As a result of consultations between the Liberian government, AFRICOM, U.S. embassy personnel, and the USCG, an AFRICOM-funded USCG maritime/LCG advisor was deployed to Monrovia in September 2009. LCG personnel, who number under 50 members, subsequently began basic maritime operations, law enforcement and engineering training provided by USCG Mobile Training Teams (MTT) in Liberia. Further MTT training is expected to continue for multiple years and may be periodically supplemented by U.S. Navy training. A small cadre of selected LCG members, both officers and enlisted, are undergoing additional USCG technical and managerial training in the United States. An activation ceremony for the new LCG attended by President Sirleaf was held in February 2010. U.S. training efforts have been complemented by a U.S. Navy Construction Battalion (Sea Bee) team, which is building waterfront facilities (e.g., a boat ramp and a related pier) at Freeport. The Liberian government has also rehabilitated or constructed a headquarters and barracks at Freeport. Two 25-foot Defender-class boats for use in harbor and near-coast operations are expected to be provided to the LCG by the United States in late 2010, along with approximately two years worth of associated equipment. The duration of U.S. assistance to the LCG will depend on LCG development progress, and has not been determined; informal projections, based on the record of similar U.S. assistance programs in Georgia and Haiti, however, suggest that the effort is likely to last at least five years. Liberia was added to the National Guard State Partnership Program (SPP) in 2009, making it the eighth African SPP partner country out of 62 globally. Liberia has been twinned with the Michigan National Guard (NG). The SPP pairs U.S. state National Guard contingents with foreign militaries in support of diverse civil-military and security cooperation partnership, training, and exercise activities, depending on mutual partner needs and capacities. The program is designed "to concentrate a small component of the U.S. defense structure—a state's National Guard—on a single country or region in support of U.S. Government policies" in support of "the development of long term personal relationships and interagency coordination mechanisms that would not otherwise exist." The Michigan-Liberia SPP partnership program remains at a formative stage. The process leading to its creation began in May 2009, when after agreeing to a Liberian request for an SPP state partner, AFRICOM requested that the NG Bureau (NGB) recommend a state to fulfill the request. The NGB provisionally decided to make Liberia a SPP partner in August 2009, and Michigan was selected as Liberia's U.S. state SPP partner in October 2009. While a specific Michigan-Liberia SPP country engagement plan has yet to be finalized, it is anticipated that the partnership program would build on and complement existing AFRICOM and State Department/U.S. Embassy-Monrovia country plans. A next step in creating an SPP engagement plan, based on past SPP experience in other countries, is likely to include a Michigan NG field visit to Liberia, during which Michigan NG would consult with U.S. embassy-based State and DOD officials and Liberian MOD officials. Based on provisional findings and planning, a Michigan Bilateral Affairs Officer (BAO) would then be assigned through AFRICOM to the embassy's DOD Office of Security Cooperation (OSC). The BAO would act as a key liaison and consultant in further formulating a SPP engagement plan. Reciprocal senior leadership country consultative visits between the Michigan NG and Liberian MOD would then occur, and a partnership plan would be finalized. The Liberian government has voiced support for the new U.S. Africa Command, and offered to host it in the region, although most observers see this as unlikely, given the poor state of Liberian infrastructure and limited state capacity and resources. Liberia has received multiple U.S. Africa Partnership Station (APS) ship visits, most recently in the fall of 2009. Missions have included Liberian Coast Guard Assistance (see above), U.S. Marine training for the AFL, humanitarian and development material and medical services donations, and cultural programming. A U.S. Navy-led effort, the APS program conducts ship visits to ports in the region during which a variety of training, capacity-building, humanitarian, and cultural activities are undertaken. The APS program, housed on U.S. navy ships, is designed to function as a "maritime university" housing diverse training and assistance resources. It integrates personnel from other U.S. armed services, civilian agencies, and non-governmental organizations to provide diverse types of maritime safety and security training, as well as humanitarian and development assistance. Liberia is the signatory of a ship boarding agreement with the United States under the Proliferation Security Initiative, a U.S. effort to prevent trafficking of weapons of mass destruction and related materiel "to and from states and non-state actors of proliferation concern." The United Nations reports that police reform and restructuring efforts have made significant progress but that significant challenges remain. As of mid-August 2008, 3,661 Liberian National Police (LNP) officers, of which 9% were female, had been trained as part of an effort to complete recruitment and training of an initial target of 3,500 police officers by July 2007. While a full complement of LNP officers has been trained, the United Nations has reported that LNP operational capacity remains weak. LNP deployment to the field, particularly up-country, is limited and has faced constraints, such as lack of basic infrastructure and police equipment, including vehicles, fuel, and communication gear, for which the LNP is largely dependent on donor support. In recent years, the United Nations has also reported that there are high rates of LNP absenteeism and other disciplinary problems, such as corrupt practices involving judicial and law enforcement officials, and that LNP leadership and specialized skills are limited. In part due to limited police and broad justice sector operational weaknesses, incidents of mob violence and vigilante justice remain common. The "practical import" of such weaknesses, the UNSG reported in mid-2008, is that the United Nations police advisers and formed police units are daily called upon to support the Liberian National Police in mounting operations critical to the maintenance of law and order and to sustain the emerging peace and stability in Liberia. While the challenges facing the LNP remain substantial, diverse efforts to address them are being pursued, including the development of a Professional Standards Division to effectively investigate complaints of LNP misconduct and efforts to prevent absenteeism by vetting LNP payroll records and the duty status of officers. In mid-2008, the LNP, in collaboration with U.N. partner agencies, held a workshop to examine the long-term strategic development of the LNP, including with regard to professional standards, logistics and maintenance systems, human resource development, and effective management. In mid-2009 and again in September 2009, the LNP presented to donor government a strategic plan and 18 proposed capacity building projects estimated to jointly cost $18 million. Little donor support had been provided to fund the plans as of early 2010, but in 2009 the UNDP established a Liberia Justice and Security Trust Fund, and some donors are reportedly interested in funding police needs though it or on a bilateral basis. Due to previous U.N. Security Council arms embargos, the LNP is unarmed, with the exception of a Police Support Unit (PSU) and an Emergency Response Unit (ERU). The PSU, originally slated to include 600 personnel, currently has a force size of 200. It is intended to provide armed backing for regular LNP officers and respond to situations of public disorder. The ERU is designed to provide mobile capacity to respond rapidly and robustly to critical threats to internal security or public safety, particularly in anticipation of the eventual departure of UNMIL from Liberia. The ERU has a current strength of 287, with an additional 47 staff expected to join the force after completing training in March 2010. Originally envisioned as a 500-person force, in response to the current level of tactical demands on the unit, it will not be further expanded in the short-term. While the ERU has been a key recipient of foreign capacity building assistance, its long term sustainability and effectiveness may be curtailed by resource constraints and lack of equipment and vehicles necessary to reach remote parts of Liberia, notably after the eventual termination of UNMIL. Due to very poor road conditions in many parts of Liberia, the unit is heavily "dependent on UNMIL air assets to deploy quickly, particularly during the rainy season." The United States is continuing to provide the LNP and its ERU with training assistance through UNMIL, as it has for several years, primarily through U.S. civilian police (CIVPOL) seconded to UNMIL, who provide training, mentorship, and advice. The U.S. police training contingent, the size and focus of which has varied from year to year, has typically consisted of 10 to 20 U.S. CIVPOL officers, as well as equipment and contractor-based logistical support, in addition to other police capacity-building support. This aid, which is administered by the State Department's International Narcotics and Law Enforcement Affairs Bureau (INL), is aimed at developing the LNP "into a credible and competent police service that respects human rights and the rule of law" and "bolstering the operational and administrative capacity of the LNP," which the United States views as "a critical precursor" to eventual draw-down of UNMIL. Improved police-community relations and human rights abuse prevention are keystones of this training. A another component of INL support is the deployment of a U.S. police Senior Advisory Team (SAT), which works with UNMIL "to help the LNP leadership improve and establish personnel policies, internal affairs, logistics, payroll, discipline, promotion, and civilian oversight" both through the provision of technical advice and through leadership mentoring. In FY2010, the Obama Administration plans to deploy additional ERU advisors to provide field training and mentoring program for the ERU; provide training and equipping for the PSU; and provide non-lethal equipment and support police infrastructure improvements. U.S. and UNMIL assistance efforts also support the rehabilitation of the judicial and penal systems. U.S. efforts are provided under the INL-administered Justice Sector Support Liberia (JSSL) project, as well as by USAID-funded rule of law programs. The general aims of the JSSL program are to improve the administration of justice and bolster adherence to the rule of law generally and respect for human rights. The JSSL deploys justice sector legal and technical advisors, provides training, professional mentoring, and equipment, and helps develop and strengthen justice sector effectiveness and infrastructure. The program focuses on the judicial system broadly, including the Ministry of Justice, the corrections system, and other rule of law organizations. It has helped create Liberia's first ever public defender program, train prosecutors, renovate the main judicial building in Monrovia, create a case-numbering system slated to be scaled up nationally, and enhance LNP-prosecutor linkages, as well as providing some vehicles and equipment in support of such functions. Current efforts seek to expand capacities outside of Monrovia. The Special Security Service (SSS), which provides executive branch and VIP close protection services, is undergoing a process of restructuring and professionalization. It was a roughly 1,252-member presidential protection unit that functioned under the NTGL and the Taylor government. Under Taylor, the SSS—which was run by Benjamin Yeaten, a former Taylor militia commander who is currently being sought by the Sirleaf government for alleged treasonous activities—gained a reputation for brutality. The SSS has continued to have a sometimes troubled reputation. Some members of the leadership that initially served under the Sirleaf Administration were viewed by informed observers as unprofessional and corrupt. Multiple acts of arbitrary violence committed by SSS officers have been reported. As part of the restructuring process, a substantial number of SSS members were decommissioned; on May 1, 2006, UNMIL announced that 841 SSS members had accepted U.S. and UK-funded buyout packages and been deactivated in April. There are press reports, however, that allege that some decommissioned SSS officers had not received their severance packages, and there have been protests associated with such claims. Some protesting claimants, however, are reportedly ineligible to receive severance payments. The restructuring process, which seeks to correct reported leadership weaknesses and professionalize all aspects of SSS organization and operations, is being undertaken with the assistance of the State Department's Diplomatic Security Service (DSS). Using a mix of Nonproliferation, Antiterrorism, Demining and Related Projects (NADR) and other foreign assistance funds, DSS directly provided close protection services for President Sirleaf during the first few months of her tenure, while about 100 SSS agents underwent specialized DSS close protection training in Liberia and in the United States. About 300 SSS agents received basic close protection support and perimeter training in Liberia. About 600 SSS officers have also reportedly received general UNMIL police training. Humanitarian conditions are much improved from the context of severe and widespread post-war need that was prevalent in the years after the war, but high rates of poverty remains endemic. Liberia continues to receive substantial international food aid and is highly donor-dependent. International assistance is, however, increasingly supporting resettlement and socioeconomic recovery, rather than emergency humanitarian needs. According to a U.N. High Commissioner for Refugees (UNHCR) briefing note, about 200,000 Liberian refugees had repatriated by mid-February 2006. By late April 2006, over 321,000 Liberian internally displaced persons (IDPs), including over 59,000 families, had returned to their places of origin or resettled. Most had received resettlement assistance, usually consisting of basic non-food items, transport aid, and two months of food supplies. U.N. agencies, together with non-governmental organizations (NGOs) and NTGL ministries have implemented a wide range of reconstruction and capacity building projects relating to nutrition, water and sanitation, primary health care services, and transport infrastructure. Numerous schools have reopened nationwide, with extensive assistance from UNICEF. Nearly all child ex-combatants were reportedly been reintegrated into their communities of origin, and many received follow-up aid in the form of social services. In mid-March 2006, the U.N. Secretary-General reported (S/2006/159, March 14, 2006, op. cit. ) that 65,000 of 101,495 demobilized ex-combatants had benefitted from donor-financed reintegration and rehabilitation projects, and that about 37,000 were still waiting to be placed in such programs. The Secretary-General reported that although funding was available for most of these ex-combatants, about $5 million was "urgently needed" to provide such assistance to some 5,125 ex-fighters. Liberia faces substantial public health challenges. Malaria is endemic, water-born stomach illnesses are common, tuberculosis cases often go uncured, and there are periodic outbreaks of diseases like Yellow Fever, measles, and cholera, but Liberia lacks an adequate health infrastructure for combating such illnesses. Medical supplies and trained staff are in chronic short supply. A number of donor-backed initiatives help improve health care capacity, however. UNICEF is aiding the reopening of health clinics nationwide, and a UNICEF/WHO polio vaccination campaign that began in October 2004 has reached some 1.2 million children. WHO coordinates a U.N./government/NGO/USAID technical group that is working to improve the national health system, notably regarding HIV/AIDS, malaria and tuberculosis (see below). WHO and FAO are also helping the government to create an avian flu surveillance and response plan. The threat of HIV/AIDS in Liberia is gaining increasing attention, though recent survey information indicates that HIV prevalence rates are lower than had been commonly assumed previously. A 2007 demographic and health survey showed that the national adult HIV infection rate was 1.5%, and indicated that infection rates varied from 2.5% in urban areas to 0.8% in rural ones, with the highest prevalence rate, 2.6%, in and around Monrovia. Previous estimates of infection rates, albeit not based on national surveys, had ranged between 5.9% and 8.2%, with some observers positing that the rate could be as high as 12% in some population sub-groups. The UNMIL HIV/AIDS Adviser's Office is supporting public education-related AIDS prevention and national planning efforts focused on care of orphans and vulnerable children, among other activities. The World Health Organization, in coordination with other U.N. agencies and the NTGL, is developing project proposals to fight AIDS, malaria, tuberculosis and build health system capacity. The U.N. Population Fund supports several AIDS awareness and prevention programs. Liberia receives Global Fund assistance, but its application for further assistance under the Fund's recent Round 5 funding project assessment process was reportedly rejected. USAID implements several AIDS-related programs in Liberia on behalf of the Office of the U.S. Global AIDS Coordinator (OGAC). These include the 2007 demographic health survey, in partnership with other donors, which includes HIV surveillance; targeted behavior change efforts focusing on youth and other groups; and support for home-based care and related assistance. In her inaugural speech, in which she cited a 12% HIV infection rate, President Sirleaf vowed to "tackle this national scourge." At a February 2006 House International Relations Committee hearing on Liberia (see below), Members suggested to then-USAID Assistant Administrator for the Bureau for Africa Lloyd O. Pierson that Liberia be considered for U.S. assistance under the Presidents Emergency Plan for AIDS Relief in South Africa (PEPFAR). Liberia has received about $.7 million a year in Global HIV/AIDS Initiative (GHAI) account funds in recent years. Liberia's supreme law is its 1984 constitution, effective since 1986. It provides for a political and legal system that is substantially modeled on that of the United States, though not entirely; for instance, federalism is absent. Liberia's government is made up of three branches that exercise separate powers and authorities: a bicameral legislature, which consists of a 64-member House and a 30-member Senate; a presidentially led executive branch that controls multiple line ministries and several independent agencies; and a judiciary. Legislators are directly elected by voters in each of Liberia's 15 counties, while the president is directly elected by universal suffrage. The President and House Members are each elected to six-year terms, and Senators serve nine-year terms, except in cases of irregular vacancies of elected positions. Presidents may serve up to two terms. Although the Sirleaf government's mandate is derived from the constitution, that of the NTGL was extra-constitutional. During its tenure, those provisions of the Constitution and laws of Liberia that were inconsistent with the provisions of the 2003 Comprehensive Peace Agreement were suspended, though all other provisions of the constitution remained in force. Although Liberia's constitution provides for a system of checks and balances among the three branches of government, in practice the executive branch has historically exerted extensive influence over the legislature, the judiciary, and local governments. Historically, Liberian presidents have wielded exceptional, sometimes extra-constitutional powers and closely controlled the legal system, the security forces, and the economy, as well as headed majority ruling parties. Liberia has also long suffered from the effects of public sector corruption and a tradition of political patronage. This often resulted in uneven, urban-centered socioeconomic development and often deprived large segments of the population, notably the rural indigenous majority, of access to public goods and services. Given this history, President Sirleaf could have attempted to aggregate predominant power in her office, but doing so would have run counter to her emphasis on building national unity, constitutional and institutionally robust governance, fighting corruption, and institutionally developing the state. Her emphasis on developing state institutions and processes, rather than exerting presidential command authority may mean that she is both less likely and less able to rule in the largely unilateral manner of her predecessors. However, she also came to power with a weaker electoral mandate than those of past presidents; neither Sirleaf's Unity Party nor any other party commands a legislative majority. Similarly, no candidate was able to command majority support in the initial 22-candidate presidential first round presidential vote. The relative strength of opposition parties in the parliament initially led some observers to hypothesize that Liberia's legislators might bridge their party differences and cooperate in furtherance of their collective institutional power vis-à-vis the executive branch, and take on a more engaged and assertive role in policy-making than has been traditional. To date, however, President Sirleaf has often been able to dominate the national policy agenda. This is attributable, in part, to a tradition of strong executive leadership; limited capacity within the legislature; the limited legislative experience of many current legislators; the fractionalized party make-up of the legislature; and to the governing experience of Sirleaf and many in her cabinet. Most bills continue to be originated by the executive branch and passed with presidential priorities intact. A notable exception to this pattern was the legislature's September 2007 rejection of the asset seizures bill targeting former president Taylor and his associates. A key impetus for the Sirleaf administration's policy emphasis on anti-corruption initiatives was the mixed governance record of its predecessor, the NTGL. The NTGL was able to successfully carry out most of the basic functions assigned to it under the August 2003 peace accord, but its efforts to restore state authority and the rehabilitate state institutions were hampered by central government ministry inefficiencies, widespread resource constraints, and lack of institutional and financial system capacities and trained manpower. Despite such challenges, it did make significant progress during the last half of its tenure. During this time, many revenue, customs, immigration, and local officials were deployed to sites outside Monrovia. Regional Central Bank offices were also opened, permitting salary payments without recourse to time-consuming travel to Monrovia. The process of deploying government officials upcountry was supported by USAID, which has supported the rehabilitation of administrative buildings in several key counties. Among the most challenging issues facing governance capacity-building efforts were persistent reports of corruption within the NTGL, in some cases on a large scale. Alleged acts were particularly notable in the context of import-export transactions, government contracts and budgeting, and the issuance of commodity marketing or land, natural resource, and associated concession rights. The U.N. Secretary-General reported in mid-March 2005 that there was a "lack of [NTGL] transparency in the collection and use of revenues and the resistance of some government and public corporation officials to reforms and audits aimed at fighting corruption" (S/2005/177). The World Bank and bilateral donors made similar observations and called for transparency measures. National fiscal and budget obligation mechanisms and voucher record-keeping systems under the NTGL were chaotic and subject to manipulation by key officials in some cases. In some government agency budgets, the miscellaneous expense budget account category "Other" was reportedly substantial in many cases, and expenditures of such "Other" funds were said to have been carried out in an ad hoc manner, with few controls. Actions by the transitional legislature either to appropriate for private use or pay very nominal lease fees for expensive vehicles that each legislator was given drew local and foreign condemnation. In November 2005, the U.S. Embassy in Monrovia stated that the U.S. government was shocked and disappointed by the recent incidents of transfers of Liberian Government property and resources into private ownership. This drains vital government resources that could otherwise be used for critical developmental programs, and sends the wrong signal to international donors who finance such programs. It also perpetuates the culture of abuse of public trust and impunity that has contributed to two decades of decline in Liberia. The U.S. Embassy considers these transfers unscrupulous, irresponsible, and contrary to the public interest of the people of Liberia. Liberian government resources are for the benefit of the Liberian people and should not be misappropriated for private use. Citing a 2004 presidential proclamation, it stated that Liberian government officials who engage in "violations of the public trust" and persons who abet such actions might, along with their families, be ineligible for U.S.-funded programs and services, including consideration for Diversity Visa, Immigrant Visa, and other visa services. In January 2009, jury selection began in a corruption case involving the alleged embezzlement of Liberia Petroleum Refinery Company (LPRC) funds by former National Transitional Government of Liberia (NTGL) Chairman Gyude Bryant and four former LPRC executives from the NTGL period. Bryant is separately being tried on charges of economic sabotage relating to the alleged embezzlement of $1.3 million during his tenure as chairman. The charges stem from a Sirleaf administration investigation that began in January 2007 in the wake of an Economic Community of West African States (ECOWAS) audit probe of the NTGL. Bryant pled innocent to the charges, which were laid against him in February 2007 and carry a possible 10-year prison sentence. At trial in April 2007, Bryant unsuccessfully claimed constitutionally derived sovereign immunity from prosecution on the basis that he was a serving head of state at the time his alleged crimes took place. In August 2007, Liberia's Supreme Court approved his trial, ruling that he was not eligible for immunity because the NTGL, over which Bryant presided, was a product of the extra-Constitutional August 2003 peace accord that authorized creation of the NTGL. Other NTGL officials, such as former Finance Minister Lusinee Kamara, have also faced corruption charges linked to their NTGL duties. The charges against Kamara were spurred by the findings of the ECOWAS audit. Court proceedings in all of these cases have often been slow and protracted. Natural resource and land concession contract deals drew attention during the NTGL's tenure because of their financial significance and potential long-term effects on national development. U.N. experts and donor governments questioned the propriety of a March 2005 monopsony diamond concession deal with a previously unknown firm, which was later canceled. Some observers also questioned the NTGL's award of offshore oil exploration permits to three relatively small firms just prior to elections. The NTGL also signed two major long-term natural resource concession deals. One, with the Firestone group of companies, extends and amends a previous series of concession agreements, first signed in 1926, giving Firestone rights to large plantation areas for the cultivation of rubber. The contract was amended, in part, because Firestone contended that it was unable to exploit its holdings due to fighting over the last decade and a half, and in order to boost foreign investment in Liberia. The deal gave the Firestone group surface rental and other rights to nearly 200 square miles of active or proposed rubber plantation land for 36 years in exchange for $.50 per acre per year and various investments, tax payments, social and infrastructure development outputs, and various other commitments. It was extendable for an additional 50 years after renegotiation. Another deal, with Netherlands-based Mittal Steel Holdings, provided for the rehabilitation or construction of diverse mining, administrative support, processing, and transport infrastructure intended to support the extraction and shipment of iron ore from northern Liberia. It gave Mittal a variety of surface rental, mineral license, iron ore extraction, transport infrastructure construction, and other rights in exchange for diverse capital investments, totaling about $900 million, and royalty, lump sum, tax, and other payments to the government. The initial term of 25 years was extendable for an additional 25-year term, if certain criteria were met. Both deals drew criticism from some civil society groups that contended that the NTGL lacked a legal mandate to negotiate long-term concessions, that such functions could only be carried out by a duly elected government, and that such deals should be negotiated in a manner more favorable to Liberian economic and other national interests. The contracts were also politically controversial. The Mittal deal was the subject of rival bids by the large mining firms Global Infrastructural Holdings Limited (GIHL), BHP Billington and Rio Tinto, and its ratification was contested legally and in parliament. Some civil society critics have alleged that the deals were not undertaken in a transparent manner. Mittal denied that charge and maintained that the contract was won in a "transparent and competitive bid process" and will bring significant foreign investment and infrastructure development to Liberia. The former U.S. Ambassador to Liberia, John Blaney, reportedly pushed for a deal that would require that a major railroad that was to be rehabilitated as part of any proposed iron ore investment arrangement would be made into a multi-use railroad, regardless of what firm was awarded mining rights. The Firestone contract has also drawn attention for other reasons. Some Firestone plantation workers have complained about poor working conditions and high production quotas. Some environmental advocacy groups and residents living near Firestone rubber processing facilities have alleged that chemicals used in latex processing are polluting wells and the water and aquatic life of the Farmington River, and damaging these resources or preventing their use by local residents. A Firestone spokesperson has denied that "effluent—the by-product that comes out into the water from our operations" pollutes the Farmington River. A Firestone spokesperson reportedly stated that Firestone "consistently" samples water from the Farmington River, is in compliance with relevant Liberian environmental laws, and has developed multiple safe drinking wells areas in its plantation concession area. The Firestone group is the subject of a class action suit brought in California by the International Labor Rights Fund, an advocacy organization that says its goal is to counter child, forced, and other abusive labor practices internationally, including through litigation. The suit alleges that Firestone employs children, practices forced labor, involuntary servitude, and negligent employment practices. Firestone categorically denies these charges, describing the suit as "outrageous" and "completely without merit." It maintains that its operations comply fully with Liberian laws and asserts that its workers are all adults of legal working age, are union-represented, are paid well above prevailing wages, and are provided with social services, and that Firestone is bringing much needed investment to Liberia. In June 2007, a U.S. District Court (Indianapolis Division, Southern District of Indiana) judge granted Firestone's motion to dismiss 11 of 12 counts in the case, but denied the motion with regard to one count, a child labor claim made under international law and the Alien Tort Statute (ATS). In late April 2007, Firestone production was decreased as a result of a labor strike that reportedly concerned worker benefits, rivalry over leadership control of the union, and issues related to talks on a collective bargaining agreement. In late 2007, the Liberian Supreme Court reportedly ratified the election of a new Firestone workers union. Labor activists had long contended that the previous Firestone union, whose leadership had launched a court case to prevent the new union from being legally recognized, was a company-controlled entity. Firestone reportedly refused to recognize the new union prior to its legitimation in court. Upon taking office, President Sirleaf vowed to review and renegotiate concession contracts signed by the NTGL to ensure that they were fair, provided Liberia with favorable terms, and did not cede national financial or other interests to foreign firms, or give such firms undue control over variables such as future prices or regulatory powers. A renegotiated contract with ArcelorMittal (the name of the firm after a 2006 merger) took effect in May 2007. In late 2007, the Liberian government announced that ArcelorMittal had agreed to increase its proposed investment in Liberia from $1 billion to $1.5 billion over ten years or so, and that the firm expects to ship the first consignment of ore in mid-2009. The government projects that the new contract will eventually generate as many as 20,000 jobs for Liberians. The Liberian government has released a detailed summary comparing the old Mittal contract and the new one. According to Global Witness, a non-governmental organization critic of the original Mittal contract, improvements in the revised contract include provisions requiring iron ore prices under the contract to be set by the ore market, in contrast to the first contract, which gave Mittal the right to set the price, "thereby giving it control of royalty rates and tax payable, and encouraging transfer pricing"; a limited five-year tax holiday for Mittal, in comparison to an indefinitely extendable one; Liberian national control over two key public infrastructure assets, the port of Buchanan and the railway to Yekepa (a major iron ore mine site); the non-exemption of Mittal from future human rights or environmental laws passed by Liberia; recognition of the Mittal parent company's responsibility for liabilities faced by its operating affiliate in Liberia; and increased balance between the rights of existing property holders and Mittal regarding the latter's right to expropriate new concession land. Global Witness, however, continues to criticize what it asserts is the contract's "precedence over Liberian law on income tax, royalties and other payments due to government." It also views in a negative light a contractual confidentiality clause "which will make it very hard for Liberian citizens to monitor revenue flows from Mittal and ensure the government uses the money wisely to reduce poverty." Such challenges may subject to change as a result of Liberia's joining of the Extractive Industries Transparency Initiative (EITI) in 2009; see below. The re-negotiation of a new contract with Firestone was finished in early 2008, and the agreement is slated to be submitted to the legislature. According to President Sirleaf, the agreement includes aggregate investment on the order of $130 million in replanting, and the establishment of a rubber wood processing plant. This model agreement subjects Firestone, for the first time in its eighty-two year history of operations, to the payment of taxes of general application; to a five year plan of providing better living conditions for workers and employees; and to limited land holdings. The Sirleaf government also plans to use the new Firestone contract as a model agreement in separate renegotiations of other rubber and palm oil plantation concession agreements. The NTGL took some steps to halt corrupt practices. It established a Task Force on Corruption and a Cash Management Committee and attempted to eliminate bribe-taking in relation to commodity imports, notably by better managing Monrovia's port, of which UNMIL took temporary control in late April 2005. In addition, the National Transitional Legislative Assembly (NTLA) created a committee to investigate allegations of administrative and financial irregularities by its leadership, which eventually led to the removal of key NTLA leaders. Some observers, however, saw the NTGL Task Force as lacking the capacity or political will to achieve significant results, and some Liberian officials resisted donor and ECOWAS-backed transparency and audit measures. An African Development Bank loan was reportedly not disbursed in 2005 because Liberia failed to provide required fiscal data, and an ECOWAS-sponsored auditing mission was opposed by Liberian auditors and certain government officials, who cited concern over a violation of Liberian sovereignty, despite the publicly stated support of Chairman Bryant for the audit. In July 2005, Chairman Bryant suspended two officials over their alleged diversion of funds paid by the satellite communications firm Inmarsat to several Liberian state entities, and the NTGL suspended three Bureau of Maritime Affairs officials, including the Commissioner, and Liberia's International Maritime Organization representative for fraud. To help the NTGL tackle corruption, the United States sent several Treasury Department experts to advise the Liberian government in the areas of budget and tax policy, management, and administration and in central bank operations and fiscal policy and regulation. These U.S. experts have also assessed Liberia's financial enforcement (financial crime and corruption) capacity. A resident U.S. legal advisor and a temporary duty team of prosecution experts have been deployed to Liberia to assist in building Liberia's judicial capacity. Similar efforts have continued under the Sirleaf administration. Concerns over transparency produced a sometimes halting and often highly conditional provision of pledged aid by donor governments and agencies to NTGL-led Liberia, as well as some reticence to offer new funding. This negatively affected the scale and pace of resettlement, reintegration, and socioeconomic rehabilitation. Nonetheless, a network of national, international, U.N., and private development and relief organizations has made considerable progress in these areas. Most of them participate in an inter-sectoral, U.N.-coordinated initiative, the Results-Focused Transitional Framework (RFTF). An April 2005 NTGL/U.N./World Bank assessment of the RFTF found that it has been effective in "addressing short-term, stabilization priorities," but that medium- to long-term post-transition institutional and reconstruction development will require a more robust, coherent, and comprehensive strategy. Liberian-donor government relations have improved under President Sirleaf, in large part due to her strong support for anti-corruption and other economic governance efforts. In late January 2006, she announced a financial audit of the outgoing transitional government, which had repeatedly been accused of corruption. Sirleaf has also suggested that she may seek a review of other public contracts and concession deals granted by the NTGL. The Liberian government is also working to reform its key export-earning forestry and diamond sectors. In early February 2006, Sirleaf adopted the recommendations of the Liberian Forest Concession Review Committee, an entity comprised of Liberian civil society, government agency, UNMIL, and donor government representatives. It reviewed the legality and propriety of logging concession contracts and recommended diverse logging sector reforms. Sirleaf's action effectively canceled all existing logging concessions and created a Forestry Reform Monitoring Committee (FRMC) to regulate future concession contracts. The natural resources and human rights policy advocacy group Global Witness, which has tracked abuses and corruption in Liberia's forestry sector for several years, praised the move. It called, however, for "greater support" by UNMIL "to the Forestry Development Authority ... to ensure that it is able to operate in a secure environment" as a prerequisite to the removal of then-current U.N. timber sanctions on Liberia. UNMIL, along with a consortium of donor governments and specialized agencies known collectively as the Liberia Forest Initiative (LFI), is assisting the Liberian government to implement timber reforms. The FRMC is tasked with carrying out its functions by applying or establishing the following: land-use planning principles; a timber production and export chain-of-custody tracking system; a market value-based tax system timber tax system defined by "equitable sharing of the benefits with local communities;" revised contract requirements; transparent forest concession allocation procedures, based on Liberia's Public Procurement and Concession Act of 2005, which allows the suspension of participants who abet civil disturbances or default on their financial obligations—a key aim in light of alleged patterns of abuse under the Taylor administration; a regulatory and law enforcement regime to counter financial and tax fraud, human rights abuses, economic sabotage, and violations of labor and other laws relating to the misuse and mismanagement of forest resources; and an environmental impact assessment process. It was also given the tasks of advising on the implementation of GEMAP goals (see below) as they pertain to the Liberian Forestry Development Authority; ensuring the full and transparent participation of communities and civil society in forest management, conducting a full review of the forestry laws and regulations; and recommending legislation to implement forestry reforms. Sirleaf's cancellation of prior logging concessions and creation of the FRMC were seen as key steps prompting the U.N. Security Council to pass Resolution 1689 on June 20, 2006, which lifted the ban on Liberian timber exports first imposed under Security Council Resolution 1521 (2003). In passing Resolution 1689, the Security Council cited the Sirleaf administration's "commitment to transparent management of the country's forestry resources for the benefit of Liberians and its reforms in the timber sector." It warned, however, that it would reinstate the timber ban if the government does not adopt FRMC-proposed forestry reform legislation. Global Witness opposed the Security Council's lifting of sanctions, contending that the Liberian government lacks full control over forest lands and has not yet adequately reformed the forestry sector. Some other experts have expressed concerns that echo those of Global Witness. The U.S. Treasury's Office of Foreign Assets Control is reportedly currently preparing updated regulations to allow the import of Liberian timber into the United States. In early October 2006, President Sirleaf signed into law the National Forestry Reform Law of 2006, passed by the legislature in mid-September 2006 in one of its first major legislative actions. In doing so, she fulfilled the U.N. Security Council's criteria for lifting its ban on exports of Liberia timber. Among other measures, the new law divided Liberia's forest lands into three categories: protected areas, areas where community logging and wood processing can be pursued, and commercial logging concession areas. It also requires that logging firms publicly disclose their revenues and that 30% of commercial timber concession lease revenues be used to fund education, healthcare, and other basic community social services. The law reportedly does not, however, clearly define how revenues for such services are to be divided among beneficiaries, which may make decision making processes pertaining to that end politically controversial. Liberia's Forestry Development Authority has formulated a timber concession bidding process, based on the new forestry law, which was initially implemented in early 2007. Environmental activists are monitoring this process to ensure that it meets the forestry management, conservation, and other goals of the new law. Liberia's forests are the home to diverse species of flora and fauna, some rare or endangered. According to U.N. research findings, in 2000, Liberia's forests "constitute[d] approximately 45% of the remaining Upper Guinea Forest, which spans 10 West African States from Guinea to Cameroon" and were "variously assessed as [occupying] between 31.3% and 50% of the total territory of Liberia." Estimates of the contribution of timber exports to Liberia's foreign exchange earnings vary. They declined after the imposition of sanctions on such exports in 2003, but U.N. research findings indicate that for 2002, such earnings totaled "at least $146 million" and could have been as high as "$180 to 200 million." Although precise data on the value of pre-war timber revenues vary, such revenues are generally thought to have comprised as much as half of all export earnings. Depending on such factors as price, rates of cutting, and relative use of sustainable forestry practices, future export levels could vary widely from those estimated for 2002, when forestry concessions were administered by the Taylor regime and harvested by commercial interests with allegedly close links to the Taylor administration. The Taylor regime was accused of allowing the use of unsustainable forestry practices and illicitly diverting earnings from the timber sector. It also allegedly used some timber firms' transport and trade activities as cover for arms trafficking and turned the security forces of some firms into pro-government militias. On May 4, Liberia was admitted into the Kimberley Process following the U.N. Security Council's passage on April 27, 2007, of Resolution 1753, which lifted an export ban on Liberian diamonds imposed by the Council in late 2003 (Resolution 1521). In passing Resolution 1753, the Council also announced its intention to review Liberia's admission to and general compliance with the Kimberley Process. In May 2007, ten diamond screening and evaluation offices were opened across Liberia, and in July began to offer mining, selling and broker licenses. The first post-embargo diamond exports began in September 2007. In order to meet Kimberley Process certification criteria, the Liberian government had suspended the issuance of diamond mining licenses, all of which expired at the end of December 2005, making diamond mining effectively illegal in Liberia pending its accession to the Kimberley Process. As part of its efforts to implement the Kimberley Process, the government now has a diamond office in Monrovia and several regional diamond certification offices. Liberia's Kimberley Process-related capacity building and a technical training effort have been substantially aided by the United States. In addition to constructing the Government Diamond Office and providing it with gemology equipment and office furnishings, U.S. assistance in this area has included the following: training of Liberian diamond evaluators in South Africa (three staff) and Dubai (two staff); training of Ministry of Lands, Mines, and Energy staff to manage ten regional offices and related material and salary assistance, including vehicles, to support the establishment and future functioning of these posts throughout Liberia; salary support for five diamond evaluators; provision of specialized technical training to multiple ministry staff in the areas of Stream Sediment Studies, database applications, and GIS and remote imagery; production of a comprehensive geological assessment of Liberia's diamond production capacity, and digitization and reproduction of geological maps of Liberia; provision of software and hardware components of a database for tracking diamond production and Kimberley Process admission and program compliance; and production of 1,000 Kimberley Process rough diamond export certificates. Much of this assistance was provided under a $1.44 million FY2005 ESF funding tranche under a U.S. Geological Survey-implemented contract with the Constella Futures International, a social development technical assistance firm. The U.S. Treasury's Office of Foreign Assets Control is reportedly currently preparing updated regulations to allow the import of Liberian rough diamonds into the United States. Diamond deposits in Liberia are mostly alluvial, that is, found on or near the surface after having been deposited by water flows, often far from their point of origin. In January 2006, however, the firm Diamond Fields International (DFI) Ltd. announced that it had discovered strong indications of a kimberlite, or pipes of igneous, volcanic, often diamond-bearing material, in Grand Cape County. If the kimberlite is verified as being richly diamondiferous, Liberia's future production of diamonds could rise substantially, potentially to the level of neighboring Sierra Leone. The Sirleaf Administration strongly supports the Governance and Economic Management Assistance Program (GEMAP), an agreement signed in September 2005 by the NTGL and the International Contact Group on Liberia (ICGL), an international policy coordinating group of donor and regional governments and multinational institutions. The aims of GEMAP are to secure Liberia's revenue base; improve budgeting, expenditure management, procurement practices, and concession grant-making; and establish mechanisms to control corruption. It is also seeks to build the capacity of government agencies involved in financial management and economic governance reform, e.g., the General Auditing Commission (GAC,) General Services Agency (GSA), Governance Reform Commission (GRC), and Public Procurement and Concessions Commission (PPCC), as well as the capacities of line ministries in these areas. GEMAP also supports public accountability-focused access to government information by journalists, civil society, and citizens. A key component of GEMAP was the provision of contract-based management of the revenue and expenditure flows of key public sector entities, notably the main port, airport, and fuel refining firm, among others, in order to strictly enforce central government controls over state revenues and to improve public fiscal capacities. Under this component of the program, international financial comptrollers with co-signing authority regarding key fiscal management mechanisms, assumed duties at the Central Bank of Liberia and other key ministries, notably the Ministry of Finance, the Ministry of Lands, Mines, and Energy and the Bureau of Budget, and as well as key revenue-earning agencies, including ports, airports, customs offices, and the forestry sector. A key GEMAP benchmark was met in September 2009, when GEMAP's international comptrollers relinquished co-signatory authority to their government counterparts in those agencies that had not previously "graduated" from GEMAP, i.e., met their goals under the program. GEMAP also involves donor-assisted support for diverse economic governance, financial management technical assistance, and judicial capacity-building efforts to institutionalize transparent state management capacity-building goals and related reforms. The United States and other donors are continuing to provide financial management technical assistance aimed at consolidating gains made under GEMAP. Liberia is a signatory of the Extractive Industries Transparency Initiative (EITI), an international effort to foster transparent and accountable governance in resource-rich countries through the publication of verified government revenues derived from extractive industry company payments. In October 2009, Liberia became the second EITI signatory to be judged an EITI Compliant Country, i.e., a country that has undergone EITI "validation," a formal assessment process that verifies compliance with EITI transparency standards, goals, and processes that signatories agree to implement and uphold. Liberia committed to join EITI in October 2006, and formally agreed to participate under a Memorandum of Understanding (MoU) signed in April 2008, shortly after the formation of the Liberia Extractive Industries Transparency Initiative (LEITI), a national EITI group of government, civil society, and private business stakeholders. The MOU formally committed LEITI members to full implement EITI principles in Liberia. Like most EITI-signatory countries, Liberia's EITI program addresses revenues from oil, gas, and mined commodities, but is unique in that it is the first one to include forestry as a sector subject to EITI compliance. Agricultural production is also subject to LEITI reporting. Among other actions taken to implement the LEITI program, a forestry scooping was produced in June 2008; a presidential proclamation was issued in September 2008 making the LEITI program a key, binding government policy; a LEITI public communications strategy was initiated in October 2008; and two EITI validation reports were published (in February of 2009 and 2010). In addition, in July 2009 Liberia a public act was signed into law that formally established LEITI as an independent state entity, albeit made up, in part, of non-governmental actors, and laid out its legal and functional mandates; it was the second country to pass such a law. Significantly, the act requires public access to all contracts subject to LEITI reporting compliance. As discussed elsewhere in this report, Liberia's current Congress could potentially play a more prominent role in governance than have its predecessors, in part because President Sirleaf's party does not enjoy a majority in either chamber of the legislature. Many Members are enthusiastic about their representative role and are determined to assertively exercise the constitutional powers and responsibilities of the legislature. A range of challenges may, however, impede the realization of such goals. A key impediment is the relative inexperience of many of Liberia's legislators. Although a number of Members are professionals with varying private or public sector experience and a few served previously in the legislature as Members or staff, the vast majority have never previously held elected office and have no lawmaking or policy-making experience. In meetings attended by the author in July 2006, many Members expressed a need for instruction or information regarding the basic functions of being a legislator, the workings of the committee system, and the legislature's oversight, appropriations, authorizing, and constituent relations roles. In many cases, Members are unable to turn to their personal staffs to provide expertise on legislative functions because, as is common across the public sector in Liberia, many staff lack appropriate training or job-specific skills. In many instances, the professional work of the legislature is carried out by university students, reportedly because pay levels are viewed as too low to attract trained, professional staff. In other cases, staff reportedly lack appropriate skills because they were hired "based solely on contacts and family relationships," with little regard to competence or training, "rendering [many offices ... ] dysfunctional." There is also a paucity of institutional resources available to Members. Committee staff are virtually nonexistent, and the legislature as a whole lacks many of the assets necessary to independently carry out its principal roles. The two chambers largely lack bill drafting expertise, and most bills are drafted by the executive branch or by outside organizations. Parliamentary record keeping capacity is also limited; legislative debates and votes are recorded by hand, in part due to a lack of audio or stenographic recording equipment. Legislative debates and decisions, therefore, are reportedly often documented incompletely and sometimes erroneously. The manner in which legislative resources are allocated also appears to curtail the institution's potential effectiveness. In comparison to many countries, the size of Liberian Members' office staffs is large, and a high proportion of Members' staffs perform non-legislative services, such as food preparation, gardening, and driving. Similarly, despite a general lack of resources, the two chambers of the legislature maintain duplicate services; each, for instance, has its own research department. These institutional challenges are compounded by a dearth of office space and equipment. The legislature's Capitol building, which was looted and suffered decay due to neglect during the civil war, lacks most basic functional infrastructure elements, such as water and electricity, though it is currently undergoing an upgrade (see below). Some Liberians, including some legislators, as well as outside observers are also concerned that legislators' lack of knowledge regarding their normative and constitutional roles as representatives of the public might cause some to seek use their offices for purposes of private gain, rather than to serve the public. Such concerns were highlighted in October 2006 when, just prior to the slated start of a U.S.-supported project to rehabilitate the Capitol building (see below), several Liberia news reports described acts of alleged "looting" of the Capitol building by some Members and staff of the legislature, who were reported to have removed and appropriated government property for personal use from the Capitol. Similar concerns reportedly arose in relation to legislative negotiations relating to the recently enacted forestry law reforms. According to informed observers, during talks prior to the passage of the forestry reforms, some legislators made remarks suggesting that they viewed a successful outcome of the reform process as being one in which they personally—as persons representing the public, in contrast to the general Liberian public itself—would directly benefit from processes at issue, such as the allocation of forestry concessions or revenues. A certain amount of on-going public skepticism about government transparency in general may be attributable to public perceptions formed of the NTGL and of the transitional legislature, the decision-making conduct of which was often opaque and sometimes allegedly corrupt (see " Transitional Government "), and to widespread reports of corruption under previous Liberian governments. Such views may be spurred by on-going investigations of alleged corruption under the NTGL. To help overcome the challenges faced by the legislature, the United States supported a $1.8 million USAID project to rehabilitate the Capitol and is providing legislative capacity-building assistance through the U.S. democracy-building organization, the National Democratic Institute (NDI). This follows on an earlier post-elections governance capacity-building effort undertaken by NDI, the International Republican Institute (IRI), and the International Foundation for Election Systems . NDI describes its current work as follows: NDI is implementing a 14-month USAID-funded program to support the modernization of the Liberian legislature by: developing sustainable systems and institutional practices that improve the effectiveness of the legislature; improving the ability of legislative staff to respond to current members' requests and manage the day-to-day operations of the legislature; and enhancing the capacity of legislators to fulfill their representative, lawmaking, and oversight roles. The Institute has been working closely with the Joint Legislative Modernization Committee (JLMC), a group of legislators tasked with identifying institutional challenges and recommending viable remedies. Additionally, NDI provides support to the Women's Legislative Caucus of Liberia (WLCL) to strengthen its organizational structure and refine its strategic plan. NDI is also providing technical and financial support to a local radio partner to connect lawmakers with their constituents and disseminate information nation-wide on legislative activities. In addition to appropriating funds to assist Liberia, Congress is taking a direct role in supporting governance capacity-building in Liberia. In July 2006, following a visit by a congressional delegation and a parliamentary assessment by a House Democracy Assistance Commission (HDAC) staff team, Liberia was selected to participate in a multi-year HDAC House Democracy Partnership (HDP) program. HDAC partnerships provide "technical assistance to the parliaments of newly democratic countries on a peer-to-peer basis, with Members of Congress working with Members of Parliament and congressional staff working with their parliamentary counterparts." HDAC's goal is to help partner legislatures improve "fundamental capabilities of legislatures to serve as effective, independent, representative bodies of government." Key HDAC activities include Member Outbound Programs, in which U.S. Members and staff delegations hold discussion on topics such as "essential legislative capabilities, policy questions, bilateral relations and regional issues" and constituent relations with their counterparts in partner legislatures. HDAC Staff Institutes, in which HDAC and other congressional staff hold U.S. and overseas-based training sessions for partner legislature staff focusing on such areas as "budget analysis, committee operations, research, and administration" are another key activity, as are Member Inbound Programs. In the latter, Members of partner legislatures travel to the United States for "training focusing on Congressional operations and constituent services." Specialized trainings focus on such areas as defense oversight, in cooperation with the Department of Defense, ethics, and budget committee work. HDAC provides limited material assistance "in areas where it can achieve immediate impact," such as planned legislative research and library capacity-building in Liberia. Former Liberian President Charles Taylor is defending himself against an 11-count war crimes indictment first brought against him in 2003 by the Prosecutor of the U.S.-supported Sierra Leone-based Special Court for Sierra Leone. The indictment against Taylor alleges that he violated international and Sierra Leonean law by actively aiding and abetting activities in furtherance of the armed insurgency against the government of Sierra Leone by the Revolutionary United Front, a now-defunct Sierra Leonean rebel group. Taylor's trial is being conducted by the SCSL in the Hague, the Netherlands, where under a special agreement the SCSL is using the premises of the International Criminal Court (ICC). The trial, which had originally been slated to begin in April 2007, opened in early June 2007, but proceedings were delayed after Taylor boycotted his trial and later fired his initial defense team. A new defense team was later hired. It successfully requested increased funding for his legal defense and in mid-August 2007 won a postponement of Taylor's trial on the basis that the team must be allowed adequate time to review extensive evidence that has been submitted in the case. The trial resumed in January 2008, with testimony by 91 witnesses for the Prosecution, which wrapped up its case in February 2009. The defense opened its case in July 2009. Cross-examination of defense witnesses by the Prosecutor's Office of the U.S.-backed Special Court for Sierra Leone (SCSL), which began in November 2009, proceeded in early 2010. Taylor was taken into the custody of the SCSL following his arrest on March 29, 2006, at a border checkpoint in the northern Nigerian state of Borno, as he tried to cross by road into Cameroon. He was apprehended by Nigerian security forces after fleeing the southern Nigerian city of Calabar, where he had lived with an entourage of aides and family members beginning in August 2003, when he was given asylum by Nigeria's government. He reportedly fled on March 27, two days after Nigeria's government announced that Liberia was "free" to take Taylor "into its custody," while not specifying how that end could or would be achieved, or moving to arrest him. After his capture, Taylor was extradited to Liberia in a Nigerian presidential jet. He was then immediately flown by UNMIL helicopter to the premises of the SCSL in Freetown, the capital of Sierra Leone, where he was taken into SCSL custody. On April 3 he was arraigned and pled not guilty, though he qualified his plea by questioning the SCSL's "jurisdiction over me, as the 21 st President of the Republic of Liberia." In June 2006, Taylor was transferred from the headquarters of the SCSL, in Freetown, Sierra Leone, to the prison premises of the International Criminal Court (ICC) in the Hague, the Netherlands. The ICC, with the agreement of the Dutch government, agreed to allow the SCSL to use ICC facilities in order to conduct the Taylor trial. Dutch authorities agreed to allow Taylor to be tried on Dutch soil after Britain offered to imprison Taylor if he is convicted. The SCSL will retain legal and institutional control over the Taylor case but will use the physical premises of the ICC in the Hague, the Netherlands, to conduct his trial and related hearings. Taylor's transfer to the Netherlands was made for reasons of security and to prevent potential instability in Sierra Leone and Liberia, where his trial could prove politically controversial and emotive. The decision to transfer him to the Hague remains a topic of debate. The decision to transfer the trial to a venue outside of Sierra Leone or the continent of Africa stimulated debate over the over the implications for justice of the transfer. Some have contended that Taylor's trial should have been conducted in the country where his alleged crimes took place. Such an outcome, in this view, would demonstrate—both to victims and perpetrators of international human rights and laws of war violations in Sierra Leone and the surrounding sub-region—that accountability for such actions can be achieved in the same social and geographic contexts in which they were committed. Similarly, some have argued that the didactic and symbolic value for the region of a local public trial would be greater than one conducted abroad, in part because it would allow more direct and proximate access to the court proceedings by the local population. Some observers have worried that because many Sierra Leonean journalists lack the ability to cover the trial directly due to cost or other factors, Sierra Leoneans would be deprived of a key channel of information and analysis accessible to them in the local patois ( Krio , an English-based Creole) and responsive to local concerns. Sierra Leoneans lack widespread access to television and print media, particularly western media sources that are more likely to have the resources to cover a trial in the Hague. Other factors cited in favor of holding a trial locally have included concerns about the logistical, legal, financial, and bureaucratic barriers that an overseas venue might pose for witness participation in the trial, as well as for its general organization and staging. Such concerns continue, and may potentially imperil the reputation of the SCSL as a novel, cost-effective international judicial model. Others have supported the transfer on the basis that any factor that might spark political unrest or conflict—such as Taylor's trial—should be avoided, given the relatively fragile and recent transition to peace in Liberia and Sierra Leone, both of which have extended histories of political instability. In this view, moving the trial to the Hague has decreased the chance that political controversy prompted by Taylor's trial may lead to local unrest, and has undercut his ability to directly appeal to or rally potentially armed followers, should he attempt to use the trial as a political platform. Some have also maintained that holding the trial in a distant location would help Sierra Leoneans and Liberians overcome the legacies of war. A local trial, according to this point of view, might present too immediate and visceral a reminder of the wartime suffering that many in these two countries have only recently overcome. Sierra Leoneans, this line of reasoning emphasized, are weary of war and its effects and want to "move past" their experiences of wartime brutality and focus on peace and socioeconomic reconstruction. Taylor's SCSL case and extradition have been delicate matters for President Sirleaf, because her government was not party to his asylum deal or indictment, but was charged with resolving issues arising from them. Prior to his transfer to the court, some observers had raised concerns over the hypothetical possibility that the stability of Sirleaf's government might be undermined if Sirleaf were to alienate or anger supporters of former President Taylor, particularly given that he won the presidency with 75.3% of the vote in 1997, and because he is a former warlord whose factional fighters had a reputation for brutality. Prior to her mid-March 2006 visit to the United States, Sirleaf had stated that her administration would eventually seek the repatriation of former president Charles Taylor from Nigeria or his transfer to the SCSL under certain conditions. These included consultations with and the assent of "regional leaders who managed the process of leading to his exile;" accommodation for certain unspecified timing considerations; and a transfer process that would "not undermine the security" of Liberia. She also reportedly said that she did not view it as an immediate priority. She specifically stated that any solution would require the concurrence of the European Union, the African Union, and West African leaders, with whom she met during a regional pre-inauguration consulting tour, in part intended to address "certain national and regional sensitivities." Notwithstanding these actions, in March 2006 her government formally requested Taylor's extradition from Nigeria, prompting the sequence of events leading to Taylor's capture. In mid-July 2007, the Sirleaf Administration submitted a bill to the national legislature that would have allowed it to seize and seek international cooperation in "tracking, freezing and confiscating the funds, properties and assets" allegedly misappropriated and/or controlled by Taylor and certain of his relatives and associates. The bill was considered controversial because Taylor has not been convicted of any crimes in Liberia or by the SCSL. In September 2007, the legislature rejected the bill on ground that it would unconstitutionally deny due process rights. The government has pledged to attempt to continue to pursue efforts to effect such seizures, and may amend and resubmit the bill. The United States strongly supports the SCSL's mandate to try those responsible for war crimes in Sierra Leone. The court is also seen by some as providing an alternative institutional model to the International Criminal Court and is viewed as a smaller, leaner organization compared to the more administratively extensive and costly international criminal tribunals for the former Yugoslavia and Rwanda, though questions have recently been raised about its cost-effectiveness. Court officials, however, point out that per-capita "justice" cost comparisons with larger war crimes and related courts are misleading, since the latter can achieve efficiencies on the basis of larger economies of scale and because the SCSL had to invest in substantial initial fixed costs, even though the number of plaintiffs was relatively small. They also point out that the court has been able to maintain a relatively rapid trial and appeals process, which has kept down costs. They also point out that the court is expected to provide a substantial legacy, in the form of buildings and institutions, that is expected to bolster the rule of law in the region after the court has completed its activities. Lastly, they point out that the SCSL has achieved several milestones in the administration of international justice, as the first international court to indict a sitting African head of state for war crimes; derive its funding from voluntary contributions; be established in the country where the alleged crimes at issue took place; and issue rulings on the recruitment and use of children in the context of a war crimes trial and the treatment of forced marriage as a war crime separate and distinct from crimes of sexual slavery and rape. Currently the SCSL is facing a severe funding shortfall that could critically impair its ability to both complete its judicial activities and wind up its operations on schedule. The court also faces the prospect of difficulties in financing its long-term residual activities, which are expected to pertain to witness protection; archival activities, including record keeping associated with future legal and financial documents of the court; a residual registrar's capacity required for enforcing court sentences and maintaining relations with countries hosting imprisoned convicts of the SCSL; legal decision-making regarding future appeals, conditions of prisoner treatment, or contempt proceedings; and financial matters pertaining to such activities. There was occasional friction between the Bush Administration and the SCSL with regard to the effect that certain of the court's actions have had on political events and U.S. policy goals in West Africa. Some State Department officials in private, for instance, questioned the political prudence or timing of certain actions taken by former SCSL Prosecutor, David Crane, such as his unsealing of the indictment against Taylor at a critical juncture during Liberian peace talks held in Ghana in June 2003. Some critics also faulted the Administration for not pushing harder to obtain the extradition of Taylor from Nigeria after the latter provided him with asylum in August 2003. In 2006, however, the United States began to pursue this goal more urgently, explicitly, and directly, and such criticisms declined. There have been some calls for a special court to try crimes committed during Liberia's civil wars. Many Liberians who suffered the death of loved ones or personal attacks and other crimes, and some have expressed a desire to see those who committed such deeds punished. Some observers have suggested, however, that President Sirleaf does not, in general, support prosecuting those who committed war time atrocities during the 1989-2003 civil wars because such tribunals might reignite old antagonisms and conflict. Such sentiments may be held by many Liberians, in part due to personal or familial linkages to parties involved in the conflict, and due to concerns similar to those cited in favor of moving the Taylor trial to the Hague. Some have argued that the current legislature might not support the creation of a tribunal because some of its members might be targets of subsequent prosecutions. The creation of a tribunal could face legal barriers, as well as political ones. Some peace agreements covering Liberia first civil war contain amnesty provisions for war-time crimes. There is no apparent legal barrier to one that might cover Liberia's second civil war, however. The 2003 Comprehensive Peace Agreement provided for a "recommendation for general amnesty to all persons and parties engaged or involved in military activities during the Liberian civil conflict that is the subject of this Agreement" but did not explicitly provide for one. It did, however, endeavor to "address issues of impunity, as well as an opportunity for both the victims and perpetrators of human rights violations to share their experiences" by providing for the creation of a Truth and Reconciliation Commission (TRC). While no war crimes tribunal special tribunal has been established, in late February 2006, President Sirleaf inaugurated the Liberian TRC, which the transitional legislature created in 2005. She also pledged to support and strengthen the TRC, which has a mandate to investigate crimes and human rights abuses committed from 1979 until 2003. The TRC formally began operations in early June 2006, but did not begin to collect testimony until October 2006 and had to halt operations about a month later due to financial shortfalls. In mid-2007, after having undertaken a fund-raising effort, it launched a multi-month project to collect testimony from the substantial Liberian community living in the United States, in part supported by Minnesota-based Advocates for Human Rights and Northwestern University's Center for Human Rights Law, which had begun to collect diasporic statements for the TRC in early 2007. In October 2007, it re-launched field hearings in Liberia after receiving assistance from the U.N. Development Program and USAID, among other donors. In FY2006, USAID provided $.5 million in support to the TRC. In June 2009, the TRC released a draft of its final report, which was formally published in its final form in December 2009. It examined the root causes and social effects of armed conflict in Liberia, and presented findings regarding gross violations of human rights, violations of international human rights and humanitarian law, and "egregious domestic law violations." It laid out recommendations for public sanctions, including lists of alleged perpetrators of human rights violators and economic crimes whom the TRC "recommended for prosecution" or further investigation, and for non-judicial public sanctions, such as a prohibition on holding public office" or "elected or appointed for a period of thirty (30) years." The latter included a list of 49 persons named "for their role in supporting, financially and otherwise, various warring factions." Numerous other recommendations in the report related to diverse issues, "including public integrity, corruption, human rights, economic empowerment, good governance, national identity and reparation, amongst others intended to resolve past conflicts as part of a national progression towards lasting peace and reconciliation." The TRC report was controversial, in part, because President Sirleaf was included on the list of alleged leaders or key supporters of armed civil war factions whom the TRC recommended be barred from holding public offices" or "elected or appointed for a period of thirty (30) years." The basis for the recommendation was not explained in detail in the report, but appears to have been rooted in Sirleaf's short-lived support for Charles Taylor at the start of his effort to oust Doe. In early 2009, Sirleaf, who was imprisoned and tried on sedition charges by the government of former President Doe and threatened with arrest on charges of treason by that of President Taylor, testified that she had not been party to any armed group during Liberia's civil wars. She said that while she was an early supporter of Taylor and provided funds to him in light of his role in opposing Doe, she later became disillusioned with Taylor and the National Patriotic Front of Liberia, his armed rebel movement, and had never joined it as a member. Sirleaf, who ran against Taylor in the 1997 presidential election, attributed her initial support for the NPFL to being "fooled by" Taylor, which she implied was a lapse in judgment for which she had "to apologize to this nation." President Sirleaf appears to have rejected the TRC's recommendation that she not hold public office, in part due to concerns that the recommendation did not take into account the due process rights of herself and the other 48 persons to whom it pertained, and might therefore be unconstitutional. In addition to not resigning her position, during her annual message to the legislature in January 2010, she announced that she would seek reelection to a second term in 2011, as many observers had expected. In the same legislative message, she asserted that because the TRC's recommendations on "criminal tribunal, criminal sanctions and public sanctions and economic crimes and investigations" had "been the subject of great debate since the TRC Report was made public" I propose amendments to the Independent National Human Rights Commission (INHRC) Act of 2005 to enable that body to seize itself of those aspects of the TRC Report, and to work in collaboration with the Ministry of Justice to determine those recommendations that are implementable or enforceable under the Constitution and laws of Liberia. In mid-September 2006, former President Taylor's Boston-born son, Roy M. Belfast Jr. (AKA Charles McArthur Emmanuel and Charles "Chuckie" Taylor, Jr.) pled guilty to a federal passport fraud relating to his official submission of false data regarding his father's identity. He had been arrested at Miami International Airport by U.S. customs agents while attempting to enter the United States from Trinidad on March 30, 2006, one day after his father was apprehended in Nigeria. Belfast, who reportedly has an extensive U.S. juvenile criminal record, was sentenced on December 7, 2006, to 11 months in prison for the fraud. Hours after being sentenced in the passport fraud case, Belfast pled not guilty to a separate indictment brought against him by a U.S. federal Grand Jury. It charged Belfast with torture, conspiracy to torture, and of using a firearm during an act of violent crime while serving as the head of the Liberian Anti-Terrorist Unit (ATU, known informally as the "Demon Forces") during his father's presidency. The ATU was a state security unit staffed primarily by members of Taylor's former civil war faction. Belfast is reportedly the first person ever to have been charged under a statute that allows U.S. courts to hear criminal cases involving acts of torture committed abroad by any person present in the United States. The initial charges against Belfast, in his capacity as an ATU official, related to the alleged 2002 torture of one person, but other self-identified victims publicly accused him of having committed similar crimes against them after he was indicted. In November 2007, he was charged under a superseding indictment with torturing at least seven Liberians "under color of law" and in furtherance of a conspiracy to maintain and protect his father's political power. The charges included violent acts, such as burning, beating, stabbing, and the application of electrical shocks, in some cases in association with murder, committed between April 1999 and July 2003. Belfast's initial indictment followed efforts by the advocacy group Human Rights Watch (HRW) to persuade the Justice Department to investigate him "for torture and war crimes." HRW submitted a dossier to the Justice Department in support of its allegations against Belfast. In early July 2007, a U.S. Southern District of Florida judge denied a defense motion to dismiss the case. After several continuances, Belfast's trial was held over a period of six weeks in September and October, 2008. He was convicted on October 30, 2008, on five counts of torture, one of conspiracy to torture, one of using a firearm while committing a violent crime, and one of conspiracy to use a firearm while carrying out such an act. In January 2009, he was sentenced to 97 years in prison for these crimes. In May 2009, five plaintiffs who sued Belfast in civil court for damages that they claimed to have sustained as a result of the torture that he was convicted of committing won a default judgment in the case. In February 2010 they were collectively awarded $22.4 million in compensation for physical pain and mental suffering, and as a punitive measure against Belfast. Like former President Taylor and many of his associates, Belfast is also subject to a U.S. asset freeze under Executive Order 13348 (July 22, 2004) and to a United Nations travel ban. These measures were originally imposed to halt support by the Taylor government for the Revolutionary Front of Sierra Leone (see " Taylor Trial "). Some press reports suggest Belfast may have abetted such activities. The United States and Liberia have a long-standing historical relationship. The United States has long provided Liberia with substantial assistance, and U.S.-Liberian bilateral ties have often been close, with some exceptions, including the final years of late president Samuel K. Doe's regime and during the tenure of former President Charles Taylor. Official U.S. interactions with the NTGL were also guarded, due to real or perceived problems of corruption within the NTGL and due to the participation in it of members of the armed parties to the conflict, some suspected of human rights abuses. Current U.S.-Liberian relations are warm, as they were during the Administration of former President George W. Bush. The Sirleaf Administration's close working relationship with the Bush Administration began with her inauguration in 2006, which former U.S. First Lady Laura Bush and former Secretary of State Rice attended, among other prominent U.S. guests. Former President Bush—whose Administration had played key roles in ending Liberia's second civil war and in stabilizing and helping the country to rebuild in the immediate post-war years, backed by substantial, congressionally supported U.S. post-war rebuilding assistance —admired Sirleaf's leadership and achievements, and awarded the U.S. Presidential Medal of Freedom to her in November 2007. In February 2008, then-President and Mrs. Bush traveled to Liberia, among other African countries. Diverse U.S. officials have repeatedly voiced support for President Sirleaf's government since her election, most recently in April 2010, when Under Secretary of State for Political Affairs William J. Burns visited Liberia. During his visit, he stated that it was "remarkable to see how far the country has come since it held its first free and open post-conflict election in 2005," but added that it is "equally evident is that much work remains for Liberia to fully recover after years of horrific civil war." Burns stated that the core purpose of his trip was to send the message that "the United States will stand by Liberia as it continues to make progress towards reaching its full potential as a democratic state." His comments echoed those of Secretary of State Clinton, who, after meeting with President Sirleaf in April 2009, stated that Sirleaf's leadership had "been exemplary and extraordinary" and had "made an enormous contribution" to Liberia's advancement, and that "President Obama and I are very committed to the future of Liberia and to President Sirleaf's continuing leadership." During his trip, Burns also announced a U.S. commitment to "provide $19.75 million in funding to further advance Liberia National Police force training," which, he said fulfilled "a promise made by Secretary Clinton during her visit last August." Clinton's 2009 trip was the second most recent visit by a high-level U.S. official to Liberia, and the most senior leadership visit to date to the country during the Obama Administration. During the visit, in a speech to the Liberian parliament, she related the importance of expanding democratic participation and institution-building to Liberia's prospective success in meeting its substantial challenges, among the most pressing of which she cited as corruption and the need for land tenure reform, and lack of access to jobs, electricity, housing, education, and law enforcement. She specifically called on the legislature to develop its budgetary oversight role, counter corruption and promote transparency, and pass a code of conduct in order to ensure "ethical standards that guide the pursuit of the common good." She also called on the legislature to help ensure "credible ... free and fair elections in 2011," in part by passing a threshold bill. In remarks delivered at the Liberian National Police (LNP) Academy, she discussed the importance, challenges, and achievements of U.S., multilateral, and Liberian partnership in rebuilding Liberia's police force during the on-going post-conflict period. In particular, she emphasized the importance to the United States of its investment in assisting in the development of the LNP Emergency Response Unit, and announced a prospective increase in U.S. financial support for LNP training (discussed previously in this report). President Sirleaf has made several official visits to the United States, including one in February 2007, when she attended a World Bank-organized Liberia Partners' Forum donor meeting in Washington D.C. She made another such visit in March 2006, during which she addressed a joint session of Congress on March 15 and met with President Bush on March 21. She reportedly closely consulted with U.S. officials regarding her priorities for Liberia and the status of Charles Taylor. During a pre-inaugural December 2005 trip to the United States, Sirleaf also met with key U.S. and international financial institution officials. President Sirleaf is expected to undertake a further official visit the United States in late May 2010. While her itinerary has not been released, the trip is expected to focus on deepening Sirleaf's high-level contacts with Obama Administration officials. Sirleaf is expected to update U.S. policy makers, including interested Members, on Liberia's progress since her election, as well as remaining challenges in such areas as security sector reform, anti-corruption efforts, unemployment, economic growth, and legal system capacity building. Her visit may occasion the announcement of a possible Millennium Challenge Corporation (MCC) Threshold Program and a possible U.S. Global Food Security Initiative country program (see " Development Assistance and Related Bilateral Cooperation "). Liberia-related activities in the 111 th Congress have focused on Liberian U.S. immigration issues; support for Liberian female legislators; transparency in Liberia's natural resource sector; and the appropriation of U.S. assistance for Liberia and the SCSL (on the latter, see Table 2 ). Other Liberia-related issues likely to continue to draw the attention of some Members in the 111 th Congress — and in the forthcoming 112 th Congress — include Liberia's relative progress with regard to security sector reform, anticorruption and transparency efforts, and democratization; its economic growth prospects; and its politico-military stability prior to the eventual drawdown of UNMIL. In addition to appropriating funds for foreign operations that are normally allocated, in part, for programs of assistance to Liberia, the 111 th Congress laid out several Liberia-related provisions in its FY2009 and FY2010 appropriations. The Explanatory Statement accompanying P.L. 111-8 , Omnibus Appropriations Act, 2009 (passed as H.R. 1105 , Obey) specified that Marquette University be made eligible for consideration as one of multiple potential recipients of funding for "exchanges between United States and Liberian officials" under a one-time $6 million international exchange grant program; allocated $90.3 million in Economic Support Fund (ESF) assistance for Liberia; directed, with respect to ESF funding for Liberia, that "USAID should support efforts to increase access to electricity, and should expand programs that promote and strengthen the rule of law, consistent with country plans" and "consider the work of North Carolina State University"; stated that "USAID and the Department of State should support international efforts to trace and freeze assets allegedly confiscated and controlled by former Liberian President Charles Taylor, and by his family members and associates. Funding is encouraged to support programs that work with the Liberian Solicitor General to identify and recover these funds"; and stated that the Trade and Development Agency "should consult with the Committees on Appropriations on the next phase of work related to the Mount Coffee Hydro Power Station and the construction of a proposed fiber optic ring around Monrovia." P.L. 111-117 , Consolidated Appropriations Act, 2010 (passed as H.R. 3288 , Olver) allocated for Liberia $153 million in ESF assistance and $10 million in regional Peacekeeping Operations funding. It also directed that funds appropriated in the law that are available for assistance for Liberia... shall be made available to promote and support transparency and accountability in relation to the extraction of timber, oil and gas, cacao and other natural resources, including by strengthening implementation and monitoring of the Extractive Industries Transparency Initiative and the Kimberley Process Certification Scheme. As in previous Congresses, some Members have argued in favor of measures to allow certain Liberian refugees to reside in the United States, either on a temporary or permanent basis. Most recently, some Members have urged that Deferred Enforced Departure (DED; see text box), a special immigration status under which certain eligible Liberian aliens may legally reside and work in the United States, be extended by President Obama for such persons upon its current scheduled expiration on March 31, 2010. Two bills would also provide permanent residence status to Liberian refugees in the United States. On March 10, 2010, a Liberian National Immigration Conference was held on the Capitol to "highlight the need for an immediate extension of DED for the approximately 3,600 eligible Liberians living in the United States and ... efforts supporting the extension." In a Dear Colleague letter announcing the forum, Representative Donald M. Payne invited Members to participate in the event. He also stated that he would be "sending a letter to President Obama urging an extension of DED." In late February 2010, over 20 Members also wrote a similar letter to President Obama. Two bills, S. 656 (Reed), the Liberian Refugee Immigration Fairness Act of 2009, introduced March 19, 2009, and H.R. 2258 (Kennedy), the Liberian Refugee Immigration Protection Act of 2009, introduced May 5, 2009, seek to adjust the immigration status of various categories of Liberians in the United States. S. 656 would direct the Secretary of Homeland Security to adjust the U.S. residency status of qualifying Liberian aliens to that of lawful permanent residents. The bill would require qualifying applicants to be non-criminals, as defined in the bill; to be present in the United States since January 1, 2009; and to apply for adjustment before April 1, 2011, among other criteria. It would also authorize the Secretary to authorize applicants to work in the United States while their cases are pending and would not trigger a reduction in the number of immigrant visas available to Liberians not eligible for adjustment under the act. H.R. 2258 provides for a broadly similar immigration status adjustment process for qualifying Liberians as those that set out in S. 656 , but defines eligibility differently, and similarly provides that such adjustments will not offset the number of immigrant visas otherwise available to Liberians. In contrast to S. 656 , eligibility for adjustment under H.R. 2258 would be limited to Liberian U.S. alien residents who were granted TPS on or after March 27, 1991; or were eligible to apply for TPS on or after March 27, 1991. Liberia-related bills or measures introduced in the 111 th Congress that have not been passed into law include the following: As passed by the House, H.R. 2410 (Berman), the Foreign Relations Authorization Act, Fiscal Years 2010 and 2011, introduced May 14, 2009, would establish a new State Department exchange program, to be undertaken in cooperation with the Liberian Women's Legislative Caucus. It would fund scholarship-based exchanges for female legislators and congressional staff from Liberia in order to increase active female participation in Liberian politics and democratic processes. H.R. 2475 (Ros-Lehtinen), the Foreign Relations Authorization and Reform Act, Fiscal Years 2010 and 2011, introduced May 19, 2009, contains an almost identical measure. According to H.Rept. 111-136 , which accompanies H.R. 2410 , the Congressional Budget Office estimates that this program would cost under $.5 million per year, and total $1 million between 2010 and 2014. S. 1434 (Leahy), Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, introduced July 9, 2009, would mandate that assistance funds appropriated under the Act for Liberia, among three other West African countries, "be made available to promote and support transparency and accountability in relation to the extraction of timber, oil and gas, cocoa and other natural resources, including by strengthening implementation and monitoring of the Extractive Industries Transparency Initiative (EITI) and the Kimberley Process Certification Scheme," and prohibits such funds from being used to support "industrial-scale logging." The House report ( H.Rept. 111-105 ) accompanying P.L. 111-32 (passed as H.R. 2346 , Obey) called for Liberia, among nine other countries, to "receive priority consideration" with respect to receiving a potential portion of a $300 million FY2009 ESF appropriation to assist developing countries affected by the global financial crisis. Such language, however, did not appear in P.L. 111-32 or the conference report accompanying it. Liberia-related activities by the 110 th Congress built on those pursued by the 109 th Congress. Congress continued to monitor the activities of the SCSL and, in particular, the Taylor war crimes case, and provide funding for the SCSL. Congress's focus on Liberia also centered on aiding Liberia's efforts to consolidate its post-war governance and economic rebuilding processes. Issues that drew particular congressional attention included efforts to rehabilitate schools, clinics, roads and other public facilities; progress under the GEMAP transparency initiative; progress of U.S.-backed security sector restructuring, and possible expansions of related assistance, e.g., for the creation of a quick reaction gendarme unit; increased mobility capacity building for the police and military; and maritime waters and land border monitoring and interdiction capacity building. consideration of potential continued support for UNMIL and the pace of its projected draw-down; and U.S. decision-making on debt relief for Liberia and the status of future Brooke Amendment restrictions on Liberia. The 110 th Congress provided continuing appropriations for the purpose of assisting Liberia's post-war rebuilding process when it passed P.L. 110-5 ( H.J.Res. 20 /Revised Continuing Appropriations Resolution, 2007), which provided approximately $120.81 funding for FY2007 foreign operations. The Congress also provided $48.95 million in supplementary FY2007 funding for Liberia under P.L. 110-28 ( H.R. 2206 /U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007). In FY2008, Congress allocated $125.35 million in FY2008 Liberia funding for Liberia, as laid out in its joint explanatory statement for P.L. 110-161 ( H.R. 2764 /Consolidated Appropriations Act, 2008). The final amount allocated to Liberia, which included funds allocated for Liberia from central appropriation accounts under the law, totaled $163 million in FY2008. The Liberia Stabilization, Economic Empowerment, Development and Security Act of 2008 (Liberia SEEDS Act of 2008, or H.R. 6655 , Jackson, 110 th Congress) would have authorized assistance to Liberia for the following: (1) roads and bridges; (2) rehabilitation of Monrovia Freeport; (3) water and sanitation; (4) the electricity sector; (5) vocational education programs for war-affected youth and ex-combatants; (6) establishment of a government employee training institute and enhancement of government accountability and effectiveness; (7) narcotics control and law enforcement; (8) educational exchanges; and (9) the Truth and Reconciliation Commission of Liberia. Other Liberia-related bills introduced in the 110 th Congress include the following: H.R. 1941 (Kennedy), Liberian Refugee Immigration Protection Act of 2007; H.R. 1591 (Obey), U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007; H.R. 3123 (Kennedy), To extend the designation of Liberia under section 244 of the Immigration and Nationality Act so that Liberians can continue to be eligible for temporary protected status under that section; S. 396 (Dorgan), A bill to amend the Internal Revenue Code of 1986 to treat controlled foreign corporations in tax havens as domestic corporations; S. 554 (Dorgan), Act For Our Kids; S. 656 (Reed), Liberian Refugee Immigration Fairness Act of 2007; S. 965 (Byrd), U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007; S. 1508 (Dorgan), Clean Energy Production Tax Incentives Act of 2007; and S. 1903 (Reed), A bill to extend the temporary protected status designation of Liberia under section 244 of the Immigration and Nationality Act so that Liberians can continue to be eligible for such status through September 30, 2008. H.R. 1941 and S. 656 would have provided permanent residency status to certain Liberian nationals who were granted or were eligible for TPS, while H.R. 3123 and S. 1903 would have extended the status of persons eligible for TPS. On July 30, the House passed H.R. 3123 , which was received in the Senate on August 3. On September 12, 2007, President Bush, citing the continued fragility of "the political and economic situation in Liberia," directed that eligible Liberians resident in the United States and subject to a loss of TPS as of October 1, 2007, be granted DED for 18 months, until March 31, 2009. He also directed that such grantees be allowed to work in the United States. His action fulfilled basic underlying aims of the TPS-related bills discussed above. In December 2008, a number of House Members co-signed a letter to former President Bush and similar one to the Transition Team of then-President-Elect Obama calling for an extension of DED for eligible Liberians resident in the United States and subject to a loss of TPS on March 31, 2009. U.S. assistance to Liberia, which is broken out by accounts and amounts for FY2004-FY2010, appear in Table 3 . The Obama Administration's assistance agenda for Liberia, which continues many of the same kinds of activities that had been pursued by the Bush Administration, centers on "fostering peace and security, strengthening democratic institutions, and rebuilding the economy in a country recovering from 14 years of civil war." In addition to security sector assistance, which is discussed elsewhere in this report, current USAID and State Department assistance is focused on increasing good governance and democratization; advancing economic growth through assistance to capacity-building and investments related to agriculture, sustainable natural resource management, energy, and infrastructure; and investments in the education and health sectors. Apart from elections support and legislature strengthening, which are discussed elsewhere in this report, focal governance-strengthening activities center on rule of law judicial system strengthening and in creasing access to justice through support for magistrate and legal assistance training, notably through a long-term American Bar Association program called the Judicial Training Institute (JTI), and alternate dispute resolution, notably with regard to land disputes. Efforts to bolster government transparency and accountability are another key component of such programs. Such assistance is provided through support for the Anti-Corruption Commission and USAID follow-on support for GEMAP (discussed elsewhere in this report), under a USAID program called the Financial Management and Capacity Building Program (FIMCAB) and other civil services training programs. There are also USAID-supported civil society and media capacity building efforts to increase human rights education. Economic growth and related programs center on agriculture capacity-building and the small business sector (e.g., tree crop rehabilitation, livestock re-stocking, and small business training and credit programs, notably in rural and farm areas); and food-for-work initiatives targeting rural areas and food aid for vulnerable groups. Another key program provides capacity-building assistance to the Ministry of Agriculture. Programs in this area also support community-based land and forest management; transparent regulation and governance of commercial forest management; and support for biodiversity conservation goals. According to the FY2011 CBJ, As part of the new Global Hunger and Food Security Initiative, the United States will help Liberia design and implement a country-led comprehensive food security strategy to help the country increase long-term food security and provide support to entire value chains, in order to bring produce to markets and enable Liberia's farmers to feed all the country's citizens. USAID energy and infrastructure assistance is another key component. Activities in this area focus on rebuilding roads and bridges to enable farm to market transport; rehabilitation of government buildings, e.g., schools, clinics, and training institutions; and increasing access to electricity. The latter centers on increasing access to electricity through increased power distribution and generation, notably through the use of clean and renewable energy technologies, e.g., solar, water-based and biomass power generation, and technical energy efficiency use gains. Support is also provided to enhance energy-related government policy-making capabilities and public utility effectiveness. Micro-power generation, particularly in rural areas and in support of other USAID activities, is also a key focus of these efforts. Health and education programs form the final two main pillars of U.S. development assistance in Liberia. Health assistance seeks to rebuild and improve basic health services through support for staffing, equipment and supplies, and training, and facilities upgrades, notably in rural areas; ensure child welfare, notably for orphans and other vulnerable or special needs children; and increase access to clean water and sanitation. There are special programs for family planning and reproductive health; nutrition; and for prevention and intervention programs aimed at combating malaria, tuberculosis, and HIV/AIDS. USAID also supports efforts to bolster the program planning and management capabilities of the Ministry of Health. Education programs center on teacher training, with a special program aimed at improving reading instruction and testing; increasing professional public service worker access to higher education; providing financial support and mentorship to poor children and programs to facilitate the access of older youth to access formal education and life skills training; and a book distribution program. USAID also supports Ministry of Education policy-making, program management, and financial capacity-building, and broader community outreach education programs pertaining to health, nutrition, hygiene, and sanitation. Liberia has been eligible for Millennium Challenge Corporation (MCC) Threshold Program assistance since late 2008. As of early April 2010, MCC and USAID were working with Liberia's Ministry of Planning and Economic Affairs to develop a country Threshold Program, for which an agreement may be signed by mid-2010. The program is currently conceived of as a three-year program (2010-2013) that would focus on girl's primary education; land rights and access; and trade policy. The Peace Corps is expanding its presence in Liberia. In August 2008, the Peace Corps—which had deployed over 3,832 Peace Corps Volunteers (PCVs) to Liberia from 1962 to 1990, when war-related security conditions led to a suspension of the program—officially reopened its program in Liberia. In October 2008 the first group 12 volunteers, of an eventual total of 13, deployed to Liberia under the new program, which was initiated under the Peace Corps Response (PCR) program (formerly called Crisis Response), a special short-term humanitarian service deployment program. Under the program, veteran PCVs called Peace Corps Response Volunteers (PCRVs) deploy to countries that have special needs, typically ones recovering from armed or political conflict or natural disasters, but which may eventually host a regular Peace Corps country program. In Liberia, PCRVs have worked on health and education system reconstruction, mentoring teacher trainers, training health professionals, and supporting Parent Teacher Associations and resource libraries for teachers, among other education capacity-building projects. The program helped lay the groundwork for a transition to a full Peace Corps country program that is expected to receive its first group of PCVs in July 2010. The new PCVs, whose services will overlap with the continuing PCRV program, will support secondary education, working as English, science, and math teachers. Funding for Peace Corps activities in Liberia is estimated at $1.44 million in FY2010 and projected to rise to $2.45 million for FY2011, when the program is expected to support 41 volunteers. The United States is also supporting President Sirleaf's market-based economic growth agenda in a variety of other ways. In late February 2006, the U.S. Trade Representative announced that President Bush had reinstated duty-free Generalized System of Preferences (GSP) trade benefits for Liberia. USTR said that the action was intended to provide "strong support to recently elected President Ellen Johnson Sirleaf's efforts to increase employment, diversify exports, and stabilize society." It was made, according to the USTR, because Sirleaf had repealed a decree prohibiting strikes and invited the International Labor Organization (ILO) to help Liberia to conform with ILO obligations, thus making "improving worker rights a high priority." On January 1, 2007, Liberia became eligible to receive U.S. trade benefits under the African Growth and Opportunity Act (AGOA). In February 2007, Liberia and the United States signed a bilateral Trade and Investment Framework Agreement (TIFA). Its aim is to bolster bilateral economic cooperation, primarily by creating a U.S.-Liberia Council on Trade and Investment charged with monitoring bilateral trade and investment developments and opportunities, related policy problems, and identifying and working to remove impediments to bilateral investment. In February 2007, the U.S. Trade and Development Agency (USTDA) announced that it would provide a $400,000 grant to the Liberian Ministry of Lands, Mines and Energy to fund a technical and economic feasibility study of the rebuilding and expansion of the Mount Coffee Hydropower Station. The station, once a key national source of electricity, was destroyed during the first civil war. USTDA had first announced plans to support such a study in mid-May 2006. This announcement had been preceded by a February 2006 announcement by the U.S. Export-Import Bank (Ex-Im) stating that it had renewed its Short-Term Insurance Pilot Program for Africa (STIPP) for three years beginning March 31, 2006, and that Liberia had been added to the program. Similarly, in March 2006, the Overseas Private Investment Corporation (OPIC) had announced that "following the election of President Ellen John Sirleaf and the conclusion of its long civil war," it had "reopened its programs in Liberia for the first time since 1990" as part of an effort of "[r]eaffirming U.S. government support for Liberia." OPIC is now involved in a public-private commercial and investment business development lending project, the Liberia Enterprise Development Fund (LEDF), together with the RLJ Companies of Black Entertainment Television founder Robert L. Johnson, CHF International, and the U.S. African Development Foundation (ADF). The purpose of LEDF is to create a projected $30 million loan portfolio aimed at supporting small businesses in Liberia. OPIC has committed to provide $20 million in debt financing to LEDF, and Mr. Johnson and the ADF have committed, respectively, to provide $3 million and $1 million annually over three years. CHF International will administer the program in Liberia. OPIC also co-sponsored a Liberia Private Sector Investment Forum in February 2007. Another effort aimed at fostering bilateral ties, including commercial ones, was the February 2007 signing of an Open Skies aviation agreement between the United States and Liberia. In October 2008, Delta Airlines announced plans to initiate U.S.-Liberia flights, an outcome that would fulfill some of the goals of the Open Skies agreement. Flights were originally slated to begin in mid-2009, but Delta's plans faced delays, and flights are now slated to begin in mid-2010. Delta's initial plans were deferred in June 2009, when the U.S. Department of Homeland Security (DHS) announced that it would not authorize the operation of the planned route, pending further DHS evaluation of Delta's request to initiate the flights. The decision followed an assessment of Roberts International Airport (ROB), outside Monrovia, by the Transportation Security Administration (TSA), a DHS unit. It indicated that ROB did not meet international security and International Civil Aviation Organization (ICAO) standards. TSA is providing Liberia with technical assistance to enhance aviation security and compliance with ICAO standards. It has deployed an Aviation Security Sustainable International Standards Team (ASSIST) to Liberia to assess local needs and help build national capacities in this area, and is slated to conduct a reassessment of ROB capabilities in these areas. ROB services and infrastructure are also being upgraded, in part with the U.S.-supported, contract-based assistance of Lockheed Martin Global Services. Another key benchmark necessary prior to the initiation of flights to Monrovia was met in October 2009, when the TSA reportedly gave provisional approval for the operation of Delta flights at Amilcar Cabral International Airport in Cape Verde, which is slated to function as a refueling stop for Delta's planned flights to Liberia and other African destinations. The U.S. Postal Service (USPS), in cooperation with the Departments of Defense and State, is also helping to boost U.S.-Liberian communications and help rebuild Liberian government capacity. USPS has donated postal equipment to Liberia, trained Liberian postal workers, and provided recommendations regarding its future development. In February, 2007, the United States, other governments, and several multilateral organizations co-hosted the Liberia Partners' Forum, a meeting between the Liberian government and Liberia's public sector creditors and bilateral assistance donors in Washington, D.C. The aim of the event, following a similar one held in July 2006, was to review Liberia's achievements and challenges in the areas of economic governance, fiscal policy implementation, general economic development, and related matters. During the meeting, Bush Administration officials announced their intention to cancel $391 million in debt owed by Liberia to the United States, both under the Heavily Indebted Poor Countries (HIPC) Initiative and in cooperation with other donors, such as the World Bank, the African Development Bank, and the International Monetary Fund. In early June 2008, the United States acted on its pledge, writing off $394 million of Liberian debt under HIPC and Paris Club agreements. The U.S. Treasury has also provided over $185 million to support Liberian IMF debt relief financing and provided $17.5 million to clear Liberia's African Development Bank debt. As of mid-2009, official bilateral debt owed to the United States, slated to be cancelled after Liberia completes the HIPC process, totaled $29.26 million. Several multilateral and bilateral creditor deals both prior to and after the U.S. action had also reduced Liberia's debt substantially, and as April 2010, bilateral debt reduction deals with all with all Paris Club creditors except Switzerland had been reached. In April 2009, Liberia was able to finalize negotiations to buy back $1.2 billion in outstanding government commercial debt held by hedge funds and other distressed debt investors (sometimes called vulture funds) at a deep discount of 97.5%, after the World Bank and several bilateral donors, including the United States, agreed to provide $38 million to pay off 25 outstanding commercial claims. The balance of its sovereign debt, $1.7 billion, was expected to be written off when Liberia reaches its HIPC Completion Point. The IMF also reported in April 2010 that the Liberian government planned to reach agreements with remaining official non-Paris Club creditors, holding debt of $129 million, and private creditors holding $21 million of commercial debt, and was on target to reach its HIPC completion point in mid-2010, providing it met certain conditions. The $21 million (reported elsewhere as $20 million) is held by two vulture funds, Wall Capital Ltd. and Hamsah Investments, who were awarded a claim for that amount by a UK court after suing the Liberian government for repayment. The government has announced that it would be unable to pay the award, as doing so would violate its HIPC commitments, although it was seeking a waiver to do so. The original debt associated with the claim totaled $15 million, and had been resold several times. Levels of U.S. bilateral and U.N. peacekeeping assistance for Liberia, for FY2004 through FY2011, appear in Table 3 . | This report covers developments in Liberia, a small, poor West African country. Liberia held elections in October 2005, with a presidential runoff in November, a key step in a peace-building process following its second civil war in a decade. That war began in 1999, escalated in 2000, and ended in 2003. It pitted the forces of Charles Taylor, elected president in 1997 after Liberia's first civil war (1989-1997), against two armed anti-Taylor rebel groups. The war also destabilized neighboring states, which accepted Liberian refugees and, in some cases, hosted anti-Taylor forces and became targets of the Taylor regime. Ellen Johnson Sirleaf, an economist, won the presidential runoff vote with 59.4% of votes cast and took office in January 2006, becoming the first elected female president of an African country. Her runoff rival, George Weah, a former star soccer player, conceded Sirleaf's win after initially contesting it. Most observers viewed the vote as orderly, free, and fair. It fulfilled a key goal of an August 2003 peace accord that had ended the second civil war and led to an ongoing, U.S.-aided post-war transition process, which is bolstered by the multifaceted peacekeeping and development-focused U.N. Mission in Liberia (UNMIL). The next election is scheduled for 2011, and President Sirleaf has announced that she will seek reelection. Liberia's security situation is stable but subject to periodic volatility. Progress in governance under the interim government that preceded that of President Sirleaf was mixed; widespread corruption within it was widely reported. Liberia's economy and state structures remain devastated by war but, along with humanitarian conditions, are improving. Liberia has received extensive U.S. post-war reconstruction and security sector reform assistance. In March 2006, former President Taylor was arrested in Nigeria and transferred to the Special Court for Sierra Leone (SCSL) to face war crimes charges. He was later transferred to The Hague, the Netherlands, where he is on trial by the SCSL. In addition to providing substantial support for Liberia's post-war peace and reconstruction processes, Congress has maintained a continuing interest in the status of Charles Taylor and in ensuring funding for the SCSL. Other legislation proposed in the 109th and 110th Congresses centered on immigration, debt, and tax haven issues, and the commendation of Liberia for successfully holding elections. Liberia-specific legislation introduced or acted upon in the 111th Congress has included H.R. 1105 (Obey); H.R. 3288 (Olver); S. 656 (Reed); H.R. 2258 (Kennedy); H.R. 2410 (Berman); H.R. 2475 (Ros-Lehtinen); S. 1434 (Leahy); and H.R. 2346 (Obey). |
The Budget Control Act of 2011 ( P.L. 112-25 ) provided for automatic reductions to most federal discretionary spending if no agreement on deficit reduction was reached by the Joint Select Committee on Deficit Reduction. Such reductions, referred to as sequestration, went into effect on March 1, 2013, the extended deadline for a deficit reduction agreement established under the American Taxpayer Relief Act of 2012 ( P.L. 112-240 ). In general, sequestration required agencies to reduce non-defense discretionary spending by 5.3% in FY2013. Sequestration affects Federal Aviation Administration (FAA) operations in different ways. FAA's grants for airport improvements, which are subject to obligation limitations, were statutorily exempt from the sequester cuts. On the other hand, FAA's air traffic operations face significant spending reductions. In total, it is estimated that FAA will need to reduce its total funding by roughly $636 million in FY2013 compared to FY2012 enacted levels, with roughly three-quarters of this amount coming from FAA operations, primarily air traffic and aviation safety functions. In anticipation of the sequester cuts, Transportation Secretary Ray LaHood and FAA Administrator Michael Huerta issued a joint letter on February 22, 2013, announcing cost-cutting measures under consideration including furloughs for most FAA employees, elimination of late-night shifts in as many as 72 air traffic control facilities, and the complete closure of up to 238 control towers at airports that have fewer than 150,000 flight operations or fewer than 10,000 commercial operations per year. Towers listed as candidates for closure included 195 run by contractors under the Federal Contract Tower (FCT) program and 43 staffed by FAA controllers. On March 22, 2013, FAA announced it would close 149 FCT program towers over four weeks beginning April 7, 2013. FAA said it chose to keep open 24 FCT facilities initially identified for closure after weighing national security interests; adverse economic impacts beyond the local community; potentially significant impacts on interstate transportation, communication, or banking and financial networks; and status as a critical diversionary airport for a large hub airport. On April 5, 2013, citing a need for additional time to address multiple legal challenges to its tower closure decisions, FAA delayed the closures and set June 15, 2013, as the date it would cease funding the 149 FCT program towers. Several airports have filed suit against FAA, chiefly questioning whether it has adequately met legal obligations to evaluate potential safety risks associated with the pending tower closures. On May 1, 2013, following a week of FAA air traffic controller furloughs that contributed to some isolated air traffic system delays, particularly at the nation's busiest airports, the Reducing Flight Delays Act of 2013 ( P.L. 113-9 ) was enacted. The act gave FAA authority to transfer up to $253 million to FAA operations using available monies from unspent airport funds, which were not subject to sequestration, and from other available sources within FAA. On May 2, 2013, a bipartisan group of 25 Senators transmitted a letter to Secretary of Transportation Ray LaHood and FAA Administrator Michael Huerta. The letter indicated that the $253 million transfer authority was "far above the amount required to prevent furloughs," stressing further that "[c]ongressional intent is clear: the FAA should prevent the slated closure of 149 contract towers by fully funding the contract tower program." On May 10, 2013, Secretary LaHood announced that the funds transfer authority under P.L. 113-9 was sufficient to end FAA employee furloughs and keep the 149 towers open for the remainder of FY2013. While this action appears to have settled debate over the pending closure of control towers in FY2013, long-range plans for tower closures, cutbacks in operating hours, or both may be revisited in future policy debates regarding the FAA budget. The financing and continued operation of low-activity towers, in particular, remain significant issues for future FAA budgets. In general, the funding and operation of civil air traffic control towers in the United States and U.S. territories fall into one of four categories: (1) tower operations funded through FAA's operations budget and staffed with federal air traffic controllers; (2) contract tower operations fully funded through FAA's operations budget but staffed with controllers employed by the contractor under the federal contract tower (FCT) program (also known as the contract tower base program); (3) contract tower operations partially funded through the FAA's operations budget and partially funded by local or state government funding and managed and staffed by contractor personnel, referred to as the contract tower cost-share program; and (4) non-federal control towers that receive no funding from the federal government and are staffed with non-federal controllers. Regardless of funding and operation, FAA maintains responsibility for the regulation and oversight of operations and safety at all civil air traffic control towers in the United States. Contract towers and contract controllers must be certified by FAA and must follow FAA directives. FAA funds for tower operations are derived from appropriations to the FAA's Operations and Maintenance (O&M) account, which is funded partially from the Airport and Airways Trust Fund (AATF) and partially from the Treasury general fund. These sources provide funding for both the contract tower program and FAA-staffed towers. Of U.S. airports with control towers, 251 (slightly less than half) are operated by private firms and staffed with contract employees under the FCT program. Sixteen of the 251 contract towers are funded under arrangements in which local governments or entities pay up to 20% of the costs. The cost-share program is provided as an option to communities that wish to retain an operating air traffic control tower after FAA determines that the costs to the federal government outweigh their tower's benefits related to safety and efficiency of flight operations. With the exception of these 16 cost-share towers, towers in the federal contract tower program are fully funded by FAA. In recent years, the budget for the FCT program has been about $140 million annually, including approximately $10 million for the federal share of cost-share towers. The FCT program came into existence in 1982—initially as a pilot program at five airports—in an effort to provide air traffic services at low-activity towers in the wake of the nationwide air traffic controller strike and subsequent dismissal of striking FAA controllers. For the first 12 years, the program remained relatively small, growing to 27 towers by 1993. Nonetheless, it gained the attention of Vice President Gore's National Performance Review—later known as the National Partnership for Reinventing Government—which endorsed the program in 1993 and recommended its expansion. The FAA developed a plan to close or contract out all low-activity towers, and the number of contract towers grew to 160 by the end of FY1997. In FY1999, Congress first funded the cost-sharing program, allowing airports that would not otherwise have met FAA's threshold benefit-to-cost ratio to maintain contract tower operations with non-federal funds to supplement federal expenditures. Subsequently, Congress has limited the local share to not more than 20% of a tower's costs. Currently 16 towers are funded through this program at a cost of roughly $10 million annually. The federal funding for cost-share towers has been designated separately in recent appropriations measures, and therefore is not included in the proposed funding cuts and tower closures being considered in FY2013. However, FAA has indicated that it would seek to increase the local share portion of the cost-share program in FY2014 from 20% to 50%. While this could expand program eligibility, it could also have the effect of triggering tower closures in communities that are unwilling or unable to contribute additional funding for tower operations. In a 2012 audit, the Department of Transportation Office of Inspector General concluded that the FCT program provided air traffic services to low-activity airports at lower costs than FAA-staffed towers could. The audit found that, on average, contract towers required six fewer controllers and cost almost $1.5 million less annually than FAA-staffed towers at airports with comparable levels of flight activity. These savings were achieved through lower staffing levels and lower controller pay at contract towers compared to FAA towers. The audit found that contract towers had a lower rate of reported safety incidents than comparable FAA towers. Also, a survey of aircraft operators, conducted as part of the audit, found similar levels of satisfaction with the services provided by contract towers and FAA towers handling similar numbers of aircraft. The FAA operates 262 airport air traffic control towers. About one-quarter of these are similar in activity levels to contract towers. These have remained under FAA operation primarily because of local operational considerations, such as proximity to congested airspace, or are considered candidates for conversion to the FCT program, but have not yet been converted. Of the FAA-operated towers, 43 have been identified as having fewer than 150,000 total operations or fewer than 10,000 commercial operations annually and have been included on the list of potential tower closures. Additionally, several FAA-staffed towers at mid-sized airports had been identified as facilities where late-night shifts could be eliminated in FY2013. Several of the towers listed have radar approach capabilities. However, these towers typically see limited late-night activity, comprising mainly all-cargo operations with occasional general aviation traffic. Examples include the towers at Little Rock, AK; Manchester, NH; Oklahoma City, OK; Harrisburg, PA; Reno, NV; El Paso, TX; and Norfolk, VA. Many other towers, including both FAA-operated and contract towers, already close during late-night hours. When a tower closes, either overnight or permanently, the airport will typically remain open to traffic as an uncontrolled airport. In some rare instances, an uncontrolled airport may close late at night for noise abatement or due to safety concerns in mountainous areas, but runway lights and other navigational aids remain functional so it could serve as an emergency landing site for an aircraft in distress. When an airport is uncontrolled, pilots assume responsibility for following prescribed traffic procedures and seeing and avoiding other aircraft, both on the ground and in flight in the vicinity of the airport. Historically, FAA has relied on a formal benefit-to-cost assessment process for establishing and discontinuing air traffic control tower operations. This analysis weighs the monetized lifecycle safety and efficiency benefits derived from operating a tower against the lifecycle costs of operating and maintaining it. The analysis yields a single benefit-to-cost ratio which serves as FAA's criterion for determining whether a tower should be established or discontinued: If the ratio is greater than or equal to one, a recommendation to establish a tower may be made, whereas if the ratio falls below one, an existing tower would be subject to closure, to continuation under the cost-share program, or to conversion to a non-federal control tower if a local entity is willing to assume the costs. Currently, all airport towers in the contract tower program have benefit-to-cost ratios greater than or equal to one under FAA's valuation methodology, except for the 16 cost-share towers where local communities contribute to fund costs that outweigh the benefits, up to 20% of the total cost. Communities may identify other benefits derived from the operation of the tower, such as attracting business, that are not considered in FAA's benefit-to-cost ratio. The U.S. Contract Tower Association, a trade organization representing contract towers, has been critical of FAA's benefit-to-cost analysis methodology, claiming that it fails to consider many intangible benefits, including local economic benefits derived from maintaining an airport tower. On the other hand, the FAA methodology also ignores certain disbenefits that may arise from operation of a tower, such as increased community noise from additional aircraft attracted because of the tower's presence. Despite the criticisms, the established FAA methodology continues to serve as a basis for quantifying a tower's added value or benefit to aviation safety and operational efficiency. These econometric valuations can be used to quantify the effects of tower closures based on the levels of flight activity at affected airports. FAA compares benefits derived from operation of an existing tower against the costs of operating and maintaining it over a 15-year span. The quantified benefits include prevention of collisions between aircraft, prevention of other accidents, and benefits from reduced flight time. These benefits are considered in further detail below in the context of potential impacts associated with tower closures. The FAA's tower benefit safety analysis is predicated on projections that the presence of a tower will prevent, on average (mean value), the following number of accidents over a 15-year span as a function of the average annual number of flight operations: 1.802 x (Number of Operations/10 6 ) 2 midair collisions (both aircraft airborne); 1.238 x (Number of Operations/10 6 ) 2 collisions between an aircraft on the ground and an aircraft in flight; and 2.775 x (Number of Operations/10 6 ) 2 ground collisions between aircraft. As these equations indicate, collision risk is projected to increase exponentially (as a function of operations squared) as the number of airport operations increases. Therefore, the busier an airport is, the more significant a control tower's role in collision risk reduction. Closing 100 towers with 150,000 annual operations each would be expected to increase the number of collisions over the 15-year span by roughly 13, or slightly less than 1 per year. The likely severity of injuries and aircraft damage differ among accident types, with midair collisions being far more likely to result in fatalities and destruction of aircraft. Most accidents are minor, except among midair collisions, which pose greater than a 50% chance of fatality. It is estimated that, among all accidents that might be prevented by the operation of a tower, about 18% of aircraft occupants will be fatally injured. Other types of accidents that can be prevented by the presence of tower controllers include wheels-up landings, collisions with objects such as construction equipment, downwind landings, misaligned approaches, and runway overshoots and undershoots. From 1983 through 1986, these types of accidents occurred at nearly twice the rate at non-towered airports (2.583 accidents per million operations) than at towered airports (1.398 accidents per million operations). By adding these other accident classes into the analysis, the presence of an operational control tower would reduce total accident risk (collisions between aircraft plus other accidents) by roughly one mishap for every 2.14 million operations. The collision likelihoods in the FAA benefit-to-cost methodology are based on accident data from 1983 through 1986. Accident rates for both general aviation and commercial aviation have declined since that time, so the FAA methodology likely overestimates present-day collision probability and severity. At airports without operating control towers, pilots often overfly the field to assess conditions before landing and follow an established traffic pattern to conform to traffic management practices. Towers provide operators with efficiency gains by reducing flight time and the associated fuel burn associated with these practices. The operation of a tower typically reduces flight time by less than one minute per flight, with less of an effect on commercial aircraft than on general aviation aircraft. While the impact of tower closures on individual operators' efficiency is relatively small, tower closures can also be viewed as having a negative cumulative impact on energy and the environment by increasing aircraft fuel burn, emissions, and noise as a result of these extended flying times, assuming flight activity remains constant after closure of the tower. Tower closures could affect airlines in terms of their receipt of required information regarding current airport data and weather information that they must obtain from approved sources. A tower closure would not preclude commercial air service, but it could affect airlines' decisions regarding whether to reduce or eliminate service to an airport. Also, tower closures may affect private and business aircraft operators' decisions regarding where to base and to operate their aircraft, and could result in the diversion of some general aviation traffic from designated reliever airports to busier commercial airports. If this were to occur, it could increase commercial airline delays at certain airports. The Aircraft Owners and Pilots Association (AOPA), an advocacy group for general aviation interests, asserts that "in and near metroplexes, towers at smaller airfields provide a measure of relief to larger airports serving commercial traffic. Closing such towers will impact the entire metroplex." The potential safety impacts of long-term tower closures could be mitigated to some degree by technologies now under development. These technologies fall into two broad categories: (1) in-cockpit situation awareness technologies and (2) remote air traffic services. In-cockpit situation awareness technologies include capabilities such as moving maps and cockpit displays of traffic information. While commercial passenger aircraft are equipped with traffic collision avoidance systems (TCAS), such systems are not affordable for typical general aviation aircraft, which make up the majority of traffic at most small and mid-sized airports. A new technology known as Automatic Dependent Surveillance-Broadcast (ADS-B) may provide a means for general aviation aircraft to be equipped with in-cockpit moving maps with overlays of nearby traffic by receiving broadcast signals from other aircraft of the precise aircraft location, typically determined by global positioning system (GPS) tracking. FAA will require most aircraft to be equipped with the ADS-B capability to broadcast precise location information, a capability known as ADS-B Out, by 2020. However, at present there is no mandate to equip aircraft with the capability to receive and display information about other traffic, a capability known as ADS-B In. While some general aviation operators may see an inherent safety benefit in this capability to improve situation awareness, greater participation may be needed to obtain a comparable level of situation awareness and traffic avoidance in the air terminal environment that is currently provided by manned air traffic control towers. Another potential remedy is to provide air traffic services similar to those currently provided by towers from remote locations. Remote facilities could potentially realize cost savings over existing stand-alone towers by centralizing and consolidating operations among low-activity airports. However, initial start-up costs may be high. Some air traffic services are already provided remotely. For example, an aircraft on an instrument approach to a non-towered airport can remain under the control of an en route or approach control facility until it descends below radar coverage. While under radar control, the controller would remain responsible for maintaining aircraft separation from other aircraft flying under instrument rules and may provide advisories regarding aircraft operating in or near the airport traffic pattern under visual flight rules. Remote or virtual towers are seen as a potential next step in air traffic facility consolidation and could provide a comparatively low-cost alternative to manned towers. Remote towers could utilize data such as ADS-B and surface radar capabilities. Cameras and other sensors, such as infrared for night operations, could be installed at airports without operating towers to provide information to consolidated air traffic facilities, from which controllers could provide services similar to those airport towers currently provide. Pooling of resources at these consolidated facilities could potentially allow for significantly reduced staffing compared to stand-alone towers currently in operation. European researchers have initiated a project to develop and examine the potential benefits of expanding remote air traffic service capabilities at test sites in Norway and Sweden and are working toward full operational certification of remote tower facilities. Also, AirServices, the nationwide air traffic services provider in Australia, is testing remote approach control and airport services at Alice Springs from a remote tower center in Adelaide. In the United States, both the National Aeronautics and Space Administration and the Department of Transportation's John A. Volpe National Transportation Systems Center are conducting research on staffed "virtual towers" and remote tower sensing capabilities. Field tests at U.S. airports are currently under consideration, but it appears unlikely that remote or virtual air traffic control tower facilities will be ready for routine operation at U.S. airports in the near future. S.Amdt. 45 , amending H.R. 933 , the vehicle for consideration of an FY2013 continuing budget resolution, was submitted on March 13, 2013, with the purpose of limiting FAA tower closures in response to budget sequestration. Specifically, the amendment would fund the contract-tower program for FY2013 at a level of $130.5 million with $10.35 million for the cost-sharing program. The amendment would offset the continued funding of the contract tower program at this level by rescinding $24 million of unobligated prior-year funds appropriated for FAA facilities and equipment and $26 million of unobligated prior-year funds for FAA research, engineering, and development. The measure would not protect contract towers from budget reductions beyond FY2013 and does not address possible closures of FAA-staffed towers. On March 20, 2013, the Senate passed an amended version of H.R. 933 that did not include the language of S.Amdt. 45 regarding funding for the contract tower program. Subsequently, S. 687 was introduced on April 9, 2013. It would explicitly prohibit FAA from suspending or terminating operation of any FAA air traffic control tower that was operational on March 1, 2013, in either FY2013 or FY2014. Further, it stipulates that if FAA suspends or terminates any tower operations between March 1, 2013, and the date of enactment, FAA shall resume operations of such tower as soon as practicable. Prior to the announcement of pending tower closures in response to sequestration, legislation was offered seeking to increase tower staffing, particularly during late-night shifts. The Minimum Staffing of Air Traffic Controllers Act of 2013 ( H.R. 66 ) would require a tower to be staffed with a minimum of two air traffic controllers at all times at all airports where there are regular air carrier operations. The legislation appears to address concerns over fatigue among air traffic controllers during midnight shifts and over controller workload and operational errors, and is not directly related to budget reductions in tower operations. Due to budget limitations, a requirement for additional staffing at certain towers could result in a larger number of towers closing. | Budgetary flexibility enacted under the Reducing Flight Delays Act of 2013 (P.L. 113-9) has permitted the Federal Aviation Administration (FAA) to cancel plans to close 149 air traffic control towers operated by contractors, a measure it had proposed to address funding decreases brought about by the budget sequester. On March 22, 2013, FAA announced the planned tower closures. The closures were originally planned for April 2013, but the closure was pushed back to June 2013 and then abandoned due to receipt of new authority in P.L. 113-9 allowing funds to be transferred from other FAA accounts to FAA operations. FAA had also named 72 air traffic control facilities that would cease operations late at night as a cost-saving measure, but elimination of FAA controller furloughs subsequent to passage of P.L. 113-9 led FAA to cancel these plans as well. Roughly 10% of U.S. airports have operating control towers, although many towers close at night when flight activity is low. Closure of a tower does not mean closure of an airport: At airports where no tower is operating, pilots use established traffic patterns and procedures to avoid other aircraft. The towers that were slated for closure have no radar approach control capabilities and perform air traffic separation functions using procedures for visual flight. These airports can handle aircraft in poor weather on a limited basis, but unlike airports with radar approach control they cannot handle multiple aircraft on approach in low visibility and clouds. About half of the roughly 500 towers in the United States are operated by private firms under contract to FAA. Sixteen of the contract towers are partially funded through local (non-federal) shares of up to 20%, while 235, including the 149 identified for closure, have been fully funded by FAA. The cost-share towers are currently partially funded through a separate federal appropriation that is subject to the 5.3% sequester cut, but they were not slated to be closed in FY2013. A tower scheduled to close could be converted to a non-federal tower if a local community were willing to fully fund the tower's operation. Non-federal towers are still regulated, but not funded, by FAA. FAA has historically relied on a benefit-to-cost ratio methodology for establishing and discontinuing air traffic control tower operations. This methodology quantifies the safety and efficiency benefits of a tower in reducing aircraft collisions and other accidents and reducing flight times, and identifies established towers for possible closure or conversion to cost-share or non-federal towers if their benefit-to-cost ratio falls below one. However, all towers identified for closure under the sequestration cuts have benefit-to-cost ratios greater than one. Long-term tower closures would have relatively small but measureable impacts on safety and efficiency, and could cause a shift in both commercial and general aviation traffic to busier airports where towers remain open, depending on how airlines and other aircraft operators respond. Legislation to maintain federal control tower funding and a measure to increase tower staffing at busy airports are under consideration in the 113th Congress. S. 687 would prohibit the closure of any air traffic control tower in FY2013 and FY2014. S.Amdt. 45 had sought to maintain funding for the FAA contract towers to prevent their closure, but was not considered on the floor in the Senate. H.R. 66, pending in the House Transportation and Infrastructure Committee, would increase staffing minimums for towers at busier commercial airports, which could put additional fiscal pressures on FAA to close low-activity towers or reduce their operating hours. |
Intelligence, surveillance, and reconnaissance (ISR) systems are matters of great congressional interest. These systems can provide policymakers with information on the military capabilities of foreign countries, the location of key defense and industrial sites, indications of the presence of weapons of mass destruction, and information on the plans of foreign leaders and terrorist groups. National-level ISR is essential for both defense planning and arms control negotiations. Military commanders rely on intelligence systems for information on enemy positions and activities; tactical ISR has also been essential for precise targeting in counterterrorism operations while minimizing civilian casualties. At present, major ISR systems—national and tactical—are used by both military commanders and Washington policymakers to follow developments in combat areas in great detail. ISR systems include reconnaissance satellites, some of which have been operational for decades; Unmanned Aerial Systems (UAS) of various sizes; and manned aircraft and other sensor platforms. In practice, some ISR systems acquired for one purpose are regularly used for other missions that may have been unanticipated when the systems were designed. Acquisition of ISR systems presents particular challenges to the intelligence community, the Department of Defense (DOD), and Congress. Agencies responsible for national systems are usually separate from those that design and acquire tactical systems. The costs and complexity of individual systems, continuing changes in technologies, and the difficulties involved in linking disparate systems together to serve a variety of consumers require different acquisition approaches than those often used for ships, tanks, and manned aircraft. Moreover, since the establishment of the United Launch Alliance in late 2006, ISR satellites rely on launch platforms and other technologies used by non-intelligence satellites; thus, there is a necessity to coordinate intelligence satellite developments and launch schedules with elements of the national space effort that is managed by federal agencies outside DOD and the intelligence community. UAS have demonstrated that on occasion they can provide data at a fraction of the costs of multi-billion dollar satellites, but UAS acquisition efforts have been anything but simple. There has been a tendency to introduce new and untested capabilities to unmanned platforms, causing production delays and cost growth. Some policymakers would centralize UAS acquisition efforts under an executive agent (an initiative that Congress at one point mandated but then abandoned), but, in practice, the four services have been intent on acquiring different UAS that meet their perceived unique requirements. The result has often been excessive costs required for different systems with duplicative or overlapping capabilities. Other platforms for ISR collection, such as manned aircraft, continue to have important functions, but often they compete for agency funding with non-intelligence aircraft rather than with unmanned intelligence systems, and intelligence requirements may not receive the highest priorities. Acquisition efforts are further complicated by the fact that Congress addresses ISR programs through a number of committees, principally Armed Services, Intelligence, and Appropriations. Such factors taken together have often led to piecemeal acquisition efforts, major cost overruns, and an inability to ensure that disparate systems can be linked effectively to yield a comprehensive intelligence picture. There have been production delays and only recently have UAS been available in adequate numbers to support the pace of operations in Iraq and Afghanistan. Observers argue—and a number of key Members of Congress have concurred—that the drawbacks inherent in past and current ISR acquisition efforts are serious enough to indicate that consideration should be given to the preparation of an agreed-upon multi-year plan or "architecture" that provides production schedules for currently planned ISR systems and the introduction of new platforms. If such a plan were agreed upon, advocates argue, it would be possible to restrain cost growth, ensure that all requirements had been considered, and establish the best possible mix of satellites and unmanned and manned systems. On the other hand, skeptics suggest that dynamic technologies and the changing international environment would nevertheless necessarily limit what can be done in terms of multi-year procurement efforts. A key consideration underlying efforts to acquire, deploy, and operate ISR systems is the way or ways that they will be used. The need to gain insights into Soviet military capabilities during the Cold War provided the principal impetus for the sizable investments in global signals intelligence and overhead reconnaissance capabilities. These systems were considered "national"; they were acquired primarily to support the President and key Cabinet members. A number of "national" organizations—especially the National Reconnaissance Office (NRO) and the National Security Agency (NSA), along with the Central Intelligence Agency (CIA), were established to gather and analyze information for senior policymakers. The ability of U.S. leaders to gauge the extent of Soviet strategic capabilities was essential to defense planning and arms control negotiations, but there was less capability to support military commanders in ongoing combat operations. Beginning with Desert Shield in 1991, however, these national-level systems began to be adapted to tactical use in Iraq, Bosnia, Kosovo, Afghanistan, and elsewhere. Wherever U.S. forces have been deployed for combat there have been requirements for intensive intelligence support that called upon national systems that were not originally intended for tactical uses. In peacekeeping/peacemaking/stabilization operations, the overriding need to minimize attacks on civilians has led commanders and national-level leaders to seek ever more precise target data from all available sources of information. In addition to adapting older systems to the demands of current modes of warfighting, newer ISR systems have also been employed with considerable success. In particular, UAS have proven their value as relatively low-cost systems that can be routinely used by ground commanders to acquire tactical intelligence. In regular use since the early 1990s, UAS range in size and sophistication from very small systems that can be launched by an individual soldier for short-range tactical operations to the high-altitude Global Hawk that can acquire much of the same information as reconnaissance satellites. The potential overlap, or possibility of close coordination between UAS and national satellites has, however, called into question the separate organizational and congressional oversight structures that have been established or have evolved over the past decades. In spring 2009, Secretary of Defense Robert Gates argued in Foreign Affairs that the nature of U.S. strategic planning has unalterably changed. His comments summarize the evolution of defense and intelligence planning that guided the Administration's budget proposals for FY2010: [F]or far too long there was a belief or a hope that Iraq and Afghanistan were exotic distractions that would be wrapped up relatively soon—the regimes toppled, the insurgencies crushed, the troops brought home. Therefore we should not spend too much or buy too much equipment not already in our long-range procurement plans or turn our bureaucracies and processes upside down.... As a result of these failed assumptions, the capabilities most urgently needed by our warfighters, were for the most part fielded ad hoc and on the fly, developed outside the regular bureaucracy and funded in supplemental legislation that would go away when the wars did—if not sooner. ... [G]iven the types of situations the United States is likely to face … the time has come to consider whether the specialized, often relatively low-tech equipment well suited for stability and counterinsurgency missions is also needed. It is time to think hard about how to institutionalize the procurement of such capabilities and get them fielded quickly. Secretary Gates was addressing issues of defense acquisition in general and not ISR systems in particular. It is clear, however, from the text of his speeches and his actions as Defense Secretary that he sees ISR support to warfighters as a major example of the challenge facing policymakers in both the executive branch and Congress. Military operations have increasingly come to depend upon the availability of copious amounts of real-time ISR. As a result of the commitment to Iraq and Afghanistan, requirements for ISR and the actual use of ISR data have grown exponentially in the past decade. The military priorities of both the Bush and Obama Administrations have established priorities for particular kinds of intelligence and thus particular types of intelligence collection systems. The February 2010 Quadrennial Defense Review (QDR) Report reflected Secretary Gates's earlier statements: The wars we fighting today and assessments of the future security environment together demand that the United States retain and enhance a whole-of-government capability to succeed in large-scale counterinsurgency (COIN), stability, and counterterrorism (CT) operations in environments ranging from densely populated urban areas and mega-cities, to remote mountains, deserts, jungles, and littoral regions. Stability operations, large-scale counterinsurgency, and counterterrorism operations are not niche challenges or the responsibility of a single Military Department, but rather require a portfolio of capabilities as well as sufficient capacity from across America's Armed Forces and other departments and agencies. Nor are these types of operations a transitory or anomalous phenomenon in the security landscape. On the contrary, we must expect that for the indefinite future, violent extremist groups, with or without state sponsorship, will continue to foment instability and challenge U.S. and allied interests. The QDR indicates that DOD has placed special emphasis on "certain capabilities that have been in consistently high demand and have proven to be key enablers of tactical and operational success." These enablers include unmanned aircraft systems such as the MQ-1 Predator and MQ-9 Reaper UAS and manned aircraft systems such as the MC-12 Project Liberty aircraft. ISR systems are acquired in very different ways; the process is conducted in classified channels and there is no overall ISR package that is developed by the executive branch and forwarded to Congress for its consideration. Rather, different systems are treated separately and requests come to Congress in different ways. Funds are also authorized and appropriated in different legislative measures. As might be expected, the result can be disjointed, with duplicative coverage in some areas and shortfalls in others. The most important ISR category is the National Intelligence Program (NIP) that includes systems designed for the use of national policymakers—the President and the National Security Council (NSC). Other important ISR systems are designed for and operated by military commanders and are grouped in the Military Intelligence Program (MIP). However, NIP systems can also be used to support tactical operations, and MIP systems can collect information of interest to senior policymakers. Traditionally, satellites are acquired as part of the NIP, but some are now included in the MIP. Most UAS have been MIP systems as have manned aircraft in recent decades. The composition of annual NIP and MIP budget submissions are classified and available only to Members of Congress and appropriate committee staff. The most expensive ISR system has been surveillance satellites, the development of which is perhaps the greatest accomplishment of U.S. intelligence. For many years the NRO—an agency created in 1961 with no public acknowledgement of its existence for over 30 years—was able to develop and acquire cutting edge reconnaissance systems. Early systems were placed into orbit only after many failures; costs were relatively unconstrained, and work proceeded in secret and with minimal oversight from either DOD or Congress. Reconnaissance satellites, in being able to delineate Soviet capabilities—and the absence thereof—made a major contribution to U.S. defense policies during the Cold War and, most observers would acknowledge, essentially justified their costs. The end of the Cold War reduced the need for satellite reconnaissance of foreign military forces; the "open-checkbook" approach to satellite acquisition ended. A reduction in intelligence budgets in the 1990s coincided with the beginning of the retirements of many in the generation of scientists and engineers that launched the satellite program. It is widely acknowledged that there is inherent tension between efforts to acquire new satellite technologies and the need to maintain and/or replace existing capabilities. Acquisition of systems using currently available technologies can yield stability and contained costs, while trying to push the technological envelope to acquire cutting-edge or "exquisite" systems can be more disruptive. In addition, the tendency to prefer large Cold War-era systems has drawbacks. A senior DOD official acknowledged: we have attempted to buy large monolithic systems that produce a capability that is one size fits all, i.e. a single system that satisfies all customers, without evaluating the full set of alternatives.... This model is a Cold War relic, when space systems were needed to satisfy only the strategic policy decision maker and events unfolded in a fairly static timeline. Today's reality is that one size does not fit all. Further, the operational tempos in all of the Areas of Responsibility (AOR) diverge greatly and require different timeliness of access, volume, or fidelity. Developing a system that can satisfy all users all of the time is unsustainable, if not impossible.... deploying architectures with constellations of just a few satellites leave[s] the nation incredibly vulnerable and invites our adversaries to target our systems." Satellite acquisition is complicated. First, satellites overlap to some extent with airborne systems in terms of reconnaissance capabilities; there are potential trade-offs. Secondly, the acquisition and operations (especially the launching) of reconnaissance satellites is closely related to other types of satellites used for meteorology and communications that are not intelligence systems. As one report has noted: The U.S. space sector, in supporting commercial, scientific, and military applications of space, is embedded in our nation's economy, providing technological leadership and sustainment of the industrial base. To cite one leading example, the global Positioning System (GPS) is the world standard for precision navigation and timing, directly and indirectly affecting numerous aspects of everyday life. But other capabilities such as weather services; space-based data, telephone and video communications; and television broadcasts have also become common, routine services. The Space Foundation's 2008 Space Report indicates that the U.S. commercial satellite service and space infrastructure sector is today approximately a $170 billion annual business. Thus, the potential that high-altitude UAS have for meeting the same requirements as satellites may suggest that funds for satellite programs be shifted to UAS acquisition (leaving aside the issue of whether satellites actually provide better coverage and whether satellites are potentially less vulnerable to attack). On the other hand, if fewer reconnaissance satellites are to be launched, economies of scale among all satellite programs along with the "space intelligence base" might be affected. Another program, the Space Based Infrared System (SBIRS) consisting of infrared sensors that can detect incoming missiles, demonstrates the cost risks inherent in satellite acquisition; according to one media account the program exceeded its original $3 billion cost estimate by some $7.5 billion. The SBIRS program, centered on a space-based missile warning satellite, "originally pegged at around $3 billion, is now in the neighborhood of $10 billion; launch of the first satellite, originally targeted for 2002, is now expected anywhere between late 2010 and spring 2011." Satellites have always been costly. In earlier decades their unique ability to peer behind the Iron Curtain justified substantial investments that were known only to a few members of relevant congressional committees. National satellites remain costly, reportedly over $1 billion for each satellite, not counting considerable associated ground support and analytical efforts. The effort to acquire new technologies or to exploit available cutting-edge technologies results in highly expensive systems. Many observers argue that costs of satellite systems are unnecessarily inflated by too great a commitment to innovative technologies when others are adequate for likely missions; others point to a tendency to add unnecessary requirements ("bells and whistles") that increase complexity and delay production. Others maintain that opportunities for technological breakthroughs should not be passed up and innovative technologies usually pay for themselves eventually. The growth of program costs, however, is beyond doubt. Since passage of the Land Remote Sensing Policy Act of 1992 ( P.L. 102-555 ), commercial imaging satellites have been launched, and federal agencies were the first major customers. Arguably, commercial imagery saves the government money since purchases can be limited to meet particular requirements. In large measure, however, imagery companies have become highly dependent on government contracts, and changes in imagery procurement can have great implications for the commercial industry. In many cases, government satellites can produce more detailed information but at higher costs, and the government has to cover both acquisition and operating costs over a multi-year period. The end of the life-cycle for the current satellites was foreseen well ahead of time. Although plans for follow-on systems were and remain classified, there has been considerable public commentary about one approach, known as the Future Imagery Architecture (FIA), in which billions were invested only to have funding canceled in 2005 when it became apparent that delivery schedules and budget limitations could not be met. Most observers credit the FIA debacle as a result of choosing an inexperienced contractor, imposing excessively tight deadlines and cost controls without an adequate government oversight mechanism. In April 2009, Dennis Blair, newly appointed as DNI, announced a plan to modernize the satellite imagery architecture by having the NRO build and operate "satellites" (no number specified) and significantly increasing the acquisition of imagery produced by U.S. commercial providers. He noted that commercial "less-complex satellites, which are based on technologies already in production by U.S. vendors, would be available sooner than the much more capable NRO-developed and acquired systems." Media accounts indicate that efforts would be made to avoid the problems associated with FIA and that independent cost estimates and tougher assessments of technological maturity would be involved for the new systems that are due to operational before 2020. Some Members, especially Senator Christopher Bond, the vice chairman of the Senate Intelligence Committee, have criticized the plan, arguing that there is an opportunity to take advantage of potential technological breakthroughs and proposing a different, but as yet untested, satellite technology. The Administration proposal would provide a few highly sophisticated satellites that have the advantage of being based on available, proven technologies; Senator Bond's proposal, which was reportedly included in the FY2010 Intelligence Authorization bill, S. 1494 , would include larger numbers of smaller, less expensive satellites that are based on cutting edge technologies that have not yet been tested and approved. Media accounts indicate that defense authorization ( P.L. 111-84 ) and defense appropriations measures ( P.L. 111-118 ) for FY2010 included funding for the acquisition of at least one of the larger satellites with funding beginning in FY2011. Several attempts have been made to provide overall direction to space surveillance acquisition efforts. In 2004 the National Security Space Office (NSSO) was created to develop and coordinate national security space strategies, architectures, plans, programs, and processes on a continuing basis. The NSSO remains, however, essentially an advisory body and has not had the authority to define programs and monitor implementation. According to GAO the NSSO developed a National Security Space Strategy in 2004, but it was never issued. In 2003 an Executive Agent for Space was established with the Secretary of the Air Force designated to fill the position. The Executive Agent would have a wide range of responsibilities for planning and programming DOD's space systems, including Milestone Decision Authority. The persistence of space acquisition problems, however, led to the abandonment of the position in 2005 with procurement responsibilities returning to the office of the Assistant Secretary of Defense for Acquisition, Technology, and Logistics. In 2009, however, the Defense Appropriation Act, P.L. 111-118 , provided $7 million for a Space and Intelligence Office (SIO) within the Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)). The new office is to serve as the DOD space architecture planning office; it is to provide a roadmap to Congress in mid-2010 on how it will be used in future space system architecture planning. Although considerable efforts have been underway for many years to make information collected available for tactical use, collection priorities for NRO satellites are established by the DNI. Although military commanders may have the opportunity to request coverage of a given target, they cannot be certain that their requirements will be considered more important than those of other agencies. The inability of combatant commanders to obtain what they consider as adequate support from national satellite programs led to efforts for DOD to acquire satellites independently of the NRO for the primary support of the warfighters. Some saw significant advantages to be gained by moving beyond "the sclerotic national programs [that] simply cannot maintain the pace required for future operations." The goal was to build new, less expensive, less sophisticated satellites that could meet the critical requirements of combat commanders. Under the program, known as Operationally Responsive Space (ORS), military commanders would have access to an inventory of relatively unsophisticated satellites that could be launched when needed to provide information for limited durations. ORS would complement information from national satellites and other collection programs. Some observers have raised concerns that this program to some extent duplicates or at least overlaps the capabilities of NRO satellites and may have been established simply to avoid the organizational complexities of national satellite procurement and the need to coordinate collection management with Washington agencies. The GAO concluded in 2008 that "the [ORS] concept is in the early stages of development and not commonly understood by all members of the warfighter and national security space communities." In addition "DOD has not clearly defined key elements of the ORS concept and has not effectively communicated the concept with key stakeholders." Furthermore, GAO believes that "officials from the intelligence community were concerned about DOD's lack of consultation and communication with them regarding the ORS concept." These officials "also raised concerns about the importance of using their current processes and architecture so as not to create unnecessary duplicative processes to get data to the war fighter." Other observers maintain, however, that new systems could be built from the bottom up using available technologies, including those used in the commercial sector, and that ORS could provide a useful capability for commanders, whose requirements will always be subject to adjustment or derogation when collection priorities of national systems are established and implemented. ORS provides a just-in-time capability that can be tailored for missions of limited duration. The ORS concept has gained support in the Defense Department, and Congress has funded the ORS in defense authorization and appropriations legislation, albeit not to the extent envisioned by the Air Force. For FY2010 the Administration requested $112.9 million, an increase over the FY2009 appropriations level of $83.7 million, but over $100 million that was originally envisioned by ORS planners was included in an Air Force list of unfunded priorities. The conference report reflected an agreement to provide only the $112 million requested, but not to provide the additional funds. However, Defense officials believed that further ORS satellites will be approved if the first one can be built "within the kinds of very aggressive parameters that we've set up." As the Administration requested only $93 million for the ORS program for FY2011, some observers suggest that the limited funds may ultimately jeopardize the program. Nevertheless, support for ORS remains strong in both chambers; the House version of the FY2011 defense authorization bill ( H.R. 5136 ) would add an additional $40 million to the Administration request and the Senate Armed Services Committee in its bill ( S. 3454 ) would add an additional $20 million. In April 2009, testimony of Josh Hartman, a long-time proponent of ORS, set for the rationale for what he termed "a balanced architecture": The solution is a change in our business model that will enable employment of an architecture distributed to multiple nodes and layered to provide right level of capability to the right geographic regions at the right times, while leveraging commercial systems and multiple sensors from different sizes of space craft and non-space platforms. This model would provide for a balanced architecture where a foundational capability would be provided from medium or large systems. At the same time, small and agile, less complex systems would be "layered" to augment in optimized orbits, with additional capability in high demand areas, and niche capability for special operations, irregular needs or crisis situations." As recommended by the GAO, evolution of capability would be a hallmark and key tenet of this model. Systems would be purposely be designed to live shorter lives to reduce the system complexity, synchronize on-orbit life with developing time, increase industry volume, and take advantage of rapidly advancing technology. In June 2011, the ORS-1 satellite was the first fully operational spacecraft to be launched as part of the ORS program and featured a modified SYERS-2 sensor, similar to the electro-optical and infrared imagery sensor used on the U-2 Dragon Lady aircraft. On January 3, 2012, the ORS-1 satellite was declared operationally capable by General William Shelton, Air Force Space Command commander. The ORS system was launched 32 months after the idea was conceptualized, and combatant commanders accepted the asset less than 90 days after the launch. DOD is assessing other satellite systems besides ORS. Some hope to realize significant savings over NRO-led efforts. One media report suggests that one company believes it can deliver a half-meter-resolution imagery satellite for $6 million-$7 million a satellite. Efforts to take advantage of new technologies to produce relatively inexpensive satellites to support military commanders could usefully supplement intelligence gathered from other sources. At the same time, however, the ORS effort appears to have been undertaken in isolation from the organizations that have been responsible for launching satellites over many years. Observers suggest that the extensive expertise available in the NRO and NGA has not been fully accessed, possibly risking waste and duplication of effort. Alternately, some might argue that long-existing organizational relationships tend to become sclerotic, potentially inhibiting the development of innovative technologies that can serve operating forces at reasonable costs. UAS have become essential parts of military operations. Although first deployed during the Vietnam conflict, their use was limited until 1990-1991, when they supplied exact locating data during Operations Desert Storm that was used in targeting precision guided munitions (PGMs). Their use expanded during operations in Iraq and Afghanistan, when great emphasis has been placed on avoiding inadvertent attacks on civilians. Increasing availability of UAVs, especially the MQ-1 Predator with a range of 454 miles and the follow-on MQ-9 Reaper with a range of over 3,600 miles and a flight time of over 20 hours, has made them tactical weapons of choice. In addition to the Predators, longer-range Global Hawks, which fly at much higher altitudes, have also been employed in combat operations. Communications have improved to the point where information intercepted by UAVs can be forwarded not only to the local commander but also to intelligence centers at various echelons where it can be combined (or "fused") with data from other sources to produce a more complete intelligence picture. The history of UAV acquisition has been complicated. A crucial step was taken during the Reagan Administration by Navy Secretary John Lehman, who, having witnessed Israeli use of the systems over Lebanon, procured commercially built Israeli UAVs for the U.S. Navy. Later, the Defense Airborne Reconnaissance Office (DARO) was established by DOD to manage UAV acquisition throughout the Defense Department; this effort did not, however, endure, and in the FY1998 Defense Authorization Act ( P.L. 105-85 , §905), Congress directed the transfer of relevant DARO functions to the separate military departments. Since then, some consideration has been given to designating one service as an executive agent for UAV acquisition, but this approach has never been accepted in the face of significant opposition from other services determined to ensure that their unique requirements can be met. In recent years the use of UAVs has proliferated in Iraq and Afghanistan, where they helped in meeting the objectives of identifying elusive enemies and avoiding civilian casualties. According to DOD, "the number of deployed UAS has increased from approximately 167 aircraft in 2002 to over 6,000 in 2008, while defense investment in UAS capabilities has dramatically grown from $284 million in Fiscal Year 2000 to $2.5 billion in Fiscal Year 2008." The FY2011 request was for $4.1 billion. Responding to continuing needs for tactical systems, in the first months of the Obama Administration, Secretary of Defense Gates realigned DOD's budget priorities to emphasize tactical ISR systems including UAVs and manned ISR platforms. During this period, funding was recommended to field and sustain 50 continuous orbits for Predator or Reaper-class UAVs. In March 2012, Secretary of the Air Force Michael Donley, stated the requirement increased to 65 continuous orbits, with the ability to increase them to 85. Manned ISR platforms such as the Air Force's MC-12W Project Liberty and the Army's various turbo-prop aircraft flown by Task Force ODIN, also shared this funding. Although additional funding for ISR systems was included in the FY2009 supplemental, Secretary Gates indicated his intention to ensure that ISR programs are incorporated into base budgets rather than in supplemental appropriations measures. He also indicated plans for more extensive research and development efforts on ISR systems with emphasis on those systems that link warfighters and national systems. The most commonly used UAV systems, Predators and Reapers, are designed for tactical use. The Predator flies at altitudes up to 25,000 feet; the Reaper 50,000 feet. Both have an endurance of 24 hours. Some UAVs, such as the Global Hawk, have capabilities that rival those of reconnaissance satellites. They can fly higher—over 60,000 feet—and longer—28 hours. There is potential overlap between Global Hawk capabilities and those of reconnaissance satellites. Development costs of UAS have tended to exceed initial estimates by significant amounts. Development costs of the Air Force's Global Hawks grew by 284%; the Reaper by 97%; the Shadow by 80%, and the Predator by 60%. In some cases (especially with the Global Hawk) the increases resulted from immature technologies and fundamental restructurings; in others it was simply a matter of increasing the number of platforms to be acquired. ISR acquisition requirements extend well beyond satellites and launch vehicles. The increasing use of large numbers of UAS and other mobile ISR systems requires different and more varied communications support. In particular, the commands using such tactical systems may not have access to major DOD communications networks based on fiberoptic cables and must instead rely on communications satellites. According to one assessment the latter are essential for "reach back" from tactical units to intelligence centers at higher echelons or in the United States, where the processing, exploitation, analysis, and dissemination of intelligence products occurs. The increased use of tactical ISR systems increases requirements for the acquisition of communications satellites and for other systems to facilitate tactical communications with an increasing emphasis on Internet-based systems. As the study noted: "While small units may not require large quantities of ISR data, their needs are focused, immediate and critical when engaged with the enemy." UAS are procured by the four services, although efforts have been made to encourage shared use. An Air Force initiative in 2007 to be designated as executive agent for medium and high-altitude unmanned aerial vehicles was ultimately not approved, but efforts to make use of technologies developed for another service continue. For instance, the Marine Crops determined that the Army's Shadow system could meet its requirements and by procuring an existing system saved the costs of development and obtained systems that could be rapidly be made available to the operating forces. Similarly, the Navy has taken advantage of various components of both Global Hawks and Reapers that were developed for the Air Force in acquiring its Broad Area Maritime Surveillance UAS. Despite such initiatives GAO has argued that DOD should undertake a "rigorous and comprehensive analysis" of the requirements for UAS to identify commonalities and develop a strategy for making systems and subsystems more common and that the services should demonstrate that they have explored potentials for common platforms and sensors and are taking an "open systems approach" that will permit use of interchangeable sensors. GAO further expressed concerns about cost growth in UAS programs, indicating that "development cost estimates for the 10 [UAV] programs we assessed, collectively, has increased more than $3.3 billion (37% in 2009 dollars) from initial estimates—with $2.7 billion attributed to the Air Force's Global Hawk program." The GAO underscored the advantages it believes can be gained by designing compatible unmanned systems that are effectively linked together especially using commercially available open sources. On May 18, 2009, the Air Force announced its "Unmanned Aircraft Systems Flight Plan, 2009-2047." The plan describes a family of UAS ranging from man-portable vehicles to larger, "tanker sized" platforms. The goal is to acquire "a common set of airframes within a family of systems with interoperable, modular 'plug and play' payloads, with standard interfaces." The military services remain committed to the use of manned surveillance aircraft that can be configured for a variety of different missions depending upon specific requirements. Some systems still in use were originally designed for Cold War missions, but they continue to serve as platforms for use in tracking insurgents and improvised explosive devices. Eventually the older systems have to be retired; the Navy is currently acquiring over 100 P-8 Poseidon maritime surveillance aircraft to replace aging P-3s. The Air Force is considering P-8s as a possible replacement for the E-8 JSTARS aircraft, which has played a major role in supporting combat operations in Iraq and Afghanistan, although the E-8s are scheduled to have new engines to extend their service lives. The P-8 is a modified Boeing 737-800 aircraft of proven reliability and can be fitted with various sensor systems depending on the particular mission. Its predecessor, the P-3, first entered service in the 1960s; P-8s are also expected to be available for decades. A recent media report indicated that the Army is even considering the development of intelligence-gathering airships. In comparison to the complex acquisition history of UAS, the process for acquiring manned aircraft, although not without challenges, generally follows well established procedures. Congressional oversight in the House is shared between the Armed Services and Intelligence Committees and in the Senate is primarily the responsibility of the Armed Services Committee with input from the Intelligence Committee. In April 2008, Secretary of Defense Gates established a Department of Defense-wide task force to identify and recommend solutions for increased ISR to the ground forces stationed in the U.S. Central Command area of responsibility. In his remarks to the Air Force's Air War College in Montgomery, AL, Defense Secretary Gates criticized the services for "not moving aggressively in wartime to provide resources needed now on the battlefield," and stated he had "been wrestling for months to get more intelligence, surveillance, and reconnaissance assets into the theatre." His direction was to find "more innovative and bold ways to help those whose lives are on the line" and stated the "deadlines for the task force's work are very short." The Air Force's response to the Secretary's demand was called "Project Liberty," a Beechcraft King Air 350 turbo-prop aircraft modified with an imagery and signals intelligence suite. To answer the Secretary's proposed timeline, the Air Force diverted from the well-established procedures of acquisition and purchased the first seven from the private sector, using COTS—"commercial off the shelf"—technology to convert the aircraft to an ISR platform. By November 2008, the Air Force had signed a $171 million contract with Hawker Beechcraft Corporation, and four months later the first aircraft was delivered. In June 2009, the first MC-12 squadron at Balad Air Base, Iraq, flew the first combat mission. By December 2009, the entire MC-12 fleet was deemed operational. Within 18 months, the Air Force fielded three expeditionary MC-12 squadrons and the associated processing, exploitation, and dissemination entities to both Iraq and Afghanistan. Project Liberty was considered the fastest delivery of an Air Force weapons system from "concept to combat" since the P-51 Mustang in World War II. The MC-12 is now considered the most heavily tasked manned airframe in the combat Air Force. ISR acquisition efforts, given their size and cost, have generated significant public controversy, but public discussions are hampered by the absence of relevant information that is unclassified. However, there have been a number of recent outside reviews conducted by properly cleared outsiders. In general, these assessments have faulted organizational arrangements for the acquisition of ISR systems. A 2008 study conducted by the congressionally chartered Independent Assessment Panel on the Organization and Management of National Security Space (sometimes described as the Allard Commission after a key congressional sponsor, former Senator Wayne Allard) described the current organization for space systems used for national (as opposed to tactical) purposes: "Authorities and responsibilities are spread across numerous organizations, including many within the Office of the Secretary of Defense (OSD) [Under Secretary of Defense (USD/Intelligence], USD/Acquisition, Technology and Logistics; USD/Policy; and the Assistant Secretary of Defense (ASD/Networks & Integration], USAF, USN, USA, USMC, DARPA [Defense Advanced Research Projects Agency], MDA [Missile Defense Agency], and NRO. Furthermore: There is no standing forum or mechanism below the level of the President to coordinate efforts among the agencies responsible for NSS or to adjudicate differences over requirements and resources. The predominant capability providers are NRO and SMC [Space and Missile Systems Center, a component of the Air Force's Space Command], which today have parallel requirements and funding paths within the IC and DOD. Space capability providers in NOAA [National Oceanic and Atmospheric Administration], NASA [National Aeronautics and Space Administration], and other federal agencies have their own requirements, funding, and reporting chains. Within DOD, there is no common authority below the Secretary of Defense to integrate space acquisition programs and resources, or to adjudicate differences There are separate requirements and funding chains within the Pentagon for the Air Force, NRO, DARPA, MDA [Missile Defense Agency], Navy and Army, commercial satellite communications, and commercial imagery. A structure for coordinating space operations between DOD and the intelligence community is emerging and is thought to be on target." The Independent Assessment Panel argued that the President should establish and execute a National Space Strategy and establish a National Security Space Authority who would be jointly responsible to the Secretary of Defense and to the DNI and charged with defining the space budget for DOD and the intelligence community and executing the program with milestone decision authority. There would also be an effort to improve the qualifications of Air Force and NRO acquisition professionals. Most controversially, the panel would create a National Security Space Organization, which would combine several Air Force space offices with the NRO under the National Security Space Authority. Arguably, this official might be perceived as a security space "czar" with a role subordinate to one Cabinet officer and the DNI. In 2008 the House Permanent Select Committee on Intelligence (HPSCI) undertook its own assessment of U.S. space capabilities. The resulting report reflected the conclusions of the committee's majority, that the United States is "losing its preeminence in space." The report focused on the need for an "integrated overhead roadmap" or "architecture." By "architecture," HPSCI meant a problem-driven approach that is based on securing prioritized, well-defined national security interests; a comprehensive solution that balances the financial investment against the overall risk to national security; a realistic delivery schedule that meets the defined timeline that in many cases must be flexible and updated against the risk; and a plan to migrate from a requirements-based acquisition approach towards a capabilities-based strategy, with the proviso that a purely capabilities-based approach could introduce additional challenges. Although the report acknowledged that executive branch officials believed they had provided a plan, committee members disagreed, maintaining that "there is no comprehensive space architecture or strategic plan that accommodates current and future national security priorities, DOD and intelligence community capability requirements." The committee suggested that the practice has been for requirements to be added during the acquisition process resulting in added costs and delays and the need to resolve repeatedly the differing priorities of DOD and the intelligence community. When cutting-edge—and not yet available—technologies are chosen, the committee suggests that uncertainty and need for further testing complicate acquisition. The report alluded to the interest of some to develop space systems solely for operational commanders in isolation from the NRO. Presumably reference was being made to the ORS; HPSCI suggested that "it is not in the best interest of the country to pursue separate national and military space architectures." The House report recommended that R&D be treated as a national security priority and protected against from diversion to immediate operational needs. The HPSCI report raised concerns about programs jointly funded in the National Intelligence Program (NIP) and the Military Intelligence Program (MIP). The NIP is designed to provide intelligence systems that can supply information primarily of interest to national-level policymakers; the MIP supports combatant commanders. Although there is pervasive overlap between the two sets of systems, there is also concern that, in some instances, funds from the NIP have in effect been used by DOD to fund what are essentially MIP projects. The committee report also addressed use of commercial imagery and statutes and regulations governing space commerce. Members of the committee's minority criticized several aspects of the report and maintained that it failed to "address the importance of integrated ground systems for tasking, processing, exploitation and dissemination." In November 2008 a Joint Defense Science Board and Intelligence Science Board task force on integrating sensor-collected intelligence produced a report looking at various flaws in current ISR efforts that extend beyond acquisition issues. It argued that ISR efforts can be better improved by integrating data from multiple sensors rather than by improving the design and performance of single sensors. In making this argument the task force pointed to structural issues that complicate such data integration. To accomplish this goal the task force recommended ensuring the inclusion of meta-data (or tags that describe specific data that can in turn be searchable whereas the data itself may not be) that can allow identification of information of specific interest. The task force's emphasis on better ways to access and analyze data is influenced by the vast expansion in data available and in many cases never exploited. It tended to favor a larger number of less sophisticated systems and achieve increased performance by integrating data from multiple sensors and platforms. Significant problems derive from limitations on the dissemination of collected data. Currently, meta-data are not consistently applied and tags are not consistent from agency to agency. Military commanders demand much larger quantities and more sophisticated types of intelligence (especially tactical imagery), but in many cases are unaware of and incapable of accessing data available throughout the intelligence community. "The number of images and signal intercepts are well beyond the capacity of the existing analyst community so there are huge backlogs for translators and image interpreters and much of the collected data are never reviewed. Further, decision makers and intelligence analyst have difficulty knowing what information is available." Although an enormous number of full-motion video missions in support of tactical commanders have been conducted in Iraq and Afghanistan, the task force suggested that surveillance has often been episodic and continuing coverage of a given region had not always been possible. The task force report emphasized that the ISR concept encompasses more than platforms for collection. It noted that DOD has developed the Global Information Grid, which includes a high-speed communications network of various ground, air, and space components. There is a need, according to the task force, for better ways for tactical commanders to access this information "on the move," and thus it emphasized the advantages of assured and accessible communications as would be made available by the redundant and complementary communications capabilities—terrestrial fiber, government and civilian communications satellites, networks built and maintained by specific agencies. (The task force advocated the Transformational Satellite System (TSAT) to provide links to the fiber network to mobile and fixed theater commands. TSAT was subsequently killed by DOD because it was considered duplicative.) A key goal should be, according to the task force, to ensure that future communications systems adhere to interoperability standards to ensure that they can support joint and international operations as well as "reach back" to U.S. agencies for analytical support. The essential concern of the task force was to ensure that the ongoing proliferation of platforms and sensors be matched by sufficient communications capabilities to enable their use. Currently, they found that "Our rapidly growing airborne ISR collection capabilities are not in balance with supporting communications." Furthermore, the task force noted that even though the Office of the Under Secretary of Defense for Intelligence (USDI) is double-hatted as Director of Defense Intelligence under the DNI, his judgment on space programs is affected by decisions of the Under Secretary of Defense for Acquisition, Technology, and Logistics (AT&L), whose mandate encompasses all DOD programs and is not limited to intelligence programs. The report reflected a concern that DOD requirements, including to some extent tactical ISR requirements, are being met at the cost of supporting national needs, echoing HPSCI's concerns. The task force found that there is a perception that intelligence officials may not be empowered to balance national and tactical requirements. The report noted the decline in the number of trained and experienced government program managers who are able to conduct extensive acquisition initiatives over a multi-year period. The report criticized short tours of duty for acquisitions personnel that precluded the development of deep expertise in specific systems and over-reliance on advisory contractors. The lack of expertise was criticized as contributing to delays and costly changes in specifications. More broadly, the report noted declining numbers of students pursuing engineering degrees and a reluctance of some to seek careers in the satellite area, where work can be repetitive and sporadic. The tendency in recent years to focus on satellites that can fulfill current missions may discourage students who are most interested in "cutting-edge" R&D. The Government Accountability Office (GAO) has assessed ongoing space systems acquisitions issues over a number of years. In a May 2009 report it recommended that a formal space plan based on a national security space strategy is essential for managing the acquisition and deployment of space systems. Without a strategy (and a plan to implement it) "the defense and intelligence communities may continue to make independent decisions and use resources that are not necessarily based on national priorities, which could lead to gaps in some areas of space operations and redundancies in others." In March 2009 GAO testified to the Senate Armed Services Committee in regard to challenges facing DOD in space acquisitions. Echoing the views of other assessments, GAO found on a broad scale, DOD starts more weapon programs than it can afford, creating a competition for funding that encourages low cost estimating, optimistic scheduling, overpromising, suppressing bad news, and, for space programs, forsaking the opportunity to identify and assess potentially more executable alternatives; DOD has tended to start its space programs too early, that is, before it has the assurance that the capabilities it is pursuing can be achieved within available resources and time constraints—in part a result of the tendency to favor acquisition programs over efforts to ensure that new technologies are reliable; DOD has tended to prefer fewer but heavier, larger, and more complex satellites than larger constellations of smaller satellites; several more recent space programs began in the late 1990s, when contracts were restructured in ways that reduced government oversight and shifted decision-making responsibilities to contractors, a situation that magnified problems relating to requirements creep and poor contractor performance. GAO generally recommended a number of best practices of the commercial sector to separate technology discovery from acquisition, follow incremental paths to meet user needs, match resources and requirements at program's start, and use quantifiable data and demonstrable knowledge to decide when to move to a new program phase. GAO acknowledged that DOD was attempting to implement some of these practices and noted legislative initiatives that were later enacted. GAO also went further to underscore the difficulties resulting from the fact that requirements, resource allocation, and acquisition processes are led by different organizations and the need to strengthen coordination of military and intelligence space efforts. As noted above, GAO has been skeptical of the Operationally Responsive Space effort due to its separation from other intelligence space programs even though it envisions smaller satellites built with available, proven technologies. In January 2010 GAO forwarded another report to the Subcommittee on Air and Land forces of the House Committee on Armed Services that expressed concern about the ability of the services to share information within combat theaters. GAO recommended that DOD establish a concept of operations to provide direction and priorities for sharing intelligence information across the defense intelligence community. GAO also urged the services to develop their own implementation plans and set timelines for sharing data with the rest of DOD. Although outlines of the Obama Administration's overall approach to longer-term ISR acquisition issues have not been publicly detailed, the Administration has taken an initial approach based on acquiring additional reconnaissance platforms that are based on currently available technologies. In April 2008, Defense Secretary Gates, having been frustrated by reports from the field regarding inadequate numbers of UAVs, established an ISR Task Force that eventually made a number of recommendations to maximize the availability of systems in the inventory and to acquire adequate numbers of additional systems. Based on these findings, in April 2009, Secretary Gates forwarded the Administration's plans for ISR programs in the FY2010 budget based on his determination to "to rebalance this department's programs in order to institutionalize and enhance our capabilities to fight the wars we are in and the scenarios we are most likely to face in the years ahead, while at the same time providing a hedge against other risks and contingencies." "First, we will increase intelligence, surveillance and reconnaissance (ISR) support for the warfighter in the base budget by some $2 billion. This will include Fielding and sustaining 65 continuous RPA orbits with the ability to increase them to 85 and maximizing their production. This capability, which has been in such high demand in both Iraq and Afghanistan, will not be permanently funded in the base budget. It will represent a 62% increase in capability over the current level and 127% from over a year ago. Increasing manned ISR capabilities such as the turbo-prop aircraft deployed so successfully as part of 'Task Force Odin' in Iraq. Maintaining the Air Force's MC-12 Project Liberty aircraft. Initiating research and development on a number of ISR enhancements and experimental platforms optimized for today's battlefield." The Administration proposal apparently does not include efforts to acquire "exquisite" satellite technologies that are at best still in the research and development stage. Congress essentially endorsed this approach in FY2010 defense appropriations and authorization legislation ( P.L. 111-118 and P.L. 111-84 ). Media reports indicate that the Obama Administration ordered a thorough review of existing national space policy, including national intelligence assets, originally intended for completion by October 2009, but which has not been made public. In May 2009 Defense Secretary Gates indicated that he and the DNI had agreed that a new charter for the National Reconnaissance Office (NRO) is needed given that the original one is decades old. A committee headed by retired Air Force General Trey Obering was asked to look at the NRO's roles and missions, and reportedly recommended that the NRO structure should not be altered. In March 2010 the DNI and the Secretary of Defense endorsed a set of organizing principles for the NRO that is intended to serve as a foundation for a revised NRO charter. On September 21, 2010, the Director of National Intelligence Jim Clapper and Secretary of Defense Gates officially signed the newest NRO charter, also referred to as a memorandum of agreement. The first signed since 1965, this agreement formalizes the role of the NRO Director as responsible for managing and operating NRO programs, serving as the principal advisor on overhead systems to the Secretary of Defense and the DNI. The new charter also grants direct access to the NRO Director to both the Defense Secretary and the DNI. Information on the ISR component of the Administration's FY2011 budget request is mostly classified, but DOD did state that an additional $2.6 billion was added for contingency operations in Afghanistan and Iraq at the recommendation of DOD's ISR Task Force, including nearly doubling procurement of the MQ-9 Reapers. ISR funding requested for ongoing combat operations rose from $5.9 billion in FY2010 to $7.0 billion in FY2011. Congressional oversight of the acquisition of surveillance systems has its own challenges. ISR systems are overseen by the armed services, intelligence, and appropriations committees. Most aspects of the ISR program are necessarily secret. Historically, the "national" systems were overseen by the intelligence committees, whereas the tactical systems were usually overseen by the armed services committees (although the House Intelligence Committee had jurisdiction over both tactical and national systems). Public statements by some Members indicate, however, that important differences among committees exist in regard to current plans for satellite programs, and there have been considerable differences in regard to UAS programs, as well. There is widespread frustration about cost growth of ISR systems, unnecessary duplication of effort, and the possibility of inadequate collection. A significant factor has been the absence of intelligence authorization legislation for over five years. This suggests that the congressional role has been primarily exercised by the appropriations and armed services committees. Some observers believe that these committees may tend to focus on ISR systems as components of larger defense programs whereas the intelligence committees might have focused more on support to national policymakers. In addition to authorizing and appropriating funds for specific ISR systems, Congress has repeatedly emphasized the need for a more comprehensive approach to ISR as a whole. The October 2008 report by the House Permanent Select Committee on Intelligence noted that "members of Congress have repeatedly expressed their disappointment that no architectural plan exists, and have repeatedly asked the Administration for the plan. The lack of an integrated architecture was one of the first issues to face the DNI after the office was established in 2005. The frustration has continued to this day, and many believe that the nation is no closer to having a clearly defined plan than it was three years ago." The HPSCI majority recommended that the DNI and the Secretary of Defense "should develop a common architecture for all space-related systems (imagery, signals, communications, etc.) that supports prioritized national and military needs and takes into consideration budgetary constraints. Organizations proposing new satellites should demonstrate how their proposals fit into the architecture." The committee further recommended that the Office of Management and Budget "carefully consider what space programs it recommends for funding until both the DNI and [the Secretary of Defense] agree on an architecture." Some observers suggest the goal of a "dynamic architecture" that will permit judicious investment in existing technologies to acquire adequate numbers of systems for current needs while intentionally providing windows of opportunity for the introduction of new technologies and adaptations to new military or diplomatic requirements. The Duncan Hunter Defense Authorization Act for FY2009 ( P.L. 110-417 ), enacted on October 14, 2008, directed that the Secretary of Defense and the DNI jointly conduct a comprehensive review of U.S. space policy, including space-based intelligence and surveillance and reconnaissance from space. The review was to describe current and planned space acquisition programs. This policy review by DOD was to have been undertaken in conjunction with the national-level review of space policy. When the overall space policy review is complete DOD's Space Posture Review will be issued. At one point there were plans to issue an interim report that would detail current posture and programs. The FY2009 Defense Authorization Act, Section 144, also required the Secretary of Defense in consultation with the Chairman of the Joint Chiefs of Staff establish a policy and an acquisition strategy for intelligence, surveillance, and reconnaissance payloads and ground stations for manned and unmanned aerial vehicle systems. The policy and acquisition strategy shall be applicable throughout the Department of Defense and shall achieve integrated research, development, test, and evaluation, and procurement commonality. In the explanatory statement accompanying the FY2010 Defense Appropriations Act ( P.L. 111-118 ), DOD was directed to provide a classified report that describes the deployment of additional ISR capabilities, particularly tactical signals intelligence and full motion video, to support combat operations in Afghanistan "[and] address the adequacy of these capabilities to support troop commitments to Afghanistan as well as the plans to correct any shortfalls." In 2009 the House Appropriations Committee (whose annual bill includes the great bulk of intelligence funding) directed that DOD and the DNI prepare a long-range plan for space system investment, including research, development, test and evaluation as well as procurement, including schedule and funding profiles, for all national security space systems for the next 30 years. The report is to include estimated levels of annual funding to carry out the programs. The bill, H.R. 3326 , was eventually enacted as P.L. 111-118 ; it mandated that DOD deliver a 15-Year Space System Investment Strategy by May 2010. There are indications that ORS funding issues have led to broader questions about efforts to use space platforms to support national security goals. In its October 2008 report on the need for a space architecture, the House Intelligence Committee recommended that DOD and the DNI "develop a common architecture for all space-related systems" and urged that "[o]rganizations proposing new satellites should demonstrate how their proposals fit into the architecture." In May 2009 the Senate Appropriations Committee reported the defense appropriations act for FY2010 with an expression of concern that the committee is concerned about the tendency of temporary, single-issue acquisition initiatives to grow into persistent, stovepiped bureaucracies with increasingly ambiguous mandates. This tendency is often the result of deficiencies in the acquisitions process, in which urgent joint requirements are too often not effectively addressed. Section 911 of the FY2011 Defense Authorization bill, P.L. 111-383 , signed by the President on January 7, 2011, requires that the Secretary of Defense and the DNI "shall develop an integrated process for national security space architecture planning, development, coordination, and analysis." The effort is to include both defense and intelligence efforts, to provide mid-term to long-term recommendations to guide acquisitions, and is independent of but coordinated with efforts by the military departments and intelligence agencies. The accompanying report to an earlier version of the legislation ( H.R. 5136 ) by the House Armed Services Committee indicates a determination to provide a clear mandate to conduct integrated space architecture planning in order to avoid isolated, stove-piped, efforts by the services and intelligence agencies. The committee added, nevertheless, that, "This section would not be intended to limit rapid acquisition efforts such as Operationally Responsive Space (ORS); however, the committee does endorse efforts that expand user access to ORS capabilities and data." The various reviews requested are likely to be forward in classified channels and it is not known if summaries will be publicly available. Nor is it known how consistent the studies will be with budgetary requests, but they will clearly provide benchmarks for Congress as consideration of annual legislation proceeds. Congress continues to indicate concern about ISR issues, especially those relating to expensive space systems. The House version of the FY2012 defense appropriations bill, H.R. 2219 , included a provision (§8089) that would mandate the establishment of a major program category for space in future defense programs. The accompanying report noted: Over the past decade, various attempts for alternative systems have been suggested and in some cases funded. Several of those attempts included the parallel development of alternative systems or technologies. These systems were advertised as being less expensive, more capable, and less risky. In each case, these alternative systems were terminated due to cost or complexity. Although the requirement for making space a major program category was not included in the enacted version, H.R. 2055 , the conference report, H.Rept. 112-331 , indicated congressional approval of block buys of satellites that evolved from previous designs (as opposed to reliance on wholly new technologies). The conferees also noted disappointment that it took DOD over two years to develop a 15-year space strategic plan. The report directed that the next 15-year plan be delivered with the FY2014 budget submission. Concern about the possibility of a sequestration of defense spending arose at the end of 2011 with the inability of the Joint Select Committee on Deficit Reduction to reach an agreement. In November 2011 Secretary of Defense Leon Panetta indicated in a letter to Senators John McCain and Lindsey Graham the longer-term effects of sequestration could include the delay or termination of major space initiatives, including space protection, communications satellites, and ISR systems. Most recently, both the Senate and House reports accompanying their respective FY2013 National Defense Authorization Acts indicated continued congressional concern about the lack of a strategy guiding ISR acquisition. The House directed DOD's Joint Requirements Oversight Council to conduct a strategic review of current, planned, and programmed ISR capabilities. The Senate report similarly noted: The [armed services] committee is aware of the increased demand for persistent intelligence, surveillance, and reconnaissance (ISR) resources to meet each combatant command's full range of military operations. The committee acknowledges the Department of Defense has had to make difficult decisions on the acquisition, procurement, and allocation of its persistent ISR assets due to fiscal constraints alone. However, Congress has not been provided a formal report outlining the Department of Defense's long-term investment strategy to develop, procure, and sustain the necessary ISR platforms to meet these ISR collection requirements. ISR issues will continue to be an area of concern, especially in light of the lack of a long-term investment strategy called for by the 112 th Congress and the pending impact of sequestration. In testimony before the Senate Select Committee on Intelligence in March 2013, Director of National Intelligence James Clapper indicated that sequestration would delay major systems acquisition and require older reconnaissance systems to be decommissioned. The President's FY2014 budget request noted that the intelligence community was responding to new budget realities by terminating or reducing programs that are a lower priority and cited as an example "an initiative to transition to a more efficient space-based architecture." The DNI and the FY2014 budget request indicated an effort to protect the intelligence community workforce, suggesting that hard choices in response to budget cuts will focus on ISR systems and other expensive collection platforms. Many consider the desirability of a long-range plan or architecture for the deployment of surveillance assets is a given, but suspect it is almost unobtainable. Future intelligence requirements may change from those recently indicated by Secretary Gates. The policies and military capabilities of sophisticated nation states may again become the highest collection priorities of the intelligence community, rather than terrorist groups that are currently the chief concern. Similarly, there are no indications that technological capabilities of ISR systems have reached a stable plateau, and basing future plans on current technologies may prove to be shortsighted. There are inherent challenges involved in establishing plans for acquisitions over a multi-year span, even if they are arguably outweighed by the limitations of annual planning cycles. Ultimately, most recognize that there are limitations on what Congress can do to shape the international environment or the emergence of new technologies. Congress can, however, alter the roles and missions of the organizations involved in ISR programs acquisition, as well as authorize and appropriate funds for ISR systems acquisition. Some observers have suggested a number of steps internal to Congress that might improve the acquisition process for ISR systems. The 9/11 Commission, for instance, recommended that the intelligence committees be provided with responsibilities for both authorization and appropriations. Others have recommended a separate annual intelligence appropriations act and subcommittees for intelligence within the two appropriations committees. Such initiatives would allow greater concentration on intelligence programs as separate and distinct from defense programs. On the other hand, such separation could complicate the close linkages and desirable duplication between some intelligence and defense programs. Congress could also set up special panels to look at ISR programs with representatives from current intelligence, armed services, homeland security, and appropriations committees. Nevertheless, many of the complications involving ISR systems derive from the organization of the executive branch and current policies. The ability of the ODNI and DOD (including both the USD(I) or the USD (AT&L)) to establish an agreed-upon acquisition plan is inevitably a key factor. The role of the staffs of the National Security Council and the Office of Management and Budget in overseeing and monitoring acquisition plans and their implementation is also important. Some observers conclude that, ultimately, there must be some form of an overhead surveillance architecture, even if it cannot be set "in concrete" for a multi-year period. In this view, it must include not only the collection platforms, but also associated communications, and data processing and analysis systems. In ongoing legislative dialogue, the executive and legislative branches will be challenged to design and fund systems that maximize adaptability to new missions while accepting reasonable cost constraints. Such a goal will require not only careful interagency and inter-branch coordination, but also a willingness by all involved to accept decisions that do not fully meet the goals of each and every agency. Observers suggest a key role for congressional committees in minimizing the role of initiatives launched by "special interests" that ultimately could add significant unnecessary costs, and do not deliver maximum collection contributions. The unique perspectives of the armed services, intelligence, and appropriations committees, if considered together, arguably could provide the comprehensive oversight that has occasionally eluded the executive branch. ISR has revolutionized military operations in the past half-century; it is today an essential component of national security planning and operations. At the same time, experience shows that not all the billions of dollars that have been invested have resulted in useful systems. Acquiring and using ISR systems is likely to remain a substantial challenge for the U.S. government in coming decades and one that will depend on effective cooperation among the intelligence community, the Defense Department, and Congress. | Increasing calls for intelligence support and continuing innovations in intelligence technologies combine to create significant challenges for both the executive and legislative branches. Intelligence, surveillance, and reconnaissance (ISR) systems are integral components of both national policymaking and military operations, including counterterrorism operations, but they are costly and complicated and they must be linked in order to provide users with a comprehensive understanding of issues based on information from all sources. Relationships among organizations responsible for designing, acquiring, and operating these systems are also complicated, as are oversight arrangements in Congress. These complications have meant that even though many effective systems have been fielded, there have also been lengthy delays and massive cost overruns. Uncertainties about the long-term acquisition plans for ISR systems persist even as pressures continue for increasing the availability of ISR systems in current and future military operations and for national policymaking. These challenges have been widely recognized. A number of independent assessments have urged development of "architectures" or roadmaps setting forth agreed-upon plans for requirements and acquisition and deployment schedules. Most observers would agree that such a document would be highly desirable, but there are significant reasons why developing such an architecture and gaining an enduring consensus remain problematic. First, ISR technologies are not static; whereas it is possible to plan for aircraft, ships, or tanks that can be used for decades, it is doubtful that today's inventory of satellites, unmanned aerial vehicles, and manned aircraft will still be the right mix a few years hence. Some believe that a "cast-in-concrete" plan would inhibit the ability to take advantage of new technologies or techniques as they emerge. Secondly, achieving consensus on such a plan would be greatly affected by the separate priorities of different parts of the intelligence community, the Defense Department, and Washington policymakers. The needs of policymakers and military commanders are different and are usually reconciled only on a case-by-case basis. Furthermore, different congressional oversight committees may also have different perspectives on priorities and some may seek to emphasize funding for specific systems. The Director of National Intelligence could be given authority to reach across current organizational boundaries to define requirements and priorities. Some propose establishing a position for a separate "ISR Czar" to do this. Few observers believe that ISR programs could be carved out of the intelligence budget and/or the defense budget, and placed under the control of a single officer or lead agency. There is a strong likelihood that separate needs and concerns that affect the current systems will not disappear, even if one official has a new and expansive charter. Similar concerns would exist in regard to the jurisdictions of congressional oversight committees. ISR issues will continue to be an area of concern for the 113th Congress, especially in light of the lack of a long-term investment strategy and the pending impact of sequestration. In testimony before the Senate Select Committee on Intelligence in March 2013, Director of National Intelligence James Clapper indicated that sequestration would delay major systems acquisition and require older reconnaissance systems to be decommissioned. The DNI and the President's FY2014 budget request indicated an effort to protect the intelligence community workforce, suggesting that hard choices in response to budget cuts will focus on ISR systems and other expensive collection platforms. |
President Obama's FY2013 budget request for Energy and Water Development was released in February 2012. The request totaled $33.7 billion, compared to the FY2012 appropriation of $32.7 billion (plus $1.7 billion for disaster relief). On April 25, 2012, the House Appropriations Committee reported out H.R. 5325 ( H.Rept. 112-462 ), with a total of $32.2 billion. The Senate Appropriations Committee reported out S. 2465 ( S.Rept. 112-164 ) on April 26, funding Energy and Water Development programs at $33.4 billion. The House passed H.R. 5325 with some amendments on June 6. The Continuing Appropriations Resolution, 2013 ( P.L. 112-175 ), signed into law September 28, continues appropriations until March 27, 2013, for Energy and Water Development programs at 0.612% above the FY2012-enacted levels, with two exceptions: DOE's Nuclear Weapons Activities program is funded at an annual rate of $7.577 billion, the amount requested for FY2013, instead of the FY2012 rate of $7.214 billion, and the Nuclear Nonproliferation program was increased by $100 million over the FY2012 level of $2.296 billion to fund domestic uranium enrichment R&D. (See Nuclear Weapons Stockpile Stewardship and Nonproliferation and National Security Programs, below.) On March 6, 2013, the House passed H.R. 933 , the FY2013 Defense and Military Construction/VA, Full Year Continuing Resolution. The Senate approved an amended version of the bill on March 20, 2013, and the House agreed to the Senate amendment to H.R. 933 the next day. The bill was signed into law on March 26, 2013 ( P.L. 113-6 ). The act funds Energy and Water Development accounts at the FY2012 enacted level for the rest of FY2013, with some exceptions, and subject to the sequestration requirements of the Budget Control Act which went into effect March 1, 2013. Table 1 indicates the status of the FY2013 funding legislation. Cells will be filled in as the appropriations cycle progresses. The Energy and Water Development bill includes funding for civil works projects of the U.S. Army Corps of Engineers (Corps), the Department of the Interior's Central Utah Project (CUP) and Bureau of Reclamation (Reclamation), the Department of Energy (DOE), and a number of independent agencies, including the Nuclear Regulatory Commission (NRC) and the Appalachian Regional Commission (ARC). FY2013 discretionary appropriations were considered in the context of the Budget Control Act of 2011 (BCA, P.L. 112-25 ), which established discretionary spending limits for FY2012-FY2021. The BCA also tasked a Joint Select Committee on Deficit Reduction to develop a federal deficit reduction plan for Congress and the President to enact by January 15, 2012. Because deficit reduction legislation was not enacted by that date, an automatic spending reduction process established by the BCA was triggered; this process consists of a combination of sequestration and lower discretionary spending caps, initially scheduled to begin on January 2, 2013. The "joint committee" sequestration process for FY2013 requires the Office of Management and Budget (OMB) to implement across-the-board spending cuts at the account and program level to achieve equal budget reductions from both defense and nondefense funding at a percentage to be determined, under terms specified in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, Title II of P.L. 99-177 , 2 U.S.C. 900-922), as amended by the BCA. For further information on the Budget Control Act, see CRS Report R41965, The Budget Control Act of 2011 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. The American Taxpayer Relief Act (ATRA, P.L. 112-240 ), enacted on January 2, 2013, made a number of significant changes to the procedures in the BCA that 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. For further information on the changes to BCA procedures made by ATRA, see CRS Report R42949, The American Taxpayer Relief Act of 2012: Modifications to the Budget Enforcement Procedures in the Budget Control Act , by [author name scrubbed] 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. The sequester will ultimately be applied at the program, project, and activity (PPA) level within each account. Because the sequester 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. Although full year FY2013 funding has been enacted, the effect of these reductions on the budgetary resources that will ultimately be available to an agency at either the account or PPA level remain unclear until further guidance is provided by OMB as to how these reductions should be applied. P.L. 113-6 continues funding for Energy and Water Development programs at the FY2012 level (minus sequestrations) for all accounts except the following: In Title I, the Corps of Engineers Construction budget is reduced by $20 million from the FY2012 level of $1.617 billion In Title II, the Central Utah Project funding is set at $21.0 million instead of the FY2012 level of $28.7 million In Title III, the Energy Efficiency and Renewable Energy budget is $1.814 billion, rather than the FY2012 level of $1.810 billion In Title III, the Nuclear Energy budget is $759.0 million, rather than $765.4 million In Title III, the Science budget is $4.8760 billion, compared to the FY2012 level of $4.8736 billion In Title III, Advanced Research Projects Agency – Energy funding is $265 million, rather than the FY2012 level of $275 million In Title III, the National Nuclear Security Administration's Weapons program is funded at $7.5573 billion, rather than the FY2012 level of $7.2141 billion In Title III, the Defense Nuclear Nonproliferation program is increased by $110 million over the FY2012 level of $2.2959 billion, to fund domestic uranium enrichment R&D. Table 2 includes budget totals for energy and water development appropriations enacted for FY2006 to FY2013. Table 3 lists totals for each of the bill's four titles. Tables 4 through 15 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV (independent agencies) for FY2012-FY2013. Accompanying these tables is a discussion of the key issues involved in the major programs in the four titles. The Energy and Water Development bill provides funding for the civil program of the U.S. Army Corps of Engineers, an agency in the Department of Defense with both military and civilian responsibilities. Under its civil works program, the Corps plans, builds, operates, and maintains a wide range of water resources facilities. The Corps attracts congressional attention because its projects can have significant local and regional economic benefits and environmental effects, in addition to their water resource development purposes. A number of recent changes have affected Corps appropriations, including earmark moratoriums in both houses in the 112 th Congress and reductions for some projects and classes of projects compared to previous years. Additionally, 2011 flooding events on the Mississippi and Missouri rivers and in the northeastern United States affected a number of Corps projects and required reprogramming of Corps funds. In addition to the regular Corps appropriation for FY2012, Congress appropriated $1.724 billion in supplemental funding for response and recovery related to these events. (See Table 4 .) In most years, the President's budget request for the Army Corps of Engineers is below the agency's enacted appropriation. Enacted appropriations for FY2012 continued this trend. In contrast to most other agencies, the Corps received an increase in total funding compared to the President's request. The FY2012 enacted appropriation for the Corps was $5.002 billion, or approximately $500 million more than the President's FY2012 request. The President's FY2013 budget requested $4.731 billion for the Corps, a decrease of $271 million from the FY2012 enacted level. In its markup, the House Appropriations Committee recommended $4.814 billion for the Corps, or $83 million more than the President's request. The Senate Appropriations Committee recommended $5.007 billion, or $276 million more than the President's budget request and $193 million more than the House. Corps funding is part of the debate over congressionally directed spending, or "earmarks." Unlike highways and municipal water infrastructure programs, federal funds for the Corps are not distributed to states or projects based on a formula or delivered via competitive grants. Generally about 85% of the appropriations for Corps civil works activities are directed to specific projects. In addition to specific projects identified for funding in the President's budget, in past years many Corps projects have received additional funding from Congress in the appropriations process. In the 112 th Congress, site-specific project line items added by Congress (i.e., earmarks) have been among those projects subject to House and Senate earmark moratoriums. Thus, additional congressional funding at the project level was not provided in FY2011 and FY2012 enacted appropriations. In lieu of the traditional project-based increases, Congress in FY2012 included additional funding for broad categories of Corps projects (e.g., "ongoing navigation work"), and provided limited directions to the Corps for allocation of these funds. The large number of authorized Corps projects that have not received appropriations to date, or that are authorized and have received funding but are incomplete, is often referred to as the "backlog" of authorized projects. Estimates of the backlog range from $11 billion to more than $80 billion, depending on which projects are included (e.g., those that meet Administration budget criteria, those that have received funding in recent appropriations, those that have never received appropriations). The backlog raises policy questions, such as whether there is a disconnect between the authorization and appropriations processes, and how to prioritize among authorized activities. Recent budget requests by the Administration have included few new studies and construction starts, and enacted appropriations for FY2011 and FY2012 barred any funding for these project types (defined as projects or studies that have not received appropriations previously). For FY2013, the Administration requested funding for three new construction starts and six new studies. In addition to regular appropriations, two congressionally authorized "trust funds" are administered by the Corps and require annual appropriations: the Harbor Maintenance Trust Fund and the Inland Waterway Trust Fund. Both trust funds received attention in the FY2012 appropriations process. While the Harbor Maintenance Trust Fund has a surplus balance, the Inland Waterway Trust Fund currently faces a shortfall and a curtailment of activities. In 1986, Congress enacted the Harbor Maintenance Tax (HMT) to recover operation and maintenance (O&M) costs at U.S. coastal and Great Lakes harbors from maritime shippers. O&M is mostly the dredging of harbor channels to their authorized depths and widths. The tax is levied on importers and domestic shippers using coastal or Great Lakes ports. The tax revenues are deposited into the Harbor Maintenance Trust Fund (HMTF) from which Congress appropriates funds for harbor dredging. In 1990, Congress increased the HMT rate from four cents per $100 of cargo value to 12.5 cents per $100 of cargo value, one of many tax increases in the Omnibus Budget Reconciliation Act ( P.L. 101-508 ) designed to lower the federal deficit at that time. In recent years, HMTF annual expenditures have remained relatively flat while HMT collections have increased due to rising import volume (except in 2009 when collections declined along with import volume). Consequently, a large "surplus" in the HMTF has developed. The maritime industry seeks to enact a "spending guarantee" to spend down the surplus in the HMTF (see H.R. 104 and S. 412 ). Some harbor channels are reportedly not being maintained at their authorized depth and width, requiring ships with the deepest drafts to "light load" or wait for high tide. Harbors primarily used by fishing vessels or recreational craft have also complained of insufficient maintenance dredging. Since spending from the HMTF requires an appropriation from Congress, spending more from the HMTF could reduce available funding for other Energy and Water Development activities under congressional budget caps. The Administration's FY2013 budget requested $848 million from the HMTF, leaving an estimated-end-of-year balance of more than $8 billion. The House Appropriations Committee provided $1.0 billion in HMTF appropriations. The Senate Appropriations Committee report commented on the Administration's funding level but did not name a specific HMTF amount. (For more information on harbor maintenance, see CRS Report R41042, Harbor Maintenance Trust Fund Expenditures , by [author name scrubbed].) Since the 1980s, expenditures for construction and major rehabilitation projects on inland waterways have been cost-shared on a 50/50 basis between the federal government and users through the Inland Waterway Trust Fund (IWTF). IWTF monies derive from a fuel tax on commercial vessels on designated waterways, plus investment interest on the balance. Since FY2007, there has been a potential shortfall in the IWTF. In the past, Congress has taken measures to ensure temporary solvency of the IWTF, either by appropriating federal funds beyond the aforementioned 50% federal requirement (FY2009 and FY2010), or by limiting IWTF expenditures to the amount available under current year fuel tax revenues (FY2011 and FY2012). The IWTF is expected to have a balance of approximately $55 million at the end of FY2012, and without changes to the current system, needed funding for eligible work is expected to continue to exceed available funding for the foreseeable future. In the past multiple Administrations have proposed fees (e.g., lock user fees, congestion fees) that would have increased IWTF revenues. These fees have been opposed by users and rejected by Congress. In 2011, users endorsed a plan of their own that would increase the current fuel tax by $0.06-$0.08 per gallon and alter the cost-share arrangement for some IWTF projects to increase the portion paid for by the federal government. H.R. 5325 would authorize this proposal, which has been opposed by the Obama Administration. Changes to IWTF policies have historically been under the jurisdiction of the authorizing committees, but in recent years appropriators have expressed frustration with the lack of action on this issue. Without a new source of revenue or some other change directed by Congress, the overall number of inland waterway projects is expected to be extremely limited. Currently one project (Olmsted Lock and Dam on the Ohio River) accounts for almost all IWTF appropriations. This past year, estimates for the Olmsted project increased by $872 million, bringing the total estimate for the project to $2.9 billion. Based on the new estimates, the project is expected to continue to require the majority of IWTF revenues for at least 10 more years. In FY2013, the Administration requested limited appropriations for IWTF projects based on current-year fuel tax revenues. The FY2013 Administration budget requested approximately $94 million in inland waterway spending from the IWTF, with an equal amount to be drawn from the General Fund of the Treasury. The Administration also assumed an additional $80 million in new revenues from an unspecified user fee, presumably separate from the current fuel tax. The majority of FY2013 IWTF funds were proposed for the Olmsted project. In appropriations action, the House Committee agreed with the requested IWTF funding, but mandated that a portion be restricted until a review of the Olmsted project's cost overruns is completed. The Senate Appropriations Committee also provided the funding for Olmsted, but provided that only 25% of the funding for Olmsted would have to be cost-shared with the IWTF (the rest would come from the General Fund). In effect, this change provides an extra $72 million for IWTF projects. The Corps portion of the Energy and Water bill typically includes funding for ecosystem restoration projects, such as restoration of the Everglades in South Florida. Some in Congress have criticized the fact that while the Corps has requested reductions for some "traditional" activities in recent budgets, funding for activities under its environmental business line (which includes ecosystem restoration projects) has largely remained the same. For FY2013, the Administration requested $511 million (approximately 11% of the FY2013 request) for ecosystem restoration projects, which are the largest component of the environmental business line. This amount is similar to the amount appropriated for these activities in recent years. In its markup of the President's budget, the House Appropriations Committee decreased funding levels for several of the Administration's major ecosystem restoration initiatives, including Everglades (reduced from $153 million to $145 million) and Missouri River Fish and Wildlife Recovery (reduced from $90 million to $71 million). The Senate Appropriations Committee agreed with the Administration's request. Projects funded under the Corps Continuing Authorities Programs (CAPs) are typically smaller projects that can be carried out without obtaining a project-specific study or construction authorization or project-specific appropriations. CAPs are referred to by the section number in the bill where the CAP was first authorized. The Administration's FY2013 budget requested $24 million in funding for five of the nine CAPs, or a decrease of approximately $19 million from the FY2012 enacted level. The Administration proposed no funding for four CAPs, including no funding for Section 14 (emergency streambank and shoreline protection), Section 103 (shore protection), Section 107 (navigation), and Section 208 (snagging and clearing for flood control). The House Appropriations Committee agreed with the Administration's overall request for CAPs, but shifted some of the funding within individual CAPs. The Senate Appropriations Committee provided $45 million in funding for eight of the nine CAPs. The Energy and Water Development bill includes funding for the Central Utah Project (CUP) and the Bureau of Reclamation, both part of the Department of the Interior. The total discretionary FY2013 budget request for Title II funding for the Central Utah Project and Reclamation was approximately $1.034 billion, or a decrease of $42 million from the FY2012 enacted amount. The Obama Administration requested $21 million for the Central Utah Project (CUP) Completion Account in FY2013, or $7 million less than the amount appropriated in FY2012. Significantly, the Administration also proposed to make Reclamation responsible for oversight and implementation of CUP (these responsibilities are currently housed within a separate office in DOI). Both the House and the Senate appropriations committees disagreed with this recommendation. The FY2013 request for the Bureau of Reclamation totaled $1.013 billion in gross current budget authority, or $34 million less than the amount enacted in FY2012. The FY2013 request for the Bureau of Reclamation included an "offset" of $39.9 million for the Central Valley Project (CVP) Restoration Fund (Congress does not list this line item as an offset), yielding a "net" discretionary authority of $973 million. As in previous years, additional funding is estimated to be available for FY2013 via "permanent and other" funds. Reclamation's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including construction, operations and maintenance, the Dam Safety Program, Water and Energy Management Development, and Fish and Wildlife Management and Development, among others. The Obama Administration requested $818 million for the Water and Related Resources Account for FY2013, a reduction of $76 million from the FY2012 level. However most of this decrease is due to shifting of funds for Indian water rights settlements and San Joaquin restoration to two new accounts. Accounting for these changes, the proposed decrease from FY2012 to the FY2013 request was approximately $34 million. In its markup, the House Appropriations Committee recommended $834 million in funding for Water and Related Resources, a decrease of $43.5 million from the Administration's request after allowing for the shifting/elimination of funding for the aforementioned two accounts proposed in the President's request. The Senate Appropriations Committee provided $892.1 million, which amounts to an increase of $15 million from the President's request after accounting for these same changes. Most of the large dams and water diversion structures in the West were built by, or with the assistance of, the Bureau of Reclamation. Whereas the Army Corps of Engineers built hundreds of flood control and navigation projects, Reclamation's mission was to develop water supplies, primarily for irrigation to reclaim arid lands in the West. Today, Reclamation manages hundreds of dams and diversion projects, including more than 300 storage reservoirs in 17 western states. These projects provide water to approximately 10 million acres of farmland and a population of 31 million. Reclamation is the largest wholesale supplier of water in the 17 western states and the second-largest hydroelectric power producer in the nation. Reclamation facilities also provide substantial flood control, recreation, and fish and wildlife benefits. Operations of Reclamation facilities are often controversial, particularly for their effect on fish and wildlife species and conflicts among competing water users. As with the Corps of Engineers, the Reclamation budget is made up largely of individual project funding lines and relatively few "programs." Also similar to the Corps, previously these Reclamation projects have often been subject to earmark disclosure rules. The current moratorium affects Congress's ability to steer money toward specific Reclamation projects, as it has done in the past. The CVP in California is one of Reclamation's largest and most complex water projects, and limited deliveries to CVP contractors are often the subject of appropriations and authorization debates. In recent years, Reclamation has had to limit water deliveries and pumping from CVP facilities due to drought and other factors, including environmental restrictions. In previous appropriations bills, this action has resulted in attempts to prevent Reclamation from implementing Biological Opinions (BiOps), some of which restrict CVP operations because of the project's potential effects on certain fish species. Previous restrictions that would prevent implementation of BiOps in the CVP, including amendments to appropriations bills, have not been enacted. However, other measures to lessen the impact of these restrictions have been enacted, and related legislation is currently under consideration. The San Joaquin River Restoration Fund was authorized by the enactment of Title X of the Omnibus Public Land Management Act of 2009 ( P.L. 111-11 ), the San Joaquin River Restoration Settlement Act. The Fund is to be used to implement fisheries restoration and water management provisions of a stipulated settlement agreement for the Natural Resources Defense Council et al. v. Rodgers lawsuit. The Fund is supported through the combination of a reallocation of Central Valley Project Restoration Fund receipts from the Friant Division water users and accelerated payment of Friant water users' capital repayment obligations, as well as other federal and non-federal sources. In recent years, funding for the San Joaquin River settlement has been controversial. Some have proposed repealing the settlement outright. In lieu of repealing the settlement, some have proposed de-funding the most important components of the settlement that were authorized by Congress, including rescission of prior year mandatory appropriations for San Joaquin restoration. To date, none of these proposals have been enacted. Previous funding for the San Joaquin River settlement included mandatory funds that were made available to Reclamation without further appropriation between FY2010 and FY2012. For FY2013, Reclamation proposed an allocation of $12 million in discretionary funding within a new account for San Joaquin River restoration activities. The House Appropriations Committee provided no funding for these activities. The Senate Appropriations Committee agreed with the Administration's request. The current Administration has undertaken efforts to avoid water allocation conflicts and restore the fisheries of the Klamath Basin in southern Oregon and Northern California. Two related agreements, the Klamath Basin Restoration Agreement (KBRA) and the Klamath Hydroelectric Settlement Agreement (KHSA), aim to achieve these goals through a mix of federal actions and non-federal dam removal. The agreements, which require authorization by Congress to move forward, would cost the federal government $800 million over 15 years, with additional costs for dam removal funded by nonfederal entities. There are a number of ongoing federal activities in the Klamath, including some actions and studies under the KBRA and KHSA that are going forward under existing authorities. However in order to proceed with other activities, including most of the restoration actions in the KBRA and a secretarial determination related to dam removal under the KHSA, Congress must authorize the agreements. In FY2013, in addition to base funds for the Klamath Project (approximately $18.6 million), Reclamation proposed $7.1 million in new funding for selected KBRA activities that are authorized under existing law. Both the House and the Senate appropriations committees agreed with the Administration's requested funding level. In recent years Reclamation has combined funding for several individual "bureau-wide" programs that promote water conservation into a single program—the WaterSMART (Sustain and Manage America's Resources for Tomorrow) Program. The program is part of an effort by the Department of the Interior to focus on water conservation, re-use, and planning. In the FY2013 request the WaterSMART program included five components: WaterSMART Grants, Basin Studies, Title XVI Projects, the Cooperative Watershed Management Program, and Water Conservation Field Services. The FY2013 President's budget request for WaterSMART programs was $53.9 million. The House Appropriations Committee recommended $46.9 million for the program, and the Senate Appropriations Committee agreed with the President's request. Funding levels for WaterSMART programs are shown in Table 7 . The Energy and Water Development bill has funded all DOE's programs since FY2005. Major DOE activities funded by the Energy and Water bill include research and development on renewable energy and nuclear power, general science, environmental cleanup, and nuclear weapons programs, as well as programs for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, and energy statistics. The FY2012 appropriations act, P.L. 112-74 , funded DOE programs at $26.3 billion. For FY2013, the Obama Administration requested $27.7 billion for DOE programs. The House Appropriations Committee recommended $26.1 billion. The Senate Appropriations Committee recommended $27.1 billion. DOE administers a wide variety of programs with different functions and missions. In the following pages, some of the most important programs are described and major issues are identified, in approximately the order in which they appear in Table 8 . President Obama has declared energy efficiency and renewable energy to be in a "Sputnik moment," comparable to the U.S.-Soviet space race that began in the 1950s. In his State of the Union address in February 2012 he reiterated their importance to jobs, economic growth, and U.S. manufacturing competitiveness. But the Congress has been reluctant to go along with his efforts to boost spending for these programs. His proposed FY2011 budget for EERE of $2.4 billion was reduced to $1.8 billion, and his FY2012 proposal of $3.2 billion was cut to $1.8 billion. For FY2013, DOE requested $2.267 billion for the EERE programs. Compared with the FY2012 appropriation, the FY2013 request would increase EERE funding by $458 million, or 25%. The House bill would reduce the requested amount sharply, to $1.381 billion. The Senate bill would appropriate $1.916 billion. DOE requested an additional $143.0 million for Electricity Delivery and Energy Reliability (EDER) programs. Table 9 gives the programmatic breakdown for EERE and EDER. For each major EERE technology program (e.g., Solar Technologies, Vehicle Technologies), DOE proposed changing the subprogram account structure from descriptions of technology-specific activities (e.g., Photovoltaic R&D, Battery Technology) to a uniform sub-program structure that has four areas: Innovations, Emerging Technologies, Systems Integration, and Market Barriers. The four areas are sequential, following the technology development progression—research, development, demonstration, and deployment (RDD&D). Each of the four new subprogram areas is identified with the concept of "technology readiness level (TRL)," a new element of its vocabulary for describing EERE technology programs. TRL is defined by a numerical scale that covers the RDD&D progression. The scale ranges from TRL1, for basic research, to TRL10, for commercial market penetration. Thus, the Innovations subprogram encompasses activities traditionally defined as applied research, covering TRL levels 2 through 3. The Emerging Technologies subprogram captures activities traditionally defined as development, covering TRL levels 3 through 6. The Systems Integration subprogram embraces demonstration activities, associated with TRL levels 6 through 8. The Market Barriers subprogram is comprised of deployment-related activities, covering TRL levels 8 through 10. Both the House and Senate reports rejected DOE's proposal for a new subprogram account structure, citing its inadequacy for budgeting purposes. For the FY2014 request, the Senate report directed DOE to provide more detail at the program, project, and activity level. For the Hydrogen/Fuel Cell Program, DOE requested $80 million, $24 million below FY2012. In general, activities would be reduced, but not eliminated. The House bill would go along with the cut, appropriating $82 million. The Senate bill would appropriate $104 million, the FY2012 level. This program aims to foster a domestic bioenergy industry that produces renewable biofuels, bioproducts, and biopower. The goals are to curb oil dependence, reduce greenhouse gas emissions, and stimulate economic and job development—especially in the farms and forests of rural areas. While biofuels and bioproducts may soon be price-competitive, swings in oil prices pose an ongoing challenge to achieve cost-competitiveness. The program strategy addresses a feedstock collection barrier by focusing on converting raw biomass to solid pellets or to "green crude" oil that is easy to transport at large scale. The program aims to help cellulosic biofuels (renewable gasoline, diesel, and jet fuel) reach a wholesale finished-fuel cost under $3 per gallon by 2017. DOE requested $270 million for FY2013 for biomass and biorefinery programs, compared to $199 million appropriated for FY2012. Most of the increased funding would be used to complete pilot- and demonstration-scale biorefinery demonstration projects. The increase would support the construction and operation phases for biofuels, such as cellulosic ethanol and renewable diesel. Also, funds would support an innovative pilot program and deployment of a mobile feedstock process demonstration. DOE also sought authority from Congress to transfer $100 million from the EERE appropriation to the Defense Production Act Fund. This money would be used in joint activities by DOE, the Department of Defense, and the Department of Agriculture to develop pilot-scale demonstrations for production of renewable diesel and jet fuel to be used by the Navy. The House and Senate bills, as reported by the Appropriations Committees, would not fund the increased activity. The House bill would appropriate $203 million, the Senate bill $200 million. The House Appropriations Committee did not agree to the proposed transfer to the Defense Production Act Fund; the Senate Appropriations Committee approved it. For the Solar Program, DOE requested $310 million, a net increase of $21 million over FY2012. Much of the increase would go to research on new data analysis capabilities to help cut time and permitting process costs for solar installations. The Senate Appropriations Committee recommended $293 million, and supported the increase for data analysis. The House bill would cut the Solar Program to $155 million. The House Appropriations report specified a minimum of $65 million for Innovations in Manufacturing, and $20 million for Photovoltaic Cell Development and Supply Chain activities. For the Wind Program, DOE requested $95 million, essentially no change over FY2012. The Senate Appropriations Committee recommended the full amount of the request, while the House report recommended $70 million. Both reports stressed support for offshore wind technology development. For the Geothermal Program, DOE requested $65 million, an increase of $27.1 million over FY2012. Much of the increase would go to an Enhanced Geothermal Systems (EGS) Field Sites program. The Senate bill would fund the Geothermal Program at the requested level. The House bill would appropriate $30 million. The House Committee report specified no funding for the EGS program. Both the House and the Senate Appropriations Committees urged DOE to pursue the potential of low-temperature geothermal sources. For the Water Power Program, DOE requested $20 million, a cut of $38.8 million below FY2012. Water power technologies employ marine and hydrokinetic (wave, tidal, current, and ocean thermal) resources, and conventional hydropower resources, to generate electricity. The budget request would have allocated $15 million to water power technologies and $5 million to conventional hydropower. The Senate Appropriations Committee recommended $59 million for water power, in the same proportion of 75% for water power technologies and 25% for conventional hydropower. The House Appropriations Committee recommended $25 million for technologies and $20 million for conventional hydropower. In 2011 the President announced a goal to put 1 million electric vehicles (EVs) on the road by 2015, although since then the administration has backed off from this goal. To help promote EV development and deployment, DOE requested an increase of $91 million for the Vehicle Technologies Program over the $329 million appropriated for FY2012. Most of the increase would support the Electric Vehicle (EV) Grand Challenge, with the goal of assuring U.S. leadership in the global market for next generation electric vehicle technology. The EV Challenge focuses on advanced battery technology, power electronics, and advanced charging technology. Neither the House nor the Senate Appropriations Committees agreed to the increase. The House bill would appropriate $335 million; the Senate bill $330 million. This program develops energy efficiency measures to curb building-related energy costs, with a goal of reducing energy use 50% by 2030. The program strategy is designed with three linked paths: improve building components (envelope/windows, HVAC, lighting, and sensors/controls), strengthen market pull (through cooperation with private industry), and raise energy efficiency for new equipment (via standards) and new buildings (via model codes). DOE requested $310 million for FY2013, an increase of $90.8 million over FY2012. The funding increase would be spread over most building activities, with a special focus on accelerating currently scheduled rulemakings for equipment standards and on initiating standards for about six additional (new) products. Both reports rejected DOE's proposed overall increase—yet both support another year of funding for the Building Innovation Hub. The Senate Appropriations Committee recommended $220 million, which is the same as FY2012. The House report recommended $125 million. Also, it directed DOE to (1) conduct a study of the benefits of an R&D program to improve the manufacturing of consumer electronics and (2) ensure that any proposed standards for manufactured housing account for both up-front costs and lifecycle operating costs. DOE proposes to restructure the Industrial Technologies Program into an Advanced Manufacturing Office (AMO). This reflects an effort to accelerate the program's evolution in response to national interests—especially concerns about jobs, critical materials, and international competitiveness. The general goal for AMO programs is to reduce the energy use of manufactured goods across targeted product life-cycles by 50% over 10 years. The manufacturing focus is a major theme of the EERE request, which follows from the President's Advanced Manufacturing Partnership initiative. Under EERE, the focus centers on the AMO and is also evidenced by manufacturing elements under several other technology programs. To meet the above-noted goal, DOE requested $290 million, a net increase of $174.4 million. Nearly 80% of the increase would go Next Generation Manufacturing Processes, with the remainder split between Next Generation Materials and Industrial Technical Assistance. These proposed increases directly parallel the "Next Generation" manufacturing initiatives proposed in the FY2012 request. The FY2013 proposals appear to involve less funding, more focus, and more specifics than those in the FY2012 request. The increase for Manufacturing Processes is intended to develop new ways to reduce and/or integrate the number of steps in industrial processes (e.g. to reduce energy losses from industrial motors, steam, and process heating activities) and to discover alternate processes (e.g., bio-manufacturing to support the production of oil substitutes). Public-private partnerships would be expanded through manufacturing demonstration facilities (MDFs), research/industry manufacturing awards, and manufacturing challenges. DOE expects that many projects funded through the Administration's Innovative Manufacturing Initiative (IMI) will advance into this phase, as technologies are scaled up and demonstrated for industrial applications. Through these various activities, small- and medium-sized firms would gain access to specialized technology that would otherwise be cost-prohibitive. Also, the funding for Next Generation Materials aims to allow for energy savings in energy intensive processes, create new design opportunities for renewable energy generation in austere environments, and help bypass the need for critical materials while reducing cost. The House Appropriations Committee recommended $150 million, which is $34 million more than FY2012. The Senate report recommended $168.6 million, which is $52.6 million more than FY2012. Both reports agreed to extend funding for the Critical Materials Hub for another year. FEMP provides expertise, training, and other services to help federal agencies achieve congressionally mandated energy efficiency and renewable energy goals. DOE requested $32 million, which would be $2 million more than FY2012. The Senate Appropriations Committee recommended $30 million and the House Appropriations Committee recommended $18 million. This program funds federal employees, contract support, and operational costs. DOE requested $164.7 million, essentially level funding with FY2012. The Senate Appropriations Committee recommended the full amount of the request. The House report recommended $115 million. For Strategic Programs (formerly Program Support), DOE seeks $58.9 million, an increase of nearly $34 million over FY2012. Most of the increase would go for joint work with DOE's Office of Science on clean energy research and innovation. Also, the International subprogram would get a $3.5 million increase, from which $2 million would support exports to foreign markets. The Senate Appropriations Committee recommended $25 million, the FY2012 level, and the House Appropriations Committee recommended $10 million. This program addresses regulatory, financial, and planning barriers faced by state and local governments. The goal is to foster technologies, practices, and policies that support state and local governments in providing home energy services to low-income families that help them reduce energy costs and save money. DOE requested $139 million for FY2013, compared to $68 million appropriated for FY2012. Nearly all of the addition would increase the number of low-income households weatherized. The Senate Appropriations Committee recommended $145 million. The House Appropriations report cited the availability of $810 million in unspent prior year funds in its recommendation for $54.6 million. This program supports many state energy offices, both administration and activities. DOE requested $49 million, nearly level funding with FY2012. The Senate Appropriations Committee recommended $50 million, and the House report recommended $25 million. DOE requested $143 million, a net increase of $3.9 million, for EDER, which included $20.0 million for a new Electricity Systems Hub. The Hub would address the growing need for grid accommodation of renewables, the impact of electric vehicles and distributed generation, and the advent of smart grid equipment. Hub funding would be mostly offset by cuts to other programs. The Senate Appropriations Committee recommended the full amount of the request, including funding for the Hub. The House report recommended $123 million, specifying no funds for the Hub. The Obama Administration's FY2013 funding request for nuclear energy research and development totaled $770.4 million. Including advanced reactors, fuel cycle technology, infrastructure support, and safeguards and security, the total nuclear energy request was $88.3 million (10%) below the enacted FY2012 funding level. Funding for safeguards and security at DOE's Idaho facilities in FY2012 was provided under a separate appropriations account, Other Defense Activities, but it was included under the Nuclear Energy account in the FY2013 request. The largest proposed reductions for FY2013 were Reactor Concepts (36%), Radiological Facility Management (27%) and Nuclear Energy Enabling Technologies (13%). Excluding funding for Idaho safeguards and security, the House Appropriations Committee recommended an increase of $89.9 million for the nuclear energy account, for a total of $765.4 million. The committee recommended that $93.4 million for Idaho safeguards and security be provided under the Other Defense Activities Account. The Senate Appropriations recommended a $20.1 million increase for nuclear energy, including Idaho safeguards and security and $17.7 million in prior-year balances. Using reorganized budget categories established for FY2011, the Administration's FY2013 nuclear R&D budget request is consistent with DOE's Nuclear Energy Research and Development Roadmap issued in April 2010. The Roadmap lays out the following four main goals for the program: Develop technologies and other solutions that can improve the reliability, sustain the safety, and extend the life of current reactors; Develop improvements in the affordability of new reactors to enable nuclear energy to help meet the Administration's energy security and climate change goals; Develop sustainable nuclear fuel cycles; and Understand and minimize the risks of nuclear proliferation and terrorism. The Reactor Concepts program area includes the Next Generation Nuclear Plant (NGNP) demonstration project and research on other advanced reactors (often referred to as Generation IV reactors). This area also includes funding for developing advanced small modular reactors (discussed in the next section) and to enhance the "sustainability" of existing commercial light water reactors. The total FY2013 funding request for this program was $73.7 million, a reduction of $41.2 million from FY2012. The House Appropriations Committee recommended an increase of $11.1 million from the FY2012 level, while the Senate panel's recommendation was the same as the request. Most of the Administration's proposed reduction in Reactor Concepts would be for NGNP, a high-temperature gas-cooled reactor demonstration project authorized by the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ). The reactor is intended to produce high-temperature heat that could be used to generate electricity, help separate hydrogen from water, or be used in other industrial processes. DOE is requesting $21.2 million for the NGNP project for FY2013, down from $40 million provided in FY2012. Under EPACT05, the Secretary of Energy was to decide by the end of FY2011 whether to proceed toward construction of a demonstration plant. Secretary of Energy Steven Chu informed Congress on October 17, 2011, that DOE would not proceed with a demonstration plant design "at this time" but would continue research on the technology. Potential obstacles facing NGNP include low prices for natural gas, the major competing fuel, and private-sector unwillingness to share the project's costs as required by EPACT05. According to the DOE budget justification, the NGNP program in FY2013 will focus on fuels for very high temperature reactors, the graphite used in high-temperature reactor cores, and licensing issues. The House Appropriations Committee recommended $50 million for NGNP, to allow DOE to continue developing a licensing framework and continue working with industry on the program. The Senate panel restricted NGNP activities to ongoing fuel-related research. Funding for the Advanced Reactor Concepts subprogram would also be reduced sharply by the Administration request, from $21.9 million in FY2012 to $12.4 million in FY2013. Reactor concepts being developed by this subprogram are generally classified as "Generation IV" reactors, as opposed to the existing fleet of commercial light water reactors, which are generally classified as generations II and III. Such advanced reactors "could dramatically improve nuclear power performance including sustainability, economics, and safety and proliferation resistance," according to the FY2013 justification. Nuclear technology development under this program includes "fast reactors," using high-energy neutrons, and reactors that would use a variety of heat-transfer fluids, such as liquid sodium and supercritical carbon dioxide. International research collaboration in this area would continue under the Generation IV International Forum (GIF). The House Appropriations Committee recommended an increase $1.1 million over FY2012, while the Senate panel approved the Administration's proposed reduction. DOE's FY2013 request for the Light Water Reactor Sustainability subprogram was $21.7 million, $3.3 million below the FY2012 appropriation. The program conducts research on extending the life of existing commercial light water reactors beyond 60 years, the maximum operating period currently licensed by the Nuclear Regulatory Commission. The program, which is to be cost-shared with the nuclear industry, is to study the aging of reactor materials and analyze safety margins of aging plants. Other research under this program is to focus on improving the efficiency of existing plants, through such measures as increasing plant capacity and upgrading instrumentation and control systems. Research on longer-life LWR fuel is aimed at eliminating radioactive leakage from nuclear fuel and increasing its accident tolerance, along with other "post-Fukushima lessons learned research needs," according to the budget justification. The House Appropriations Committee rejected the Administration's proposed reduction, while the Senate panel approved it. Rising cost estimates for large conventional nuclear reactors—widely projected to be $6 billion or more—have contributed to growing interest in proposals for small modular reactors (SMRs). Ranging from about 40 to 350 megawatts of electrical capacity, such reactors would be only a fraction of the size of current commercial reactors. Several modular reactors would be installed together to make up a power block with a single control room, under most concepts. Current SMR proposals would use a variety of technologies, including high-temperature gas technology in the NGNP program and the light water (LWR) technology used by today's commercial reactors. DOE requested $65 million for FY2013 to provide technical support for licensing small modular LWRs, $2 million below the FY2012 funding level. This program focuses on LWR designs because they are believed most likely to be deployed in the near term, according to DOE. Conferees on the FY2012 appropriations bill anticipated a five-year program totaling $452 million. The program is similar to DOE's support for larger commercial reactor designs under the Nuclear Power 2010 Program, which ended in FY2010. DOE will provide support for design certification, standards, and licensing. As with the Nuclear Power 2010 Program, at least half the costs of the LWR SMR program are to be covered by industry partners, according to DOE. The program will support two teams of reactor vendors and specific utilities or consortia who are interested in building the reactors at specific sites, according to the DOE justification. DOE announced a funding solicitation for the program on March 22, 2012. The House Appropriations Committee recommended $114 million for the SMR licensing program, $47 million above FY2012. The committee report called the increase necessary to keep the program on track to receive $452 million over five years. The Senate panel provided the same funding as in the budget request. An additional $18.5 million for FY2013 was requested by DOE under the Reactor Concepts program (described in the section above) for SMR advanced concepts R&D—$10.2 million below the FY2012 funding level. Unlike the SMR licensing support program, which focuses on conventional LWR technology, the SMR advanced concepts program would conduct research on technologies that might be deployed in the longer term, according to the budget justification. The House Appropriations Committee rejected the Administration's proposed reduction, while the Senate panel approved the budget request. Small modular reactors would go against the overall trend in nuclear power technology toward ever-larger reactors intended to spread construction costs over a greater output of electricity. Proponents of small reactors contend that they would be economically viable despite their far lower electrical output because modules could be assembled in factories and shipped to plant sites, and because their smaller size would allow for simpler safety systems. In addition, although modular plants might have similar or higher costs per kilowatt-hour than conventional large reactors, their ability to be constructed in smaller increments could reduce electric utilities' financial commitment and risk. The Fuel Cycle Research and Development Program conducts "long-term, science-based" research on a wide variety of technologies for improving the management of spent nuclear fuel, according to the DOE budget justification. The total FY2013 funding request for this program is $175.4 million, $10.8 million below the FY2012 appropriation. The House Appropriations Committee recommended $138.7 million for Fuel Cycle R&D, $36.7 million below the request. The Senate panel recommended $193.1 million, $17.7 million above the request. The range of fuel cycle technologies being studied by the program includes direct disposal of spent fuel (the "once through" cycle) and partial and full recycling, according to the budget justification. The Fuel Cycle R&D Program "will research and develop a suite of technology options that will enable future decision-makers to make informed decisions about how best to manage nuclear waste and used fuel from reactors," the budget justification says. Much of the planned research on spent fuel management options will address the near-term recommendations of the Blue Ribbon Commission on America's Nuclear Future, which issued its final report on January 26, 2012. The commission was chartered to develop alternatives to the planned Yucca Mountain, NV, spent fuel repository, which President Obama wants to terminate. The largest subprogram under Fuel Cycle Research and Development is Used Nuclear Fuel Disposition, with a request of $59.7 million, the same as the FY2012 funding level. Activities in that area include work toward the development and licensing of standardized spent fuel containers, studies of potential spent fuel disposal partnerships, and the accelerated characterization of potential geologic media for waste disposal. The House report contended that much of the proposed research in the Used Fuel Disposition Program relates to waste program changes recommended by the Blue Ribbon Commission that have not been enacted by Congress. As a result, the panel reduced funding for Used Fuel Disposition to $38 million, $15 million of which would be for storage and transportation work related to the Yucca Mountain repository. The Senate panel's $17.7 million increase from the budget request consists of prior-year funds that would be used for a spent fuel storage pilot project (see the " Nuclear Waste Disposal " section for more details). Other major research areas in the Fuel Cycle R&D Program include the development of advanced fuels for existing commercial reactors and advanced reactors, improvements in nuclear waste characteristics, and technology to increase nuclear fuel resources, such as uranium extraction from seawater. The Nuclear Energy Enabling Technologies (NEET) program "is designed to conduct research and development (R&D) in crosscutting technologies that directly support and enable the development of new and advanced reactor designs and fuel cycle technologies," according to the FY2013 DOE budget justification. The DOE funding request for the program was $65.3 million, $9.4 million below the FY2012 level. The House Appropriations Committee recommended $75 million, nearly the same as in FY2012, while the Senate panel recommended the same funding as the request. DOE's proposed funding cut would come entirely under the category of Crosscutting Technology Development, for which $26.2 million was requested, $9.7 million below FY2012. According to the budget justification, the cuts result from elimination of research on manufacturing methods and nonproliferation risk assessments. Continuing crosscutting research activities are to include development of innovative materials, advanced automation and information technologies, advanced sensors, and improved fuel performance. The Energy Innovation Hub for Modeling and Simulation, created in FY2010, had a request of $24.6 million, slightly above the FY2012 appropriation. The Modeling and Simulation Hub is creating a computer model of an operating reactor to allow a better understanding of nuclear technology, with the benefits of such modeling extending to other energy technologies in the future, according to the budget justification. DOE requested $14.6 million for the National Scientific User Facility, the same as the FY2012 appropriation, to support partnerships by universities and other research organizations to conduct experiments "at facilities not normally accessible to these organizations," according to the justification. Up to five such partnerships are currently anticipated, and the FY2013 funding will allow up to three new long-term and five "rapid turnaround" projects to be awarded. The Obama Administration proposed a new budget structure for the FY2012 Fossil Energy Research and Development (FER&D) program that emphasized coal with a focus on carbon capture and storage (CCS) technologies. The new structure was adopted in the final appropriations bill. The CCS program is intended to demonstrate advanced clean coal technologies on a commercial-project scale, and build and operate near-zero atmospheric emissions power plants that capture and store carbon dioxide (CO2). A Carbon Capture sub-program focuses on separating CO2 in both pre-combustion and post-combustion systems. The Carbon Storage sub-program focuses on long-term geologic storage of CO2, including small- and large-scale CO2 injection tests. An Advanced Energy Systems sub-program focuses on improving the efficiency of coal-based power systems to capture CO2. The Advanced Energy Systems sub-program focuses on improving the efficiency of coal-based power systems, enabling affordable CO2 capture, increasing plant availability, and maintaining the highest environmental standards. The Cross-Cutting Research activity serves as a bridge between basic and applied research by fostering the development and deployment of innovative systems. For FY2013 the budget structure remains unchanged, and the Administration requested $420.6 million and the use of $7.9 million in prior-year balances, bringing spending on Fossil Energy R&D to $428.5 million. The Administration had proposed eliminating spending on Natural Gas Technology, Unconventional Technologies, and Cooperative R&D for FY2011, but Congress insisted on continued spending on natural gas both in FY2011 and FY2012. For FY2013 the Administration requested $17 million for Natural Gas Technologies. The House Committee recommended $554 million for Fossil Energy Research and Development, $207.3 million above FY2012 and $133.4 million above the budget request. After accounting for rescissions of $187.3 million in FY2012, the recommendation is $20 million above FY2012. The committee recommendation of $384.3 million for Carbon Capture and Sequestration (CCS) and Power Systems includes $68.9 million for Carbon Capture, $115.3 million for Carbon Storage ($16 million for enhanced oil recovery technologies), $110 million for Advanced Energy Systems ($25 million for solid oxide fuel systems research, development, and demonstration), $10 million for coal-biomass to liquids activities, $5 million for High Performance Materials, $55 million for Cross-Cutting Research, and $35 million for NETL Coal Research and Development. The committee also recommended $17 million for Natural Gas Technologies ($10 million for shale gas extraction, and $2 million for Risk Based Data Management Systems), and $115.7 million for Program Direction. With gasoline prices once again at record levels, the committee report says, it is more important than ever to use all means possible to increase the domestic oil supply, and recommended $25 million for a new program in Unconventional Fossil Energy Technologies. The Senate Committee recommended $460.6 million for Fossil Energy Research and Development, $40 million more than the budget request. The committee recommendation of $301.6 million for Carbon Capture and Sequestration includes $60.4 million for Carbon Capture, $95.5 million for Carbon Storage, $80.9 million for Advanced Energy Systems, $29.7 million for Cross-Cutting Research, and $35.0 million for NETL Coal Research and Development. The committee also recommended $22 million for Natural Gas Technologies, $5 million for a new Unconventional Fossil Energy program, and $120 million for Program Direction. The Strategic Petroleum Reserve (SPR), authorized by the Energy Policy and Conservation Act ( P.L. 94-163 ) in 1975, consists of caverns formed out of naturally occurring salt domes in Louisiana and Texas. The purpose of the SPR is to provide an emergency source of crude oil that may be tapped in the event of a presidential finding that an interruption in oil supply, or an interruption threatening adverse economic effects, warrants a drawdown from the reserve. By early 2010, the SPR's maximum capacity reached 727 million barrels. The federal government has not purchased oil for the SPR since 1994. Beginning in 2000, additions to the SPR were made with royalty-in-kind (RIK) oil acquired by the Department of Energy in lieu of cash royalties paid on production from federal offshore leases. In September 2009 the Secretary of the Interior announced a transitional phasing out of the RIK Program. In its FY2012 request, the Obama Administration had proposed a sale of $500 million in petroleum from the SPR, to be completed not later than March 1, 2012, for deposit in the General Fund of the Treasury. In summer 2011, the President ordered an SPR sale in coordination with an International Energy Administration sale under treaty obligation. The U.S. sale of 30.6 million barrels, for a total of about $3.3 billion, reduced the SPR inventory to 695.9 million barrels. For FY2013, the administration requested $195.6 million to operate the SPR, an increase from the $192.7 million enacted in for FY2012. The Administration also proposed rescinding $291 million in balances from the SPR account resulting from the emergency sale of SPR oil conducted in 2011. The House and Senate Committees recommended $195.6 million for operation of the SPR, and opposed the Administrations proposed rescission of $291 million from the SPR Account. The DOE Office of Science conducts basic research in six program areas: basic energy sciences, high-energy physics, biological and environmental research, nuclear physics, advanced scientific computing research, and fusion energy sciences. Through these programs, DOE is the third-largest federal funder of basic research and the largest federal funder of research in the physical sciences. For FY2013, DOE requested $4.992 billion for the Office of Science, an increase of 2.4% from the FY2012 appropriation of $4.874 billion. The House committee recommended $4.801 billion. The Senate committee recommended $4.909 billion. (See Table 11 .) The Administration's stated goal is to double the funding of the Office of Science. This continues a plan initiated by the Bush Administration in January 2006. The original target under both Administrations was to achieve the doubling goal in the decade from FY2006 to FY2016. The Administration's current policy no longer specifies a completion date. The FY2013 request is 37% more than the FY2006 baseline. The House and Senate committee recommendations are respectively 32% and 35% more than the baseline. The request for the largest Office of Science program, basic energy sciences, is $1.800 billion. This would be an increase of $111 million from FY2012 and accounts for nearly the entire increase requested for the Science account. The increase would fund science in support of clean energy, such as combustion research to improve simulation of advanced engines; research on materials and chemistry by design; and jointly funded R&D with the Office of Energy Efficiency and Renewable Energy. The request would also support increased utilization of existing scientific user facilities and the start of construction of the Linac Coherent Light Source-II, a new high-energy x-ray source. The House committee recommended $1.657 billion, including $33 million less than the request for facility operations, $20 million less than the request for energy frontier research centers, $76 million less than the request for other research activities, and $14 million less than the request for construction projects. The Senate committee recommended $1.712 billion, including $88 million less than the request for research activities but the full requested amount for construction. Both committee reports directed DOE not to engage the energy frontier research centers in joint work with the Office of Energy Efficiency and Renewable Energy; they stated that DOE had not adequately justified this proposal. For high-energy physics, the request is $777 million, a decrease of $14 million from FY2012. Nonaccelerator physics projects would increase $12 million, in part to support engineering and design work on the Large-Scale Synoptic Telescope, a joint activity with the National Science Foundation. This increase would be more than offset, however, by reductions elsewhere in the program. Facilities funding at Fermilab would decrease $13 million because of a planned shutdown to perform accelerator upgrades. Accelerator development would decrease $23 million because of the completion of R&D on the International Linear Collider. Construction of the Long Baseline Neutrino Experiment (LBNE) would not be funded. The House committee recommended $16 million for LBNE, offset by a reduction of $16 million in other activities. The Senate committee also recommended $16 million for LBNE, partially offset by a reduction of $11 million for other activities. The request for biological and environmental research is $625 million, an increase of $16 million from FY2012. Most of the increase ($12 million) would be for terrestrial ecosystem science. Funding for radiobiology would decrease $5 million. The House committee recommended $542 million and expressed support for the program's activities in biological systems science without mentioning its activities in climate and environmental sciences. The Senate committee recommended the requested amount. For nuclear physics, the request is $527 million, down $20 million from FY2012. Funding for continued construction of an upgrade at the Continuous Electron Beam Accelerator Facility (CEBAF) would decrease $9 million. Utilization of existing nuclear physics user facilities would decrease: the Relativistic Heavy Ion Collider (RHIC) from 58% to 33%, and the Argonne Tandem Linac Accelerator System (ATLAS) from 95% to 80%. The House committee recommended $21 million more than the request to support facility operations and maintenance. The Senate committee recommended $13 million more than the request for the same purpose. The request for advanced scientific computing research is $456 million, an increase of $15 million. Research funding would increase by $28 million, while facilities funding would decrease by $13 million. The House committee recommended $442 million and expressed concern that DOE had not yet provided a long-term plan for exascale computing that was mandated by prior appropriations reports. The Senate committee recommended the requested amount. The request for fusion energy sciences is $398 million, a decrease of $3 million. The proposed U.S. contribution to the International Thermonuclear Experimental Reactor (ITER), a fusion research facility currently under construction in France, is $150 million, an increase of $45 million. As a consequence, funding for domestic fusion activities would decrease by $48 million. Among the affected domestic activities, the Alcator C-Mod fusion reactor would be permanently shut down. Policymakers and fusion researchers have long been concerned about the impact of ITER's funding needs on the availability of resources for the domestic fusion program. The House committee recommended $475 million, including $28 million more than the request for ITER and $48 million more than the request for the domestic program. The Senate committee recommended the requested amount. The Advanced Research Projects Agency–Energy (ARPA-E) was authorized by the America COMPETES Act ( P.L. 110-69 ) to support transformational energy technology research projects. It received its first funding in FY2009, mostly through the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), and announced its first round of contract awards in October 2009. DOE budget documents describe ARPA-E's mission as overcoming long-term, high-risk technological barriers to the development of energy technologies. The request for ARPA-E in FY2013 is $350 million, an increase of $75 million from FY2012. The House committee recommended $200 million. The Senate committee recommended $312 million, which it noted is the amount authorized by the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ). The Administration's FY2013 budget includes no funding for DOE's Office of Civilian Radioactive Waste Management (OCRWM), which was established by the Nuclear Waste Policy Act of 1982 (NWPA, 42 U.S.C. 10101 et seq.) to dispose of highly radioactive waste from nuclear power plants and defense facilities. OCRWM had been developing a permanent nuclear waste repository at Yucca Mountain, NV, as specified by an NWPA amendment in 1987. Funding for OCWRM ended after FY2010, so the office has been closed and activities at the Yucca Mountain site halted. The Obama Administration "has determined that developing the Yucca Mountain repository is not a workable option and the Nation needs a different solution for nuclear waste disposal," according to the DOE FY2011 budget justification. To develop alternative waste management strategies, the Administration established the Blue Ribbon Commission on America's Nuclear Future, which issued its final report to the Secretary of Energy on January 26, 2012. The Blue Ribbon Commission recommended that future efforts to develop nuclear waste facilities follow a "consent based" approach. The House Appropriations Committee sharply criticized the Administration's nuclear waste policy and provided $25 million for FY2013 to resume work on the Yucca Mountain repository. The Senate Committee included language (§312) authorizing a pilot program to demonstrate one or more consolidated interim storage facilities for spent nuclear fuel and high level waste. Any proposed storage site would require the consent of the affected state governor, local government of jurisdiction, affected Indian tribes, and Congress. The Senate panel directed DOE to use $2 million of its program direction funding for the pilot program, along with $17.7 million in unobligated prior-year appropriations from the Nuclear Waste Fund. DOE had filed a license application with the Nuclear Regulatory Commission (NRC) for the proposed Yucca Mountain repository in June 2008 but filed a motion to withdraw the application on March 3, 2010. An NRC licensing panel rejected DOE's withdrawal motion June 29, 2010, on the grounds that NWPA requires full consideration of the license application by NRC. The full NRC Commission deadlocked on the issue September 9, 2011, leaving the licensing panel's decision in place and prohibiting DOE from withdrawing the Yucca Mountain application. However, the commission ordered at the same time that the licensing process be halted because of "budgetary limitations." No funding was provided in FY2012 or requested for FY2013 to continue Yucca Mountain licensing activities, although the issue is currently the subject of a federal appeals court case. The final report of the Blue Ribbon Commission on America's Nuclear Future recommended options for temporary storage, treatment, and permanent disposal of highly radioactive nuclear waste, along with an evaluation of nuclear waste research and development programs and the need for legislation. It did not recommend specific sites for new nuclear waste facilities or evaluate the suitability of Yucca Mountain. The commission's proposed "consent-based" approach called for the roles of local, state, and tribal governments to be negotiated for each potential site. The development of consolidated waste storage and disposal facilities should begin as soon as possible, the commission urged. A new waste management organization should be established to develop the repository, along with associated transportation and storage systems, according to the commission. The new organization should have "assured access" to the Nuclear Waste Fund, which holds fees collected from nuclear power plant operators to pay for waste disposal. Under NWPA, DOE could not spend those funds without congressional appropriations. DOE's Office of Nuclear Energy (NE) has taken over the remaining functions of OCRWM and will "lead all future waste management activities," according to the FY2011 budget justification. Substantial funding has been requested for NE to conduct research on nuclear waste disposal technologies and to respond to the recommendations of the Blue Ribbon Commission (see " Nuclear Energy " section above for more details). The House Appropriations Committee noted that many of the Blue Ribbon Commission's recommendations would require changes in law to implement and cautioned the Administration against efforts to "unilaterally develop or implement policy" on nuclear waste management. The Senate panel directed DOE to implement the waste storage pilot program in its bill "consistent with the recommendations in the Blue Ribbon Commission's final report." NWPA required DOE to begin taking waste from nuclear plant sites by January 31, 1998. Nuclear utilities, upset over DOE's failure to meet that deadline, have won two federal court decisions upholding the department's obligation to meet the deadline and to compensate utilities for any resulting damages. Utilities have also won several cases in the U.S. Court of Federal Claims. DOE estimates that liability payments would eventually exceed $20 billion if DOE were to begin removing waste from reactor sites by 2020, the previous target for opening Yucca Mountain. (For more information, see CRS Report R42513, U.S. Spent Nuclear Fuel Storage , by [author name scrubbed]; CRS Report RL33461, Civilian Nuclear Waste Disposal , by [author name scrubbed]; and CRS Report R40996, Contract Liability Arising from the Nuclear Waste Policy Act (NWPA) of 1982 , by [author name scrubbed].) DOE's Loan Programs Office provides loan guarantees for projects that deploy specified energy technologies, as authorized by Title XVII of the Energy Policy Act of 2005 (EPACT05, P.L. 109-58 ), and direct loans for advanced vehicle manufacturing technologies. No funding for additional loans and loan guarantees was requested for FY2013. However, $38 million for loan guarantee administrative expenses would be offset by fees, and $9 million was requested for administrative expenses for the vehicle manufacturing loan program, an increase of $3 million over FY2012. The House and Senate Appropriations Committees approved the $38 million request for the loan guarantee program. The House panel cut the vehicle manufacturing request to $6 million, while the Senate panel approved the full request. Two major loan guarantee programs are currently conducted by the DOE Loan Programs Office: Section 1703 innovative clean energy technology loan guarantees . Loan guarantees are provided for "new or significantly improved technologies," as compared to existing commercial technologies, that "avoid, reduce, or sequester" air pollutants and greenhouse gas emissions. Eligible technology categories include renewable energy, advanced fossil energy, advanced nuclear energy, energy efficiency, and pollution control. Section 1705 renewable energy, electric transmission, and advanced biofuels loan guarantees . Established by Section 406 of the American Recovery and Reinvestment Act (ARRA, P.L. P.L. 111-5 ), the Section 1705 program was designed as a temporary economic stimulus measure available through the end of FY2011. Unlike the Section 1703 program, which is limited to innovative technologies, loan guarantees are available to already-commercialized renewable energy and electric transmission technologies. Title XVII allows DOE to provide loan guarantees for up to 80% of construction costs for eligible energy projects. Under such loan guarantee agreements, the federal government would repay all covered loans if the borrower defaulted. This would reduce the risk to lenders and allow them to provide financing at below-market interest rates. DOE currently has two conditional loan guarantee commitments pending under Section 1703, totaling $10.33 billion for nuclear power and nuclear fuel projects. Under Section 1705, final loan guarantees have been issued for 26 projects, totaling $16 billion. DOE issued final rules for the program October 4, 2007. DOE's proposed loan guarantee rules, published May 16, 2007, had faced sharp criticism for limiting the guarantees to 90% of a project's debt. The affected industries contended that EPACT05 allows all of a project's debt to be covered, as long as debt does not exceed 80% of total construction costs. In its explanation of the proposed rules, DOE expressed concern that guaranteeing 100% of a project's debt could reduce lenders' incentive to perform adequate due diligence and therefore increase default risks. In the final rule, however, DOE agreed to guarantee up to 100% of debt, but only for loans issued by the Federal Financing Bank. DOE's first loan guarantee under Section 1705 was issued in September 2009 to Solyndra Inc., a manufacturer of photovoltaic equipment. Solyndra's bankruptcy announcement on August 31, 2011, prompted strong congressional criticism of the Administration's management of the loan guarantee program. Solyndra's DOE loan guarantee totaled $535 million, and the company's bankruptcy placed most or all of that amount at risk. (For details, see CRS Report R42058, Market Dynamics That May Have Contributed to Solyndra's Bankruptcy , by [author name scrubbed].) Title XVII requires the estimated future government costs resulting from defaults on guaranteed loans to be covered up-front by appropriations or by payments from project sponsors (borrowers). These "subsidy costs" are calculated as the present value of the average possible future net costs to the government for each loan guarantee, on a case-by-case basis. If those calculations are accurate, the subsidy cost payments for all the guaranteed projects together should cover the future costs of the program. However, the Congressional Budget Office has predicted that the up-front subsidy cost payments will prove too low by at least 1% and is scoring bills accordingly. As a result, appropriations bills that provide loan guarantee authorizations include an adjustment totaling 1% of the loan guarantee ceiling. Subsidy costs for Section 1703 loan guarantees must usually be paid by project sponsors, because no appropriations for that program were provided before FY2011 (as described below). However, ARRA appropriated $6 billion to cover the subsidy costs of Section 1705 loan guarantees, so subsidy cost payments are not required from project sponsors under that program. The total loan guarantee amounts that could be provided under ARRA depend on the level of subsidy costs that would be charged. For example, if the subsidy costs averaged 10% of the total guaranteed loans, then $6 billion in subsidy cost appropriations would support $60 billion in loan guarantees. However, $2 billion of Section 1705 subsidy cost appropriation was subsequently transferred to the Consumer Assistance to Recycle and Save ("cash for clunkers") automobile trade-in program by P.L. 111-47 , and another $1.5 billion was rescinded to help pay for the Education Jobs and Medicaid Assistance Act ( P.L. 111-226 ), leaving $2.5 billion. Of the $2.5 billion available for subsidy costs, $1.9 billion had been obligated by the end of FY2011. Under the Federal Credit Reform Act (FCRA), federal loan guarantees cannot be provided without an authorized level in an appropriations act or an appropriation for the subsidy costs. Pursuant to FCRA, the FY2007 continuing resolution ( P.L. 110-5 ) established an initial cap of $4 billion on loan guarantees under the Section 1703 program, without allocating that amount among the various eligible technologies. The explanatory statement for the FY2008 omnibus funding act ( P.L. 110-161 ) increased the Section 1703 loan guarantee ceiling to $38.5 billion through FY2009, including $18.5 billion specifically for nuclear power plants and $2 billion for uranium enrichment plants. The FY2009 Omnibus Appropriations Act ( P.L. 111-8 ) increased DOE's total loan guarantee authority under Section 1703 to $47 billion, in addition to the $4 billion authorized in FY2007, half of which DOE has designated for uranium enrichment. Of the $47 billion, $18.5 billion continued to be reserved for nuclear power, $18.5 billion was for energy efficiency and renewables, $6 billion was for coal, $2 billion was for carbon capture and sequestration, and $2 billion was for uranium enrichment. The time limits on the Section 1703 loan guarantee authority were eliminated. The FY2011 Department of Defense and Full-Year Continuing Appropriations Act ( P.L. 112-10 ) reduced the previous loan guarantee authority for Section 1703 non-nuclear technologies to $8.3 billion but added new authority for a total of $9.5 billion. Including the $2 billion in FY2007 authority that has not been designated for uranium enrichment, the Section 1703 non-nuclear loan guarantee ceiling stands at about $11.5 billion. Nuclear loan guarantees remain at $18.5 billion, and uranium enrichment totals $4 billion. Unobligated appropriations for subsidy cost payments under the Section 1705 loan guarantee program were no longer available after FY2011, as noted above. However, the FY2011 Continuing Appropriations Act provided $170 million, with no expiration, to pay subsidy costs for renewable energy and efficiency projects under the Section 1703 program. The act also provided authority for up to $1.183 billion in loan guarantees for those renewable energy and efficiency projects, in addition to the $32.8 billion in Section 1703 authority remaining from earlier appropriations acts for all technologies. The additional loan guarantee authority and subsidy cost appropriation provided by the FY2011 Continuing Appropriations Act is available to projects that applied under the expiring Section 1705 before February 24, 2011. Following is a summary of the various elements of the current DOE loan guarantee program, as modified by the FY2011 Continuing Appropriations Act (CR): $8.3 billion ceiling in CR on non-nuclear technologies under Section 1703 ($317 million conditionally committed), reduced from ceilings set in FY2009. $2 billion for unspecified projects from FY2007 under Section 1703, not affected by CR. $18.5 billion ceiling for nuclear power plants ($8.3 billion conditionally committed). $4 billion allocated for loan guarantees for uranium enrichment plants ($2 billion conditionally committed). $1.183 billion ceiling for renewable energy and energy efficiency projects under Section 1703, in addition to other ceiling amounts, which can include pending applications under Section 1705. An appropriation of $170 million for subsidy costs for renewable energy and energy efficiency loan guarantees under Section 1703. If the subsidy costs averaged 10% of the loan guarantees, this funding could support loan guarantees totaling $1.7 billion. $2.5 billion for Section 1705 subsidy costs appropriated by ARRA. As noted above, about $1.9 billion of this funding was used to pay the subsidy costs for $16 billion in loan guarantees with final commitments under Section 1705, for which the deadline was September 30, 2011. DOE also administers the Advanced Technology Vehicles Manufacturing (ATVM) Loan Program established by the Energy Independence and Security Act of 2007 ( P.L. 110-140 ). The FY2009 Continuing Resolution appropriated $7.5 billion to allow DOE to issue up to $25 billion in direct loans. The program was designed to provide loans to eligible automobile manufacturers and parts suppliers for making investments in their plant capacity to produce vehicles with improved fuel economy. Along with the EPACT loan guarantee programs, the ATVM Loan Program is administered by the DOE Loan Programs Office. DOE reports that five ATVM loans have been issued, totaling $8.4 billion. Congress established the Stockpile Stewardship Program in the FY1994 National Defense Authorization Act ( P.L. 103-160 ), "to ensure the preservation of the core intellectual and technical competencies of the United States in nuclear weapons." The FY2010 National Defense Authorization Act, ( P.L. 111-84 , §3111), amended this language to state that the program is to ensure "(1) the preservation of the core intellectual and technical competencies of the United States in nuclear weapons, including weapons design, system integration, manufacturing, security, use control, reliability assessment, and certification; and (2) that the nuclear weapons stockpile is safe, secure, and reliable without the use of underground nuclear weapons testing." The program is operated by the National Nuclear Security Administration (NNSA), a semiautonomous agency within DOE that Congress established in the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII). Stockpile stewardship consists of all activities in NNSA's Weapons Activities account, as described below. Table 12 presents Weapons Activities funding. NNSA manages two programs outside of that account: Defense Nuclear Nonproliferation, discussed later in this report, and Naval Reactors. Most stewardship activities take place at the nuclear weapons complex (the "Complex"), which consists of three laboratories (Los Alamos National Laboratory, NM; Lawrence Livermore National Laboratory, CA; and Sandia National Laboratories, NM and CA); four production sites (Kansas City Plant, MO; Pantex Plant, TX; Savannah River Site, SC; and Y-12 National Security Complex, TN); and the Nevada National Security Site (formerly Nevada Test Site). NNSA manages and sets policy for the complex; contractors to NNSA operate the eight sites. Although the "Complex" currently consists of eight sites, it was much larger during the Cold War in terms of number of sites and personnel. Despite the post-Cold War reductions, many in Congress have for years wanted the Complex to change further, in various ways: fewer personnel, greater efficiency, smaller footprint at each site, increased security, and the like. After numerous exchanges between DOE and the appropriating and authorizing committees, such issues still remain. According to a White House document of May 2010, the President provided Congress with a classified report required by the FY2010 National Defense Authorization Act, Section 1251, "on the comprehensive plan to: (1) maintain delivery platforms [that is, bombers, missiles, and submarines that deliver nuclear weapons]; (2) sustain a safe, secure, and reliable U.S. nuclear weapons stockpile; and (3) modernize the nuclear weapons complex." According to that document, "the Administration intends to invest $80 billion in the next decade to sustain and modernize the nuclear weapons complex." The Administration submitted a revised Section 1251 report in November 2010, projecting weapons stockpile and infrastructure costs for FY2011-FY2020 at between $85.4 billion and $86.2 billion. Its estimate for FY2013 was $7.9 billion. For FY2013, the Administration requested $7,577.3 million for Weapons Activities. This would be a reduction compared to the amount set forth in the November 2010 1251 report. The budget made some cuts, deferrals, and stretch-outs in key programs, as discussed below, and declared it would present out-year figures "at a later date." These changes have generated controversy in Congress. Senator Jon Kyl reportedly said that the Administration "made an absolute commitment to me that the 2012 budget, 2013 budget, budgets thereafter, would contain the funding in the 1251 report and that commitment has now not been kept. It isn't because of a lack of support in the United States Congress. So rather than redouble their efforts to make up the difference, they basically threw in the towel. Perhaps they wanted to do that all along." Representative Michael Turner, chairman of the Strategic Forces Subcommittee of House Armed Services Committee, said, "It is now clear [the President] will submit a budget next week that would be a significant reversal from the stated commitment, per his own section 1251 plan, to request at least $7.9 billion for the NNSA for FY13.… The ratification of the New START treaty was a package deal, and President Obama is now changing the terms of the Senate's ratification of the treaty." Representative Turner introduced H.R. 4178 , Maintaining the President's Commitment to Our Nuclear Deterrent and National Security Act of 2012. On the other hand, Representative Edward Markey introduced H.R. 3974 , Smarter Approach to Nuclear Expenditures (SANE) Act of 2012, calling for further cuts in DOE and DOD nuclear weapons programs. Despite such positions, the House Appropriations Committee recommended $7,512.3 million, or $65.0 million less than the request. The $65.0 million was the amount rescinded, so excluding the rescission, the committee recommended the amount requested. The Senate Appropriations Committee likewise recommended the amount requested. The Continuing Appropriations Resolution, 2013 ( P.L. 112-175 ), funding Energy and Water Development programs until March 27, 2013, funds Weapons Activities at a rate equivalent to an annual $7,577.3 million, the amount requested by the Administration for FY2013. The changes to the FY2013 Weapons Activities budget, as compared to the projection in the 1251 report, raise several policy questions: If the 1251 report deemed key projects essential, why is it now acceptable to reduce or delay them? Given fiscal constraints and the Budget Control Act of 2011 ( P.L. 112-25 ), was the lower funding requested for FY2013, as compared to the figure for FY2013 in the 1251 report plan, unavoidable? How can NNSA plan ahead given the changes from the 1251 plan made in the FY2012 appropriation and the FY2013 request? Might credibility problems resulting from cuts compared to the budget projections set forth in the 1251 plan affect Senate consideration of future arms control agreements? The Senate Appropriations Committee, in its report on FY2013 energy and water development appropriations, expressed concern over NNSA's "inadequate project management." It noted that "all of NNSA's major construction projects exceed the initial cost estimates," including cost growth for the Uranium Processing Facility (discussed below) by a factor of 10, and "most of NNSA's major construction projects are behind schedule," including a slippage of 14 years for the MOX Fuel Fabrication Facility. It pointed to "NNSA's inability to adequately assess alternatives." The committee directed five reports: (1) NNSA reports to GAO every six months on implementing certain management recommendations; (2) a GAO study on NNSA project management; (3) a report by NNSA to the committee, to be submitted every six months, on changes to cost, schedule, and scope of projects estimated to cost at least $750 million; (4) a JASON defense advisory group study on NNSA's stockpile surveillance program; and (5) a report by NNSA on a comprehensive plutonium strategy. This program involves work directly on nuclear weapons in the stockpile, such as monitoring their condition; maintaining them through repairs, refurbishment, life extension, and modifications; conducting R&D in support of specific warheads; and dismantlement. Specific items under DSW include the following: Life Extension Programs (LEPs). These programs aim to extend the life of existing warheads through design, certification, manufacture, and replacement of components. An LEP for the B61 mods 7 and 11 bombs was completed in FY2009. (A "mod" is a modification or version of a bomb or warhead type.) An LEP for the W76 warhead for the Trident II submarine-launched ballistic missile is ongoing; its FY2010 actual appropriation was $231.9 million and the FY2011 enacted figure was $248.2 million. The FY2012 request was $257.0 million for the W76 LEP and $223.6 million for the B61 LEP. The latter represents a shift "from a feasibility study to a full LEP"; no funds were requested in FY2010 or FY2011 for the B61 LEP. This LEP is intended to extend the service life of B61 mods 3, 4, and 7 nuclear bombs—combining them into a new mod, B61 mod 12—for another 30 years, with the first production unit to be completed in FY2017. The House Appropriations Committee recommended $278.6 million for the B61 for FY2012 in order to begin the LEP. It allowed NNSA to spend up to half that amount until it meets certain reporting requirements, such as "a cost-benefit analysis of any warhead enhancements." For the W76 LEP, the committee recommended $255.0 million. The Senate Appropriations Committee recommended $180.0 million for the B61 LEP and $257.0 million for the W76 LEP. The committee called the B61 LEP "the most ambitious and extensive refurbishment of a weapon system to date." Further, "NNSA plans to incorporate untried technologies and design features to improve the safety and security of the nuclear stockpile. The committee supports enhanced surety of weapon systems … but it should not come at the expense of long-term weapon reliability." The committee directed the submission of two reports and a certification on this LEP. The final appropriation was $257.0 million for the W76 LEP and $223.6 million for the B61 LEP. Of the latter amount, the conference agreement withheld $134.1 million until NNSA provided the appropriations committees with results of a design definition and cost study. While the November 2010 1251 report stated that the W76 "LEP will be fully funded for the life of the program at $255 million annually," the FY2013 request was $174.9 million. Donald Cook, Deputy Administrator for Defense Programs, NNSA, reportedly said that the revised plan would meet the Navy's operational needs for W76s by the end of 2018 but would delay completion of production for extra W76s as a hedge force until 2021. This approach, he said, would free up funds for the B61 LEP. The House Appropriations Committee noted its deep concern about NNSA's "ability to deliver on its production requirements." It recommended adding $45.1 million above the request for the W76 LEP to raise the production rate beyond what NNSA had planned in the FY2013 request. The Senate Appropriations Committee expressed its concern about a "significant funding decrease" given that the W76 is "the largest share of our nuclear deterrent on the most survivable leg of the Triad." It noted that shifting funds to the B61 "is not fully justified" because the B61 LEP is behind schedule, it "will not be able to efficiently spend the requested amount," and there are carryover balances. Accordingly, it increased funds for the W76 LEP by $30 million and reduced funds for the B61 LEP by the same amount. Regarding the B61 bomb, the 1251 report stated that NNSA "will accelerate" work "that is necessary to retain the schedule for the completion of the first production unit in FY 2017." However, the FY2013 request planned for the first production unit in FY2019. According to one report, "NNSA was able to delay the project by two years due to new assumptions about the need to replace limited life components in the bomb." (These components have a service life shorter than that of the rest of the weapon, so must be replaced from time to time.) The FY2013 request for the B61 LEP was $369.0 million, an increase of more than 50%, compared to FY2012. The House Appropriations Committee recommended the amount requested. Noting its concern over funds spent on a higher-cost option for the B61 LEP even though a lower-cost option was subsequently chosen, the committee directed NNSA "to report the total amount of funding it has spent to date for development and experimental activity associated with the full option for the B61 life extension program." In addition to recommending a reduction in B61 LEP funds by $30 million, as noted, the Senate Appropriations Committee stressed that a validated cost, schedule, and scope baseline for this LEP is essential for evaluating life cycle costs, assessing the impact of this LEP on other programs, and determining if the proposed schedule meets military requirements, among other things. Accordingly, it "directs that no funding be used for B61 life extension program activities until NNSA submits to the Committee a validated cost, schedule, and scope baseline." Stockpile Systems. This program involves routine maintenance, replacement of limited-life components, surveillance, assessment, and the like for all weapon types in the stockpile. For FY2012, the request was $497.6 million and the final appropriation provided the same amount. Of these funds, it directed NNSA to use $175.0 million for surveillance and $99.5 million for W78 Stockpile Systems. The FY2013 request was $590.4 million, a 20% increase over FY2012. The House Appropriations Committee recommended $454.2 million for Stockpile Systems. The request included $76.6 million under W78 Stockpile Systems for studying the feasibility of a common W78/W88 warhead, and $59.7 million for a W88 program ("Alt 370") that included consideration of commonalities between the two warheads. The House Appropriations Committee recommended fully funding these latter two amounts under a new category, Stockpile Assessment and Design, in order to help distinguish these costs from routine stockpile work. The Senate Appropriations Committee recommended funding Stockpile Systems as requested, with the requested amounts for the W78 LEP study and the W88 Alt 370 program, and at least $181.0 million for surveillance. Weapons Dismantlement and Disposition (WDD). The President and Congress have agreed on the desirability of reducing the stockpile to the lowest level consistent with national security, and numbers of warheads have fallen sharply since the end of the Cold War. Because of the large number of warheads being retired, there is a need to dismantle some warheads and to further break down some components to "prevent storage problems across the [nuclear weapons] enterprise." WDD involves interim storage of warheads to be dismantled; dismantlement; and disposition (i.e., storing or eliminating warhead components and materials). The FY2012 request was $56.8 million and the appropriation provided that amount. The FY2103 request was $51.3 million. The House and Senate Appropriations Committees recommended fully funding this request; the latter committee commended NNSA for completing two dismantlements (W62 and B53) a year ahead of schedule. Stockpile Services. This category includes Production Support; R&D Support; R&D Certification and Safety; Management, Technology, and Production; and Plutonium Infrastructure Sustainment. NNSA states, "Stockpile Services provides the foundation for the production capability and capacity within the nuclear security enterprise. All enduring systems, LEPs, and dismantlements rely on Stockpile Services to provide the base development, production and logistics capability needed to meet program requirements. In addition, Stockpile Services funds research, development and production activities that support two or more weapons-types, and work that is not identified or allocated to a specific weapon-type." The FY2012 request was $928.6 million and the final appropriation provided $854.5 million, of which $64.0 million was to be used for surveillance. The FY2013 request was $902.7 million. The House Appropriations Committee recommended $838.5 million, including an increase of $25.0 million for Production Support "for investments needed to modernize manufacturing processes" and a reduction of $46.6 million to R&D Certification and Safety to deny funds for certain new development activities and limit future requests for this activity to annual assessments of the stockpile and investigating warhead problems. The Senate Appropriations Committee recommended $892.7 million, expressed its concern about significant recent increases for Production Support on grounds that it "is relatively insensitive to major shifts in activities," and "directs NNSA to provide additional information in future budget justifications to explain these increasing costs." These are "multi-year, multi-functional efforts" that "provide specialized scientific knowledge and technical support to the directed stockpile work on the nuclear weapons stockpile." Many campaigns have significance for policy decisions. For example, the Science Campaign's goals include improving the ability to assess warhead performance without nuclear testing, improving readiness to conduct nuclear tests should the need arise, and maintaining the scientific infrastructure of the nuclear weapons laboratories. Campaigns also fund some large experimental facilities, such as the National Ignition Facility at Lawrence Livermore National Laboratory. The FY2013 request included five campaigns: Science Campaign. According to NNSA, this campaign "develops our nation's scientific capabilities and experimental infrastructure used to assess the safety, security, reliability, and performance of the nuclear explosives package (NEP) [the explosive component of a nuclear weapon] without reliance on further underground testing." The FY2012 request was $405.9 million and the final appropriation provided $334.0 million. The FY2013 request was $350.1 million. Much of the increase was for increasing the rate at which a certain experiment is conducted, and developing "expanded predictive science capabilities needed for national security assessments motivated by intelligence community requirements for foreign nuclear weapon assessments." The House Appropriations Committee recommended $27.0 million above the request as a result of realigning funding from Directed Stockpile Work for certain experimental activities. The Senate Appropriations Committee recommended the requested amount. Engineering Campaign. This campaign "provides the modern tools and capabilities needed to ensure the safety, security, reliability and performance of the United States nuclear weapons stockpile … [It] funds activities that assess and improve fielded nuclear and non-nuclear engineering components without further underground testing." For FY2012, the request was $143.1 million, and the appropriation provided that amount. The FY2013 request was $150.6 million; the subprogram with the largest dollar increase, of $4.9 million, was Enhanced Surety, the goal of which is to "modernize and enhance surety options" for LEPs and other changes to weapons. ("Surety" includes such characteristics as safety, security, and use control.) Enhanced Surveillance was reduced by $2.6 million. The House Appropriations Committee recommended $8.0 million above the request as a result of realigning funding for some surety technologies from Directed Stockpile Work. The Senate Appropriations Committee recommended the requested amount. Inertial Confinement Fusion Ignition and High Yield Campaign. This campaign is developing the tools to create extremely high temperatures and pressures in the laboratory—approaching those of a nuclear explosion—to support weapons-related research and to attract scientific talent to the Stockpile Stewardship Program. NNSA states, "Virtually all of the energy from a nuclear weapon is generated while in the high energy density (HED) state. High-energy density physics (HEDP) experiments conducted at ICF facilities are required to validate the advanced theoretical models used to assess and certify the stockpile without nuclear testing. The National Ignition Facility (NIF) extends HEDP experiments to include access to thermonuclear burn conditions in the laboratory, a unique and unprecedented scientific achievement." The centerpiece of this campaign is NIF, the world's largest laser. While NIF was controversial in Congress for many years and had significant cost growth and technical problems, controversy waned as the program progressed. The facility was dedicated in May 2009. Between February 20, 2011, and March 20, 2011, NIF personnel conducted 34 "successful target shots … in support of HEDSS [High Energy Density Stockpile Stewardship]." In 2011, personnel conducted a total of 283 NIF shots of all types. For FY2012, the appropriation was $476.3 million. The FY2013 request was $460.0 million. The House Appropriations Committee noted the possibility that NIF will not achieve ignition in FY2012 and stated, "the considerable costs [for NIF] will not have been warranted if the only role the National Ignition Facility (NIF) serves is that of an expensive platform for routine high energy density physics experiments." Further, the committee noted that in past years NNSA had permitted Livermore to use a lower overhead rate for operating NIF. "This practice misrepresented the full costs of these activities and shifted those costs onto other programs at the laboratory." The committee recommended adding funds "to mitigate any unintended adverse impacts in fiscal year 2013." The Senate Appropriations Committee recommended the requested amount. It directed NNSA to use up to $140 million of Livermore's "internal additional direct purchasing power … to increase the level of the laboratory's Readiness in Technical Base and Facilities funds dedicated to supporting NIF," and recommended that NNSA move NIF's operating budget line to RTBF "consistent with the facility's transition to regular operations." The committee expressed its concern over the prospects of NIF achieving ignition by the end of FY2012 and directed NNSA to establish an advisory committee on this and related topics. Advanced Simulation and Computing (ASC) Campaign. This campaign develops computation-based models of nuclear weapons that integrate data from other campaigns, past test data, laboratory experiments, and elsewhere to create what NNSA calls "the computational surrogate for nuclear testing to determine weapon behavior." In addition, "ASC plays an important role in supporting nonproliferation, emergency response, nuclear forensics and attribution activities." Some analysts doubt that simulation can be relied upon to provide the confidence needed to certify the safety, security, and reliability of warheads, and advocate a return to testing. The campaign includes funds for hardware and operations as well as for software. For FY2012, the request was $628.9 million and the final appropriation was $620.0 million. The FY2013 request was $600.0 million. The reduction was caused by completion of an academic alliance program and delay of its follow-on program to FY2014, lower funding for exascale computing (a new and controversial initiative intended to boost computing capability by a factor of a thousand), and completion of procurement of a supercomputer. The House Appropriations Committee recommended providing the funds requested. The Senate Appropriations Committee recommended $620.0 million, and within these funds recommended using $69.0 million for the exascale initiative. Readiness Campaign. This campaign "operates the capability for producing tritium to maintain the national inventory needed for the nuclear weapons stockpile and selects and matures production technologies that are required for manufacturing components to meet … requirements." The FY2012 request was $142.5 million, and the final appropriation was $128.6 million. The FY2013 request was $130.1 million. The House Appropriations Committee recommended $120.0 million; the Senate Appropriations Committee recommended the amount requested. This program funds infrastructure and operations at Complex sites. For FY2012, the final appropriation was $2,009.2 million. The FY2013 request was $2,239.8 million. The House and Senate Appropriations Committees recommended providing the funds requested. RTBF has several subprograms. The largest is Operations of Facilities (FY2012 appropriated, $1,285.6 million; FY2013 requested, $1,419.4 million; House Appropriations Committee, $1,369.4 million; Senate Appropriations Committee, $1,419.4 million). NNSA states that the increase "includes new sustainment initiatives, full operations of new and existing facilities, and addresses infrastructure deficiencies across the complex." Second largest is Construction (FY2012 appropriated, $511.1 million, FY2013 requested, $450.1 million; House Appropriations Committee, $480.8 million; Senate Appropriations Committee, $450.1 million). Two subprograms that consolidate previous budget categories are new for FY2013: Science, Technology, and Engineering Support ($166.9 million requested), and Nuclear Operations Capability Support ($203.3 million requested; House and Senate Appropriations Committees, the requested amount). The first is self-descriptive; the second "combine[s] activities that are focused on support of day-to-day nuclear operations (but are not program-specific) into a single subprogram." The House Appropriations Committee recommended no funding for Science, Technology, and Engineering Support, instead funding these activities within Program Readiness, Operations of Facilities, and Maintenance and Repair of Facilities. The committee recommended funding the NNSA's Capabilities-Based Facilities and Infrastructure program under Maintenance and Repair of Facilities "in order to provide more clarity into the purpose of this funding." The Senate Appropriations Committee recommended the requested amount and directed NNSA to "identify funds for maintenance and operations by site as separate line items" under RTBF in order to "increase transparency in NNSA's efforts to sustain existing physical infrastructure." Perhaps the most controversial activity in the Weapons Activities account is the Chemistry and Metallurgy Research Facility Replacement (CMRR) at Los Alamos National Laboratory. It would replace the Chemistry and Metallurgy Research (CMR) building, which was built in 1952. Among other things, CMR houses research into plutonium and supports pit production at Los Alamos. Since 2005, cost estimates for CMRR have doubled or tripled, and some critics have argued that it is not necessary. For FY2012, NNSA requested $300 million for CMRR but the conference report directed that "no construction activities are funded for the CMRR-Nuclear Facility during fiscal year 2012." NNSA requested no funds for FY2013 for CMRR. According to the request justification, NNSA has determined, in consultation with the national laboratories, that existing infrastructure in the nuclear complex has the inherent capacity to provide adequate support for plutonium chemistry, plutonium physics, and special nuclear materials. NNSA proposes deferring CMRR Nuclear Facility construction for at least five years. Studies are ongoing to determine long-term requirements. Instead of the CMRR Nuclear Facility, NNSA will maximize use of existing facilities and relocate some nuclear materials. Estimated cost avoidance from FY 2013 to FY 2017 totals approximately $1.8 billion. At the same time, another project, the Uranium Processing Facility (UPF), which will replace old facilities at the Y-12 National Security Complex, showed an increase from $160.2 million enacted for FY2012 to $340.0 million requested for FY2013; the increase was to accelerate UPF design and construction. UPF, if approved, would conduct operations involving enriched uranium for nuclear weapons and naval reactors. It would also conduct downblending of enriched uranium (i.e., reducing the fraction of fissile uranium-235 and increasing the fraction of non-fissile uranium-238) to make it unusable for weapons in support of nuclear nonproliferation. The House and Senate Appropriations Committees recommended the amount requested. The House Appropriations Committee recommended no funds for CMRR-NF. Instead, it proposed rescinding $65.0 million in prior-year balances from this project and using these funds to offset costs of improving the plutonium infrastructure at Los Alamos, including $30.0 million "to accelerate the completion of safety-related infrastructure improvements needed at the existing Los Alamos Plutonium Facility-4 (PF-4) under the TA-55 Reinvestment Project" and $35.0 million "to begin characterization and cleanout of the PF-4 vault under Material Recycle Recovery." In addition, under Maintenance and Repair of Facilities, the committee's recommendation included $5.0 million to begin replacement of certain piping at the Device Assembly Facility (DAF) "which is needed to provide additional storage options for plutonium due to the delay of the CMRR-NF." (The DAF is a large structure at the Nevada National Security Site, formerly Nevada Test Site, that has capabilities similar to those of Pantex for handling, processing, and storing plutonium components of nuclear weapons.) The Senate Appropriations Committee also recommended no funds for CMRR-NF. It recommended that $35.0 million, as requested, within Nuclear Operations Capability Support be used to accelerate cleanout of the PF-4 vault. It expressed concern that "NNSA has failed to put forth an alternative plutonium strategy," instead focusing on stockpile requirements for plutonium and not fully considering other missions involving plutonium, such as nuclear nonproliferation and nuclear counterterrorism. Weapons Activities includes several smaller programs in addition to DSW, Campaigns, and RTBF. Among them: Secure Transportation Asset provides for safe and secure transport of nuclear weapons, components, and materials. It includes special vehicles for this purpose, communications and other supporting infrastructure, and threat response. For FY2012, the appropriation provided $243.3 million. The FY2013 request was $219.4 million; much of the decrease was due to deferring production of special vehicles for this program, completion of upgrades to the program's aviation fleet, and anticipated savings from these upgrades. The House and Senate Appropriations Committees recommended the amount requested. Nuclear Counterterrorism Incident Response "responds to and mitigates nuclear and radiological incidents worldwide and has a lead role in defending the Nation from the threat of nuclear terrorism." For FY2012, the appropriation was $222.1 million. The FY2013 request was $247.6 million. Much of the increase was to augment support for teams that would respond to a radiological or nuclear emergency, to accelerate "experimental activities in support of non-stockpile nuclear weapons assessments," and to develop tools and methods to render "nuclear threat devices" safe. The House Appropriations Committee recommended $225.4 million. It stated that many activities of the newly established Office of Counterterrorism and Counterproliferation are closely linked to technologies being developed by Defense Nuclear Nonproliferation (DNN) and should, in the future, be integrated with the request for DNN. The Senate Appropriations Committee recommended the amount requested, but expressed its concern "that NNSA does not have a clear strategy in place that links the unique capabilities of the labs and supporting NNSA infrastructure to clear mission goals and funding requirements to support the Department of Defense and the intelligence community." Facilities and Infrastructure Recapitalization Program (FIRP) "continues its mission to restore, rebuild and revitalize the physical infrastructure of the nuclear security enterprise." It focuses on "elimination of legacy deferred maintenance." For FY2012, the appropriation was $96.4 million. No funds were requested for FIRP for FY2013 due to completion of the program. Some of the type of work it did will be continued by the Capability-Based Facilities and Infrastructure program, which NNSA describes as "an enterprise-wide, program-informed investment approach to ensure infrastructure is in place to execute program workload." The House Appropriations Committee recommended no funds for FIRP but stated that "Maintenance and Repair of Facilities [within RTBF] also includes additional funding requested for major multi-year operating expense recapitalization projects." The Senate Appropriations Committee also recommended no funds for FIRP but stated under Nuclear Operations Capability Support that it "believes it is important that NNSA continue to reduce deferred maintenance on aging infrastructure and reduce the size of its footprint." Site Stewardship seeks to "ensure environmental compliance and energy and operational efficiency throughout the nuclear security enterprise." It was a new program for FY2010, consolidating several earlier programs. For FY2012, the appropriation was $78.7 million. The FY2013 request was $90.0 million. The main increases were in the Energy Modernization and Investment Program and Corporate Project Management. The main decrease, in Nuclear Materials Integration, reflected completion of removal of certain nuclear materials from Livermore, slowing the removal of certain radioactive waste from Livermore, and deferring disposition of nuclear materials at several sites. The House Appropriations Committee recommended $79.6 million and provided no funds for the Energy Modernization and Investment Program. The Senate Appropriations Committee recommended $88.2 million and "encourages NNSA to report on cost savings and cost avoidances related to its energy modernization and investment program." Safeguards and Security consists of two elements: (1) Defense Nuclear Security provides operations, maintenance, and construction funds for protective forces, physical security systems, personnel security, and the like. It "provides protection from a full spectrum of threats, especially terrorism, for NNSA personnel, facilities, nuclear weapons, and information." For FY2012, the appropriated amount was $698.0 million. The FY2013 request was $643.3 million. The decrease was largely due to removal of certain nuclear materials from Livermore, which permits a reduction in protective forces, and the projected completion of the Nuclear Materials Safeguards and Security Upgrades Project in FY2013. The main increases were in physical security systems and program management. The House Appropriations Committee recommended $663.3 million. "While efforts to reduce costs are encouraged, the NNSA has not performed a new multi-site security assessment that would justify the five percent reduction in protective forces proposed in the budget request and it is not clear how those proposed reductions would impact the security posture of NNSA facilities." The Senate Appropriations Committee recommended the requested amount. "The Committee is encouraged by NNSA's efforts to find cost efficiencies while still meeting security requirements." (2) Cyber Security "provides the requisite guidance needed to ensure that sufficient information management security safeguards are implemented throughout the NNSA enterprise." For FY2012, the appropriation was $126.6 million. No funds were requested for this program for FY2013, as discussed next. NNSA CIO [Chief Information Officer] Activities is a new program for FY2013; the request was $155.0 million. It will consolidate cyber security and information technology programs. Of the requested amount, $111.0 million was for cyber security, $14.0 million was for enterprise secure computing, and $30.0 million was for federal unclassified information technology. The latter will provide "commodity computing infrastructure" that will support a "shift from a traditional, costly desktop support model to a cloud-provisioned virtualized desktop-based solution." This shift is intended to facilitate collaboration, save money, aid recruiting, and improve security. The House Appropriations Committee recommended renaming NNSA CIO Activities as Information Technology and Security, and recommended adding $5.0 million above the request "in order to restore funding for Technology Application Development to the fiscal year 2012 level." The Senate Appropriations Committee recommended the requested funds. Legacy contractor pensions: Certain employees at Los Alamos and Lawrence Livermore National Laboratories had defined-benefit pension plans through the University of California (UC), which had been the contractor for these laboratories. However, the current contracts for the laboratories are between DOE and a consortium of contractors, one of which is UC. The current contracts (one for each laboratory) gave employees hired while UC was the sole contractor a choice between the equivalent of the UC pension plan and another plan. Many employees chose the former, which cost more than the current plan. Payment to UC's retirement plan to compensate for the added cost is a legacy cost of the UC-Los Alamos and UC-Livermore contracts. The final appropriation for FY2012 was $168.2 million; the conference report stated, "NNSA requested these funds within Readiness in Technical Base and Facilities and a separate line is provided to improve transparency." The FY2013 request for this item within Weapons Activities was $185.0 million; NNSA stated that "the amount of the annual payment is determined by actuarial valuation." Another $62.0 million was requested for FY2013 for this item within Defense Nuclear Nonproliferation. The House and Senate Appropriations Committees recommended providing funding for this purpose in both programs in the amounts requested. National Security Applications: NNSA says this program "makes strategic investments in the national security science, technology and engineering capabilities and infrastructure base that are necessary to address current and future global security issues." The FY2012 appropriation was $10.0 million. The FY2013 request was $18.2 million. Part of the increase will be used for R&D on standoff detection of highly enriched uranium (HEU) and HEU-based nuclear weapons. HEU is particularly difficult to detect, yet it is the type of fission fuel that could be used to make the simplest type of nuclear weapon. The House Appropriations Committee recommended providing no funds for this program on grounds that the requested funding is for "nonproliferation-related activities." The Senate Appropriations Committee recommended $10.0 million. DOE's nonproliferation and national security programs provide technical capabilities to support U.S. efforts to prevent, detect, and counter the spread of nuclear weapons worldwide. These nonproliferation and national security programs are included in the National Nuclear Security Administration (NNSA). Funding for these programs in FY2012 was $2,295.9 million. The request for FY2013 was $2,458.6 million. The House Appropriations Committee recommended $2,276.0 million; the Senate Appropriations Committee recommended $2,458.6 million. The Nonproliferation and Verification R&D program was funded at $354.2 million for FY2012. The request for FY2013 was $548.2 million. The proposed increase includes a one-year $150 million initiative to fund domestic uranium enrichment RD&D. The House bill would appropriate $528.2 million, including $100 million for the uranium enrichment initiative. The Senate Appropriations Committee recommended $418.2 million, with no funding in the R&D program for uranium enrichment. The Senate report stated: "Rather, the Committee recommends transfer authority to the Secretary of Energy of up to $150,000,000 from NNSA to fund this project." The Continuing Appropriations Resolution, 2013 ( P.L. 112-175 ), funding Energy and Water Development programs until March 27, 2013, funds nonproliferation programs at 0.612% above the FY2012-enacted levels, but adds $100 million to that amount for the uranium enrichment initiative. Nonproliferation and International Security programs include international safeguards, export controls, and treaties and agreements. The FY2013 request for these programs was $150.1 million, compared with $153.6 million appropriated for FY2012. The House Appropriations Committee recommended $134.5 million; the Senate Committee recommended the requested amount. International Materials Protection and Control (IMP&C), which is concerned with reducing the threat posed by unsecured Russian weapons and weapons-usable material, was funded at $569.9 million in FY2012; the FY2013 request was $311.0 million. The decrease, according to DOE's budget justification document, reflects completion of several major programs, including the installation of detection equipment in 45 sites in the Megaports initiative. The House bill would appropriate the requested amount. The Senate Appropriations Committee, however, noted that DOE's proposed budget would reduce so-called Second Line of Defense Activities, mostly border and port detection programs, by $171 million, while the programs were under a strategic review. The committee objected to the curtailment and recommended $368.0 million for IMP&C. The goal of the Fissile Materials Disposition (FMD) program is disposal of U.S. surplus weapons plutonium by converting it into fuel for commercial power reactors, and a similar program in Russia. Funding for the U.S. program was controversial for several years, because of lack of progress on the program to dispose of Russian plutonium. However, for FY2010 the Obama Administration requested and got a total of $701.9 million for Fissile Materials Disposition, noting that "DOE and its Russian counterpart agency, Rosatom, agreed on a financially and technically credible program to dispose of Russian surplus weapon-grade plutonium in November 2007." The program would rely on Russian fast reactors "operating under certain nonproliferation restrictions," according to the budget document. The U.S. side of the program includes construction of three projects at Savannah River, SC: a facility to fabricate "mixed-oxide" (MOX) reactor fuel; a pit disassembly and conversion facility (PDCF), and a waste solidification facility. However, controversy developed over whether the pit disassembly project is necessary. The FY2012 request for the Fissile Materials Disposition program was $892.2 million, including $172 million for the PDCF but the final bill appropriated $685.4 million for the program, and included no funding for the PDCF project, because, the conference report stated, "NNSA has not completed a study of alternatives or a conceptual design report with a cost and schedule estimate." The FY2013 request for FMD programs was $921.3 million. The major cause of the increase was the planned cold start-up of the MOX facility. No funding was asked for the PDCF; NNSA said it would use existing facilities for pit disassembly. The waste solidification facility was completed and no further funding was requested. The House Appropriations Committee recommended $764.7 million for FMD programs. It fully funded ongoing construction of the MOX facility but "delays funding for the MOX facility early startup options until the actual costs and schedules for completing and operating the MOX facility are better known." The Senate bill would fund FMD programs at the requested amount. The Global Threat Reduction Initiative is aimed at converting research reactors around the world from using highly enriched uranium, removing and disposing of excess nuclear materials, and protecting nuclear materials from theft or sabotage. The FY2012 appropriation for this program was $498.0 million. The FY2013 request was $466.0 million. The House Appropriations Committee recommended $482.7 million. The Senate Committee recommended $539.0 million. The development and production of nuclear weapons for national defense purposes for over half a century since the beginning of the Manhattan Project resulted in a legacy of wastes and contamination that continues to present substantial challenges today. In 1989, DOE established what is now the Office of Environmental Management to consolidate its responsibilities for the cleanup of former nuclear weapons production facilities that had been administered under multiple offices. These cleanup efforts are broad in scope and include the disposal of large quantities of radioactive and other hazardous wastes generated over decades; management and disposal of surplus nuclear materials; remediation of extensive contamination in soil and groundwater; decontamination and decommissioning of excess buildings and facilities; and safeguarding, securing, and maintaining facilities while cleanup is underway. The Office of Environmental Management also is responsible for the cleanup of DOE facilities that were involved in civilian nuclear energy research, which generated wastes and contamination. These research facilities add a non-defense component to the office's mission, albeit smaller in terms of the scope of their cleanup and associated funding. Efforts to clean up the environmental legacy of nuclear weapons production and nuclear energy research represent the single largest environmental liability of the United States, exceeding the cleanup liability of Department of Defense facilities. The need for annual appropriations of several billion dollars for ongoing cleanup efforts at nuclear weapons production and nuclear energy research facilities has generated continuing interest within Congress about the long-term financial liability of the United States to address potential risks at these sites. How to ensure the protection of public safety, human health, and the environment in the most expedient and cost-effective manner has been a perennial issue in the appropriations debate. DOE has identified in excess of 100 facilities in over 30 states that historically were involved in the production of nuclear weapons and nuclear energy research for civilian purposes. The geographic scope of these facilities is substantial, collectively encompassing a land area of approximately 2 million acres. Cleanup remedies are in place and operational at the majority of these facilities. The responsibility for their long-term stewardship has been transferred to the Office of Legacy Management and other offices within DOE for the operation and maintenance of cleanup remedies and monitoring. See the " Office of Legacy Management " section of this report. Some of the smaller sites for which DOE initially was responsible were transferred to the Army Corps of Engineers in 1997 under the Formerly Utilized Sites Remedial Action Program (FUSRAP). The cleanup of these sites is funded within the civil works budget of the Corps. (See Table 4 .) Once the Corps completes the cleanup of a FUSRAP site, it is transferred back to DOE for long-term stewardship under the Office of Legacy Management. Much work remains to be done at the facilities that are still administered by the Office of Environmental Management. DOE expects cleanup to continue for several years or even decades at some of these facilities, necessitating billions of dollars to fulfill the cleanup liability of the United States. As of the beginning of FY2012, the Office of Environmental Management administered 17 facilities in 11 states at which cleanup was not yet complete. Although cleanup is scheduled to be complete at some of these facilities over the next several years, cleanup is expected to continue at some of the larger and more complex facilities for decades. The Hanford site in the state of Washington has the lengthiest estimated time frame, with cleanup scheduled to continue possibly as late as 2062 based on more conservative assumptions. DOE estimates that the costs to complete the cleanup of these 17 facilities could range between $174 billion and $209 billion, exceeding the past costs already incurred across the entire inventory of facilities. DOE periodically revises its estimates as project baselines and assumptions change. The estimates have varied widely over time by many billions of dollars. DOE typically estimates a range of costs, rather than a single dollar amount, to reflect uncertainties in the cleanup process. For example, final decisions have yet to be made at some facilities to determine the actions that will be necessary to remediate contamination. Methods to dispose of vast quantities of wastes, and the scheduling of these actions, also could affect cleanup costs and time frames. The costs of long-term stewardship also are excluded from the above estimates. Long-term stewardship entails an even greater degree of uncertainty considering the lengthy time frames of maintenance and monitoring once cleanup remedies are in place and operational, especially at sites where the cleanup method entails the permanent containment of radioactive wastes. Three appropriations accounts fund the Office of Environmental Management: Defense Environmental Cleanup, Non-Defense Environmental Cleanup, and the Uranium Enrichment Decontamination and Decommissioning (D&D) Fund. The Defense Environmental Cleanup account constitutes the vast majority of the funding for the Office of Environmental Management and is devoted to the cleanup of former nuclear weapons production facilities. The Non-Defense Environmental Cleanup account funds the cleanup of wastes and contamination resulting from civilian nuclear energy research, and the Uranium Enrichment D&D Fund account finances the cleanup of facilities that enriched uranium for national defense and civilian purposes. For FY2013, the Senate Appropriations Committee recommended $5.74 billion for these three accounts combined. The House Appropriations Committee recommended $5.54 billion, nearly $200 million less overall, distributed among multiple facilities. The President requested $5.65 billion, and Congress enacted $5.71 billion for FY2012. Neither the House nor Senate Appropriations Committee included the $463 million that the President requested within the Defense Environmental Cleanup account to resume the federal payment to the Uranium Enrichment D&D Fund. Congress ceased this payment in FY2012. This payment historically has been treated as an offset to the total funding for the Office of Environmental Management because the payment actually does not become available to DOE until Congress subsequently appropriates it out of the Uranium Enrichment D&D Fund. The President has proposed to resume this federal payment, contingent upon the enactment of legislation to reauthorize appropriations for the payment and the collection of assessments against nuclear utilities that also once contributed revenues to the Uranium Enrichment D&D Fund until the authority expired in 2007. See the " Uranium Enrichment Facilities " section of this report for further discussion. Table 14 presents a breakout of the amounts reported by the House and Senate Appropriations Committees for FY2013, compared to the President's FY2013 request and the FY2012 enacted appropriations, among each of the three appropriations accounts that fund DOE's Office of Environmental Management (and line-items within those accounts for specific facilities and supporting program activities). As noted in the table, the FY2012 enacted amounts reflect DOE's allocation of a $21.2 million contractor pay freeze rescission distributed among each of the three accounts, as directed in P.L. 112-74 . The table also presents the net total program funding level for the Office of Environmental Management for the three accounts combined, accounting for offsets including the use of prior year balances and the federal payment to the Uranium Enrichment D&D Fund that the President proposed for FY2013. A discussion of perennial issues in the debate over the adequacy of funding for the Office of Environmental Management follows. The adequacy of funding for the Office of Environmental Management to ensure compliance with cleanup "milestones" has been a recurring issue in the appropriations debate. DOE's attainment of these milestones often is used as a measure to gauge overall cleanup progress at individual facilities. Cleanup milestones establish time frames for the completion of specific actions or steps within the cleanup process. Compliance with these milestones is intended to satisfy applicable statutory and regulatory requirements. Each milestone is identified in formal compliance agreements negotiated among DOE, the Environmental Protection Agency (EPA), and the states in which the facilities are located. EPA and the states are responsible for overseeing DOE's performance of the cleanup of each facility under these agreements and enforcing the milestones. Although the cleanup milestones are legally binding, the ability to meet deadlines depends upon the availability of funding to carry out necessary actions, the technical feasibility of those actions, and in some cases, the resolution of other regulatory issues upon which a milestone may be based. Consequently, the availability of funds is not the sole factor that may determine whether DOE is capable of attaining a cleanup deadline. Furthermore, not all of the Office of Environmental Management's annual budget is available for attaining cleanup milestones, as funding also is needed for safeguarding, securing, and maintaining facilities while cleanup is underway. According to DOE, the President's FY2013 request for the Office of Environmental Management would support the completion of all enforceable cleanup milestones with deadlines that fall within the fiscal year. Although the House Appropriations Committee recommended less than the President requested for certain facilities, the committee observed in its report on H.R. 5325 that many schedules in existing compliance agreements were not realistic in terms of the availability of funding and technical and management challenges. The committee expressed its support for DOE to update its estimates of the completion of cleanup to provide an "accurate accounting to all stakeholders" for a basis to negotiate a "clear, affordable, and attainable path forward" at "sites where the current schedule for cleanup will not be met." As discussed above, terms of the compliance agreements are binding and enforceable, and revisions must be negotiated among the parties to avoid potential violations if milestones or schedules cannot be met. DOE has negotiated revisions to many of its compliance agreements on multiple occasions in past years, as the challenges have become better understood over time. Cleanup progress especially has been a concern at DOE's largest nuclear weapons production facilities where high-level radioactive wastes are stored in hundreds of tanks. Under existing law, these wastes eventually are to be permanently disposed of in a geologic repository. However, the need to first remove the wastes from the tanks and treat them in a manner that would be suitable for permanent disposal has presented many technical difficulties. The availability of a geologic repository to dispose of the tank wastes once they are removed and treated could present challenges that may delay permanent disposal and thereby lengthen cleanup time frames and affect costs. The availability of such a repository also could present challenges for the permanent disposal of DOE's inventory of high-level wastes that are in the form of spent nuclear fuel. See the " Nuclear Waste Disposal " section of this report for a discussion of a geologic repository. DOE facilities where high-level tank wastes are stored and managed include the Hanford site in Washington, the Savannah River site in South Carolina, and the Idaho National Laboratory. DOE reports that there are approximately 88 million gallons of high-level wastes stored in tanks at these three locations combined. Of this inventory, 54 million gallons are stored in 177 tanks at Hanford, 33 million gallons in 49 tanks at the Savannah River site, and nearly 1 million gallons in 4 tanks at the Idaho National Laboratory. DOE reports that funding for the construction of facilities at each location that would process and treat these wastes for permanent disposal represents "one of the primary risk and cost drivers" for the Office of Environmental Management. The most recent estimate to complete the construction of these high-level waste treatment facilities alone is $14.2 billion. Once they are operational, additional funding and time would be needed to remove the wastes from the tanks and to process the wastes into a more stabilized form for permanent disposal. Because of these substantial challenges, long-term funding needs for the cleanup of Hanford, the Savannah River site, and the Idaho National Laboratory are expected to continue for decades. DOE estimates that cleanup may not be complete at Hanford until as late as 2062, at the Savannah River site until 2040, and at the Idaho National Laboratory until 2044. These lengthy time frames in part are due to the time estimated for the treatment and disposal of the substantial volumes of high-level wastes stored at these facilities. However, these estimated dates do not reflect the additional time necessary for the long-term stewardship of these sites, once the initial cleanup is completed under the Office of Environmental Management, likely resulting in even lengthier horizons for total federal responsibilities at these sites. The source and availability of funding for the cleanup of three DOE uranium enrichment facilities has been a recurring issue in the appropriations debate. These facilities enriched uranium both for national defense purposes and the generation of electricity by commercial nuclear utilities. These facilities are located in Paducah, KY; Piketon, OH (Portsmouth plant); and Oak Ridge, TN. Title XI of the Energy Policy Act of 1992 ( P.L. 102-486 ) established the Uranium Enrichment D&D Fund to pay for the cleanup of these facilities, and to reimburse uranium and thorium licensees for their costs of cleaning up sites that supported the enrichment facilities. The House Appropriations Committee recommended $425.5 million in appropriations for FY2013 from the available balance in the Uranium Enrichment D&D Fund. The Senate Appropriations Committee recommended $442.5 million, the same amount that the President requested. Each of these amounts is less than the appropriations of $472.2 million enacted for FY2012. The overall decrease among each proposal is attributed to a reduction in funding for the Portsmouth facility, whereas funding for the Oak Ridge and Paducah facilities would increase. See Table 14 for a breakout of funds for each facility. (The Paducah and Portsmouth facilities also receive funds within the Non-Defense Environmental Cleanup account.) Neither the House nor Senate Appropriations Committee, nor the President's request, included any dedicated funding within the Uranium Enrichment D&D Fund for reimbursement payments to uranium and thorium licensees in FY2013. However, the House Appropriations Committee highlighted the importance of the cleanup of the uranium and thorium sites to affected communities, the outstanding claim balances and total liabilities, and the need for progress in remediation. To finance the Uranium Enrichment D&D Fund, Congress originally authorized the collection of special assessments from nuclear utilities based on the portion of enrichment services each utility purchased from the federal government. Congress also authorized payments by the federal government to the Uranium Enrichment D&D Fund out of the General Fund of the U.S. Treasury, subject to annual appropriations. The original requirement for both the federal government, and the nuclear utilities that purchased enrichment services, to contribute to the Uranium Enrichment D&D Fund was based on the premise that both the United States and the nuclear utilities benefitted from the production of enriched uranium and therefore should share the liability for the cleanup of facilities involved in these activities. The authority to collect the utility assessments, and the authorization of appropriations for the federal payment, expired on October 24, 2007. Since that time, Congress had continued federal payments to the Uranium Enrichment D&D Fund through the annual appropriations process, without enacting separate reauthorizing legislation. The federal payment had been made through a transfer from the Defense Environmental Cleanup account to the Uranium Enrichment D&D Fund. The federal payment is not available to DOE for obligation until it is appropriated out of the Uranium Enrichment D&D Fund. Congress ceased the federal payment in FY2012, with no funds provided for it in P.L. 112-74 . The last federal payment of $33.6 million in FY2011 was intended to fulfill the remaining balance of the required federal contribution to the fund, as originally authorized in the Energy Policy Act of 1992. Whether to reauthorize the utility assessments and the federal payment has been an issue, as repeated DOE estimates continue to suggest that the remaining balance of the Uranium Enrichment Decontamination and Decommissioning Fund does not appear sufficient to pay for the completion of the cleanup of the three federal uranium enrichment facilities over the long-term. The Office of Management and Budget (OMB) estimates that $3.85 billion will remain available in the Uranium Enrichment D&D Fund for appropriation by Congress, as of the beginning of FY2013. In December 2010, DOE had estimated an $11.8 billion shortfall over the long term to meet all remaining cleanup needs, and projected that the fund would be exhausted by FY2020 without additional deposits. Similar to prior years, the President's FY2013 request includes a proposal to reauthorize appropriations to resume the federal payment and to reauthorize the collection of the nuclear utility assessments. The President's proposal is intended to increase resources in the Uranium Enrichment D&D Fund that would be available for appropriation by Congress. The President's FY2013 request states the Administration's position that reauthorization is necessary "due to higher-than-expected cleanup costs." OMB estimates that reauthorization of the nuclear utility assessments would generate $200 million in revenues in FY2013, and the President's FY2013 request included $463 million within the Defense Environmental Cleanup account to resume the federal payment, subject to reauthorizing legislation. Neither the House nor the Senate Appropriations Committee proposed appropriations to resume the federal payment in FY2013. In this debate, the nuclear utilities have asserted that they have fulfilled their share of the cleanup liability, as originally authorized in the Energy Policy Act of 1992. However, the amounts envisioned in the statute were based upon estimates of funding needs at that time. As waste disposal and remediation challenges have become more defined in the intervening years, DOE estimates that greater funding is needed to complete the cleanup of the uranium enrichment facilities than initially thought. Whether the remaining cleanup liability should be shared by the nuclear utilities and the federal government continues to be an issue. If the available balance of the Uranium Enrichment D&D Fund is expended, the Energy Policy Act of 1992 still requires DOE to pay the costs of cleanup, subject to annual appropriations. If the Uranium Enrichment D&D Fund is not reauthorized and becomes fully expended, the remaining cleanup costs could be borne at the expense of the federal taxpayer alone. To augment the existing balance of the fund and extend its availability for appropriations, DOE has transferred portions of excess federal uranium inventories in exchange for cleanup services performed by private parties. The President's FY2013 request includes a plan to transfer up to 1,750 metric tons of excess uranium within that fiscal year. The value of this material in terms of offsetting the need for appropriations would depend on the actual amounts that are transferred and the market value at the time of transfer. Although DOE has relied upon these transfers to accomplish certain aspects of cleanup efforts in recent years, the department's authority for the contracting mechanisms that are used to execute the transfers, and the potential impact on uranium markets, have received heightened attention within Congress. The House Appropriations Committee addressed some of the above issues in its report on H.R. 5325 , expressing its concern about the costs of reinstating the nuclear utility assessments on industry and ultimately on electricity consumers at a time of rising energy prices. The committee also questioned the reliability of DOE's estimates of long-term funding needs to complete the cleanup of the three federal uranium enrichment facilities as the basis for the President's proposal to reinstate the nuclear utility assessments and to resume the federal payment. Regarding the transfer of excess federal uranium inventories, the committee voiced its concern that this mechanism has focused on enhancing cleanup at the Portsmouth facility and has not included the Paducah facility so far. The committee also questioned the lack of congressional oversight in the use of these transfers in exchange for cleanup services, observed the uncertainty these exchanges raise in terms of Congress determining the annual funding level that is needed to augment them, and directed DOE to "clearly outline all potential impacts" on the domestic uranium mining industry in the update of its excess federal uranium inventory management plan. In the first session of the 112 th Congress, related legislation ( H.R. 2054 and S. 1135 ) was introduced to authorize the re-enrichment of excess federal inventories of depleted uranium for sale. As introduced, both bills would authorize a pilot program to re-enrich depleted uranium owned by the federal government, and would direct proceeds from the sale of the re-enriched uranium into the Uranium Enrichment D&D Fund. The quantity that could be sold would be limited to minimize the impact on domestic markets. These proceeds would be authorized as mandatory funds that would be available directly to DOE for cleanup purposes, without being subject to discretionary appropriations. A substitute amendment to H.R. 2054 , approved in a House Subcommittee markup in the First Session on July 27, 2011, would make the proceeds deposited into the Uranium Enrichment D&D Fund subject to discretionary appropriations prior to being made available to DOE for obligation to perform cleanup activities. Once cleanup remedies are in place under the Office of Environmental Management, DOE's Office of Legacy Management administers the long-term stewardship of the facilities that do not have a continuing mission. The Office of Legacy Management also is responsible for the long-term stewardship of sites that had been transferred from DOE to the Army Corps of Engineers under the FUSRAP program in 1997. Once the Corps completes the cleanup of a site under this program, it is responsible for the initial two years of operation and maintenance, after which time the site is transferred back to DOE's Office of Legacy Management for long-term stewardship. The Office of Legacy Management also manages the payment of pensions and retirement benefits of former contractor personnel who worked at DOE facilities that do not have a continuing mission, among other supporting activities. The federal role in the management of these former contractor pensions and benefits stems from the long-term nature of the projects and the associated length of employment for the personnel who performed the work for DOE. These pensions and benefits are earned and accrued by contractor employees while in active employment at DOE facilities and are payable after their employment ends. The Office of Legacy Management is funded within DOE's Other Defense Activities account. The House Appropriations Committee recommended $173.9 million within this account for DOE's Office of Legacy Management in FY2013. The Senate Appropriations Committee recommended the President's FY2013 full request of $177.9 million. Each of these proposed amounts is an increase above the $169.6 million in appropriations enacted for FY2012. Accounting for an additional $12 million in prior year unobligated balances, DOE reports that the total budget authority for the office in FY2012 was $181.6 million. In its report on H.R. 5325 , the House Appropriations Committee noted that additional prior year unobligated balances should be available to meet funding need in FY2013, to offset the decrease of $4 million in new appropriations it recommended below the President's request. Funding needs for the Office of Legacy Management are likely to increase beyond current levels over time, as more facilities are cleaned up and transferred from the Office of Environmental Management and the FUSRAP program of the Corps for long-term stewardship. Over the next 10 years, DOE projects that the total number of facilities administered by the Office of Legacy Management will rise from 91 in FY2011 to 129 in FY2020. In FY2012 alone, the Office of Legacy Management assumed two new responsibilities: long-term stewardship of the Mound site in Miamisburg, OH, once the cleanup was complete under the Office of Environmental Management, and the management of records and former contractor pensions and benefits for the terminated Yucca Mountain project. Estimating the long-term funding needs for the Office of Legacy Management is inherently challenging because of the lengthy time horizons that are involved. For example, actions may be necessary for many decades to operate and maintain cleanup remedies and monitor contaminant levels to ensure the effectiveness of the remedies over time. At sites where the cleanup entails the permanent containment of radioactive wastes, long-term stewardship may continue indefinitely because of the time needed for radioactivity to decay to acceptable levels. Enforcement of land use restrictions or other institutional controls also may be necessary in perpetuity at facilities that are not cleaned up for unrestricted use, in order to prevent potentially harmful exposure. These and other factors make it difficult to reliably estimate the financial liability of the United States for long-term stewardship of sites contaminated from the historic production of nuclear weapons and civilian nuclear energy research in the 20 th century. DOE's four Power Marketing Administrations (PMAs)—Bonneville Power Administration (BPA), Southeastern Power Administration (SEPA), Southwestern Power Administration (SWPA), and Western Area Power Administration (WAPA)—were established to sell the power generated by the dams operated by the Bureau of Reclamation and the Army Corps of Engineers. In many cases, conservation and management of water resources—including irrigation, flood control, recreation or other objectives—were the primary purpose of federal projects. (For more information, see CRS Report RS22564, Power Marketing Administrations: Background and Current Issues , by [author name scrubbed].) Priority for PMA power is extended to "preference customers," which include municipal utilities, cooperatives, and other "public" bodies. The PMAs sell power to these entities "at the lowest possible rates" consistent with what they describe as "sound business practice." The PMAs are responsible for covering their expenses and for repaying debt and the federal investment in the generating facilities. The Obama Administration's FY2013 request for the PMAs was $85 million. This is the same level as the FY2012 appropriation. The FY2013 budget request continues a change enacted in FY2010 that reclassified receipts from the PMAs from mandatory to discretionary. This change offsets many of the expenses of WAPA, SWPA, and SEPA that were previously paid for with discretionary appropriations. As a result of the change, two PMAs require discretionary funding in addition to their receipts: SWPA requests $11.8 million and WAPA requests $96.1 million. Receipts for SEPA are expected to offset all operating costs in FY2011. In addition, $220,000 is requested for Falcon and Amistad operations and maintenance, and collections of $23 million from Colorado River basins score as an additional offset toward the net discretionary appropriation. Both the House and the Senate Appropriations Committees recommended funding PMAs at the requested amount, but did not include the $23 million collections from Colorado River basins in the total. BPA is a self-funded agency under authority granted by P.L. 93-454 (16 U.S.C. §838), the Federal Columbia River Transmission System Act of 1974, and receives no appropriations. However, it funds some of its activities from permanent borrowing authority with the Treasury, which was increased in FY2003 from $3.75 billion to $4.45 billion (a $700 million increase). ARRA further increased the amount of borrowing that BPA conducts under the Transmission System Act by $3.25 billion to the current authority for $7.7 billion in bonds outstanding to the Treasury. ARRA also provided WAPA borrowing authority for the purpose of planning, financing or building new or upgraded electric power transmission lines to facilitate the delivery of renewable energy resources constructed by or expected to be constructed after the date of enactment. The authority to borrow from the United States Treasury had not previously been available to WAPA. It is now available on a permanent, indefinite basis, with the amount of borrowing outstanding not to exceed $3.25 billion. Independent agencies that receive funding from the Energy and Water Development bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. The Nuclear Regulatory Commission (NRC) requested $1.053 billion for FY2013 (including $11 million for the inspector general's office), $15 million above FY2012 funding level. Major activities conducted by NRC include safety regulation and licensing of commercial nuclear reactors and oversight of nuclear materials users. The House and Senate Appropriations Committees recommended relatively small changes from the budget request (see Table 15 ). The NRC budget request includes $264.8 million for new reactor activities, nearly the same as the FY2012 level. Until 2007, no new commercial reactor construction applications had been submitted to NRC since the 1970s. However, volatile fossil fuel prices, the possibility of controls on carbon emissions, and incentives provided by the Energy Policy Act of 2005 prompted electric utilities and other generating companies to apply for licenses for 30 new reactors, although several license applicants have suspended work on their projects. NRC issued combined construction and operating licenses for four new reactors at two sites in Georgia and South Carolina in early 2012. NRC's proposed FY2013 budget includes no funds for licensing DOE's previously planned Yucca Mountain nuclear waste repository. Because the Obama Administration wants to cancel the Yucca Mountain project and filed a motion to withdraw the license application on March 3, 2010, the NRC's FY2011 appropriation was used to close out its licensing activities. The House Appropriations Committee directed NRC to resume consideration of the Yucca Mountain application with prior-year funds. The panel also cut $3.4 million for NRC's Waste Confidence Rulemaking on the safety of on-site waste storage for up to 300 years, an effort that the committee said was designed "to provide cover for the Administration's Yucca Mountain policy." In response to controversy over actions by NRC Chairman Gregory Jaczko to halt the Yucca Mountain licensing process, the enacted FY2012 funding bill included a provision (§401) that prohibits the NRC chairman from terminating "any program, project, or activity" without a majority vote by the NRC Commission. A majority commission vote would also be required to reprogram funds that were specifically included in the bill. That language is continued in the House Appropriations Committee's FY2013 bill. For regulation of operating reactors, NRC's FY2013 budget request includes $545.1 million, $10.4 million above the FY2012 level. Those activities include reactor safety inspections, license renewals and modifications, collection and analysis of reactor performance data, and oversight of security exercises. The Fukushima nuclear disaster in Japan increased congressional and public concern about the safety of U.S. nuclear power plants. NRC established a task force 10 days after the accident to review NRC's regulatory system, and NRC issued the first regulatory orders resulting from that review on March 12, 2012. The Energy Policy Act of 2005 permanently extended a requirement that 90% of NRC's budget be offset by fees on licensees. Not subject to the offset are expenditures from the Nuclear Waste Fund to pay for waste repository licensing, spending on general homeland security, and DOE defense waste oversight. The offsets in the FY2013 request would result in a net appropriation of $128.5 million, nearly the same as ($100,000 below) the FY2012 enacted level. | The Energy and Water Development appropriations bill provides funding for civil works projects of the Army Corps of Engineers (Corps), for the Department of the Interior's Bureau of Reclamation (Reclamation) and the Department of Energy (DOE), and for a number of independent agencies. President Obama's FY2013 budget request for Energy and Water Development was released in February 2012. For FY2013 the level of overall spending has been a major issue. The Budget Control Act of 2011 (BCA, P.L. 112-25) contained an overall discretionary spending cap for FY2013 of $1.047 trillion. On March 29, 2012, the House passed a budget resolution (H.Con.Res. 112) that caps spending at a lower level, $1.028 trillion. The Senate has not passed a budget resolution, but on April 19, 2012, the Senate Appropriations Committee allotted subcommittee funding levels that totaled the $1.047 trillion cap in the BCA. The difference between overall spending caps is reflected in differences in spending proposals for Energy and Water Development programs. The Administration's request for FY2013 was $33.684 billion. On April 25, the House Appropriations Committee reported out H.R. 5325 (H.Rept. 112-462), with a total of $32.156 billion. The Senate Appropriations Committee reported out S. 2465 (S.Rept. 112-164) on April 26, funding Energy and Water Development programs at $33.432 billion. On June 6 the House passed H.R. 5325 by a vote of 255-165, with some amendments. On September 28, 2012, President Obama signed into law the Continuing Appropriations Resolution, 2013 (P.L. 112-175). The act continues appropriations until March 27, 2013, for Energy and Water Development programs at 0.612% above the FY2012-enacted levels, with several exceptions. On March 26, 2013, the President signed H.R. 933, the FY2013 Defense and Military Construction/VA, Full Year Continuing Resolution (P.L. 113-6). The act funds Energy and Water Development accounts at the FY2012 enacted level for the rest of FY2013, with some exceptions, and subject to the sequestration requirements of the Budget Control Act which went into effect March 1, 2013. In addition, issues specific to Energy and Water Development programs included the distribution of appropriations for Corps (Title I) and Reclamation (Title II) projects that have historically received congressional appropriations above Administration requests; alternatives to the proposed national nuclear waste repository at Yucca Mountain, Nevada, which the Administration has abandoned (Title III: Nuclear Waste Disposal); and proposed FY2013 spending levels for Energy Efficiency and Renewable Energy (EERE) programs (Title III) that are 25% higher in the Administration's request than the amount appropriated for FY2012. |
W ith the Rules Enabling Act, Congress granted to the Supreme Court the authority to write federal rules of procedure, including the rules of criminal procedure. After several years of evaluation by the Judicial Conference, the policy-making arm of the federal judiciary, on April 28, 2016, the Supreme Court transmitted to Congress proposed changes to Rule 41 of the Federal Rules of Criminal Procedure. These proposed changes would amend the federal search and seizure rules to permit the government to remotely access electronic devices although the location of the device may be unknown. This issue has become more pressing in recent years with an increasing number of users anonymizing their communications, hindering the government's ability to pinpoint the location of the target, and thus making it difficult to discern the appropriate federal court to apply for a search warrant. In recent years, a tension has arisen between Rule 41 as currently drafted and the Department of Justice's (DOJ's) desired use of the rule for digital searches. One facet of this problem arose in a 2013 magistrate judge's ruling from the Southern District of Texas, in which the court denied DOJ's application to conduct remote searches of a computer believed to have been part of a fraudulent scheme. The court declined to grant the DOJ's application because the government could not establish the location of the target, thereby placing the proposed search outside the scope of Rule 41 and in violation of the Fourth Amendment particularity requirement. There have been at least two lines of argument against the proposed rule change, one based on the substance of the proposed amendment and the other grounded in the process by which the rule is being changed. The substantive arguments pertain to the actual substance of the rule and include for example, an argument that the new rule would breach the particularity requirement of the Fourth Amendment. The procedural arguments concern how this potential authorization should be made law: through the rulemaking process by the courts or through enacted legislation by Congress. While federal law enforcement has been supportive of the proposed rule change, some advocacy groups have argued that the proposed change "would have significant legal and technical implications" and thus "merit[s] open consideration by Congress, rather than a rulemaking proceeding of the Judicial Conference." This report provides a brief overview of the proposed amendment to Rule 41. First, it sets out background on the origin of, and rationale underlying, the proposed amendment and a description of the rule as currently written. Second, it reviews the potential changes made by the proposed amendment and surveys various concerns commenters have raised with the proposal. Rule 41 of the Federal Rules of Criminal Procedure governs the procedures for obtaining a search warrant in federal court. Among other elements, Rule 41 primarily requires a government official to demonstrate probable cause that evidence of a crime will be found in the place to be searched. As to the question of venue—that is, which is the appropriate federal district court to seek a search warrant—Rule 41 provides that a search warrant may be issued by "a magistrate judge with authority in the district." In a 2013 ruling from the Southern District of Texas, discussed below, the court found that although Rule 41 permits extraterritorial warrants (a warrant to be served outside of that judge's jurisdiction) in limited situations, the factual predicates to obtaining one were not present there. Rule 41 permits the issuance of extraterritorial warrants in four limited instances: (1) the property is within the jurisdiction but may be moved out of the jurisdiction before the warrant is executed; (2) the property is part of an investigation of domestic or international terrorism; (3) tracking devices are used which can be monitored outside the jurisdiction if installed within the jurisdiction; or (4) the property is located in a U.S. territory or U.S. diplomatic or consular mission. However, based on the text of the rule, none of these exceptions appear to permit searches where the location of the target is unknown, such that it is not clear in which jurisdiction to request a warrant. The amendment to Rule 41 approved by the Supreme Court and now before Congress would expand the instances in which DOJ could seek extraterritorial warrants. More broadly, it would codify DOJ's ability to "to use remote access to search electronic storage media and to seize or copy electronically stored information," an authority that is not explicitly found in the rule now. Before looking at the amendment, it is helpful to understand some of the background and cases behind the current version of Rule 41. The universe of reported cases in which DOJ has relied on the current version of Rule 41 to remotely access a target's computer is small, but does shed light on how DOJ might use amended Rule 41 if adopted. The federal government's ability to remotely access computers as part of a criminal investigation was first revealed in 2001 when journalists discovered the existence of "Magic Lantern," later renamed the "Computer and Internet Protocol Address Verifier," a covert project used by the FBI to hack into a target's computer. Known more generally as "network investigative techniques" (NIT), this technology can be used to gather both metadata from a computer, such as the Internet Protocol (IP) address of a target's computer, and the c ontent of data stored on that computer, such as email communications or photographs. The first publicly reported court case which relied on a NIT was in 2007, where the government obtained a Rule 41 search warrant to identify a Myspace user who had made bomb threats to a high school. The warrant permitted the government to access the computer's IP address, MAC address, and other identifying information, but explicitly did not permit access to the content of any electronic messages. In a similar case from 2013, law enforcement officials were investigating a series of threats to detonate bombs at universities and airports scattered throughout the United States. The FBI sought and received a warrant from a magistrate judge of the U.S. District Court for the District of Colorado that permitted the FBI to access, among other information: the target computer's IP address; MAC address; the computer's open communication ports; a list of programs running on the computer; the type of operating system running on the computer; the web browser running on the computer; the computer's time zone information; and the Uniform Resource Locators (URLs) to which the target computer was previously connected. In these cases, the FBI used a "phishing attack," in which it sent an email embedded with a link to the target of a search. Once the user hit the link, it connected to FBI computers and downloaded malicious software that sent vital identifying information back to the FBI. Ultimately, the software produced two IP addresses which suggested the suspect was located in Tehran, Iran. In addition to targeting specific computers, DOJ has also targeted nefarious websites more broadly. In 2012, for instance, the government initiated Operation Torpedo, which involved the take down of a large-scale online child pornography network, users of which utilized the Tor network to anonymize their identities when accessing the website. There, the magistrate judge issued a warrant to install a NIT that would collect the IP addresses and other identifying information from visitors to the child pornography site, a technique known as a "watering hole" attack. Ultimately, based on this information, 14 individuals were brought to trial on child pornography charges. In addition to obtaining addressing information, remote access searches can also be used to activate the microphones in certain cell phones and laptops to record conversations without the user knowing. Additionally, the FBI has stated that it can access the camera on laptops without activating the light which lets users know it is recording. Perhaps the most prominent case for purposes of the proposed Rule 41 amendment is a 2013 magistrate judge's ruling from the Southern District of Texas in which the government's request to conduct covert searches was denied. There, the government requested a search warrant to remotely search an unknown computer in an unknown location that was believed to have been used to perpetrate a fraudulent scheme. The government wanted access to, among other things, IP addresses used; records of Internet activity, including browsing history and search terms used; and photographs taken using the computer's built-in camera. Magistrate Judge Stephen Smith rejected the government's application on two grounds. First, Judge Smith found that the government's application did not meet one of the territorial limitations found in the Rule. Again, Rule 41 permits extraterritorial warrants in four limited instances, but does not cover instances where the location of the target is simply unknown from the outset. Second, he found that the application failed to meet the particularity requirement contained in the Fourth Amendment, which requires that "no warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized ," as the government failed to explain how the target device was to be found. Further, Judge Smith noted the risk of targeting innocent computers when the location of the target is unknown. The proposal to amend Rule 41 was first brought to the attention of the Judicial Conference in a September 2013 memorandum from DOJ, which highlighted two "increasingly common situations" faced by investigators that warranted a change in the rules. The first is where the warrant sufficiently describes the device to be searched, but law enforcement officials do not know the location of the target device. The second is where the investigation requires officials to engage in surveillance of numerous computers in multiple jurisdictions. The proposed rule change was published for public comment in August 2014, in which DOJ, privacy advocates, computer experts, and members of the general public offered various arguments for and against the proposed rule change. On April 28, 2016, the Supreme Court transmitted the proposed rule change to Congress. Pursuant to the Rules Enabling Act, unless Congress responds via enacted legislation, the proposed rule will take effect on December 1, 2016. Upon transmittal of the proposed amendment to Rule 41, Senator Ron Wyden and Representative Ted Poe introduced companion bills ( S. 2952 , H.R. 5321 ) to reject this rule change. Each bill provides as follows: The proposed amendments to rule 41 of the Federal Rules of Criminal Procedure, which are set forth in the order entered by the Supreme Court of the United States on April 28, 2016, shall not take effect. The proposed amendment was designed to address two issues: (1) access to a device at an unknown location; and (2) access to multiple computers in multiple districts. Each will be addressed in turn. The first rationale for amending Rule 41 applies to situations when the government is able to describe the computer to be searched, but does not know the location of the computer. DOJ asserted, and the Judicial Conference accepted, that the government faces this situation more regularly because persons who commit crimes on the Internet are using anonymizing technologies with greater frequency. Through the use of proxy servers, criminals are able to mask their IP addresses such that the recipient only knows the IP address of the proxy and not the originator's IP address. This issue of knowing the computer to be searched but not its location was the primary issue facing the court in the Southern District of Texas ruling, a case that was cited by DOJ as a motivating factor in seeking the amendment to Rule 41. To permit extraterritorial searches, Rule 41 would be amended to read as follows: a magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if ... (A) the district where the media or information is located has been concealed through technological means[.] It appears that the government would have to demonstrate two elements: (1) that activities of the crime occurred in the magistrate judge's jurisdiction, and (2) that the location of the target has been concealed through technological means. Note that the first element—"any district where activities related to the crime may have occurred"—is the same as that found in the provision for extraterritorial searches as part of a terrorist investigation—"any district in which activities related to the terrorism may have occurred." Additionally, beyond permitting extraterritorial searches, this amendment would codify the authority to engage in "remote access" searches altogether, something that is not explicitly found in the current text of the rule. The second rationale for amending Rule 41 applies to situations where the government needs to search multiple computers in numerous districts as part of a large-scale investigation of computer crimes. Under the current rule, there are limited mechanisms for seeking a warrant outside of the judicial district in which a computer is located, but none cover the type of authorization DOJ seeks here. In its submission to the Judicial Conference, DOJ argued that effective investigation of large-scale online attacks, such as botnets—an "interconnected network of computers infected with malware without the user's knowledge and controlled by cybercriminals" —requires a change to Rule 41 such that government officials can seek authorization in one district court, although the criminal activity may span multiple districts. As submitted to Congress, the second prong of the proposed rule change reads as follows: [A] magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if ... (B) in an investigation of a violation of 18 U.S.C. § 1030(a)(5), the media are protected computers that have been damaged without authorization and are located in five or more districts. As part of the review process, the Advisory Committee received comments both supporting and opposing the proposed amendment to Rule 41. The Advisory Committee noted that "the most common theme in the comments opposing the amendment was concern that it relaxed or undercut the protections for personal privacy guaranteed in the Fourth Amendment." Objectors made other arguments against the proposal including that it might engender forum shopping. This section will briefly explore these and other concerns raised by public comments. Commenters have proffered various arguments in support of the proposed rule change. First, and perhaps most obviously, is the fact that DOJ has been prevented in at least one reported ruling from remotely searching a target's computer when it could not state the location of the target. More generally, DOJ has argued that criminals are using anonymizing techniques more frequently, so that DOJ is able to identify the computer but not the location of the target. In this vein, DOJ has argued that "there is a substantial interest in catching and prosecuting criminals who use anonymizing technologies, but locating them can be impossible for law enforcement absent the ability to conduct a remote search of the criminal's computer." As noted by the Judicial Conference, DOJ "could not now obtain a warrant even by going to every one of the 94 judicial districts, since it would not be able to establish that the property to be searched was located in any of these districts." As to the second proposed change, which would most directly implicate the investigation of botnet-like schemes that involve many computers in many districts, the National Association of Assistant United States Attorneys argued that coordinating many requests and review by many magistrate judges "not only wastes judicial and investigative resources, but also may cause delay that impedes investigation." Similarly, DOJ noted that in certain large-scale botnet investigations, the government would have to go to 94 federal courts in 94 judicial districts, a task "impossible as a practical matter." Opponents of the proposed amendment to Rule 41 have argued that it would violate the particularity requirement of the Fourth Amendment. The Fourth Amendment requires that no warrant shall issue unless it " particularly describe[s] the place to be searched, and the persons or things to be seized ." There are several different iterations of the argument that Rule 41 could authorize practices inconsistent with the particularity requirement, depending on the type of hack the government is attempting to employ. One civil liberties group argues that with "watering hole" attacks, in which the government configures a website to deliver malware to every computer that visits it, the government "will end up searching the computers of people who it cannot particularly identify or describe and to whom it lacks probable cause." Although there may websites that have no legitimate lawful purpose (e.g., terrorist websites), there may be valid reasons for visiting these sites (e.g., research, journalism). Even with more targeted surveillance that might be performed by law enforcement, such as including a link in an email directed at a specific target, the civil liberties advocate notes that the target could easily forward the message to an innocent third party in which the government would not have probable cause to search. A similar concern was raised by Magistrate Judge Smith in the Southern District of Texas Rule 41 ruling. There, Judge Smith described the government as having offered little to no information on how the targeted computer was to be found, and Judge Smith also suggested that a sophisticated target might "spoof" a fake IP address, such that the search technique could infect innocent devices. In the context of botnets, one advocacy group claimed that that the proposed amendment would allow the police to search multiple computers using one warrant, "often without particularly describing those computers or demonstrating probable cause as to their owners or users." Courts have noted that with multiple-location search warrants, the magistrate must be careful to evaluate each location separately: "A search warrant designating more than one person or place to be searched must contain sufficient probable cause to justify its issuance as to each person or place named therein." One commenter argues that this same rule should apply when multiple computers, instead of multiple residences, are involved, as "[t]he need for particularity . . . is especially great in the case of eavesdropping." In response to these concerns, the Advisory Committee included a Committee Note to Rule 41, providing the following explanation about how the Fourth Amendment should apply to the proposed amendment: The amendment does not address constitutional questions, such as the specificity of description that the Fourth Amendment may require in a warrant for remotely searching electronic storage media or seizing or copying electronically stored information, leaving the application of this and other constitutional standards to ongoing case law development. However, some privacy advocates believe that this proviso will be largely ineffective. For example, the one privacy advocate noted that while "the Committee does not seek to address such questions in this rulemaking, the proposed modification to Rule 41 nonetheless does have direct bearing on these very questions since it specifically contemplates the issuance of warrants for computers in concealed locations." Some have argued that, in certain situations, remote access searches can only be conducted using an order under Title III of the Omnibus Crime Control and Safe Streets Act of 1968, commonly referred to as the Wiretap Act, and not a warrant under Rule 41. Title III applies when the government seeks to intercept electronic, wire, or oral communications in real time, rather than stored on a computer or with a service provider. Because of the invasiveness of these searches, Title III has more robust procedural safeguards than a traditional warrant, including that the government has exhausted other investigatory procedures prior to seeking a Title III application; and that the court shall limit surveillance to what is necessary for the investigation and that the government shall minimize any communications not relevant to the purpose of the search. In addition to oral and written communications, courts have also applied Title III's requirements to video surveillance. One commenter posited that some of the searches envisioned under the changes to Rule 41 would trigger Title III's heightened requirements. For instance, if the government seeks to activate a camera or microphone on a device remotely, which the FBI claims it is capable of doing, or it seeks to access electronic communications in real time, this commenter argues that it should adhere to Title III, rather than simply Rule 41. Moreover, this entity suggests that the installation of malware, spyware, or other government software that remains on a target computer and collects information could trigger similar concerns. However, there is nothing in the text of the proposed amendment that would seem to require a Title III order when real time content was being accessed. That said, the Judicial Conferences Committee Note seems to envision that courts would resolve such questions on a case-by-case basis. At least one observer has argued that the proposed amendment cannot meet the more demanding Fourth Amendment standard required for covert-entry remote access searches, which generally requires that the government has some "reasonable necessity" for conducting the surreptitious search and that notice be given a reasonable time after the search is conducted. Others have argued that the use of "malware and zero-day exploits is more invasive than other forms of permissible searches because the consequences and collateral damage associated with their use are inherently unpredictable and often irreversible." Poorly designed malware could cause the destruction of data or the corruption of the whole operating system. Moreover, when the government releases malware, there may be a risk that the code gets into the hands of bad actors or spreads virally across the Internet, causing damage to innocent third parties. Like with the particularity arguments, discussed earlier, the Judicial Conference responded to these comments by highlighting the Committee Note, which asserts that the rule "does not foreclose or prejudge these constitutional issues," but rather "leaves them to be resolved on a case-by-case basis." Several commenters challenged the sufficiency of the notice requirements provided under the proposed rule. One privacy advocate argued, for instance, that the notice requirements were lessened under the proposed amendment as they did not require that the officer "must" provide a copy of the warrant—as is required currently under Rule 41(f)(1)(C)—but instead would require only that the officer "make reasonable efforts to serve a copy of the warrant and receipt" and ensure service is "reasonably calculated to reach that person." This advocate argued that providing notice will be difficult in many common situations, such as a target who signs onto a wireless network at a coffee shop or library. In response, the Advisory Committee described the proposed notice requirements as "intended to be parallel, to the degree possible, with the requirement for physical searches." Providing notice in the case of physical searches is not always possible, the Committee noted, and the rule as currently written does not require actual notice, but rather that notice be given "to the person from whom, or from whose premises, the property was taken, or leave a copy of the warrant and receipt at the place where the officer took the property." Additionally, one commenter argued that the government should have to provide notice to both the owner of a computer and others who may have used and stored information on that device, not one or the other as is currently proposed in the rule. The Judicial Conference rejected this suggestion, claiming that if the government executes a warrant for a business and seizes records of individual customers, providing notice to each customer would be too burdensome on the government, and is not required under current law. Finally, several commenters argued that government officials could delay giving notice, as the proposed notice requirement only requires that the government make "reasonable efforts" to provide notice, but does not require that it be given promptly. Answering these comments, the Committee noted that Rule 41(f)(3) permits delayed notice if allowed by statute. The Committee added a Committee Note stating that "Rule 41(f)(3) allows delayed notice only 'if the delay is authorized by statute.'" Some commenters also raised concerns that the proposed rule, combined with existing judicial doctrines, could hinder judicial review in various ways, including the following: Ex parte proceedings and lack of technical sophistication in the judiciary . Warrant proceedings are largely resolved ex parte —that is, only the government's attorney is present to offer arguments to the magistrate judge. Some have argued that the nature of these one-sided proceedings would hinder effective judicial review, especially when difficult technological questions are involved. Good Faith . Under the good faith exception to the exclusionary rule of the Fourth Amendment, unlawfu lly obtained evidence can still be admissible in a criminal trial if the evidence was "obtained in objectively reasonable reliance on a subsequently invalidated search warrant." Some have argued that, because c ourts have the authority to resolve the good faith question before the substantive Fourth Amendment question, the constitutional merits could largely go unresolved. Qualified Immunity . Qualified immunity operates in a similar manner in the civil context as good faith does in the criminal context: it "protects government officials from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known." Again, courts are permitted to resolve this procedural question before moving to the merits of the plaintiff's claim. Commenters have posited that qualified immunity, like good faith, could preclude judicial review of the constitutionality of these largely untested search and seizure techniques. Some have argued that permitting remote searches under Rule 41 in any district in which an element of the crime occurred raises significant concerns of forum shopping. That is, they argue that when the government has multiple options of jurisdictions in which to file a warrant application, it will more often than not choose the more government friendly judge. In addition to comments concerning the changes to Rule 41 itself, many observers have challenged the method in which the rule is being changed. Some have argued that as sensitive a topic as remote hacking should undergo a more thorough vetting via the formal congressional lawmaking process rather than through the rulemaking process of a federal agency. As argued by the one privacy advocacy group: The proposed changes to FRCrmP Rule 41 are not a Congressional amendment, nor do they implement a direct expansion of extraterritorial jurisdiction codified in statute. Congress has not authorized extraterritorial or multi-district searches for computers with concealed locations or during investigations under 18 U.S.C. § 1030(a)(5), as the proposed modification to Rule 41 contemplates. The proposed modification attempts to expand magistrates' Rule 41 authority in a manner that has historically been accomplished by Congressional action. The proposed modification should be handled through Congress rather than judicial rulemaking. Similar arguments have been made by technologists at one privacy advocacy group : "We have transitioned into a world where law enforcement is hacking into people's computers, and we have never had public debate. . . . Judges are having to make up these powers as they go along." Rule 41 of the Federal Rules of Criminal Procedure regulates the issuance of warrants to search and seize papers, effects, and other things related to federal crimes. As currently drafted, the rule neither explicitly permits nor prohibits "remote access" searches—that is, searches performed remotely to access a target's device. However, DOJ has sought and obtained Rule 41 warrants to conduct various remote access searches over the past 15 years, including accessing both metadata and content from criminals' devices. The current rule only permits judges to issue warrants within their jurisdiction, subject to several limited exceptions. This requirement cannot be satisfied when the government does not know in which jurisdiction the computer is located. With the increasing use of anonymizing technology by criminals and other targets, DOJ has claimed it has been frustrated in its attempt to seek certain warrants when it cannot locate the device. To this end, DOJ requested that the Judicial Conference of the United States, the policy-making arm of the federal judiciary, evaluate two changes to Rule 41. The first would authorize remote access searches of computers in which the location has been hidden through technological means. The second would allow the government to use one warrant to search multiple computers when five or more computers have been the subject of certain hacking attacks. After several years of evaluation, the amendments have been approved by the Judicial Conference and are now pending before Congress. Unless Congress acts, the amendments will take effect on December 1, 2016. Opponents of the rule change have argued, among other things, that it would undermine Fourth Amendment privacy protections, including the particularity requirement. Moreover, they argue that the rule change could have many unintended consequences that should be worked out by Congress in the first instance, and not the rulemaking body of the federal courts. Both DOJ and the Judicial Conference have asserted, on the other hand, that this rule change would only change the venue requirements of the rule, and that any constitutional questions would be addressed as they arise on a case-by-case basis. The following language is the final proposed amendment transmitted from the Supreme Court to Congress: Rule 41. Search and Seizure. … (b) Authority to Issue a Warrant. Venue for a Warrant Application. At the request of a federal law enforcement officer or an attorney for the government: … (6) a magistrate judge with authority in any district where activities related to a crime may have occurred has authority to issue a warrant to use remote access to search electronic storage media and to seize or copy electronically stored information located within or outside that district if: (A) the district where the media or information is located has been concealed through technological means; or (B) in an investigation of a violation of 19 18 U.S.C. § 1030(a)(5), the media are protected computers that have been damaged without authorization and are located in five or more districts. (f) Executing and Returning the Warrant. (1) Warrant to Search for and Seize a Person or Property. … (C) Receipt. The officer executing the warrant must give a copy of the warrant and a receipt for the property taken to the person from whom, or from whose premises, the property was taken or leave a copy of the warrant and receipt at the place where the officer took the property. For a warrant to use remote access to search electronic storage media and seize or copy electronically stored information, the officer must make reasonable efforts to serve a copy of the warrant and receipt on the person whose property was searched or who possessed the information that was seized or copied. Service may be accomplished by any means, including electronic means, reasonably calculated to reach that person. | With the Rules Enabling Act, Congress granted to the Supreme Court the authority to write federal rules of procedure, including the rules of criminal procedure. After several years of evaluation by the Judicial Conference, the policy-making arm of the federal judiciary, on April 28, 2016, the Supreme Court transmitted to Congress proposed changes to Rule 41 of the Federal Rules of Criminal Procedure. These proposed changes would amend the federal search and seizure rules in two ways. First, they would permit the government to remotely access electronic devices although the location of the device may be unknown. This issue has become more pressing in recent years with an increasing number of users anonymizing their communications, hindering the government's ability to pinpoint the location of the target, and thus making it difficult to discern the appropriate federal court to apply for a search warrant. Second, they would permit DOJ to search multiple computers in numerous districts as part of a large-scale investigation of computer crimes. In recent years, a tension has arisen between Rule 41 as currently drafted and the Department of Justice's (DOJ's) desired use of the rule for digital searches. One facet of this problem arose in a 2013 magistrate judge's ruling from the Southern District of Texas, in which the court denied DOJ's application to conduct remote searches of a computer believed to have been part of a fraudulent scheme. The court declined to grant the DOJ's application because the government could not establish the location of the target, thereby placing the proposed search outside the scope of Rule 41 and in violation of the Fourth Amendment particularity requirement. There have been at least two lines of argument against the proposed rule change, one based on the substance of the proposed amendment and the other grounded in the process by which the rule is being changed. The substantive arguments pertain to the actual substance of the rule and include, for example, an argument that the new rule would breach the particularity requirement of the Fourth Amendment. The procedural arguments pertain to how this potential authorization should be made law: through the rulemaking process by the courts or through enacted legislation by Congress. While federal law enforcement has been supportive of the proposed change, some advocacy groups have argued that the proposed rule change "would have significant legal and technical implications" and thus "merit[s] open consideration by Congress, rather than a rulemaking proceeding of the Judicial Conference." This report provides a brief overview of the proposed amendment to Rule 41. First, it provides background on the origin of, and rationale underlying, the proposed amendment and a description of the rule as currently written. Second, it reviews the potential changes made by the proposed amendment and surveys various concerns commenters have raised with the proposal. |
The devastation caused by the January 12, 2010, earthquake in Haiti focused world attention on the humanitarian crisis and prompted U.S. leaders to reconsider policies on Haitian migration. Most recently, the U.S. Centers for Disease Control (CDC) has stated: "An epidemic cholera strain has been confirmed in Haiti, causing the first cholera outbreak in Haiti in at least 100 years." Some members of Congress have long criticized the interdiction and mandatory detention of Haitians who attempted to enter the United States without proper immigration documents as too harsh given country conditions. Proponents of immigration control policies have held sway for many years in large part because they argue that more lenient treatment of Haitians would serve as a magnet for illegal migration from the poorest nation in this hemisphere. Whether the balance should tip more toward humanitarian policies as a consequence of the humanitarian crises that resulted from last year's earthquake in Haiti is an issue before the 112 th Congress. The phenomenon of Haitians coming to the United States by boat without proper travel documents dates back at least to the 1970s. An estimated 25,000 Haitians were among the mass migration of over 150,000 asylum seekers who arrived in South Florida in 1980 during the Mariel boatlift. The U.S. Coast Guard, as described below, has been interdicting vessels carrying Haitians since 1981. Figure 1 presents the U.S. Coast Guard data on Haitian migrants that the Coast Guard has encountered on boats and rafts in the years following the Mariel boatlift. Most notably, there was a drop of migrants after the Haitian elections in 1990 followed by a dramatic upturn after the 1991 coup (discussed in " Crisis After the Coup " below). As country conditions in Haiti and U.S. policy responses to the surges in Haitian boat people are considered, the spikes and valleys in Figure 1 become more understandable. Since FY1998, the Coast Guard had interdicted over 1,000 Haitians each year, with 1,198 in FY2006 and 1,610 in FY2007. Haitian interdictions were second only to Cuban interdictions (2,868) in FY2007. In FY2009, interdictions of 1,782 Haitians led all other countries. The Coast Guard interdicted 1,377 Haitians in FY2010 and 677 in FY2011 as of May 12, 2011. Not all Haitian migrants are interdicted by the Coast Guard, as witnessed in the widely televised landing of over 200 Haitians in Biscayne Bay, FL, in October 2002. Another noteworthy incident occurred in December 2001 when a boat bringing 167 Haitians ran aground in South Florida. In March 2007, the U.S. Border Patrol apprehended 100 Haitians who came ashore near Miami. During 2007, there were also reports of deaths at sea when boats with Haitians capsized or—in one report—caught fire. In the 2000 Decennial census of the U.S. population, there were 532,000 persons reporting Haitian ancestry residing in the United States, 185,000 who were born in the United States and another 154,000 who were naturalized U.S. citizens. According to Congressional Research Service estimates based on the 2006-2008 American Community Survey (a 1% sample of the U.S. population conducted by the Bureau of the Census), there were approximately 757,000 persons reporting Haitian ancestry in the United States (margin of error is 15,233). Of these, an estimated 523,000 were born in Haiti and migrated to the United States. These data do not indicate the immigration status of the Haitians, and a portion of these Haitians may have become naturalized U.S. citizens. During the period from 2001 to 2010, there were 213,752 Haitians who became legal permanent residents (LPRs) in the United States, according to the Office of Immigration Statistics (OIS) in the Department of Homeland Security (DHS). OIS estimates that approximately 230,000 Haitians were LPRs as of 2008. Many of these Haitians adjusted to LPR status as a result of the Haitian Refugee Immigration Fairness Act of 1998, which is discussed more fully below. There are currently no reliable estimates of Haitians residing in the United States without authorization (i.e., unauthorized aliens). The OIS estimates on unauthorized alien residents in 2009 do not include Haiti among the top 10 sending countries. DHS has indicated that 35,110 Haitians have submitted petitions for Temporary Protected Status, as discussed below. The Carter Administration labeled Haitians as well as Cubans who had come to the United States during the 1980 Mariel Boatlift as "Cuban-Haitian Entrants" and used the discretionary authority of the Attorney General (e.g., humanitarian parole) to admit them. It appeared that the vast majority of Haitians who arrived in South Florida did not qualify for asylum according to the newly enacted individualized definition of persecution in §207-208 of the Immigration and Nationality Act (INA, as amended by the Refugee Act of 1980). Subsequently, an adjustment of status provision was included in the Immigration Reform and Control Act (IRCA) of 1986 that enabled Cuban-Haitian Entrants to become LPRs. In 1981, the Reagan Administration reacted to the mass migration of asylum seekers who arrived in boats from Haiti by establishing a program to interdict (i.e., stop and search certain vessels suspected of transporting undocumented Haitians). This agreement, made with then-dictator Jean-Claude Duvalier, authorized the U.S. Coast Guard to board and inspect private Haitian vessels on the high seas and to interrogate the passengers. At that time, the United States generally viewed Haitian boat people as economic migrants deserting one of the poorest countries in the world. Under the original agreement, an inspector from the former Immigration and Naturalization Service (INS) and a Coast Guard official, working together, would check the immigration status of the passengers and return those passengers deemed to be undocumented Haitians. An alien in question must have volunteered information to the Coast Guard or INS inspector that she or he would be persecuted if returned to Haiti in order for the interdicted Haitian to be considered for asylum. Ultimately, INS would determine the immigration status of the alien in question. From 1981 through 1990, 22,940 Haitians were interdicted at sea. Of this number, INS considered 11 Haitians qualified to apply for asylum in the United States. The 1991 military coup d ' etat deposing Haiti's first democratically elected President, Jean Bertrand Aristide, however, challenged the assumption that all Haitian boat people were economic migrants. The DOS reportedly hesitated on whether the Haitians should be forced to return given the strong condemnation of the coup by the United States and the Organization of American States. By November 11, 1991, approximately 450 Haitians were being held on Coast Guard cutters while the Administration of then-President George H. W. Bush considered the options. The former Bush Administration lobbied for a regional solution to the outflow of Haitian boat people, and the United Nations High Commissioner for Refugees (UNHCR) arranged for several countries in the region—Belize, Honduras, Trinidad and Tobago, and Venezuela—to temporarily provide a safe haven for Haitians interdicted by the Coast Guard. Some of the other countries in the region were each willing to provide safe haven for only several hundred Haitians. Meanwhile, the Coast Guard cutters were becoming severely overcrowded, and on November 18, 1991, the United States forcibly returned 538 Haitians to Haiti. The options for safe havens in third countries in the region proved inadequate for the sheer numbers of Haitians fleeing their country, and the George H. W. Bush Administration began treating the Haitians fleeing by boat as asylum seekers. The Coast Guard took them to the U.S. naval base in Guantanamo, Cuba, where they were pre-screened for asylum in the United States. During this period, there were approximately 10,490 Haitians who were paroled into the United States after a pre-screening interview at Guantanamo determined that they had a credible fear of persecution if returned to Haiti. On May 24, 1992, citing the surge of Haitians that month, then-President Bush ordered the Coast Guard to intercept all Haitians in boats and immediately return them without interviews to determine whether they were at risk of persecution. The Administration offered those repatriated the option of in-country refugee processing. The repatriation policy continued for two years, until then-President Bill Clinton announced that interdicted Haitians would be taken to a location in the region where they would be processed as potential refugees. The refugee processing policy lasted only a few weeks—June 15 to July 5, 1994. Much like the George H. W. Bush Administration, the Clinton Administration cited the exodus of Haitian boat people as a reason for suspending refugee processing. Instead, the new policy became one of regional "safe havens" where interdicted Haitians who expressed a fear of persecution could stay, but they would not be allowed to come to the United States. In 1993, in-country refugee processing was further expanded to Les Cayes and Cape Haiten. In December 1997, President Clinton instructed the Attorney General to grant deferred enforced departure (DED) to Haitians for one year. Currently interdicted Haitians who expressed a fear of persecution are taken for a credible fear hearing at the Guantanamo Bay detention center. If deemed a refugee, they are resettled in the third country. In 2005, only nine of the 1,850 interdicted Haitians received a credible fear hearing and, of those, one man was granted refugee status. When Congress enacted the Nicaraguan Adjustment and Central American Relief Act (NACARA) in November 1997 that enabled Nicaraguans and Cubans to become legal permanent residents and permitted certain unsuccessful Central American and East European asylum applicants to seek another form of immigration relief, it opted not to include Haitian asylum seekers. The following year, Congress enacted the Haitian Refugee Immigration Fairness Act (HRIFA) of 1998 ( S. 1504 / H.R. 3049 ) that enabled Haitians who filed asylum claims or who were paroled into the United States before December 31, 1995, to adjust to legal permanent residence. HRIFA was added to the FY1999 Omnibus Consolidated and Emergency Supplemental Appropriations Act ( P.L. 105-277 ) at the close of the 105 th Congress. P.L. 110-161 deleted the requirement that the Comptroller General of the United States submit to Congress a status report on HRIFA applications every six months. Since enactment of the Illegal Immigration Reform and Immigrant Responsibility Act (IIRIRA) of 1996 ( P.L. 104-208 ), aliens arriving in the United States without proper immigration documents are immediately placed in expedited removal. If an alien expresses a fear of being forced to return home, the immigration inspector refers the alien to a asylum officer who determines whether the person has a "credible fear." IIRIRA requires that those aliens must be kept in detention while their "credible fear" cases are pending. As a result, those Haitians who do make it to U.S. shores and do express a fear of repatriation are placed in detention. After the credible fear determination, the case is referred to an Executive Office for Immigration Review (EOIR) immigration judge for an asylum and removal hearing (during which there is no statutory requirement that aliens be detained). EOIR granted asylum to 570 Haitians and denied asylum to 2,522 Haitians in FY2006. In FY2007, EOIR granted asylum to 587 Haitians, and 510 Haitians were granted asylum in FY2008 (the most recent year for which data are available), an approval rate of 4.6% and 4.8%, respectively. With respect to the number of Haitians in detention, according to Immigration and Customs Enforcement, as of January 19, 2010, there were 488 Haitians in detention, most of whom (415) were criminal aliens. The former INS published a notice clarifying that certain aliens arriving by sea who are not admitted or paroled are to be placed in expedited removal proceedings and detained (subject to humanitarian parole) in November 2002. This notice concluded that illegal mass migration by sea threatened national security because it diverts the Coast Guard and other resources from their homeland security duties. Then-Attorney General John Ashcroft expanded on this rationale in his April 17, 2003, ruling that instructs EOIR immigration judges to consider "national security interests implicated by the encouragement of further unlawful mass migrations" in making bond determinations regarding release from detention of unauthorized migrants who arrive in "the United States by sea seeking to evade inspection." The case involved a Haitian who had come ashore in Biscayne Bay, FL, on October 29, 2002, and had been released on bond by an immigration judge. EOIR's Board of Immigration Appeals (BIA) had upheld his release, but the Attorney General vacated the BIA decision. In 2002, DOJ acknowledged that it instructed field operations "to adjust parole criteria with respect to all inadmissible Haitians arriving in South Florida after December 3, 2001, and that none of them should be paroled without the approval of headquarters." The Administration of President George W. Bush maintained that paroling Haitians (as is typically done for aliens who meet the credible fear threshold) would encourage other Haitians to embark on the "risky sea travel" and "potentially trigger a mass asylum from Haiti to the United States." The Bush Administration further argued that all migrants who arrive by sea posed a risk to national security and warned that terrorists may pose as Haitian asylum seekers. Critics of the Bush Administration's Haitian parole policy focused on the 167 Haitians detained after their boat ran aground in South Florida on December 3, 2001, a majority of whom reportedly passed the initial credible fear hearing. Critics maintained that the Haitians were being singled out for more restrictive treatment. They challenged the view that Haitians posed a risk to national security and asserted that the term was being construed too broadly, being applied arbitrarily to Haitians, and wasting limited resources. OIS has reported that Haitians made up 2% of the 378,582 foreign nationals detained by DHS Immigration and Customs Enforcement in 2008. Concern also arose that the detention of Haitians interferes with access to legal counsel to aid with their asylum cases. According to congressional testimony, attorneys in South Florida for the detained Haitians maintained that they face various obstacles, including restricted hours to meet with clients and a serious lack of adequate visitation space. Pro bono lawyers working with Haitians argued that they experienced long delays waiting to see clients. Others pointed out that the expedited removal provisions in INA were enacted to do just that— expedite removals . Aliens without proper immigration documents who try to enter the United States, they argued, should not be afforded the same procedural and legal rights as aliens who enter legally. The issue of Haitian TPS has arisen several times in the past few years, most notably after the U.S. Ambassador declared Haiti a disaster in September 2004 due to the magnitude of the effects of Tropical Storm Jeanne. More recently, a series of tropical cyclones in 2008 resulted in hundreds of deaths and led some to label the city of Gonaives uninhabitable. The Administration of President George W. Bush did not grant TPS or other forms of blanket relief to Haitians, nor was legislation that would have provided TPS to Haitians, such as H.R. 522 in the 110 th Congress, enacted. Opponents of Haitian TPS traditionally argue that it would result in an immigration amnesty for unauthorized Haitians and foster illegal migration from the island. The scale of the current humanitarian crisis—estimated thousands of Haitians dead and reported total collapse of the infrastructure in the capital city of Port au Prince—led DHS to announce on January 13, 2010, that it is temporarily halting the deportation of Haitians. "TPS is in the range of considerations we consider in a disaster," stated DHS Deputy Press Secretary Matthew Chandler, "but our focus remains on saving lives." In the 111 th Congress, Representative Alcee Hastings introduced H.R. 144 , which would have made nationals from Haiti eligible for TPS status. H.R. 264 , introduced by Representative Shelia Jackson-Lee, included a sense of Congress that "the Secretary of Homeland Security should be more liberal with respect to Haiti in deciding whether to designate that country for temporary protected status." Neither bill received action in the 111 th Congress. On January 15, 2010, DHS Secretary Napolitano granted TPS for 18 months to Haitian nationals who were in the United States as of January 12, 2010. She stated: "Providing a temporary refuge for Haitian nationals who are currently in the United States and whose personal safety would be endangered by returning to Haiti is part of this Administration's continuing efforts to support Haiti's recovery." Secretary Napolitano extended and re-designated TPS for Haitians on May 17, 2011. The extension becomes effective July 23, 2011, and enables eligible individuals who arrived up to one year after the earthquake in Haiti to receive TPS. The re-designation targets individuals who were allowed to enter the United States immediately after the earthquake on temporary visas or humanitarian parole but were not covered by the initial TPS grant. The extension and re-designation is for a period of 18 months, through January 22, 2013. Those Haitians who are deemed Cuban-Haitian Entrants are among the subset of foreign nationals who are eligible for federal benefits and cash assistance. Those Haitians who are newly arriving LPRs, however, are barred from the major federal benefits and cash assistance for the first five years after entry. Over a decade ago, Title IV of the Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 ( P.L. 104-193 ) established comprehensive restrictions on the eligibility of noncitizens for means-tested public assistance and limited the eligibility of refugees and asylees to five years. Foreign nationals who enter the United States on temporary visas (i.e., nonimmigrants) and those who enter the United States without authorization are barred from any federal public benefit except the emergency services and programs expressly listed in PRWORA. Amendments in P.L. 105-33 and P.L. 105-185 extended the period of food stamp/Supplemental Security Income (SSI)/Medicaid (but not Temporary Assistance for Needy Families) eligibility for refugees and asylees from five to seven years and added Cuban and Haitian Entrants to those eligible for these benefits for seven years. The term "Cuban-Haitian Entrant" is not defined in the INA, but its usage dates back to 1980. Many of the Cubans and the vast majority of the Haitians who arrived in South Florida during the 1980 Mariel Boatlift did not qualify for asylum according to the individualized definition of persecution in §§ 207-208 of the INA. The Carter Administration labeled Cubans and Haitians as "Cuban-Haitian Entrants" and used the discretionary parole authority of the Attorney General to admit them to the United States. Subsequently, an adjustment of status provision was included in the Immigration Reform and Control Act (IRCA) of 1986 ( P.L. 99-603 ) that enabled the Cuban-Haitian Entrants who had arrived during the Mariel Boatlift to become LPRs. While not a term of law in the INA, Congress did define Cuban-Haitian Entrant in the context of eligibility for federal assistance. Title V of the Refugee Education Assistance Act of 1980 ( P.L. 96-422 ), commonly known as Fascell-Stone, defined Cuban and Haitian Entrants as: (1) any individual granted parole status as a Cuban/Haitian Entrant (Status Pending) or granted any other special status subsequently established under the immigration laws for nationals of Cuba or Haiti, regardless of the status of the individual at the time assistance or services are provided; and (A) who—(i) was paroled into the United States and has not acquired any other status under the Immigration and Nationality Act [this chapter]; (ii) is the subject of removal proceedings under the Immigration and Nationality Act [this chapter]; or (iii) has an application for asylum pending with the Immigration and Naturalization Service; and (B) with respect to whom a final, nonappealable, and legally enforceable order of removal has not been entered. The intent and resulting effect of the Fascell-Stone provision was to treat Cubans and Haitians in the same manner as refugees and asylees for the purposes of the federal refugee resettlement program and most other federal benefits and assistance. The Office of Refugee Resettlement (ORR) uses the term Cuban-Haitian Entrants for Haitians who meet the Fascell-Stone definition. It could be argued that Haitians who currently benefit from TPS meet the definition of Cuban-Haitian Entrant, as do those who are paroled into the United States after the January 12, 2010, earthquake. It remains to be seen, however, whether policy makers will attempt to narrow the applicability of the Cuban-Haitian Entrants classification for Haitians displaced by the earthquake. Under current law, asylees, refugees, and Cuban-Haitian entrants (as well as certain aliens whose deportation/removal is being withheld for humanitarian reasons and Vietnam-born Amerasians fathered by U.S. citizens) are among categories of aliens who may be eligible for SSI for seven years after entry/grant of such status. In order to receive SSI benefits, these qualified aliens must meet all the requirements for eligibility as native-born citizens. SSI eligibility requirements include meeting the definitions for age, disability, or blindness and falling below established income and resource thresholds. This SSI eligibility for Cuban-Haitian entrants as well as refugees, asylees, and aliens in other specified humanitarian categories was extended to nine years (during FY2009 through FY2011) by P.L. 110-328 . If qualified aliens are eligible for SSI, they are likely to be eligible for enrollment in their state's Medicaid Program. Haitians deemed to be Cuban-Haitian Entrants are eligible for Medicaid until they have been in the United States for seven years. After the initial seven years, states have the option to continue to provide Medicaid. After five years in the United States, Haitians who are LPRs may become eligible for Medicaid at the state's option. Those Haitian LPRs with a substantial work history—generally 10 years (40 quarters) of work documented by Social Security or other employment records—or a military connection (active duty military personnel, veterans, and their families) are also eligible. As noted above, Medicaid coverage is required for all otherwise qualified SSI recipients, so long as they meet SSI noncitizen eligibility tests. Cuban-Haitian Entrants are treated as refugees, and thus those families with children under 18 may be eligible for time-limited cash assistance through a state's Temporary Assistance for Needy Families (TANF) program. PRWORA restricted receipt of federal TANF benefits to a 60-month lifetime limit. States may exempt up to 20% of the caseload from the time limit due to state-defined hardship, and states have the option to continue TANF benefits under special circumstances. Like other federal welfare programs, the TANF program is means-tested; however, unlike SSI, the TANF program is state-administered and payment levels can vary widely by state. Refugees and entrants participating in job training programs sponsored by the Office of Refugee Resettlement (ORR) are considered to be working toward self-sufficiency and may be exempt from certain state TANF program requirements. TANF beneficiaries may be eligible for their state's Medicaid program; however SSI beneficiaries are generally ineligible to receive TANF in addition to SSI. As noted above, those Haitians deemed to be Cuban-Haitian entrants are eligible for the federal resettlement assistance program for refugees and entrants, which is partially funded through the ORR. In addition to providing a range of social services, primarily administered by states, the ORR provides funding to states for transitional cash and medical assistance through the Transition and Medical Services program. ORR resettlement assistance and services are designed to help refugees and entrants obtain self-sufficiency and social adjustment as quickly as possible. Refugees and entrants are expected to become self-sufficient within six months of arrival, and Refugee Cash Assistance (RCA) and Refugee Medical Assistance (RMA) are limited to eight months. Refugees and entrants who meet the income and resource eligibility requirements for SSI, TANF or Medicaid, but are not otherwise eligible (e.g., single males or childless females and couples), may receive benefits under the ORR-funded RCA and RMA programs. Under Title V of the Refugee Education Assistance Act, participating states are fully reimbursed for cash and medical assistance to Cuban and Haitian entrants under the same conditions and to the same extent as such assistance and services for refugees under the refugee program. States have the option of choosing either a publicly administered or public/private RCA program. Most states publicly administer their RCA program. By doing so, the state agency must operate its RCA program consistent with the provisions of their TANF program. In publicly administered RCA programs, payment levels to refugees or entrants are equivalent to a state's TANF payment levels, and thus vary across the country. Like RCA benefits, states administer their own RMA program from ORR funds which pay for 100% of RMA costs for eligible refugees and entrants. Refugees or entrants who are not eligible for their state's Medicaid program may be eligible for RMA benefits for up to eight months. In many states, covered services under RMA are the same as covered services under their state Medicaid plan. Costs of RMA per refugee vary due to variables such as age, health of the beneficiary, and services provided. Some U.S. citizens and legal permanent residents (LPRs) have family in Haiti for whom they have petitioned for visas to become LPRs in the United States. According to the DOS, there were 54,716 Haitians who had approved petitions to immigrate to the United States at the time of the earthquake and who were waiting for visas to become available. The INA provides for a permanent annual worldwide level of 675,000 LPRs, but this level is flexible and certain categories of LPRs are permitted to exceed the limits. The INA establishes per-country levels at 7% of the worldwide level for other family-sponsored LPRs. Immediate relatives of U.S. citizens are among those exempt from direct numerical limits. According to the INA, family-sponsored (and employment-based) preference visas are issued to eligible immigrants in the order in which a petition has been filed. Spouses and children of prospective LPRs are entitled to the same status, and the same order of consideration as the person qualifying as principal LPR, if accompanying or following to join (referred to as derivative status). When visa demand exceeds the per-country limit, visas are prorated according to the preference system allocations for the oversubscribed foreign state or dependent area. Relatives of U.S. citizens and LPRs are waiting in backlogs for a visa to become available, with the brothers and sisters of U.S. citizens now waiting about 11 years, with even longer waits for siblings from Mexico and the Philippines. Married adult sons and daughters of U.S. citizens who filed petitions almost nine years ago are now being processed for visas. Haitians with family in the United States are in this worldwide backlog for visas. Advocates for Haitians asked Secretary Napolitano to give humanitarian parole to those Haitians with approved petitions for visas. In the context of immigration law, parole means that the foreign national has been granted temporary permission to be present in the United States. Parole does not constitute formal admission to the United States, and parolees are required to leave when the terms of their parole expire, or if otherwise eligible, to be admitted in a lawful status. Options to expedite the immigration of Haitians with approved petitions that would require legislative actions would include enacting an amendment to the INA that exempts certain Haitians for the numerical limits, and amending a transitional nonimmigrant visa—the V visa—for immediate relatives (spouse and children) of LPRs who have had petitions to also become LPRs pending for three years to include certain Haitians. Proponents of expediting the admission of Haitians with family in the United States maintained that it would relieve at least some of the humanitarian burden in Haiti. "Unless our government does something to make sure loved ones can join families quickly," argues Cheryl Little of the Florida Immigrant Advocacy Center, "it could have devastating consequences for those in Haiti waiting for these visas." Other supporters assert that it would increase the remittances sent back to Haiti to provide critical help as the nation tries to rebuild. "A larger Haitian diaspora would be a far better base for the country's economic future than aid pledges that may or may not be met," according to Elliot Abrams of the Council on Foreign Relations. Those opposed to expediting the admission of Haitians asserted that it would not be in the national interest, nor would it be fair to other foreign nationals waiting to reunite with their families. The Center for Immigration Studies' Mark Krikorian has gone on record saying that "poverty and underdevelopment can't be criteria we use to pick immigrants," and concludes that the "place to help Haitians is in Haiti, not the United States." The Haitian Emergency Life Protection Act of 2010 ( S. 2998 / H.R. 4616 ) would have amended the INA to allow Haitian nationals whose petition for a family-sponsored immigrant visa was approved on or before January 12, 2010, to obtain nonimmigrant visas under §101(a)(15)(V). As noted earlier, this nonimmigrant visa—known as the V visa—is a transitional visa category for immediate relatives (spouse and children) of LPRs who have had petitions to also become LPRs pending for three years. Haitian children who were legally confirmed as orphans eligible for intercountry adoption by the government of Haiti and who were in the process of being adopted by U.S. residents prior to the earthquake have been given humanitarian parole to come to the United States. DHS Secretary Napolitano's announcement of the policy on January 18, 2010, indicated that the Haitian orphans must meet one of following criteria to be eligible: Evidence of availability for adoption, which includes at least a full and final Haitian adoption decree, a Government of Haiti custody grant to prospective adoptive parents for emigration and adoption, or secondary evidence in lieu of the first two criteria. Evidence of suitability for adoption, which includes at least a Notice of Approval of Form I-600A, Application for Advance Processing of an Orphan Petition, a current FBI fingerprints and background security check clearances, or physical custody in Haiti plus a security background check. Other Haitian orphans potentially eligible for humanitarian parole include children who were identified by an adoption service provider or facilitator as eligible for intercountry adoption and who were matched to prospective American adoptive parents prior to January 12, 2010. When it announced the humanitarian parole for Haitian orphans, DHS acknowledged, "Given the severity of the disaster in Haiti, we understand that there are additional children that have been orphaned and/or separated from relatives and may also be in varying stages of the adoption process. DHS and DOS continue to evaluate additional eligibility criteria and will provide additional information as soon as it is available." No policy or procedures, however, have been announced regarding prospective adoptions of Haitian children orphaned as a result of the earthquake. As of March 29, 2010, the United States has given humanitarian parole to 1,050 Haitian orphans, and 902 of those have already arrived in the United States. The program to grant humanitarian parole to enter the United States to certain Haitian children who were in the process of being adopted by U.S. residents prior to the earthquake ended in April 2010. Under most circumstances, when adoptive children immigrate to the United States, they are admitted as LPRs. The children granted parole under this program would otherwise have to live with their families in the United States for two years before they will be eligible to become LPRs. On July 20, 2010, the House passed the Help HAITI Act of 2010 ( H.R. 5283 ), which would authorize the DHS Secretary to adjust to LPR status those aliens who were granted parole into the United States pursuant to the humanitarian parole policy for certain Haitian orphans from January 18, 2010, through April 15, 2010. A similar bill, S. 3411 , was introduced in the Senate. To qualify for the adjustment, the applicant must be physically present in the United States when the adjustment application is filed and be admissible as an LPR. The requirements are applicable to adopted children if, before the alien is 18 years of age, he or she adjusts LPR status and is adopted by a U.S. citizen (which may occur before, on, or after status adjustment). The legislation would permit a parent or legal guardian to apply on behalf of a minor and would prohibit any derivative immigration benefits for the birth parent of an alien adjusted under this act. The Senate passed H.R. 5283 with an amendment on August 4, 2010. On December 1, 2010, the House suspended the rules and agreed to the Senate amended version of H.R. 5283 , which became P.L. 111-293 on December 9, 2010. P.L. 111-293 made the children who were paroled into the country as Haitian orphans eligible to immediately adjust to LPR status, and other provisions of immigration law enable them to automatically become U.S. citizens when granted LPR status. Haitian Orphan Placement Effort Act of 2010 ( H.R. 4603 ) would have directed the DHS Secretary to expand the humanitarian parole policy for certain Haitian orphans announced on January 18, 2010, so it would have applied on a case-by-case basis to children who were legally confirmed as orphans eligible for intercountry adoption by the government of Haiti before January 12, 2010. The bill also would have authorized the placement of Haitian children granted humanitarian parole into the United States in an unaccompanied refugee minor program if a suitable family member is not available to provide care. President Barack Obama requested that the Congress consider supplemental FY2010 funding to provide for costs associated with relief and reconstruction support for Haiti, including reimbursement of obligations that have already been incurred by federal agencies after the January 12, 2010, earthquake. Only a small portion of the $2.8 billion requested would pertain to Haitian evacuees and migrants in the United States. Specifically, the President requested $220.0 million for the Department of Health and Human Services (HHS) to fund four types of activities, of which two are directly related to Haitians brought to the United States after the earthquake. These two are the state share of Medicaid and Children's Health Insurance Program (CHIP) costs for eligible Haitians; and cash, medical, and repatriation assistance for eligible Haitians. The request does not specify how much funding would be allocated to each of these activities. The President's request did not propose any changes or expansions in eligibility for assistance or benefits as described above. The Supplemental Appropriations Act, 2010 ( H.R. 4899 , P.L. 111-212 ), provides the requested $220 million. The President's supplemental request also included $15 million for the USCIS Examinations Fee Account. USCIS funds the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenship benefits almost entirely through monies generated by the Examinations Fee Account. USCIS charges fees for almost all adjudications and services; however, the agency traditionally has not charged the Examination Fee for refugees and asylum seekers. The Administration proposed to use funds for reception and settlement services provided to designated Haitians; fee waivers for eligible Haitians granted TPS; humanitarian parole to bring medical evacuees and certain categories of Haitians into the United States; and costs associated with adoptions and orphans. The Supplemental Appropriations Act, 2010 ( H.R. 4899 , P.L. 111-212 ), provides $10.6 million to the USCIS for costs associated with processing the Haitian migrants. Several versions of the legislation on comprehensive immigration reform that stalled in the Senate in June 2007 (e.g., S. 1348 and S. 1639 ) included provisions that would have enabled many of the Haitians in the United States without authorization to adjust to LPR status under certain circumstances and with some penalties. In the 110 th Congress, H.R. 1645 also included provisions that would have allowed HRIFA adjustments to encompass a child of an applicant based on the child's age and status on October 21, 1998. H.R. 750 would have, among other things, authorized the adjustment of status for certain nationals or citizens of Haiti who are present in the United States. H.R. 454 would have amended HRIFA to provide that determinations with respect to children be made according to their age and status as of October 21, 1998; would have permitted an application based upon child status to be filed by a parent or guardian if the child is present in the United States on such filing date; and would have included document fraud among the grounds of inadmissibility, which would not have precluded an otherwise qualifying Haitian alien from permanent resident status adjustment. Many of these elements are included in a comprehensive immigration reform piece of legislation in the 111 th Congress ( H.R. 4321 ). During the 110 th Congress, §105 of the FY2008 Consolidated Appropriations Act ( P.L. 110-161 ) continued the prohibition of the use of funds to provide visas to certain aliens who were involved in political violence in Haiti. As noted above, U.S. citizens and LPRs have family in Haiti for whom they have petitioned for visas to become LPRs in the United States. According to the DOS, there were 105,193 Haitians who had approved petitions to immigrate to the United States at the end of FY2010. Last year, the Government of Canada established the Haiti Special Measures Program to expedite the processing of Haitians with family members in Canada and reported processing more than five times the number of applications in 2010 than were processed in 2009 for the same time frame. Some have called on DHS Secretary Napolitano to use the humanitarian parole authority under the INA to allow Haitians with approved visa petitions to enter the United States without waiting for visas to become available. Those opposed to expediting the admission of Haitians argue that it would not be fair to other foreign nationals waiting to reunite with their families. The cholera outbreak, which CDC confirmed on October 21, 2010, has renewed appeals to Congress to enact legislation that would expedite the admission of Haitians with family in the United States. Although some concerns are being raised about the possible spread of cholera by Haitians coming to the United States, others point out that medical examinations and health screenings are core features of U.S. immigration policy. Supporters of the current policy assert that expediting the admission of Haitians would not be in the U.S. national interest at this time, especially given the cholera outbreak. There are concerns that the ongoing crisis in Haiti may result in mass migration from the country. Not only has there been massive displacement of people caused by the earthquake, but observers of the situation warn of potential and widespread lawlessness as well as outbreaks of disease. These health, safety, and security factors—individually or in combination—could trigger an exodus of Haitians seeking refuge in nearby countries, including the United States. Moreover, the unexpected return to Haiti on January 16, 2011, of Jean-Claude "Baby Doc" Duvalier, the dictator deposed 25 years ago, has heightened fears that political turmoil may ensue. The practice of Haitians fleeing by the thousands began when Duvalier was dictator. At least five federal agencies now handle Haitian migrants: DHS's Coast Guard (interdiction); Customs and Border Protection (apprehensions and inspections); Immigration and Customs Enforcement (detention); U.S. Citizenship and Immigration Services (credible fear determination); and DOJ's EOIR (asylum and removal hearings). DHS would take the lead in handling a potential mass migration and has long had a set of operational plans in place to respond to such a situation. In her TPS announcement, Secretary Napolitano warned of the consequences of Haitians fleeing to the United States: At this moment of tragedy in Haiti it is tempting for people suffering in the aftermath of the earthquake to seek refuge elsewhere. But attempting to leave Haiti now will only bring more hardship to the Haitian people and nation.... It is important to note that TPS will apply only to those individuals who were in the United States as of January 12, 2010. Those who attempt to travel to the United States after January 12, 2010 will not be eligible for TPS and will be repatriated. The balancing of DHS's border security and immigration control responsibilities during an ongoing humanitarian crisis poses a unique challenge. In January 2011, DHS's Immigration and Customs Enforcement (ICE) bureau deported 27 Haitians, 26 of whom reportedly had criminal convictions and one of whom was deemed a national security risk. ICE had announced in December 2010 that it was resuming the Haitian deportations that were halted immediately following the 2010 earthquake. Reportedly 300-350 Haitians with criminal convictions are currently in custody and slated for removal. In response to questions about who among those Haitians with orders of removal were actually scheduled for deportation, ICE spokeswoman Barbara Gonzalez stated that the decisions would be made "consistent with our domestic immigration enforcement priorities." Advocates for the Haitians point out that an estimated 1.3 million Haitians remain displaced from their homes after the 2010 earthquake and that the forced repatriation of Haitians would fuel the political turmoil in Haiti. Some argue further that deportation would endanger the lives of the deportees because the Haitian government often detains criminals who have been repatriated, and the Haitian jails are riddled with cholera. ICE, however, maintains that deportation is preferable to releasing large numbers of people with criminal convictions back into U.S. communities. An ICE official said DOS had been working with Haitian officials "to ensure that the resumption of removals is conducted in a safe, humane manner with minimal disruption to ongoing rebuilding efforts." | The environmental, social, and political conditions in Haiti have long prompted congressional interest in U.S. policy on Haitian migrants, particularly those attempting to reach the United States by boat. While some observers assert that such arrivals by Haitians are a breach in border security, others maintain that these Haitians are asylum seekers following a decades old practice of Haitians coming by boat without legal immigration documents. Migrant interdiction and mandatory detention are key components of U.S. policy toward Haitian migrants, but human rights advocates express concern that Haitians are not afforded the same treatment as other asylum seekers. The devastation caused last year by the January 12, 2010, earthquake in Haiti led Department of Homeland Security (DHS) Secretary Janet Napolitano to grant Temporary Protected Status (TPS) to Haitians in the United States at the time of the earthquake. The scale of humanitarian crisis—estimated thousands of Haitians dead and collapse of the infrastructure in the capital city of Port au Prince—resulted in this TPS announcement. On May 17, 2011, Secretary Napolitano re-designated TPS for Haitians through January 22, 2013. The extension also enables eligible individuals who arrived up to one year after the earthquake in Haiti to receive TPS. Secretary Napolitano gave humanitarian parole to Haitian children who were legally confirmed as orphans eligible for intercountry adoption by the government of Haiti and who were in the process of being adopted by U.S. residents prior to the earthquake. P.L. 111-293, the Help HAITI Act of 2010, authorizes the DHS Secretary to adjust to legal permanent residence (LPR) status those Haitian orphans who were granted parole from January 18, 2010, through April 15, 2010. Those Haitians who are deemed Cuban-Haitian Entrants are among the subset of foreign nationals who are eligible for federal benefits and cash assistance. Those Haitians who are newly arriving legal permanent residents, however, are barred from the major federal benefits and cash assistance for the first five years after entry. The Supplemental Appropriations Act, 2010 (H.R. 4899, P.L. 111-212), includes funding to cover additional costs for federal benefits and cash assistance resulting from Haitian evacuees. According to the U.S. Department of State (DOS), there were 54,716 Haitians who had approved petitions to immigrate to the United States at the time of the earthquake and who were waiting for visas to become available. Advocates for Haitians continue to request that Secretary Napolitano give humanitarian parole to those Haitians with approved petitions for visas. Proponents of expediting the admission of Haitians with family in the United States maintain that it would relieve at least some of the humanitarian burden in Haiti and would increase the remittances sent back to Haiti to provide critical help as the nation tries to rebuild. Those opposed to expediting the admission of Haitians assert that it would not be in the national interest, nor would it be fair to other foreign nationals waiting to reunite with their families. More broadly, there are concerns that the crisis conditions in Haiti—notably, the outbreak of cholera and the return of deposed dictator Jean-Claude "Baby Doc" Duvalier—may trigger mass migration from the island. DHS agencies that would address a potential mass migration include the U.S. Coast Guard (interdiction); Customs and Border Protection (apprehensions and inspections); Immigration and Customs Enforcement (detention and removal); and the U.S. Citizenship and Immigration Services (credible fear determinations). The balancing of DHS's border security responsibilities during a humanitarian crisis poses a challenge. |
This report reviews estimates of fiscal impacts to the federal, state, and local governments of the foreign born who reside in the United States. By fiscal impacts, the report refers to both tax-funded expenditures for public services such as public education and public health programs, and tax revenues received through payroll withholdings on income, property taxes, sales taxes, and other taxes. The analysis of tax-funded expenditures and tax revenues together is referred to as the net fiscal impact. Congress has had a long-standing interest in the fiscal impacts of the foreign born. Congressional interest has emphasized two public policy issues: immigration policy, particularly what categories of foreign nationals and what number should be granted admission into the country; and to a lesser extent, budget concerns over the cost of public services used by the foreign born. For instance, concerns about consumption of public services by unauthorized aliens and other foreign-born persons caused Congress to pass the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA, P.L. 104-193 ), which statutorily barred many legal permanent residents and other noncitizens from many federal assistance programs. This report focuses exclusively on literature that examines fiscal impacts of the foreign born. However, it does not address the following topics: economic impacts of the foreign born, such as their effect on industrial competitiveness, economic development, or the employment prospects, wages, and working conditions of U.S. workers; demographic impacts of the foreign born, such as their effect on the size and composition of the U.S. population; socio-cultural impacts of the foreign born, such as their effects on language use and civic participation; and environmental impacts of the foreign born, such as their effects on pollution generation, public goods consumption, and traffic congestion. Nor does it address, for the unauthorized alien population, costs to the federal government of enforcing immigration laws, such as investigating, arresting, detaining, and removing unauthorized aliens from the United States. The report examines the academic and policy literature on fiscal impacts of two populations: the entire foreign-born population and the unauthorized alien population. While many studies have been conducted to estimate fiscal impacts of just the unauthorized alien population, few have estimated fiscal impacts of just the legally residing foreign-born population. For example, The New Americans , an authoritative report discussed extensively below, considers all foreign born without analyzing populations separately according to legal status. Consequently, the first portion of this report evaluates studies of all foreign born, irrespective of legal status. The second portion evaluates studies of only the unauthorized alien population. This report is not an exhaustive review of the literature. Reviewed studies were generally selected if they included attempts to quantify the cost of public services and benefits received by the foreign born and/or tax revenues contributed, and they explained their methodologies for computing estimates. Hence, studies that applied excessively simple, incomplete, or undisclosed methodologies were generally not included. This report also excluded studies that intended to show only a favorable or unfavorable portrait of the foreign born, unless their methodological sophistication warranted their inclusion. The span of methodologies used in the analyses presented in this report ranges from basic arithmetic computations to sophisticated microeconomic and macroeconomic models. Moreover, the report distinguishes between cross-sectional studies that consider the fiscal impacts of the foreign born at a particular year, versus longitudinal studies that attempt to capture fiscal impacts of the foreign born across longer periods or several generations. With the exception of studies discussed in a 1995 General Accounting Office (GAO) report that assess fiscal impacts of the unauthorized alien population, studies reviewed herein were completed after 1996. Studies within each section are generally reviewed in chronological order, with the earliest studies evaluated first. The Appendix summarizes findings for all studies reviewed. Because of differences in research scope, methods, specific populations analyzed, and other factors, the report refrains from synthesizing these results beyond what is presented in its conclusion section. The report begins by discussing challenges of enumerating the foreign born, including the unauthorized alien population, and estimating fiscal impacts of the foreign born. Next, it reviews four sets of studies. The first, included in a National Research Council (NRC) report entitled The New Americans , represents an evaluation of short- and long-term fiscal impacts of the entire foreign-born population that served as a touchstone for subsequent research assessing the impact of U.S. immigration. The second part of this report reviews scholastic research on fiscal impacts of the total foreign-born population published after the NRC report. These scholastic analyses, published mostly in peer-reviewed academic journals, generally encompass greater analytic rigor than policy studies. The third part of this report reviews policy studies of fiscal impacts of the total foreign-born population conducted at the national and state levels that were undertaken by policy organizations. The fourth part considers the unauthorized alien population by first discussing a seminal policy debate between 1993 and 1995 assessing fiscal impacts of unauthorized aliens, and continuing with a review of policy studies conducted mostly at the state level on fiscal impacts of unauthorized aliens. Analysts have long attempted to estimate the fiscal impacts of immigrants to the United States. Their work has produced useful conceptual and analytic frameworks to guide such research. These frameworks typically describe elements necessary to produce accurate and comprehensive impact estimates: defining precisely the foreign-born population analyzed; distinguishing among the foreign born by legal status, education, decade of U.S. arrival, or other policy-relevant criteria; determining an appropriate unit of analysis for computing fiscal impacts; deciding which public service costs and tax revenues to include; making assumptions about the extent to which the foreign born use public services and contribute taxes relative to native residents; and deciding over how many generations to compute impacts. Studies can be evaluated on the extent to which they incorporate or address such elements. However, analysts face a number of methodological hurdles to incorporating these elements into fiscal impact studies. To produce viable estimates of fiscal impacts, analysts must accurately count the population of interest. The foreign born who legally reside in the United States, for instance, technically include naturalized citizens, legal permanent residents, refugees, asylees, and legal noncitizens such as temporary workers. They do not include unauthorized aliens who overstayed their legally obtained visas, violated the terms of their admission, or entered the United States unlawfully. The foreign born can be distinguished in large-scale data sets such as the Current Population Survey (CPS), the Decennial Census of the Population (Census), or the American Community Survey (ACS). However, while these data sets distinguish between foreign born who are naturalized citizens and those who are noncitizens, they do not distinguish between noncitizens with legal status and noncitizens who are unauthorized aliens. They also do not distinguish between refugee or asylee status, or between legal temporary noncitizens, such as temporary workers, and legal permanent residents. The studies reviewed in the first half of this report estimate fiscal impacts of all foreign-born persons. To evaluate fiscal impacts for only the legally residing foreign born, analysts must isolate that population from the unauthorized alien population. This can be done in several ways, including making assumptions about the legal proportion of the total foreign-born population, subtracting estimates of the unauthorized population from the total foreign-born population, or applying methodologies that assign legal or unauthorized status to a dataset's cases based on individual case characteristics and then analyzing only cases with legal status in that dataset. These methodological challenges may have contributed to the paucity of fiscal impact studies of legal immigration. Consequently, analyses of the foreign-born population's fiscal impacts sometimes yield ambiguous policy implications because they combine effects of legally residing foreign born and unauthorized aliens, two groups with distinct educational profiles and employment trajectories. Legal status also affects fiscal impacts according to federal law. For instance, whether foreign-born persons must pay taxes depends both on their legal status and if tax treaties or agreements exist between their countries and the United States. However, a foreign-born person's legal status may limit his or her eligibility to receive public services. Studies that estimate fiscal impacts of the unauthorized alien population are hampered by difficulties associated with accurately enumerating that population. People who try to avoid being detected by the government are difficult to count using formal surveys. As noted above, large nationally representative surveys that serve as primary data sources of socioeconomic information—the CPS, the Census, and the ACS—ask citizenship status but not immigration or legal status. Researchers wishing to know the cost of public services used or contribution of taxes contributed by unauthorized aliens must use alternative methods. Given the methodological challenges to accurately estimating the number, distribution, and demographic characteristics of the unauthorized alien population, researchers typically rely upon existing estimates. Much literature cites estimates of the unauthorized population produced annually by Jeffrey Passel of the Pew Hispanic Center. Most recently, the Pew Hispanic Center estimated that approximately 11.2 million unauthorized (illegal) aliens resided in the United States in March 2010. Published estimates by the Department of Homeland Security's Office of Immigration Statistics (OIS) yielded results consistent with but not equivalent to Passel's. OIS estimated that 10.8 million unauthorized aliens resided in the United States as of January 2010. Part of the difference stems from the use of different datasets: OIS uses ACS data to produce its estimates while the Pew Hispanic Center relies on CPS data. Such discrepancies suggest that attempts to quantify the fiscal impact of unauthorized aliens are hindered by disagreement over how many reside in the United States, among other factors. Producing comprehensive and realistic estimates of fiscal impacts of the foreign born requires the analyst to select which costs and revenues should be included. Most state-level analyses reviewed in this report highlighted the largest budget expenditures that varied with the size of the foreign-born population, such as public education costs, criminal justice administration costs, and the cost of public health care programs. Some studies attempted to estimate less expensive services such as sanitation and police and fire protection. Some included the cost of federal income transfers, such as the Supplemental Security Income (SSI) program, the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), Medicaid, and the Temporary Assistance for Needy Families (TANF) program. Others included public infrastructure and service costs, such as those for highways, parks, and libraries, which pose particular challenges to quantifying costs from additional use by the foreign born. Finally, some studies estimated costs for pure public goods that require little or no additional spending for new foreign-born persons residing in the United States, such as national defense, medical and technical research, or interest on the national debt. For revenues, most state-level studies estimated state and local income taxes based on recorded survey data or from estimates based on recorded or estimated annual incomes. Other frequently estimated tax revenues included property, sales, and excise taxes. While some studies limited their analyses of fiscal impacts entirely to state and local costs and revenues, others expanded their scope to include federal revenues such as federal taxes, FICA, and Medicare withholdings. Including estimated federal tax contributions in an analysis but not estimated federal public services costs (or vice versa) distorts estimates of the net fiscal impacts of the foreign born. A major challenge for researchers conducting studies of fiscal impacts of immigration is to select an appropriate time frame. Fiscal impacts are often measured as the difference between estimates of annual tax and other revenues from noncitizens (or noncitizen headed-households) and estimated costs of government services and benefits to these persons or households. However, because fiscal impacts of foreign-born persons accumulate over their lifetimes, this methodology represents a static, cross-sectional perspective that obscures their more substantial costs as young consumers of public education or elderly consumers of public health care services, as well as their contributions as working-age taxpayers. Estimates from such annual studies thereby implicitly assume a demographic "steady state" condition whereby the age and skill composition of the foreign born remains unchanged over time. Such circumstances hardly ever occur: over even short periods of time, foreign-born populations change in size, age composition, and educational composition, all of which affect public service consumption and tax revenue contributions. Many policy studies reviewed in this report applied a cross-sectional approach. However, several academic studies employed longitudinal approaches that attempted to overcome this shortcoming. Some of these methods accumulate fiscal impacts of the foreign born over their expected life spans as U.S. residents, while others incorporate assumptions about generations of the foreign born to estimate fiscal impacts more extensively. Studies sometimes use households rather than individuals as the unit of analysis because households act as primary units through which taxes are paid and public services consumed. Nonetheless, households can pose methodological complications if they contain citizens and noncitizens. Such "mixed status" families and households not only constitute a sizeable portion of all foreign-born households, but they also complicate fiscal impact analyses because of variation in federal program eligibility. As an example of how this issue was treated, The New Americans , reviewed below, included revenues and expenditures for all children of noncitizens, including U.S. citizen children, but only for those who lived in the household. As such, this analysis overstated estimated costs to U.S. taxpayers of noncitizen households because most U.S. citizen children were in the household during the relatively costly school-age period but not when they were of tax-contributing working ages. Another analytic issue centers on children of the foreign born. An "immigrants only" approach to estimating fiscal impacts includes only foreign-born individuals and their foreign-born children, not their U.S. citizen children. In contrast, an "immigrant households" approach includes their U.S. citizen children under the assumption that such children reside in the United States solely because of the presence of their foreign-born parents in the United States. The New Americans was undertaken at the behest of the bipartisan Commission on Immigration Reform established by Congress in 1990 to recommend immigration policy reforms. The report addressed three topics: (1) the effect of immigration on the future size and composition of the U.S. population; (2) the influence of immigration on the economy (i.e., labor markets, wages); and (3) the fiscal impact of immigration on federal, state, and local governments. Although the report includes estimated impacts for all foreign-born persons, regardless of legal or temporal status, it is considered authoritative because of its thorough and rigorous methodology. This study, and several others reviewed in this report, were conducted using data prior to 1996. As such, they do not reflect changes imposed by the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 that statutorily barred LPRs and other noncitizens from many federal assistance programs. It is expected that, all else being equal, a similar analysis using data after 1996 would yield larger estimated surpluses and smaller deficits to some unknown degree because of greater restrictions placed on the foreign born to accessing public services. The New Americans distinguished between short-term (annual) and long-term impacts of the foreign born. The conclusions of the report's annual impact analysis relied on studies of California and New Jersey, states with sizable foreign-born populations. The annual impact analysis estimated revenues and costs associated with foreign-born households and co-resident U.S.-born children, in contrast to the long-term impact analysis, which considered all children of foreign-born parents regardless of where they resided. The authors cautioned that excluding U.S.-born children not residing in such households in the short-term analysis most likely overstated the fiscal burden of the foreign born because while it included children's considerable costs at younger ages when they were most likely to live with their parents, it excluded their tax contributions as adults when children were most likely to live separately. Results for the New Jersey and California studies were expressed as estimated benefits or costs to native-headed households. At the state level , the estimated impact of a foreign-born-headed household amounted to a net cost to each native-headed household of $232 and $1,178 in 1996 dollars for New Jersey and California, respectively, or $322 and $1,637 in 2010 dollars, respectively. At the federal level , the estimated impact amounted to a much smaller net benefit of about $3 in 1996 dollars for each of the two states. Yet, because of these two states' sizable foreign-born populations, California and New Jersey more accurately represent such fiscal impacts primarily for residents living in similarly populated states than they do for other states in the country. When the authors broadened their analysis and estimated the impact of all U.S. foreign-born-headed households on all U.S. native-headed households, the resulting net impact at the state level was a lower cost, ranging from $166 to $226 to each native-headed household in 1996 dollars for each foreign-born-headed household, or $231 to $314 in 2010 dollars. At the federal level, when the study was expanded to the entire nation, foreign-born-headed households were expected to produce a larger net fiscal benefit than the $3 figure estimated for just New Jersey and California, although the authors did not estimate this amount. According to the authors, three factors explain why foreign-born households consume more in public services than they contribute in tax revenues. First, foreign-born households have greater numbers of children and consume more public education services. Second, on average, foreign-born households are poorer and consequently receive more income transfers and benefits. Third, because the foreign-born earn lower average incomes and own less property, they contribute less income and property taxes. Annual estimates, however, should not be extrapolated to determine long-term fiscal impacts for several reasons. First, timing distorts the ultimate fiscal impact of foreign-born households. For example, young foreign-born persons consume costly public education services but subsequently contribute considerable tax revenues over the course of their working lives. Older foreign-born persons arriving to the United States later in their working lives may contribute withholdings immediately to support Social Security and Medicare but not for a sufficient period to balance the cost of their subsequent use of those services upon retirement. Short-term analyses cannot factor in other predictable changes that affect public service consumption or tax contributions, including changes in tax rates as incomes increase, changing public service eligibility with age, and the degree to which current demographic and fiscal conditions in the United States may alter the provision of future public services or receipt of tax revenues. Finally, the foreign born arriving in the United States during different decades have encountered different economic, demographic, labor market, and regulatory circumstances that have significantly affected their fiscal impacts. To estimate long-term fiscal impacts of the foreign born, the authors of The New Americans extended their methodology for computing annual estimates by making assumptions regarding several factors, including future taxes and public service expenditures; characteristics of the new foreign born; foreign born and native differences in characteristics ranging from fertility to lifetime earnings trajectories; and discount rates used to translate future revenues and costs into current dollars. Altering these assumptions generated different estimates, which were discussed at length. The analysis yielded several overall conclusions regarding the fiscal impact of the foreign born. On the cost side, the authors found little difference between the estimated cost of public services used by foreign-born and native residents over the long term. Although some foreign born and native differences in estimated per-capita costs varied substantially across the separate government programs examined, combined per-capita costs for major government programs yielded little difference. Similarly, while the study found that the foreign born incurred higher estimated social program costs than native residents at younger ages, it also found that they incurred lower costs in old age, a difference which tended to balance out over lifetimes. On the revenue side, the study found considerable differences between foreign-born and native residents' tax contributions, stemming largely from differences in future earnings. The analysis estimated the net fiscal impact of the presence of a new foreign-born individual in the United States by subtracting the cost of his or her estimated social benefit consumption from estimated tax contributions, at every age, over three centuries to account for all descendents. The resulting estimated net fiscal impact for someone arriving in 1994 is an $80,000 net surplus. This baseline figure varies substantially by personal characteristics and model assumptions. Figure 1 graphs the net present value of this total fiscal impact, which is represented by the total area between the graph lines and the horizontal axis. For instance, the estimated federal impact from 1994 though 2050 is a surplus because the thin solid line falls above the axis, while the state impact for that period is a deficit because the broken line falls below the axis. The $80,000 estimate ($111,000 in 2010 dollars) represents the sum of the total federal and state estimates for each year, summed across all 300 years. It illustrates how one foreign-born individual, arriving in 1994, produces varied state and federal impacts over time. Like native residents, the foreign born are costly to society at young and old ages, but are net revenue generators during working ages. As a result, according to the study, a foreign-born individual's long-term fiscal impact depended largely on age at arrival in the United States. Most foreign born between ages 10 and 25 produced a net fiscal surplus, while those arriving at retirement age produced a net fiscal deficit. Because most foreign born arrive as young adults, estimates produced by this type of analysis typically yield net fiscal surpluses. Finally, Figure 1 shows that the estimated fiscal impact differs markedly at the federal and state levels, with the federal government reaping surpluses over the life of the individual and his/her descendents, and state and local governments incurring deficits. Impact estimates were especially sensitive to assumptions about educational attainment ( Table 1 ). Foreign-born persons with less than a high school diploma generated an estimated net deficit of $18,000 (in 2010 dollars) over their lifetimes, while those with more than a high school education produced an estimated net surplus of $275,000. Education differences altered the range of estimates for foreign-born persons by themselves, from -$124,000 for less than a high school education to +$146,000 for more than a high school education, a difference of $270,000. By contrast, the range of estimates for descendents of the foreign born, from $106,000 to $129,000, produced a difference of only $23,000. Education also altered fiscal impact differences within the same education categories. Foreign-born persons with less than a high school education generated an estimated fiscal deficit of $124,000, while their descendents generated a surplus of $106,000, a gap of $230,000. For foreign born with more than a high school education, that same gap amounted to -$17,000. The estimated fiscal impact of $111,000 (in 2010 dollars) that the authors produced was based upon assumptions using average characteristics of the foreign born at the time of the analysis. The authors extended their analysis to suggest what altering those assumptions implied for U.S. immigration policy ( Table 2 ). For instance, if the United States were to admit foreign-born persons whose educational profile matched that of U.S. native residents, the average estimated fiscal impact would increase from +$111,000 to +$168,000. On the other hand, if the foreign born admitted possessed the same older age profile as U.S. native residents—thereby reducing the span over which they paid taxes—their estimated average fiscal impact would decrease from $111,000 to $44,000. Age-adjusted "sensitivity analyses" conducted by the authors indicated that on average, the foreign born paid less taxes and received fewer benefits than native residents. Geographically, the authors found that the foreign born generated net federal fiscal surpluses throughout the country, in contrast to net state and local fiscal deficits concentrated among states with large foreign-born populations. As a result, this study suggested that native residents in those states incurred net fiscal costs while residents in all other states reaped net fiscal benefits. Since The New Americans was published in 1997, considerable foreign-born population growth has occurred in new urban and rural destinations outside of traditional immigrant-receiving states. Yet, even in 2008, roughly two-thirds of the foreign born remained concentrated in just six U.S. states. A widely cited and authoritative analysis by George Borjas of Harvard University critiqued assumptions and findings from long-term impact studies found in The New Americans . Borjas acknowledged the superior conceptual approach and more complete accounting from analyzing fiscal costs and contributions of the foreign born over their lifetimes. However, he questioned, for several reasons, the finding that admitting a foreign-born person to the United States in 1994 yielded an estimated $111,000 (in 2010 dollars) net fiscal national surplus over the long run of 300 years (see Figure 1 and discussion above). Borjas first questioned the assumption that the federal government, facing fiscal imbalances, would pass substantial tax increases to reduce national debt growth in 2016. This assumption, the author contended, automatically incorporated into the analysis a favorable result for the foreign born who, by shouldering their portion of an assumed tax increase, would make themselves more fiscally valuable. According to his own calculations, removing this assumption changed the estimated $111,000 net fiscal surplus to a $21,000 net fiscal deficit (in 2010 dollars). Borjas also critiqued the study's 300-year time frame, which he argued was excessive given widely acknowledged limitations of standard economic forecasts. According to the author's computations, adopting a 50-year time frame from the time a new foreign-born person arrived in the United States reduced the estimated net surplus from $111,000 to just over $15,000. A 25-year time frame yielded an estimated $26,000 deficit. Borjas concluded that variations in estimated fiscal impacts found in the research literature stemmed mostly from assumptions about the appropriate time frame, with short-run and long-run estimates each containing inherent flaws. Short-run estimates from The New Americans (noted above) suggested that foreign-born households cost each native household between $166 and $226 in additional taxes each year ($231 and $314 in 2010 dollars). Moreover, according to the author's computations, the long-term estimated fiscal impact in that same study, when computed for a 50-year work-span and annualized, generated an annual fiscal surplus of just $450 ($625 in 2010 dollars). The authors of this analysis estimated the fiscal impacts of the foreign born at the national level using a cross-sectional approach not found in many contemporary analyses. The methodology adopted represented a conceptual experiment that estimated the fiscal impact of a situation in which all the foreign born were removed from the calculations in a given year, along with all of their descendents. The data, taken from the 1994 and 1995 Current Population Surveys, represented 40.4 million persons, including 22.8 million foreign-born individuals alive in 1994, their 13.8 million surviving U.S.-born children, and their 3.9 million grandchildren (born to U.S.-born children). The latter two categories, children and grandchildren, were referred to as "concurrent descendents." Four categories of public expenditures were estimated: (1) public goods, the cost of which does not increase with population size (e.g., national defense, publicly funded medical research); (2) public debt servicing; (3) congestible public goods, the cost of which does increase with population growth (e.g., roads, police, libraries); and (4) transfer programs (e.g., Social Security, Medicare, food stamps). The authors obtained most of their data for their estimates from variables available in the CPS data. Other variables were constructed, including individuals' share of corporate and business taxes, sales taxes, and property taxes from rental units. This yielded a detailed accounting, for state and local governments and for the federal government, of fiscal revenues and costs for many public expenditures and taxes. The authors estimated that for states and localities, the foreign born and their concurrent descendents in 1994 generated $88.9 billion in public service costs and $61.5 billion in tax revenues, for an estimated net fiscal deficit of $27.4 billion in 1994 dollars. Translating that into per-capita numbers yielded a net fiscal deficit of $680 per foreign-born individual and concurrent descendent versus a $200 surplus per native-born individual and concurrent descendent. According to the study, the difference stemmed from two sources: the foreign-born population's greater costs for public education, bilingual education, noninstitutional Medicaid, and other public health services; and their lower per capita tax payments. At the federal level, however, the foreign born and their concurrent descendents paid an estimated $153.4 billion in taxes and consumed $102.5 billion in public services, for an estimated net fiscal surplus of $50.9 billion. Translating that into per-capita numbers yielded an estimated net fiscal surplus of $1,260 per foreign-born individual or concurrent descendent versus $1,340 per native-born individual. Table 3 illustrates how these estimated net fiscal impacts changed according to who was included in the definition of foreign-born population. In the first formulation of this conceptual experiment, the foreign born by themselves represent a mostly working-age population with no children and yielded estimated fiscal surpluses at all levels. In the second formulation, foreign-born households include co-residing U.S.-born (citizen) children, who, being mostly school-aged, caused the estimated net fiscal impact to change from a $32.4 billion surplus to a $13.3 billion deficit. According to the authors, state and local costs for public education accounted for most of the difference in estimates between the first and second formulations. The study's third formulation, of the foreign born and all of their children, regardless of where the latter resided, yielded a net fiscal surplus of $29.5 billion, reflecting the tax contributions of the adult children of the foreign born. Finally, the study's fourth formulation, which included the foreign born, their children, and their grandchildren, reduced the estimated net fiscal surplus from $29.5 billion to $23.5 billion while increasing the estimated deficit on states and localities from $19.3 billion to $27.4 billion. According to the study, impacts differed for the six high immigration states, which possessed roughly three-fourths of all foreign-born persons and their concurrent descendents, and all other U.S. states. Table 4 presents the estimated net fiscal impacts on just native residents if the foreign born and their concurrent descendents were to have vanished in 1994. The study estimated that throughout the country, each native resident would have had to pay an average of $107 more in taxes or suffer an equivalent reduction in public services and benefits. However, in high immigration states, native residents would have received a net benefit of $49 based largely on reduced state and local fiscal impacts, while native residents in all other states would have had to pay $182 more in taxes. In this national-level empirical analysis, the authors used a methodology known as "generational accounting" to overcome one of the primary shortcomings of static, cross-sectional approaches that compare fiscal revenues and costs across a single year. They evaluated the long-term fiscal impact of the foreign-born population projected as of 2000, not only quantifying the outcome as a net surplus or deficit, but also estimating the impact relative to the overall fiscal imbalance (i.e., the national budget deficit). The analysis did not distinguish legal status and it used a number of macroeconomic assumptions related to variables in the model such as estimated taxes paid over the lifetimes of the foreign born, public goods and services consumed by the foreign born, length of time the foreign born spent in the host countries, and population growth, among others. Total fiscal impacts reflected the discounted difference between tax payments and income transfers that the foreign born received while in the host country. The analysis produced three different sets of results reflecting six different scenarios. First, results were estimated for contemporary newborn native residents and for future generations of native residents. Second, two immigration policy scenarios were used and involved either contemporary immigration policies or a hypothetical extreme policy that halted all immigration starting in the year 2000. Third, the analysis differentiated two policy environments, one in which current taxpayers addressed current fiscal imbalances, and another in which that responsibility was passed to future generations. Based on the results of their econometric model, the authors concluded that estimates of the fiscal impact of the foreign born depended on whether the burden of current fiscal imbalances was borne by future generations or by current taxpayers through an immediate imposition of fiscal policy. If future generations were responsible for addressing the fiscal imbalance, then eliminating immigration in 2000 would hurt native residents, raising the net fiscal burden by an estimated average present value of 3.7%. This result suggested that foreign born residents assisted native residents in restoring fiscal balance. If, on the other hand, the burden of current fiscal imbalances were borne by current taxpayers, then halting immigration in 2000 benefitted future generations, reducing the net fiscal burden by an estimated average present value of 5.4%. This finding suggested that immigration has two opposing impacts; it can assist in reducing current fiscal imbalances as well as generate costs for future taxpayers. The authors also concluded that the impact of the foreign born on the fiscal balance was "extremely small" relative to the size of the imbalance, suggesting that U.S. immigration was neither a cause nor cure for national-level budget imbalances. This analysis considered how changing U.S. immigration policy could alter the nation's fiscal condition in light of impending retirements and public service demands of baby boomers. The author used a "calibrated general equilibrium overlapping generations" model that accounted for the impacts of changing wages and interest rates resulting from changes in immigration inflows. The author derived national-level conclusions based on individual-level computations that estimated the net present value (NPV) of foreign-born persons equal to the discounted value of future tax receipts minus future public expenditures ( Figure 2 ). His computations yielded average NPVs (in 1993 dollars) of $96,000, -$2,000, and -$36,000 respectively for high-, medium-, and low-skilled legal foreign born, irrespective of age. High-skilled foreign born, ages 40-44, who did not incur taxpayer-sponsored public education costs, yielded the highest NPV of $177,000. The family migration alternative scenario, which included the existing children of highly skilled foreign born, yielded a lower NPV of $140,000. To provide context, the author also estimated the NPV of a newborn native-born resident (-$88,000) and a new unauthorized alien (-$54,000). According to the author, the analysis implied that selective immigration policies could reduce or eliminate the need for anticipated fiscal reforms—tax hikes and/or spending cuts—associated with baby boomer aging. For that to occur, however, foreign-born composition and the number of foreign born admitted would have to change substantially from existing policies. Specifically, the author posited that annual immigration would have to change from 0.44% of the U.S. population to 0.62%, or from 1.1 million to 1.6 million persons (as of 2000). Moreover, all new foreign born would have to be between 40 and 44 years old and highly skilled. Acknowledging the infeasibility of such an immigration policy, the author proposed expanding annual immigration flows even further to 1.08% of the U.S. population, or 2,700,000 persons, consisting entirely of families headed by high-skilled foreign-born individuals who were between the ages of 45 and 49. In this analysis, the authors assessed the degree to which foreign-born status or nativity affected the degree to which individuals paid taxes, consumed public services, and thereby generated a deficit or surplus for New Jersey taxpayers. While New Jersey possesses characteristics that make the study's findings relevant to other states, the authors also noted that the state's foreign born originate from more countries and are more educated than foreign-born populations of other states. Foreign-born households were defined as those headed by foreign-born individuals, either naturalized citizens or noncitizens. The study relied on 1990 Census data and used multivariate regression analysis to isolate the impact of being foreign born, after controlling for other standard socioeconomic characteristics that influence tax contributions and public service consumption. The authors found that foreign-born households in New Jersey paid higher average taxes and consumed fewer state government services than statistically equivalent native households. Some differences by region of origin emerged. For instance, Latin American immigrant households consumed less in state government services than comparable European households. At the local level, being foreign born was found to have no statistical effect on local benefit use but generated a net surplus for local tax contributions. The authors concluded from their analysis that if foreign-born households possessed the average characteristics of native households, they would consume fewer state-level services and the same quantity of local services as native households. This paper reviewed the academic literature on estimation of fiscal impacts of immigration in advanced economies, mostly in Europe and the United States. The author found that while the highly skilled foreign born made net fiscal contributions, the unskilled foreign born imposed net costs to native taxpayers. However, the unskilled foreign born could also be net fiscal contributors provided they did not settle in host countries and used public services sparingly. Most empirical studies reviewed found relatively minor fiscal impacts, typically within the range of +/-1% of Gross Domestic Product (GDP), a result that held up across a variety of methodologies and countries. In this review of the economic literature, the authors surveyed studies that evaluated the impact of immigration on host countries' public finances. According to the authors, findings from initial studies conducted in the United States during the 1960s and 1970s suggested that foreign-born families used public social services less frequently than comparable native families. Subsequent studies detected a substantial increase in foreign born use of public services beginning in the 1970s, a shift found at all age levels and attributed to the weaker labor market position of more recent foreign born. According to the authors, different research findings sometimes emerged because of noncomparable emphases on the quantity of public service used by the foreign born versus frequency of public service use. Other differences stemmed from differing assumptions used. Ultimately, the authors found that the academic literature yielded few definitive conclusions and often produced conflicting results on foreign born use of taxpayer funded social services over time as well as the size of their overall fiscal impact. The authors did find consistent evidence that such fiscal impacts were relatively modest compared to nations' GDPs. The academic studies reviewed above consisted either of empirical experiments, simulations, and quantitative analyses that estimate fiscal impacts, or literature reviews that attempted to summarize findings from a range of academic studies. The policy studies below represent cross-sectional analyses at both the national and state levels. They typically estimate fiscal impacts by tabulating estimated costs of providing the foreign born with public services and subtracting this amount from their estimated tax contributions. This national-level analysis examined the fiscal impact of households headed by foreign-born persons with less than a high school diploma, referred to in the paper as "low-skilled immigrant households." In FY2004, these 4.5 million households represented 15.9 million people, or about 5% of the U.S. population. According to the study, an estimated 59% of such households were headed by persons with legal status, and 41% were headed by unauthorized aliens. Relying on a variety of federal data sources and published policy reports, the authors estimated over 50 separate expenditures for immediate benefits and services, yielding fiscal costs of the foreign born in greater detail than those found in many other studies reviewed in this report. Fiscal costs were divided into six categories. The first four—"immediate benefits and services"—included (1) direct benefits, including Social Security, Medicare, and smaller transfer programs; (2) means-tested benefits such as cash, housing, social services, and medical care for the poor and near poor; (3) public education expenditures at all education levels; and (4) population-based services, which included police and fire protection, infrastructure, food safety inspection, and public parks. The report discussed, but excluded from its analysis, two additional cost categories, often labeled "pure public goods," that the authors asserted accrue public expenditure over the longer term from low-skilled immigrant households: (1) interest payments on government debts and expenditures related to public services provided in earlier years; and (2) the cost of "pure public goods" such as national defense, international affairs, scientific research, and some environmental expenditures. The authors also tallied 31 separate sources of taxes and revenues paid by low-skilled immigrant households. Of these, five—Social Security contributions, sales taxes, federal income taxes, property taxes, and corporate income taxes—accounted for almost 80% of the total paid. The last two were assumed to be passed through to low-skilled workers by landlords and corporations, respectively. The authors estimated that in FY2004, low-skilled foreign-born households received $30,160 in immediate benefits and services, roughly three times their estimated tax contributions of $10,573. The authors estimated that this fiscal gap of $19,588 between costs and revenues occurred for low-skilled foreign-born households regardless of the household head's age. Hence, they estimated that over an estimated adult life span of 60 years, from age 18 to age 78, the average lifetime cost to U.S. taxpayers for the presence of each low-skilled foreign-born household was nearly $1.2 million. Alternatively, extending the annual $19,588 shortfall to the nation's 4.5 million low-skilled foreign-born households yields an estimated annual cost to U.S. taxpayers of $89.1 billion. This report evaluated findings from other studies of Minnesota to assess, rather than estimate, fiscal impacts of the foreign born on the state. Regarding tax revenues, the authors posited that the foreign born are, for the most part, subject to the same tax requirements and eligible for the same tax refunds as native residents. They noted that Minnesota's Department of Revenue does not collect information on immigration status and cannot compute contributions, refunds, and rates of compliance with tax requirements according to nativity or legal status. Hence, while nothing clearly suggested differences in revenue contributions between foreign-born and native residents, the authors acknowledged that this assessment remained ambiguous. On the cost side, the report presented information on programs for which immigration status was known. Census data indicate that the foreign born made up close to 7% of Minnesota's total population in 2006. According to the report, they accounted for a slightly disproportionate share of some state expenditures, including 10% of food support programs and 11% of state public financial assistance. According to the authors, the report did not quantify the foreign born consumption of the state's other costs such as public infrastructure because of the difficulty attributing consumption patterns to particular groups. Moreover, at the time the report was issued, there were no comprehensive analyses of fiscal impacts of the foreign born on the state from which to cite additional figures or findings. The authors acknowledged studies done on the short-term fiscal impacts of other states but chose to highlight conclusions from The New Americans because of its estimation of long-term impacts of the foreign born. Minnesota differs from many other states because its foreign-born population includes a sizeable share of refugees. According to the report, refugees made up half of the state's new foreign born in 2004 and 44% of all noncitizens receiving public health care benefits. The authors pointed to research indicating that refugees have higher levels of public service consumption than other foreign born and that over the long term, refugees' earnings, while initially lower, eventually surpass those of economic migrants. Citing the findings of The New Americans , the authors concluded There is little compelling evidence to suggest that the impacts of Minnesota's immigrants on taxpayers would be less positive than those suggested by such national analyses. Minnesota's immigrants tend to be somewhat younger and better educated than immigrants nationally, suggesting greater potential for earnings and tax revenues over time. The long-term impact of immigrants on taxpayers depends considerably on the earnings of immigrants' children and grandchildren, and this may depend on their success in Minnesota's schools. This report examined taxes paid by the foreign born in the Washington, DC, metropolitan area, which includes the District of Colombia and portions of suburban Maryland and Northern Virginia. It differs from other studies presented in this review by its exclusive focus and detailed analysis of foreign-born persons' tax contributions, without an analysis of their fiscal costs. According to the report, the Washington, DC, metropolitan area is relatively affluent, possesses a strong economy, and is home to many highly skilled and highly educated foreign born. The report also noted that the area's 1.16 million foreign-born residents made up 20% of the area's population in 2004, compared with the national foreign-born proportion of 12%. According to the report, foreign-born households contributed an estimated $9.8 billion in taxes in 1999, representing 18% of all taxes paid. Federal taxes accounted for almost three-fourths of all taxes paid by both foreign-born and native households. Foreign-born households in the Washington, DC, metropolitan area had relatively lower average incomes and paid an average of 28% of their incomes in taxes in 1999-2000, compared with 31% for native households. Differences, however, appeared at both ends of the income range, with foreign-born households in the highest earning groups paying a greater share of their incomes in taxes than native households, and those in the lowest earning groups paying a smaller share. According to the report, taxes paid by foreign-born households were positively correlated with naturalized citizenship status, educational attainment, English language proficiency, and household origins from most regions of the world except Central America and sub-Saharan Africa. This report's authors used 1990 and 2000 Census data to estimate economic and fiscal impacts of Arkansas' foreign-born population on the state in 2004. The report, which did not distinguish between legal foreign born and unauthorized aliens, estimated that the foreign born that year numbered 123,000, or 4.5% of the state's 2004 population. After accounting for money that foreign nationals sent back to their countries of origin (remittances), savings, and interest payments, the authors estimated that the total economic impact of the foreign-born population amounted to a $2.9 billion surplus through the effects of its purchasing power. Estimated expenditures for public services in 2004 were computed for the foreign born share of K-12 public education ($186 million), health care ($37 million), and criminal justice expenditures ($15 million), for a total of $237 million. The authors estimated 2004 state income tax revenues at $47 million, corporate income tax contributions at $5 million, and property tax contributions at $30 million, yielding a total estimated tax contribution by the foreign born of $82 million. The authors also estimated that Arkansas' foreign-born population paid $111 million in sales and motor vehicle use taxes. Taxes collected by the state as an indirect result of foreign born consumer spending were estimated at $47 million for income and property taxes paid by businesses, and $17 million for income, property, and consumer taxes paid by the employees of those same businesses. In sum, Arkansas' foreign born contributed an estimated $257 million in direct and indirect tax contributions to the state. After accounting for education, health care, and corrections costs, the authors estimated the fiscal impact to the state's budget as a $19 million net surplus, roughly $158 per foreign-born person. The report also emphasized the geographic concentration of economic benefits among four counties, the contribution the foreign born made on the state's manufacturing competitiveness, and the inability of localities to completely tap immigrants' purchasing power by marketing their goods and services to them. This study estimated and compared taxes contributed by and economic benefits received from foreign-born and native residents in Florida. Among the foreign born, no distinction was made between naturalized citizens, legal permanent residents, noncitizen aliens, and unauthorized aliens. The report focused exclusively on taxes paid and benefits (transfer payments) received annually for the period between 2002 and 2004. The authors did not evaluate costs of public services, such as education, health care, or criminal justice services, used by the foreign born for two reasons: the complexity of estimating the cost for all public services used (e.g., miles driven on roads, library services) and the explicit perspective of the authors who viewed education and health spending as investments rather than costs. The authors used data from the CPS Annual Social and Economic supplement (ASEC) that was incorporated into a U.S. Census Bureau tax return simulation model to estimate contributions from income taxes, FICA withholdings, and property taxes. To estimate sales taxes paid, the authors used an income-based model devised by the Institute on Taxation and Economic Policy. The resulting estimates indicated that the foreign born in Florida contributed $3,314 per capita in federal and FICA taxes compared to $3,554 for native residents. To estimate property taxes in the CPS, the Census Bureau statistically applies data from the American Household Survey. According to the authors, these data indicated that Florida foreign-born and native residents who were homeowners paid $388 and $448, respectively, in property taxes. However, a greater proportion of the foreign born (34%) than native residents (21%) in Florida rent rather than own, requiring additional estimates to account for indirect property tax contributions. To do so, the authors modeled income, property, and sales tax contributions based on income rather than homeownership. Including these estimates increased estimated per capita property tax contributions of foreign-born and native residents to $421 and $528, respectively. Using this model, the authors also estimated sales tax contributions for foreign-born and native residents at $1,020 and $1,180, respectively. To estimate receipts of transfer payment benefits, including cash benefits and other public assistance, the authors relied on the ASEC, which includes information on Social Security payments, Supplemental Security Income, disability income, veterans' benefits, unemployment compensation, Temporary Assistance to Needy Families (TANF), food stamps, housing subsidies, and energy assistance. The authors estimated that the foreign born received $1,619 in these public cash benefits and public assistance grants compared with $2,218 received by native residents. The authors also estimated the market value of Medicare and Medicaid benefits received. Foreign-born residents received an average of $1,255 in Medicare and $385 in Medicaid compared with $1,331 and $324, respectively, for native residents. Summing all tax estimates yields a total estimated per-capita tax contribution—from federal income, FICA, property, and sales taxes—of $4,756 for foreign-born residents compared to $5,262 for native residents, a difference of $506 or 11%. Summing all cash benefits and public assistance yields a total estimated per-capita public benefits receipt of $3,259 for foreign-born residents and $3,873 for native residents. The final net estimated difference between taxes paid and benefits received was an estimated positive contribution of $1,497 for foreign-born residents and $1,388 for native residents. This study estimated foreign-born residents' state and local tax contributions and costs for their public education, direct public assistance, and criminal justice services for one year, 2007. Unlike many studies that assess the impact of the foreign born as a single group, this analysis estimated fiscal impacts separately for naturalized citizens, legal permanent residents, and unauthorized aliens. The authors used 2007 American Community Survey (ACS) Public Use Micro Survey (PUMS) data and employed a method similar to that used by the Pew Hispanic Center to assign legal status to each of the roughly 3 million cases in the dataset. Tax information was either taken from the ACS or estimated using alternative data sources. Revenues were estimated separately for the following taxes: state income, county income, sales, food and beverage, property, federal income, and federal payroll. According to the analysis, in 2007 naturalized citizens, legal permanent residents, and unauthorized aliens contributed an estimated $370 million, $270 million, and $97 million, respectively, for all taxes except federal income and federal payroll taxes. Including the two latter taxes raised estimated contributions to $1,163 million, $902 million, and $256 million, respectively. The authors estimated three fiscal expenditures for the foreign born: primary and secondary public education, criminal justice (which included the cost of incarceration, policing, and court functioning), and public assistance receipts reported in the ACS (but not including Social Security). Public education costs dominated the three items estimated, accounting for $453 million, or 89%, of the $509 million fiscal cost total in 2007. Of this estimated $453 million expenditure, naturalized citizens, authorized foreign-born residents, and unauthorized aliens generated costs of $123 million, $149 million, and $181 million, respectively. Subtracting estimated fiscal costs from estimated fiscal revenues yielded an estimate for the net fiscal impact at the state level of $234 million for naturalized citizens, $103 million for authorized foreign-born residents, and -$109 million for unauthorized aliens in 2007. However, when federal tax estimates were included with revenues, the net impact increased to $1,027 million, $735 million, and $50 million, respectively. The authors addressed several methodological omissions in their report. For instance, unlike several comparable state-level analyses, the authors did not estimate fiscal impacts of foreign-born residents' health care utilization. They justified this omission by asserting that data limitations made such costs too difficult to estimate and that other evidence suggested such costs would be relatively modest. Similarly, they did not estimate foreign-born residents' revenue contributions for several Indiana taxes, including fuel, "sin," and corporate taxes. Citing the need to put some parameters around a potentially onerous and excessive series of estimates on both the cost and revenue side, the authors contended that they produced conservative estimates that would not change substantially with more detailed analyses. This report estimated costs for providing critical public services to foreign-born residents in Arizona in 2004. It also estimated their tax contributions as well as other economic benefits not discussed herein. The author relied on the IMPLAN economic impact assessment model to compute estimated fiscal impacts. The report estimated these impacts for all foreign-born residents, distinguishing only between naturalized citizens and noncitizens. It concluded that foreign-born residents' total estimated state revenue contributions of $2.4 billion exceeded the estimated $1.4 billion in costs to provide education, health care, and law enforcement services. Costs to the state in 2004 were estimated as follows. The analysis used English Language Learner (ELL) enrollment to proxy foreign-born children in public schools. Such ELL programs cost the state an estimated $540 million. Note that this figure includes only ELL program costs and excludes all other public education costs. The foreign born accounted for an estimated $150 million in uncompensated health care costs and $640 million to serve them through Arizona's Medicaid program. Of this total $790 million figure, $620 was attributed to noncitizen utilization. Foreign-born residents' incarceration costs in 2004 totaled $91 million, almost all of which was for noncitizens. The author estimated total state tax revenues attributable to immigrant workers at $2.4 billion, with naturalized citizens and noncitizens contributing an estimated $860 million and $1.5 billion, respectively. Personal taxes, business taxes, and sales taxes accounted for 15.6%, 41.0%, and 43.4%, respectively, of the total $2.4 billion in tax revenues generated. This report, which broadly evaluated economic impacts of all foreign born in Nebraska, included an analysis, Fiscal Contribution and Social Cost Pressures from the Immigrant Population in Nebraska, that estimated public service costs and tax revenues for the state's foreign-born and native residents. In 2006, the foreign-born population of 99,500 represented 5.6% of the state's total population of 1.77 million. Using 2006 ACS PUMS and other data, the authors estimated that the foreign born contributed $155 million in property, income, sales, and gasoline taxes in 2006, representing 4.6% of total state revenues from those sources. In turn, foreign-born residents consumed an estimated $145 million in food stamps, public assistance, health services, and public education, representing 4.3% of state expenditures on these services. Native residents contributed $3,243 million in tax revenues and consumed $3,239 million of the same public services, representing 95.4% and 95.7%, respectively, of state total amounts. Foreign-born residents' per-capita revenue contributions and public service consumption, at $1,554 and $1,455, respectively, were lower than that of native residents ($1,944 and $1,941, respectively), while their ratio of contributions to costs, at 1.07, was slightly higher than that of native residents (1.00). This demographic and economic profile of the foreign born in Massachusetts used 2007 ACS data to compare estimates of foreign-born and native residents' revenue contributions and public service costs. The authors selected only items that could be readily estimated: state, local, sales, excise, and property tax contributions; expenditures for public school enrollment; expenditures for institutionalization in a variety of facilities; and transfer payments for food stamps, public assistance, Supplemental Security Income (SSI), unemployment compensation, and Social Security. Federal income taxes were not estimated. The study found that differences between foreign-born and native residents' tax contributions and public service expenditures and transfer payments were relatively modest compared to the revenues and expenditures themselves. Foreign-born residents' estimated tax contributions were less than those of native residents, a finding the authors attributed to their relatively lower incomes and wealth. For instance, foreign-born households' lower state tax payments ($2,700) compared to those of native households ($3,600) in 2005 were explained by differences in average adjusted gross incomes of $61,500 versus $77,000, respectively. The study distinguished between average incomes of "recent" foreign born arriving in the United States between 1997 and 2007 ($46,146) and those of "established" foreign born arriving earlier ($70,142) to illustrate the narrowing of the foreign born and native income gap with foreign-born residents' increased experience in the United States. Similar results were found for native residents, established foreign-born residents, and recent foreign-born residents who paid $3,016, $2,913, and $2,431, respectively, in property taxes in 2007. Estimates of sales and excise taxes indicated that foreign-born households, who made up 15.9% of Massachusetts households in 2006, accounted for 14.5% of the state's sales and excise tax receipts. Using data from the following year, the authors estimated that children from foreign-born households, which made up 15.5% of all Massachusetts households in 2007, accounted for 19.1% of all school enrollments. The authors attributed a third of this proportional difference of 3.6% to the relatively younger ages of foreign-born household heads. If foreign-born households had possessed identical school enrollment rates to those of native households, the authors estimated that 39,000 fewer foreign-born children would have been attending public schools, reducing educational expenditures by an estimated $440 million, based on an $11,210 per-pupil cost in the 2005-2006 school year. Foreign-born residents across all age groups were less likely to reside in mostly taxpayer-funded institutions such as correctional facilities, juvenile facilities, nursing homes, skilled nursing facilities, residential schools, and psychiatric institutions. The authors estimated that had the foreign born been institutionalized at similar rates as natives in 2007, they would have added 5,100 individuals to the state's institutionalized population, at an estimated cost of $300 million. The authors' analysis of transfer payments revealed relatively minor differences between foreign-born and native residents, except for Social Security. In 2007, an estimated 8% of all foreign-born households received food stamps (Supplemental Nutrition Assistance Program or SNAP) versus 6.2% of native households. In the same year, an estimated 1.5% of foreign-born residents received an average of $3,878 per person in public assistance, compared to an estimated 1.4% of native residents who received $4,006. Between 2005 and 2007, an estimated 3.3% of foreign-born wage-earners received an average of $5,563 per person each year in unemployment compensation, compared with 2.6% of native wage-earners who received $5,362. Recent foreign-born residents were less likely (0.5%) than established foreign-born residents (4.7%) to receive unemployment compensation, and the amounts they received were also less, an estimated $3,031 versus $5,705. However, for Social Security, an estimated 11.4% of eligible foreign-born residents received an average of $9,763 per person in 2007, compared to 18.1% of native residents who received $11,146. In sum, in 2007 16.4% of all foreign-born residents received an estimated average of $8,674 in total transfer payments compared to 22.3% of all native residents who received $10,453, a difference in per-capita transfer payments of $1,779. Most of that difference (78%) stemmed from differences in Social Security receipts. This section reviews selected studies that examine fiscal impacts to federal, state, and local governments of just the unauthorized alien population. Similar to the section of this report above that reviewed studies of the entire foreign-born population, this section begins by reviewing an authoritative report that reflected a prominent policy debate in the mid-1990s on the fiscal impact of unauthorized aliens. It is followed by policy studies that quantified fiscal impacts of just the unauthorized alien population. Only studies with clear explanations of their estimate methodologies were included. Fiscal impact analysis for unauthorized aliens poses greater challenges than that for all foreign-born persons. Two reasons explain the absence of reliable estimates. First, reliable estimates of public service costs and tax revenues of unauthorized aliens require the following: accurate counts of unauthorized aliens and accurate measures of their socioeconomic characteristics, reliable and complete information on public service utilization and associated costs, and reliable and complete information on tax and withholding revenue generated by unauthorized aliens. Since these data generally do not exist, many studies are based on assumptions of the very items they are trying to estimate. Without additional data, net fiscal impacts of unauthorized aliens remain estimates, with varying and unknown margins of error. Second, as with research on the total foreign-born population, studies of unauthorized aliens analyze different services and revenues, hindering cross-study comparisons. State and local governments bear much of the cost of providing public services to unauthorized aliens residing in their jurisdictions. The most expensive public services are public education, health care, and law enforcement, although such spending for unauthorized aliens often makes up a small proportion of these governments' total spending. Given these challenges, researchers attempting to quantify the costs and revenues of unauthorized aliens used more circumscribed methodologies. Not all studies estimated both public service costs and revenue contributions. Many studies analyzed limited geographic regions, such as border communities and states, and/or limited their analyses to discrete issues, such as the cost of medical care or criminal justice services. Many relied on published data and quantitative modeling to estimate fiscal impacts. Some overcame the lack of legal status information in conventional data sets by surveying immigrant communities and asking immigration status or by asking local agencies to estimate the cost of public services provided to unauthorized aliens. Other studies used proxies to determine unauthorized status, such as the combination of being foreign-born and earning low wages. Each method has strengths and limitations, and none provided estimates that all researchers accept. In 1994, the U.S. General Accounting Office (GAO), now named the U.S. Government Accountability Office, was commissioned to examine estimates of the net cost of unauthorized aliens. In response, it issued a 1995 report, Illegal Aliens: National Net Cost Estimates Vary Widely , in which it examined 13 studies published between 1984 and 1994 that estimated the net costs of unauthorized aliens. Only three of these studies provided national estimates, which GAO examined in detail. GAO concluded that national studies of the net costs and revenues of unauthorized aliens in the United States varied considerably, and they were unable to definitively quantify the fiscal impact of unauthorized aliens. The studies examined in the GAO report were (1) "The Costs of Immigration" by Rice University Professor Donald Huddle; (2) "How Much Do Immigrants Really Cost? A Reappraisal of Huddle's 'The Cost of Immigrants'" by the Urban Institute; and (3) "A Critique of the Urban Institute's Claims of Cost Free Immigration: Huddle Findings Confirmed," by Huddle. In their review of the three studies, GAO found that approaches used to estimate costs were "often based on assumptions whose reasonableness is unknown," and contended that data limitations prevented a fair assessment of the validity of several assertions made by the researchers. GAO noted that few datasets were available on unauthorized aliens' use of public services and payment of taxes, and that the three studies used indirect and varying approaches that made them difficult to compare. GAO asserted that small changes in assumptions often yielded large differentials in net estimated costs. GAO also stated that unauthorized aliens generate revenues that offset some costs governments incur. GAO noted that the studies indicated that many unauthorized aliens "pay taxes, including federal and state income taxes; Social Security tax; and sales, gasoline, and property taxes," but researchers disagree on the amount of revenues generated and the extent to which they offset government costs. GAO concluded from reviewing all 13 studies initially examined that unauthorized aliens generate more costs than revenues, although the magnitude of those costs was a subject of "continued debate." Major conclusions of the three more comprehensive studies that GAO reviewed thoroughly in its report are summarized below. Huddle's study, "The Costs of Immigration," estimated the national net cost of unauthorized aliens to federal, state, and local governments at $11.9 billion in 1992. Huddle obtained estimates of per-capita tax revenue collected from unauthorized aliens from a 1992 Los Angeles County study and extrapolated these estimates to arrive at a national estimate of taxes paid by all unauthorized aliens in the United States. The Urban Institute's authors acknowledged that Huddle's approach was theoretically valid. Nonetheless, they argued that because the Los Angeles study underestimated taxes paid by unauthorized aliens, its estimates were not representative of the country as a whole, thus discrediting Huddle's public service cost estimates. The authors also asserted that Huddle overestimated U.S. worker job displacement. Re-estimating the net cost for unauthorized aliens using its own "corrected" assumptions, the Urban Institute authors estimated that unauthorized aliens cost the nation a net $1.9 billion, considerably lower than Huddle's $11.9 billion estimate. Following the Urban Institute review, Huddle updated his analysis, producing a revised estimated net cost of unauthorized aliens of $19.3 billion in 1993, which not only supported his initial findings but increased the estimated net cost by $7.4 billion. Central among the differences between Huddle's and the Urban Institute's analyses was the treatment of Social Security contributions. The Urban Institute treated such contributions as revenues and included them in their analysis, while Huddle treated them as purchases of future benefits and excluded them from his study. The United States/Mexico Border Counties Coalition received a grant from the Department of Justice to measure costs to the general funds of all 24 border counties for providing law enforcement, criminal justice, and emergency medical services to unauthorized aliens for FY1999. Since many services were provided to noncitizens without ascertaining immigration status, it was unclear how accurately the data measured the unauthorized alien population. Four university researchers collected data by conducting site visits and interviewing governing board members, department heads, judicial officials, division heads, county managers, and information management specialists. The Border Patrol and state agencies were consulted. The study used CPS and Census data, border crossing data from the former Immigration and Naturalization Service (INS), Border Patrol apprehension data, newspaper accounts, public documents, congressional hearings, and previous research. It found that border counties in FY1999 spent $23.3 million in Texas, $5.0 million in New Mexico, $24.2 million in Arizona, and $55.7 million in California to provide law enforcement, criminal justice, and emergency medical services consumed by unauthorized aliens. The average per-capita cost for all persons residing in the 24 county region was $17.31 per year. This United States/Mexico Border Counties Coalition study estimated the cost of emergency medical services provided to unauthorized immigrants using statistical modeling. The methodology, referred to as cluster analysis, identified non-border counties that "capture essential characteristics of each border county with respect to the demand for emergency medical services." The researchers noted the challenge of finding comparable non-border counties that match U.S.-Mexico border counties, given that the latter are unique in many important dimensions, and they acknowledge that this complexity may have impacted their results. After identifying 117 non-border counties with a roughly comparable demand for emergency medical services that could serve as a comparison group, the researchers constructed a linear regression model to express unreimbursed hospital costs as a function of five critical variables, including whether a county lies on the border. Applying the value of the resulting coefficient to average hospital costs yielded an estimate of $189.6 million spent by all hospitals in the 24 Southwest border counties to provide uncompensated care to unauthorized aliens in 2000. This amount, stemming mostly from emergency medical treatment, represented about 25% of all uncompensated care by these hospitals. This study by the Center for Economic Development at the University of Illinois at Chicago surveyed 1,653 legal and unauthorized aliens living in the Chicago metro area. To capture the unauthorized population in their study, researchers conducted the survey through community-based organizations, yielding a non-random sample. It remains unclear whether the area surveyed is representative of other geographic areas. The authors asserted that their conclusions related to recent low-wage workers of Latin American and Eastern European ancestry who were most likely to seek services of social-service providers. The estimate was based on the survey data, 2001 CPS data, and INS estimates of the unauthorized alien population living in Illinois in 2001. The study estimated that unauthorized aliens in the Chicago area spent $2.89 billion annually and generated an additional $2.56 billion in local spending. Costs from public service utilization were not addressed in the study. This study by the Center for Immigration Studies used CPS and Census data as well as the methodology found in two frequently cited studies of fiscal impacts of immigration: The New Americans (1997) and Immigrants in New York: Their Legal Status, Incomes and Taxes (1998). The study used households as the unit of analysis, arguing that the household is the primary unit through which taxes are paid and public services used. Given the lack of legal status information in the CPS, the study statistically assigned such status to each individual represented in the CPS dataset based on socioeconomic characteristics such as age, gender, education, and country of origin. Each household's legal status was then designated according to the assigned status of the household head. The study estimated that in FY2002, unauthorized households paid approximately $4,200 in all forms of federal taxes (e.g., payroll taxes, Medicare taxes, income taxes), but consumed about $6,950 worth of federal public services, for an average net federal cost of $2,736. The Office of Strategic Planning and Results Management for the State of Minnesota reported that in FY2005, unauthorized aliens cost Minnesota between $176 million and $188 million. The study used the estimates of the unauthorized population from Pew Hispanic Center researcher Jeffrey Passel. The study estimated costs of public services to unauthorized aliens but did not consider taxes and other public revenues. To estimate education costs to the state, the study utilized data from the Urban Institute to estimate the number of unauthorized alien children ages 5 to 18 in the state and used the average daily operating expenditures per child for the school year. Estimates of the costs to Minnesota's health assistance programs were provided by the Minnesota Department of Health and Human Services. Estimates on incarceration costs were provided by the Minnesota Department of Corrections. The study concluded that Minnesota spent an estimated $176 million to $188 million on public services for unauthorized aliens (after federal reimbursement for some health costs), including $146 million to $158 million spent for K-12 public education, $17 million spent for public assistance health care programs, and $13 million spent for incarceration. This study by the Comptroller of the State of Texas estimated the fiscal impact of unauthorized aliens in Texas using population estimates from the Pew Hispanic Center; reports by the Government Accountability Office (GAO) and the Border Counties Coalition; and the state's own information on public service costs and tax revenues. The report estimated that unauthorized aliens consumed an estimated $1.16 billion in state services, including $968 million for K-12 and public higher education, $58 million for healthcare, and $130.6 million for incarceration. To estimate state revenues contributed by unauthorized aliens, the study used estimates from the comptroller's model of the tax impact on households in Texas given a specific average income level. The model also relied on Pew estimates of unauthorized aliens in Texas and the income and demographic characteristics of unauthorized aliens nationwide. Revenue estimates were based on sources that reflected spending by unauthorized aliens such as utility tax revenues, lottery revenues, and revenues from other consumer taxes. The study estimated that in FY2005, unauthorized aliens contributed $1,581 million, or 3.6%, of state revenues analyzed in the analysis, including $582 million, or 2.9%, of total school property tax revenues. Subtracting the estimated expenditures of $1,156 million from the estimated revenues of $1,581 million yielded an estimated net fiscal surplus of $425 million at the state level. At the local level, however, the report found that local governments paid $1.44 billion in uncompensated health care and law enforcement costs that were not reimbursed by the state. The comptroller estimated that local hospitals spent $1.3 billion and local jails spent $141.9 million on services to unauthorized aliens. The study also estimated that unauthorized aliens paid at least $513 million in local taxes, yielding a net fiscal deficit at the local level of $929 million. The study concluded that while state revenues exceeded state expenditures for unauthorized aliens, local governments and hospitals had the reverse experience, with spending on unauthorized aliens exceeding revenues paid. In this study, researchers extrapolated results from the 1992 Los Angeles County study to the entire United States. The study used the estimated finding that the total medical costs for the nonelderly unauthorized alien population in Los Angeles County was $887 million and extrapolated it to the nation. The authors then used additional assumptions taking into account the unique socio-demographic characteristics of Los Angeles County to translate the costs to the national level. The analysis yielded an estimate of $1.1 billion spent on medical costs for nonelderly, unauthorized aliens in the United States in 2000, representing 1.3% of all such public spending. Total public, private, and personal medical costs for nonelderly, unauthorized aliens were estimated at $6.5 billion, or 1.5%, of national public, private, and personal medical costs, a smaller percentage than their 3.2% population share. Of this amount, an estimated $2.4 billion, or 36%, was paid by unauthorized aliens, leaving $4.1 billion in estimated unreimbursed public and private spending on medical care. Of this amount, $1.1 billion came from public sources. The study concluded by estimating per-household expenditures for medical care for the foreign born, and specifically unauthorized aliens. It computed an estimate of $56 as the public portion paid by each U.S. household to fund medical care for each nonelderly foreign-born individual. That figure amounted to only $11 paid by each U.S. household for each nonelderly, unauthorized alien because of lower health care utilization rates and less reliance on public providers. This study by the Bell Policy Center used demographic estimates by the Pew Hispanic Center to estimate how much Colorado spent to provide federally mandated services (K-12 education, emergency medical care, and incarceration) to unauthorized aliens. The authors estimated that Colorado spends approximately $224.9 million a year on services to unauthorized aliens, including $175.6 million on public primary and secondary education, $31.3 million on emergency Medicaid, and $18.0 million on incarceration. The cost of providing public primary and secondary education was calculated by taking the estimated number of school-aged unauthorized aliens in Colorado and multiplying that by the average cost per student per year in Colorado ($6,167). To estimate the number of primary and secondary students who were unauthorized alien children in Colorado, the study used figures from the Pew Hispanic Center, which estimated that 16% of the unauthorized alien population in 2005 was under age 18 and that Colorado's unauthorized alien population numbered between 225,000 and 275,000. The study assumed that the age distribution of Colorado's unauthorized alien population was similar to the nation's. Because 28.4% of Colorado's under-18 population was under age 5, the study assumed that 28,480 unauthorized alien children between ages 5 and 17 lived in Colorado. Incarceration costs were calculated by multiplying the daily prisoner incarceration cost by the number of inmate days of "verifiable illegal aliens" for which the state and some Colorado counties received SCAAP funding in 2004. In an accompanying study to the one discussed above, the Bell Policy Center estimated state and local tax revenues paid by unauthorized alien households. The study found that unauthorized alien households paid between $159 million and $194 million in state and local sales taxes, income taxes, and property taxes in 2005. Using the finding from their companion study, the authors estimated that the taxes paid by unauthorized alien households compensated for 70% to 86% of state and local governments' costs of providing federally mandated services to unauthorized aliens. To estimate taxes paid by unauthorized aliens, the researchers used tax data on Colorado provided by the Institute on Taxation and Economic Policy's Microsimulation Tax Model. The study also used estimates by the Pew Hispanic Center on the number of unauthorized aliens living in Colorado, their average household size, and their average income. The researchers estimated the amount of remittances sent to unauthorized aliens' home countries, and adjusted sales tax estimates downward to account for the effects of remittances on consumer spending. The study estimated that in 2005, an unauthorized alien household in Colorado paid an average of $1,861 in taxes: $1,265 in sales taxes, $491 in income taxes, and $105 in property taxes. It estimated that all unauthorized alien households in Colorado paid between $159 million and $194 million in taxes, including $125 million to $151 million in sales taxes, $24 million to $30 million in state income taxes, and $10 million to $13 million in property taxes. This policy brief by the Missouri Budget Project (MBP) used the Pew Hispanic Center's range of estimates of Missouri's unauthorized alien population—35,000 to 65,000 individuals, or 15,285 to 31,707 families—and Pew's national average annual income estimate of $27,400 for an unauthorized alien family. Applying an unpublished methodology provided by the Institute on Taxation and Economic Policy, MBP estimated sales and property tax payments of unauthorized aliens in 2005 at $25 million to $50 million and state income tax payments at $4 million to $7 million. Estimates of public service costs were limited to K-12 education. They were computed by multiplying the estimated unauthorized alien population by the proportion expected to be enrolled in grades K-12, and multiplying that figure by the state's share of public education costs of $3,000 per child. The authors thus estimated a total state cost of between $17.5 million and $32.6 million for educating children of unauthorized alien parents. The authors asserted that remaining education costs borne by local districts were outweighed by unauthorized aliens' contributions to local economies through consumer purchases but provided no supporting evidence. This report, by the Fiscal Policy Project of New Mexico Voices for Children (NMVC), an advocacy organization, presents estimates of public education costs and state tax revenues of unauthorized aliens in New Mexico for 2004. NMVC focused exclusively on education costs. Annual per-student expenditures incurred at the state and local level were estimated at $7,331, with the remaining difference between that and the total per-pupil cost of $8,838 covered by the federal government. Using an estimate of 40,000 unauthorized aliens and 6,700 students from the former Immigration and Naturalization Service (INS), the study estimated the state's total education costs at $49.1 million. Using the Pew Hispanic Center's lower bound estimate of 55,000 unauthorized aliens and 9,200 students yielded an estimate of $67.4 million. Both estimates excluded the federal portion of education costs. The study also estimated total state and local tax revenues from unauthorized aliens at between $50.4 million and $69.3 million, the higher figure of the range exceeding unauthorized alien children's cost of public education to state and local taxpayers. No other fiscal impacts were estimated in the study. This study compared tax revenues and social service costs of unauthorized aliens in Iowa in 2007. The analysis began with a national estimate for the average annual income of an unauthorized family ($27,400) computed by the Pew Hispanic Center. This figure was then adjusted to account for circumstances facing unauthorized alien families, such as having unrecorded income and remitting income abroad. Using this adjusted income estimate, Iowa's estimated unauthorized alien population size, and an estimate of the proportion of unauthorized aliens whose incomes were formally recorded, the authors computed estimated withholdings for state taxes, state unemployment insurance taxes, Social Security, and Medicare for unauthorized alien employees and their employers. To compute the cost of public education, emergency medical care, and incarceration for unauthorized aliens, the authors applied the costs of such services used by legal immigrant families with similar incomes. The net fiscal impact computed by the study depended on the size of the unauthorized alien population in Iowa, which ranged from an estimated 55,000 to 85,000 persons. That range in turn yielded an estimated range of 24,017 to 37,118 unauthorized alien families, based upon an average nationwide unauthorized family size of 2.29 persons per family. The authors estimated that the state's unauthorized aliens contributed between $40 million and $62 million in state revenue through property, sales, excise, and income taxes, and they cost the state an estimated $54 million to $81 million in K-12 public education, emergency medical care, and incarceration services. The authors did not estimate costs of other public services. Unlike legal immigrants, unauthorized aliens in Iowa are ineligible for unemployment benefits, in-state public university tuition, the Iowa children's health insurance program, and child-care assistance. The study, however, estimated that unauthorized aliens contributed between $52 million and $81 million in unemployment insurance, Social Security, and Medicare withholdings. This report issued by the Comptroller of the Treasury in Tennessee used several different data sources to estimate public education, emergency medical care, and law enforcement costs to the state of Tennessee attributed to unauthorized aliens. Tax revenues of unauthorized aliens in the state were not estimated. The report used the number of students lacking proficiency in English (English Language Learners or ELLs) as a "rough" estimate of the number of unauthorized aliens in elementary and secondary schools in Tennessee. Given an estimated 26,707 ELL students, and average statewide operating expenditures per student of $7,469, the report estimated that state and local funding for ELL students totaled $32 million in FY2006. In addition, the study noted that the Tennessee General Assembly appropriated $14.9 million in FY2007-FY2008 to lower teacher-student ratios in ELL classes. The state's health care program, TennCare, reportedly spent an estimated $4.9 million, including $1.8 million in state funds, on emergency treatment for 1,300 unauthorized aliens in FY2005. In addition, the authors stated that in July 2006, TennCare covered emergency care for 62 unauthorized aliens at a cost of $1.7 million. Using the number of children who are ineligible for TennCare as a proxy for unauthorized status, the authors estimated that the Tennessee Department of Children's Services spent only about $8,000 to provide 20 to 25 unauthorized alien children with non-emergency medical care for roughly three months. The report estimated that the Tennessee Department of Corrections spent an average of $3.2 million annually incarcerating unauthorized aliens. This number was calculated by checking inmate records in July 2006 to determine the number of inmates with detainers requiring that the Department of Homeland Security, Immigration and Customs Enforcement (ICE) be notified before the offender was released. The researchers found 152 inmates with such detainers, and then multiplied that number by 365 days per year and again by the average daily incarceration cost of $57.33. Similar to their 2001 report (discussed above), the United States/Mexico Border Counties Coalition measured the public cost to all 24 border counties for law enforcement and criminal justice services needed to process unauthorized aliens apprehended on state felonies or multiple misdemeanors, for FY1999 through FY2006. County operations included patrol, investigation, sheriff administrative operations, detention, lower and trial courts, district and county attorneys and clerks, indigent defense, adult probation, and juvenile probation and detention. In some cases the costs also included the use of the judicial system for civil purposes. Researchers collected data by visiting sites and interviewing governing board members, department heads, elected officials, data specialists, budget specialists, judicial officials, and county managers. The Border Patrol was also consulted. Estimates for each department were based on their general fund budgets and the estimated portion of the workload attributable to unauthorized aliens. The researchers noted that county agencies did not track the legal status of clients. The report estimated that between FY1999 and FY2006, the 24 border counties spent a cumulative $1.23 billion on services to process unauthorized criminal aliens through the law enforcement and criminal justice system. For just FY2006, these border counties spent $191.9 million, of which Arizona spent $26.6 million, California $82.6 million, New Mexico $7.3 million, and Texas $75.4 million. This report, undertaken by the Federation for American Immigration Reform (FAIR), estimated the net fiscal impact of unauthorized aliens for the United States at the federal, state, and local levels. The authors estimated net fiscal deficits at the federal ($19.3 billion) and state and local ($79.9 billion) levels, yielding an estimated national net fiscal deficit of $99.2 billion, and representing an estimated $1,075 cost to each household headed by a U.S. citizen. The authors of the report began with several assumptions. They estimated the unauthorized alien population at 13 million. They included in their estimates the fiscal impacts of children born to unauthorized aliens both abroad (1.3 million) and in the United States (3.9 million). The authors assumed a population size of 8.4 million working unauthorized aliens, half of whom worked in the underground economy and did not pay taxes. Based on these initial assumptions, the authors estimated the net fiscal costs at the federal level of the unauthorized population at $28.8 billion, comprised of public expenditures for education ($2.1 billion), medical services ($5.9 billion), justice administration ($7.8 billion), welfare benefits ($4.7 billion), and general expenditures ($8.2 billion). The authors estimated net federal tax receipts from the unauthorized alien population at $9.5 billion, comprised of Social Security ($7.0 billion), Medicare ($1.6 billion), excise and miscellaneous taxes ($2.5 billion), employer taxes ($0.6 billion) and income taxes (-$2.3 billion). This net deficit of $2.3 billion estimated for income taxes derives from estimated income tax revenues ($1.6 billion) less claims for the Earned Income Tax Credit ($1.8 billion) and for the Child Tax Credit ($2.2 billion). Subtracting all revenues ($9.5 billion) from costs ($28.8 billion) yields an estimated net fiscal deficit at the federal level of $19.3 billion. The authors produced these estimates using basic computational methods that relied on assumptions about what proportions of unauthorized aliens used a particular program or service and multiplying that proportion by the total program cost. The authors computed similar estimates for the unauthorized population at the state and local level. Total costs were estimated at $83.9 billion, comprised of: K-12 education ($40.9 billion); services to K-12 students with limited English proficiency ($8.3 billion); university education ($0.2 billion); Medicaid ($8.6 billion); the State Children's Health Insurance Program (SCHIP) ($2.3 billion); justice administration ($8.7 billion); welfare benefits ($5.4 billion); and general expenditures ($9.6 billion). Net state and local tax receipts were estimated at $4.0 billion, which consisted of property taxes ($1.4 billion); sales taxes ($2.3 billion); and income taxes ($0.3 billion). Subtracting all revenues ($4.0 billion) from costs ($83.9 billion) yields an estimated net fiscal deficit at the state and local level of $79.9 billion. Cost and revenue estimates for each state are presented separately in the FAIR report. As Congress addresses issues related to the current economic downturn and budgetary constraints, attention might be given to the fiscal impacts of changes in immigration policy. While such considerations have been a long-standing interest of Congress, they receive renewed attention in times of fiscal stress because they represent the intersection of two prominent public policy issues: immigration policy governing the categories and numbers of foreign born admitted to the United States, and budget concerns over public service costs. Concerns about public service use by the foreign born partly explain why Congress passed the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), which statutorily barred many legal permanent residents and other noncitizens from many federal assistance programs. Despite the limited scope, computing net fiscal impacts of either the total foreign-born population or the unauthorized alien population—the difference between taxes paid and the cost of public services consumed—remains challenging. Methodological hurdles limit the degree to which analysts can produce viable results comparable across time periods, geographies, and populations. Obstacles include datasets that have limited information on legal status, differences in the costs and revenues analysts chose to analyze, and the treatment of U.S.-born children. While a number of state-level policy studies reviewed in this report began with Pew Hispanic Center estimates of the unauthorized alien population, they diverged in what public service costs and revenue streams were analyzed. In some cases, the lack of data influenced what was quantified. Nevertheless, several recurring themes appeared throughout many of the studies considered in this report. Studies of both the total foreign-born population and the unauthorized alien population suggest that foreign-born residents' age composition substantially affects their net fiscal impact. The foreign born, like the native born, impose their largest costs on U.S. taxpayers as children through their consumption of public education, and as the elderly through their consumption of public health services from programs like Medicare and their receipt of Social Security retirement benefits. Yet, the majority of the foreign born who come to the United States as young adults and reside permanently pay taxes and contribute to programs like Social Security for most of their working lives. The relatively young ages at arrival for most foreign born help explain why many fiscal impact studies reviewed by the authors of The New Americans, for example, found that foreign-born residents over the long term generated net fiscal surpluses. Educational attainment of the foreign-born population also remains a critical determinant of net fiscal impacts. Findings from the seminal study, The New Americans , which received empirical support from several subsequent academic studies reviewed in this report, bear reiteration. The study estimated that foreign-born residents with less than a high school education created a long-term deficit of $18,000, while those with more than a high school education generated a long-term surplus of $275,000. These figures illustrate the degree to which one sophisticated estimation procedure yields substantially different fiscal impacts by varying one key characteristic: education. Fiscal impacts differ at the state and federal levels. Differences varied according to which contributions and public services were considered, what time frame was used, and the taxing scheme of the state in which the study was undertaken. Hypothetically, a legal permanent resident could contribute more federal taxes than the cost of Social Security, Medicare, and other federal public services he and his family consume in a given year, yielding a net fiscal surplus at the federal level. However, if his children attended public schools, whose costs are borne by local residents through state and local income and property taxes, he and his family could generate a net fiscal deficit at the state level during the same year. Foreign-born residents' relatively young age distribution accentuates the degree to which states and localities incur greater fiscal costs from the foreign born than the federal government. Federal programs such as Social Security and Medicare are oriented toward assisting the elderly, while state and local level jurisdictions are often responsible for services consumed by younger persons, such as public education and criminal justice administration. Studies of the fiscal impact of unauthorized aliens reach less consensus than those of the total foreign-born population. Three national estimates of the net fiscal impact of unauthorized aliens evaluated in a 1995 GAO report varied considerably and left the agency unable to definitively quantify such impacts. Subsequent state-level studies emphasized fiscal impacts from the most costly public services: public education, health care, and law enforcement. Many also estimated tax and other fiscal contributions. Studies estimating fiscal impacts for unauthorized aliens were more likely to yield estimated net fiscal deficits than those that estimated fiscal impacts for all foreign born. On average, unauthorized aliens tend to be younger and less educated, thereby earning lower wages and salaries than all foreign-born workers. As a consequence, they are more likely to use public education for their children and contribute relatively less in tax revenues compared to all foreign born. However, deriving more specific conclusions or estimates from studies of unauthorized aliens reviewed in this report remains elusive due to differences in study methodology and variation in costs across states where these analyses were conducted. Policy analyses reviewed in this report illustrate two key findings. First, both the noncitizen foreign born and many unauthorized aliens can generate significant fiscal expenditures. Moreover, the relative pervasiveness of document fraud among unauthorized aliens working in the formal economy suggests that some portion of those nominally ineligible for public services can still obtain them. Second, these analyses also indicate that the noncitizen foreign born and many unauthorized aliens pay taxes at all government levels and contribute to the Social Security program from which they may never obtain benefits. | This report reviews estimates of fiscal impacts to the federal, state, and local governments of the foreign born who reside in the United States. It examines the academic and policy literature on fiscal impacts of two populations: all U.S. foreign born and unauthorized aliens. Computing such fiscal impacts involves numerous methodological and conceptual challenges, and resulting estimates vary considerably according to the assumptions used, including those about the time frame considered, the treatment of U.S.-born children, the unit of analysis used, and which costs and revenues are included. For the total foreign-born population, the findings of a 1996 analysis commissioned by the National Research Council entitled The New Americans remain authoritative and relevant. The report estimated that each new immigrant at that time, with his or her descendents, would generate an average net fiscal surplus. The authors illustrated how their estimate varied according to foreign-born residents' age composition and educational attainment. Varied assumptions about education generated substantially different impacts. For instance, immigrants with above-average education generated a considerably larger than average net fiscal surplus; those with below-average education levels generated a net fiscal deficit. Reducing the time frame of the analysis to fewer generations changes the average net fiscal surplus into an average net fiscal deficit. This study and others confirm that the foreign born, like the native born, impose their largest costs on U.S. taxpayers as children, through their consumption of public education, and as the elderly, through their consumption of government-funded public health programs. Yet, the majority of the foreign born come to the United States as young adults, where they pay taxes and contribute to programs like Social Security for most of their working lives. Relatively young ages at arrival for most foreign born help explain why many fiscal impact studies found that foreign-born residents generated net fiscal surpluses over the long term. Findings from all of the studies reviewed in this report indicate different impacts at the state and federal levels. Many federal programs, such as Social Security and Medicaid, are oriented toward assisting the elderly, while many state and local level jurisdictions are responsible for services consumed by younger persons, such as public education and criminal justice administration. Foreign-born residents' relatively young age distribution thus accentuates the degree to which states and localities incur greater fiscal costs from the foreign born than the federal government. Fiscal impact studies of unauthorized aliens reach less consensus than those of the total foreign-born population. Three national estimates evaluated in a 1995 General Accounting Office (GAO) report varied considerably and left the agency unable to definitively quantify such fiscal impacts. Subsequent state-level studies emphasized fiscal impacts of costly public services: public education, health care, and law enforcement. Many estimated tax and other fiscal contributions. Studies estimating fiscal impacts for unauthorized aliens are more likely to yield estimated net fiscal deficits than those estimating fiscal impacts for all foreign born, because unauthorized aliens, on average, tend to be younger and less educated. Consequently, they are more likely to use public education for their children and contribute relatively less in tax revenues compared to all foreign born. Given their unauthorized status, they are also less likely themselves to receive public benefits, although their U.S.-born children may be more likely to qualify for such benefits. However, deriving more specific conclusions or estimates from studies of unauthorized aliens reviewed in this report remains elusive due to variation in study design and methodology. |
The United States acts to advance U.S. foreign policy and national security goals and respond to global development and humanitarian needs through its foreign assistance programs. Following the September 2001 terrorist attacks, foreign aid gained importance as a "vital cornerstone," along with diplomacy and defense, in U.S. national security strategy. The Bush Administration reoriented foreign assistance programs, particularly to "front line" states in the war on terrorism. For many countries, the U.S. government directed not only increased security and military assistance but also development aid for counterterrorism efforts, including programs aimed at mitigating conditions that may make radical ideologies and religious extremism attractive, such as cycles of violence, poverty, limited educational opportunities, and ineffective or unaccountable governance. In 2007, the Bush Administration restructured U.S. foreign aid programs to better serve the goal of transformational development , which places greater emphasis on U.S. security and democracy building as the principal goals of foreign aid. Toward these ends, the new Strategic Framework for U.S. Foreign Assistance divides aid programming among five objectives: peace and security; governing justly and democratically; investing in people; economic growth; and humanitarian assistance. The Millennium Challenge Account (MCA), established in 2004, promotes these objectives by rewarding countries that demonstrate good governance, investment in health and education, and sound economic policies. According to some analysts, recent U.S. foreign policy trends have weakened programs and institutions that specialize in basic development. Some policy-makers have expressed concern that transformational development and MCA funding priorities have taken resources away from traditional programs, particularly in countries that contain lesser security threats to the United States or where governments do not meet various U.S. performance criteria. Other analysts argue that promoting democracy in some countries prematurely may result in a waste of aid. According to one study, insufficient funding for foreign assistance objectives has reinforced a "migration of foreign aid authorities and functions to the Department of Defense." Foreign operations appropriations declined from a peak in 1985 to a low in 1997, after which they began to grow again. Many of the fluctuations in aid flows over the past 25 years can be attributed to U.S. foreign policy responses to events such as natural disasters, humanitarian crises, and wars and to U.S. military assistance and other security initiatives in the Middle East. Since 2001, U.S. assistance to front line states in the global war on terrorism and Iraq war-related funding have propelled foreign aid funding to new highs. Other sources of growth include the Millennium Challenge Account (MCA) and the President's Emergency Plan for AIDS Relief (PEPFAR). Four Asia-Pacific countries are eligible to apply for MCA assistance—East Timor, Mongolia, Sri Lanka, and Vanuatu—while two countries—Indonesia and the Philippines—have been designated as "threshold," qualifying them for assistance to help them become eligible for MCA funds. In October 2007, the Mongolian government and the Millennium Challenge Corporation (MCC) signed a five-year, $285 million agreement. Vietnam is the largest Asian recipient of Global HIV/AIDS Initiative (GHAI) funding under PEPFAR ($118 million between 2005 and 2007). The war on terrorism has reoriented foreign assistance priorities in Asia and accelerated a trend toward increased aid to the region that began in 2000. Throughout the 1990s, U.S. assistance to Asia fell due to the ebbing of Cold War security concerns, nuclear proliferation sanctions, and favorable economic and political trends. For example, the withdrawal of U.S. military forces from the Philippines, nuclear proliferation and other sanctions against Pakistan, and the reduced need for economic assistance, particularly in Southeast Asia, contributed to declines in U.S. aid levels. The Asian financial crisis of 1997-98 reversed the downward trend, as USAID funded a regional economic recovery program for Indonesia, the Philippines, Thailand, and Vietnam. Since the war on terrorism began in 2001, Pakistan, India, the Philippines, and Indonesia became the foci of the Bush Administration's counterterrorism efforts in South and Southeast Asia, due to their strategic importance, large Muslim populations, and insurgency movements with links to terrorist groups. These countries have received the bulk of the increases in U.S. foreign aid (non-food) to Asia (excluding Afghanistan), although funding for aid programs in India and the Philippines reached a peak in 2006 and fell in 2007 and 2008. Beginning in 2004, both Indonesia and the Philippines received new funding for education programs in order to promote diversity, non-violent resolution of social and political conflict (Indonesia), and livelihood skills among Muslims residing in impoverished and conflict-ridden areas (southern Philippines). See Figure 1 . Both the Bush Administration and Congress have supported increased funding for the Department of State's Human Rights and Democracy Fund (HRDF). Spending for HRDF increased from a yearly average of $13 million in 2001-2002 to $31 million in 2003-2005. The Fund received $71 million in both FY2006 and FY2007. In addition, the U.S. government provided a total of $65 million for National Endowment for Democracy (NED)-administered HRDF programs between 2003 and 2007. Approximately one-third of the Democracy Fund has been allocated to Asia, mostly for rule of law and civil society programs in China. In the past decade, the United States has imposed restrictions on non-humanitarian development aid, Economic Support Funds (ESF), and military assistance to some Asian countries in order to pressure them to improve performance related to democracy, human rights, weapons proliferation, foreign debt payments, and other areas. These countries include Burma, Cambodia, China, Indonesia, Thailand, and Pakistan. However, the United States continues to fund non-governmental organizations (NGOs) that run development and democracy programs in some of these countries. Most sanctions on aid to Cambodia, Indonesia, Thailand, and Pakistan have been lifted. The Consolidated Appropriations Act for FY2008 placed human rights conditions upon portions of the U.S. military assistance grants to Indonesia, the Philippines, and Pakistan. The Administration's FY2008 budget request for the East Asian countries that are covered in this report ($453 million) represented a slight increase compared to FY2007 ($442 million). With the exception of Indonesia and Vietnam, assistance to most East Asian countries is to decrease or remain about the same in 2008 compared to 2007. The budget request for Indonesia included large increases in Development Assistance (DA) and Foreign Military Financing (FMF). Global HIV/AIDS Initiative funding for Vietnam is to grow by 36% in FY2008, from $63 million in FY2007 to $86 million. The FY2008 budget raised assistance to South Asian countries by 8% (from $900 million in FY2007 to $974 million). This reflected greater funding for Bangladesh (mostly Development Assistance) and Pakistan (ESF). In addition, for FY2008, the Administration requested new funding for law enforcement enhancement activities in Nepal and Sri Lanka. Regional Development Mission Asia programs (an estimated $13.7 million in FY2008) support public health efforts, improved water and sanitation services, trade, environmental preservation, and investments in energy efficiency, renewable energy, and clean technologies in East and South Asia. The Consolidated Appropriations Act, 2008 ( H.R. 2764 , signed into law as P.L. 110-161 ), Division J, made some changes to the Administration's request. These revisions included additional ESF for democracy and humanitarian activities for Burma; funding for democracy, rule of law, and Tibet programs in China as well as U.S.-China educational exchanges; and increased FMF for the Philippines. The spending measure also imposed new restrictions on FMF for Sri Lanka. Africa remained the largest regional recipient of Child Survival and Health (CSH) and Development Assistance (DA) funding in FY2007. The largest regional recipients of Economic Support Funds in FY2007 were Near East Asia (Middle East) and South and Central Asia (mostly to Afghanistan, with a large portion going to Pakistan as well). The largest recipient of military assistance, by far, was Near East Asia followed by South and Central Asia. These rankings were the same as those for FY2006. See Table 1 and Figures 2-4 . Since 2001, foreign aid spending in East Asia has grown markedly, largely due to counterterrorism efforts in the Philippines and Indonesia. The Philippines, a Major Non-NATO Ally, and Indonesia, a democratizing nation with the world's largest Muslim population, are home to several insurgency movements and radical Islamist organizations, some with ties to Al Qaeda, such as the Abu Sayyaf Group (Philippines) and Jemaah Islamiyah (Indonesia). USAID's programs in East Asia also aim to address the conditions that may give rise to radical ideologies and terrorism, such as poverty and unemployment, lack of education, failing governments, political disenfranchisement, and violent conflict. In October 2003, the Bush Administration launched education programs in Muslim communities in the Philippines and in Indonesia as part of its regional counterterrorism efforts. Among East Asia and the Pacific (EAP) countries (excluding the Pacific Island nations), in FY2007, Indonesia was the largest recipient of U.S. foreign aid, particularly ESF, health, and development assistance (CSH and DA), followed by the Philippines. The Philippines was the region's largest beneficiary of Foreign Military Financing (FMF) and International Military Education and Training (IMET). Counter-narcotics and law enforcement assistance (INCLE) were provided to Indonesia, the Philippines, Laos, and Thailand. Indonesia, Cambodia, and the Philippines were the largest recipients of Non-proliferation, Anti-terrorism, De-mining, and Related Programs (NADR). Vietnam, as one of 15 focus countries under the President's Emergency Plan for AIDS Relief (PEPFAR), received $118 million from the Global HIV/AIDS Initiative (GHAI) account between 2005 and 2007 and is to receive $86 million in 2008. See Figures 5 and 6 . U.S. assistance also finances several EAP regional programs. Estimated funding for such programs in FY2007 was $27 million, a slight decrease from that provided in FY2006. Most of the funding—approximately 75%—supports economic growth efforts. In addition, the United States contributes to the Developing Asian Institutions Fund as part of the establishment of a Free Trade Area of the Asia-Pacific. The second largest regional aid objective is the advancement of peace and security (nearly 20% of regional program funding), including the following aid activities: counterterrorism, counternarcotics, fighting transnational crime, non-proliferation, and maritime cooperation. The third largest aid area is democracy-building. Taiwan and Singapore, two newly developed countries in East Asia, also receive limited U.S. assistance. Taiwan receives over $550,000 annually to develop its export control system and combat trafficking in persons. The United States government provides Singapore roughly $700,000 per year to help the country deter, detect, and interdict the flow of illegal arms across its maritime borders. In some East Asian countries, the United States has withheld assistance or restricted it to non-governmental organizations (NGOs) or to exiled democratic political groups in response to government actions that the U.S. government has deemed in violation of international human rights standards. In the past decade, foreign operations appropriations measures have imposed human rights-related sanctions on U.S. foreign assistance to the governments of Burma, Cambodia, and Thailand and to the Indonesian military while supporting Burmese dissident groups and promoting human rights, civil society, and democracy in Cambodia, China, East Timor, Indonesia, Mongolia, and elsewhere. Since 2006, most sanctions on aid to the governments of Cambodia and Thailand and to the Indonesian military have been lifted. Between 1993 and 2005, Indonesia faced sanctions on military assistance largely due to U.S. congressional concerns about human rights violations, particularly those committed by Indonesian military forces (TNI). In February 2005, Secretary of State Condoleezza Rice determined that the Indonesian government and armed forces (TNI) had satisfied legislative conditions and certified the resumption of full IMET for Indonesia. P.L. 109-102 , Section 599F(a), continued existing restrictions on FMF, stating that such assistance may be made available for Indonesia only if the Secretary of State certifies that the Indonesian government is prosecuting, punishing, and resolving cases involving members of the TNI credibly alleged to have committed gross violations of human rights in East Timor and elsewhere. Section 599F(b) provided that the Secretary of State may waive restrictions on FMF for Indonesia if such action would be in the national security interests of the United States. In November 2005, the Secretary of State waived restrictions on FMF to Indonesia on national security grounds pursuant to Section 599F(b). In response to the September 19, 2006, military coup in Thailand, the Bush Administration suspended military and peacekeeping assistance pursuant to Section 508 of the Foreign Operations Appropriations Act, which provides that such funds shall not be made available to any country whose duly elected head of government was deposed by military coup. The U.S. government also suspended funding for counter-terrorism assistance provided under Section 1206 of the National Defense Authorization Act for FY2006. Other aid programs not affected by Section 508 or in the U.S. national interest continued to receive funding. In February 2008, the United States resumed security and military assistance to Thailand following the holding of democratic elections. In comparison to major bilateral donors in the region, the People's Republic of China (PRC) provides relatively little official development assistance (ODA). Furthermore, the PRC government appears to lack a foreign aid system with a centralized organizational structure, long-term development goals, open funding processes, and published data. Nonetheless, the PRC administers a wide range of economic assistance to Southeast Asia that includes many forms of aid that generally are not counted as ODA by established international aid agencies: infrastructure and public works projects, trade and investment agreements, pledges of foreign direct investment, and technical assistance. China is also a large source of loans. According to some analysts, when these kinds of assistance are included, China is one of the largest bilateral aid donors in Southeast Asia. The PRC has been described as the "primary economic patron" of the region's least developed countries (Burma, Cambodia, and Laos). China also has provided considerable foreign aid to Vietnam as well as other large and more developed countries (Thailand, Indonesia, and the Philippines). Some analysts have criticized PRC assistance and investments for being non-transparent, supporting urban "trophy projects" rather than sustainable development, and lacking performance criteria and environmental safeguards. Others have argued that the benefits of PRC assistance to these countries, particularly Cambodia and Laos, have outweighed adverse effects, and that China has helped to address needs not met by Western and Japanese aid. Many observers argue that the United States should bolster its aid programs, trade activities, and diplomatic presence in the region in order to counteract China's growing influence. Burma's political, economic, educational, and public health institutions and systems have deteriorated under 40 years of military rule. The United States provides no direct aid to the Burmese government in response to the Burmese military junta's (State Peace and Development Council or SPDC) repression of the National League for Democracy (NLD), failure to honor the NLD's parliamentary victory in 1990, and harassment of its leader, Aung San Suu Kyi, who remains under house arrest. U.S. sanctions were tightened, especially travel and financial restrictions against SPDC leaders, following the Burmese government's violent suppression of democracy demonstrators in September 2007. On June 11, 2003, the 108 th Congress passed the Burmese Freedom and Democracy Act of 2003 ( P.L. 108-61 ), which bans imports from Burma unless democracy is restored. Additional U.S. foreign aid sanctions against Burma include opposition to international bank loans to Burma and a ban on debt restructuring assistance. Since the Office to Monitor and Combat Trafficking in Persons was established by the U.S. State Department in 2001, Burma has received a "Tier 3" assessment annually by the Office for failing to make significant efforts to bring itself into compliance with the minimum standards for the elimination of trafficking in persons. The Tier 3 ranking could serve as a basis for withholding non-humanitarian aid. Inside Burma, the United States provides assistance for HIV/AIDS prevention, care, and treatment, English language training, and civil society. The largest U.S. aid programs assist Burmese refugees in Thailand. The Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ) appropriated $13 million (ESF) primarily for Burmese student groups and other democratic organizations located outside Burma, and for the provision of humanitarian assistance to displaced Burmese along Burma's borders. The act also provides $3 million for community-based organizations operating in Thailand to provide food, medical and other humanitarian assistance to internally displaced persons in eastern Burma. Cambodia ranks 131 st out of 177 countries and regions on the United Nations Development Program's Human Development Index, which measures GNP per capita, life expectancy, and educational attainment. The U.S. State Department reports that Cambodia's fragile institutions, weak rule of law, and rampant corruption are major challenges to Cambodia's democratic development and economic growth. Furthermore, Cambodia's health and education systems were decimated under the rule of the Khmer Rouge (1975-1979) and subsequent Vietnamese control. The largest U.S. assistance sectors in Cambodia are health and education ($25 million), including a significant HIV/AIDS program component. The U.S. assistance mission in Cambodia also aims to promote transparency and accountability in government, combat corruption, and strengthen civil society. Other program areas include economic reform and growth and improving the military's capability to protect Cambodia's borders from transnational threats. In February 2007, the United States government lifted a decade-long ban on direct bilateral aid to Cambodia. The U.S. government had imposed restrictions on foreign assistance to Cambodia following Prime Minister Hun Sen's unlawful seizure of power in 1997 and in response to other abuses of power under his rule. Foreign operations appropriations barred U.S. assistance to the central government of Cambodia and to the Khmer Rouge tribunal and instructed U.S. representatives to international financial institutions to oppose loans to Cambodia, except those that met basic human needs. U.S. assistance was permitted only to Cambodian and foreign NGOs and to local governments. Statutory exceptions allowed for the following categories of U.S. assistance to the central government of Cambodia: reproductive and maternal and child health care; basic education; combating human trafficking; cultural and historic preservation; the prevention, treatment, and control of HIV/AIDS and other infectious diseases; and counter-narcotics activities. Cambodia, one of the top five countries in the world for the number of landmine casualties (approximately 800 victims per year), received $5 million 2006 and an estimated $3.8 million in 2007 in U.S. de-mining assistance. Under the Administration's FY2008 budget, the country is to receive $2.5 million in de-mining assistance. In addition, in the past decade, USAID has supported programs worth $13 million providing for prostheses, physical rehabilitation, employment, and related services for mine victims using Leahy War Victims Funds. On October 12, 2005, U.S. Secretary of Health and Human Services Michael Leavitt, on a visit to Southeast Asia, signed a cooperation agreement with Cambodian officials in which $1.8 million was pledged to help the country guard against the spread of H5N1 (avian influenza). In January 2007, the Peace Corps launched programs in Cambodia to teach English and develop sustainable community activities. USAID does not have a presence or mission in the People's Republic of China (PRC). However, the Peace Corps has been involved in English language and environmental education in China since 1993, and United States funding primarily to U.S.-based non-governmental organizations (NGOs) for democracy and Tibet programs has grown substantially since 2002 (approximately $15 million per year). China received only Peace Corps assistance prior to 2000. The Consolidated Appropriations Act for FY2000 provided $1 million for foreign-based NGOs working in Tibet and authorized ESF for foreign NGOs to promote democracy in China. For FY2001, the United States extended $28 million to the PRC as compensation for damages caused by the accidental NATO bombing of the Chinese Embassy in Belgrade in 1999. Congress has increased its annual appropriation for democracy, human rights, and rule of law programs in China from $10 million in 2002 to $23 million in 2006. Appropriations for cultural preservation, economic development, and environmental conservation in Tibetan communities in China have also grown. In 2004, the Bureau of Democracy, Human Rights and Labor (DRL) of the Department of State became the principal administrator of China democracy programs. Major U.S. grantees have included the National Endowment for Democracy (NED), the Asia Foundation, Temple University (School of Law), the American Bar Association, and the Bridge Fund (Tibet). In addition, NED provides grants (approximately $2 million per year since 1999) for programs that promote human rights, labor rights, electoral and legal reforms, and independent mass media in China from its annual congressional appropriation. Since 2006, Congress has appropriated Development Assistance (DA) to American educational institutions for exchange programs related to democracy, rule of law, and the environment in China. In 2007, the U.S. government began funding HIV/AIDS programs in China. The United States continues to impose other restrictions that were put in place in the aftermath of the 1989 Tiananmen Square military crackdown, including "no" votes or abstentions by U.S. representatives to international financial institutions regarding loans to China (except those that meet basic human needs) and a ban on Overseas Private Investment Corporation (OPIC) programs in the PRC. The Foreign Operations Appropriations Act for FY2002 ( P.L. 107-115 ) lifted the restrictions (effective since FY2000) requiring that ESF for China democracy programs be provided only to NGOs located outside the PRC. However, Tibet programs are still restricted to NGOs. Congress continues to require that U.S. representatives to international financial institutions support projects in Tibet only if they do not encourage the migration and settlement of non-Tibetans (Han Chinese) into Tibet or the transfer of Tibetan-owned properties to non-Tibetans. In addition, foreign operations appropriations legislation forbids funding to the United Nations Population Fund (UNFPA) for programs in China due to alleged coercive family planning practices. East Timor (Democratic Republic of Timor-Leste) gained full independence in May 2002. The United States supports a wide range of aid programs in East Timor, one of Asia's poorest countries, with the goal of building a viable economy, functional government, and democratic political system. The largest strategic objective of U.S. assistance is economic growth, targeting agriculture, private sector competitiveness, and economic opportunity. Other major objectives are improved governance and peace and security. Program areas include rule of law, human rights, and civil society. IMET activities aim to develop more professional military and police forces. In November 2005, the Millennium Challenge Corporation selected East Timor as eligible for MCA assistance. In May 2006, the Peace Corps suspended its programs in East Timor due to civil and political unrest in the country. The U.S. State Department reports that the "overarching U.S. foreign policy priority in Indonesia is to assist its transformation into a stable, moderate democracy capable of addressing regional and global challenges in partnership with the international community." The country faces many development and security challenges, including terrorist threats, ethnic and separatist conflicts, weak institutions, high levels of corruption, poverty and unemployment, low levels of education, and poor health conditions. The largest strategic objective in terms of funding is investing in people ($87.6 million), which includes education, health, and clean water programs. A major U.S. assistance initiative is the six-year, $157 million education program that began in 2004. The second largest area of U.S. aid is peace and security—the Administration requested $41.7 million for FY2008 for the Indonesian military and police to fight terrorism, combat weapons proliferation and other transnational crimes, monitor strategic waterways, and cooperate with the United States armed forces. This increase in funding reflects the normalization of military ties in 2005. For FY2008, over $29 million in U.S. assistance are to support programs for strengthening the justice and legislative branches, participatory governance, human rights, and civil society. Economic growth programs worth $27 million are to promote greater transparency and combat corruption, and are expected to lead to an improved trade and investment climate, financial sector soundness, and increased private sector competitiveness. The MCC has designated Indonesia as a "threshold" country for 2006, meaning that the country is close to meeting MCA criteria and may receive assistance in reaching eligibility status. In November 2006, USAID and the government of Indonesia signed a $55 million, two-year agreement for MCA assistance under the MCC Threshold Program. In 2005, the Bush Administration determined that Indonesia had met legislative conditions for the resumption of full IMET and waived restrictions on FMF on national security grounds, thus lifting sanctions on military assistance that were first imposed in 1993. The Consolidated Appropriations Act for 2004 ( P.L. 108-199 ) made IMET available to Indonesia if the Secretary of State determined that the Indonesian government and armed forces (TNI) were cooperating with the United States in the investigation regarding the August 2002 attack in Timika, Papua, in which three school teachers, including two Americans, were killed. P.L. 108-199 continued the ban on FMF unless the President certified that the Indonesian government was prosecuting and punishing those members of the Indonesia armed forces credibly alleged to have committed gross violations of human rights, particularly in East Timor in 1999. The FY2005 foreign operations appropriations measure ( P.L. 108-447 ) contained similar provisions. In February 2005, Secretary of State Condoleezza Rice determined that the Indonesian government and armed forces had cooperated with the FBI's investigation into the Papua murders, thereby satisfying legislative conditions, and certified the resumption of full IMET for Indonesia. The foreign aid appropriations act for FY2006 ( P.L. 109-102 ) continued existing restrictions on FMF to Indonesia; however, the law provided that the Secretary of State may waive restrictions if such action would be in the national security interests of the United States. In November 2005, the Secretary of State exercised the waiver authority and allowed FMF for Indonesia. The Consolidated Appropriations Act for FY2008, Section 679(a) appropriated up to $15.7 million in Foreign Military Financing (FMF) for Indonesia, of which $2.7 million "may not be made available" unless the Government of Indonesia has taken steps to prosecute and punish members of the TNI credibly alleged to have committed human rights violations in East Timor and elsewhere, implement reforms related to improved transparency and accountability of the military, and allow public access to Papua. The December 26, 2004 tsunami caused catastrophic losses of lives and property in Aceh province, Indonesia, with nearly 130,000 persons dead and over 500,000 displaced. The Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Tsunami Relief, 2005 ( P.L. 109-13 ) appropriated $631 million for tsunami recovery and reconstruction in East and South Asia. Of this amount, the Bush Administration pledged $400 million for relief and reconstruction efforts in Indonesia. The bulk of U.S. aid programs in Laos are related to peace and security. The Administration's request for FY2008 includes the following programs: removing unexploded ordnance (UXO), English language training for Lao defense officials, counter-narcotics efforts, and combating transnational crime. Other program areas include public health, rule of law, and improving the country's trade and investment environment. Laos also receives assistance through the Leahy War Victims Fund ($1.5 million during the 2004-2009 period) to assist victims of UXO. U.S. mines from the Vietnam War cause an average of 120 deaths per year (nearly 4,000 deaths, and over 13,000 casualties, since 1975). UXO also takes a significant economic toll on rural areas, affecting 25% of villages or one-third to one-half of the nation's land area. In October 2005, U.S. Secretary of Health and Human Services Michael Leavitt signed a cooperation agreement with Lao officials in which the United States pledged $3.4 million to Laos for controlling outbreaks of avian flu. Malaysia is not a recipient of U.S. development and economic aid. The U.S. State Department describes Malaysia as a "key Muslim-majority state in Southeast Asia and an important contributor to conflict resolution and peacekeeping both regionally and internationally." Regional terrorist organizations, most notably Jemaah Islamiyah, are known to use Malaysia for planning and fund raising. Over half of U.S. assistance to the country is related to antiterrorism and non-proliferation activities. Other assistance is provided for military operations and law enforcement restructuring. The U.S. State Department's 2007 Trafficking in Persons Report placed Malaysia in the "Tier 3" category for failing to "make significant efforts to bring itself into compliance with the minimum standards for the elimination of trafficking in persons." Such an assessment could trigger the withholding of non-humanitarian, non-trade-related U.S. foreign assistance. U.S. assistance efforts in Mongolia aim to build foundations for the country's private economic and democratic political development. Security assistance focuses on reform of the Mongolian armed forces and regional stability. In September 2005, the government of Mongolia submitted a proposal to the Millennium Challenge Corporation for several projects to be funded by MCA funds, including railroad construction, improved housing, and health services. In October 2007, the Mongolian government and the Millennium Challenge Corporation (MCC) signed a five-year, $285 million agreement. The United States shares important security, political, and commercial interests with the Philippines, a Major Non-NATO Ally and front-line state in the global war on terrorism. Since 2001, the Philippines has received the most dramatic increases in U.S. foreign assistance in the EAP region. The main goals of U.S. assistance in the Philippines are: fighting terrorism through military means and education; supporting the peace process in Muslim Mindanao; improving governance; promoting economic reform and encouraging foreign investment; preserving the environment; and reversing the deterioration of the educational system. The largest U.S. aid accounts in the country fund health and education programs, especially in conflict-affected areas of Mindanao. Other large funding priorities are economic growth and security. Security programs include support for Philippine Defense Reform, joint military exercises, and enhanced counterterrorism capabilities. U.S. assistance also supports the battle against transnational crime (money laundering, trafficking in persons, and narcotics trade). In 2006, the MCC designated the Philippines as a "threshold" country or close to meeting MCA criteria and eligible for assistance in qualifying. The Philippines recently initiated a two-year, $21 million MCA threshold program that focuses on fighting corruption and improving government revenue collection. The Consolidated Appropriations Act for FY2008, Section 699E provided up to $30 million for FMF for the Philippines, of which $2 million may be made available after the Secretary of State reports that: the Philippine government is implementing the recommendations of the United Nations Special Rapporteur on Extrajudicial, Summary or Arbitrary Executions; the Philippine government is implementing a policy of promoting military personnel who demonstrate professionalism and respect for human rights, and is investigating and prosecuting military personnel and others who have been credibly alleged to have committed extrajudicial executions or other violations of human rights; and the Philippine military is not engaging in acts of intimidation or violence against members of legal organizations who advocate for human rights. The United States signed a Tropical Forest Conservation Act Agreement with the Philippines on September 19, 2002. This accord cancels a portion of the Philippines' debt to the United States. The money saved by this rescheduling—estimated at about $8 million—is to be used for forest conservation activities over a period of 14 years. Thailand is one of five U.S. treaty allies in Asia and was designated a Major Non-NATO Ally in 2003. Thailand has sent troops to both Afghanistan and Iraq and has aggressively pursued terrorist cells in its southern provinces. For FY2008, the Bush Administration proposed funding for domestic counterterrorism activities, border security, countering the proliferation of weapons of mass destruction, and military reform. Thailand would also receive funding for HIV/AIDS programs. In response to the September 19, 2006, military coup in Thailand, the U.S. State Department announced the suspension of nearly $24 million in U.S. foreign assistance to the country, including military and peacekeeping assistance and training under foreign operations appropriations ($7.5 million) and counterterrorism assistance under Section 1206 of the National Defense Authorization Act for FY2006 ($16.3 million). The bans were imposed pursuant to Section 508 of the Foreign Operations Appropriations Act, which provides that such funds shall not be made available to any country whose duly elected head of government was deposed by a military coup. Under Section 508, the funds can be reinstated once a democratically-elected government is in place. Other aid programs not affected by Section 508 or in the U.S. national interest would continue to receive funding. In February 2008, the United States resumed security and military assistance to Thailand following the holding of democratic elections. In 2001, the United States and Thailand signed an agreement pursuant to the Tropical Forest Conservation Act ( P.L. 105-214 ), providing $11 million in debt relief to Thailand. In return, Thailand is to contribute $9.5 million over 28 years toward the protection of its mangrove forests. The United States government pledged $5.3 million in relief and reconstruction assistance for areas in Thailand affected by the December 2004 tsunami. Vietnam, with over 250,000 HIV-positive persons in 2006, is the largest Asian recipient of Global HIV/AIDS Initiative (GHAI) funds under the President's Emergency Plan for AIDS Relief (PEPFAR). Other U.S. assistance objectives in Vietnam include the following: accelerating Vietnam's transition to an open and market-based economy; de-mining; promoting human rights and supporting civil society; and countering illegal cross-border transport of arms and narcotics. IMET programs include training in English language and international peacekeeping. The Vietnam Human Rights Act of 2007 ( H.R. 3096 ), passed by the House on September 18, 2007, would freeze U.S. nonhumanitarian assistance to the government of Vietnam at FY2007 levels unless the President certifies to Congress that the government of Vietnam has made substantial progress in the following areas: the release of political and religious prisoners; religious freedom; the rights of ethnic minorities; access to U.S. refugee programs by Vietnamese nationals; and combating trafficking in persons. Key U.S. foreign aid objectives in South Asia include combating terrorism, developing bilateral military ties, and reducing the social and economic sources of political instability and extremist religious and political thinking. These causes include lack of accountable governance, inter-ethnic conflict, poverty, disease, and illiteracy. Prior to September 2001, South Asia was the smallest regional recipient of U.S. non-food assistance. Since the war on terrorism began, counterterrorism and related funding for South Asia, especially Afghanistan and Pakistan, have made the region a relatively large recipient of humanitarian, development, and economic assistance and the second-largest beneficiary of military assistance after the Middle East. Before 2002, India and Bangladesh were the largest recipients of U.S. bilateral aid in South Asia. Following Pakistan's participation in Operation Enduring Freedom (OEF) in Afghanistan, the country became the largest beneficiary of U.S. foreign assistance in the region after Afghanistan, followed by India. See Figure 7 . Regional programs focus upon economic growth, combating terrorism, and fighting international crime. The South Asia Regional Fund ($5 million in FY2007) promotes economic growth through addressing energy needs in South Asia, such as assisting countries to find energy resources and facilitating trade in energy. The South and Central Asia Regional Fund ($1.5 million in FY2007) supports programs related to border control and education. The aim of assistance for education is to help reduce religious and ideological extremism and regional instability. Both India and Pakistan faced sanctions on non-humanitarian aid for conducting nuclear weapons tests in 1998. The United States imposed additional restrictions on aid to Pakistan because of its delinquency on foreign loan payments and because of the military coup that took place in October 1999. Many of the nuclear test-related sanctions were lifted soon after they were imposed, and the United States reportedly was prepared to normalize relations with India in the first half of 2001. On September 22, 2001, President Bush issued a final determination removing all nuclear test-related sanctions against India and Pakistan pursuant to the Department of Defense Appropriations Act, 2000 ( P.L. 106-79 ). On October 27, 2001, the President signed S. 1465 into law ( P.L. 107-57 ), exempting Pakistan from coup-related sanctions through FY2002, providing waiver authority on the sanctions through FY2003, and granting an exemption from foreign aid prohibitions related to the country's loan defaults. In subsequent years, Congress has extended the waiver authority on coup-related sanctions. Since 2003, President Bush has annually exercised the waiver authority. A crucial challenge for the United States, according to some U.S. leaders, is how to assist Pakistan in its counterterrorism activities and reward its cooperation in Operation Enduring Freedom while still applying pressure regarding democratization, nuclear non-proliferation, and other U.S. foreign policy imperatives. In the December 2004 earthquake and tsunami, Sri Lanka suffered heavy human losses and property damage. The United States government pledged $134 million in disaster assistance (including USAID disaster assistance and food aid and USDA food aid) to Sri Lanka and $17.9 million to India. On October 8, 2005, a catastrophic, magnitude 7.6 earthquake struck Pakistan, killing over 73,000 persons in Pakistan and 1,333 in India and leaving nearly 3 million people homeless. The United States pledged $300 million in economic assistance to the affected region. In addition to problems related to development, corruption remains a key obstacle to social, economic, and political advancement in Bangladesh. The largest elements of the U.S. aid presence involve public health, including HIV/AIDS programs, and basic education. In other areas, the U.S. government provides support for anti-corruption reforms and democratic institutions. U.S. assistance also aims to expand economic opportunities and equitable growth in the country. Security and military assistance help to strengthen the police and military forces to counter terrorist activity, enhance border security, and fight international financial and drug crimes. In March 2006, the Peace Corps suspended its programs in Bangladesh due to concerns that volunteers might become targets of terrorists. In 2000, the United States signed an agreement with Bangladesh reducing the country's debt payments to the United States by $10 million over 18 years. In return, Bangladesh is to set aside $8.5 million to endow a Tropical Forest Fund to protect and conserve its mangrove forests. The United States significantly increased bilateral aid to India in FY2002 and FY2003, largely as part of its counterterrorism efforts in the region. The current aid program aims to further Indian economic development in order to enhance the country's rise as "an influential U.S. partner in the international system." Furthermore, U.S. assistance serves the poorest segments of the population in order to mitigate economic and social conditions that may give rise to political extremism. For FY2008, the largest portion of U.S. assistance to India funds public health and HIV/AIDS care, treatment, and prevention. Security and military assistance supports programs related to military professionalism, counterterrorism, counternarcotics, and border security. Economic Support Funds are to promote the private agricultural sector. U.S. assistance to Nepal aims to further the peace process between the government of Nepal and Maoist insurgents, establish stability, and promote development. IMET, INCLE, and NADR programs help the Nepal military and police to restore law and order. The Consolidated Appropriations Act for FY2008 allows for only Expanded International Military Education and Training (E-IMET) for Nepal. E-IMET emphasizes and teaches the military about human rights, military codes of conduct, and civilian control of the military. Other major components of United States aid programs in Nepal include building the capacity of local and national governments to provide social services and improving public health. In 2004, the United States suspended the Peace Corps program in Nepal after Maoist rebels bombed the United States Information Center in Kathmandu. Pakistan is a front-line state in the global war on terrorism. Most U.S. assistance programs in the country claim to directly or indirectly serve U.S. counterterrorism goals. The United States government has pledged $600 million in economic and security assistance and $50 million in earthquake reconstruction aid on an annual basis through FY2009. Approximately 43% of U.S. assistance to Pakistan supports counterterrorism and border security efforts. The second largest strategic objective (36% of funding) is economic growth, aimed at nurturing a middle class as a foundation for democracy. Economic Support Funds (13%) "help Pakistan to improve the quality of and access to public education, primary healthcare, and water and sanitation services" in part to help provide alternatives to services provided by terrorist-linked charities and schools. Other assistance directly promotes democracy through support of legislative processes, democratic practices within political parties, free and fair elections, civil society, and the mass media. Pakistan received limited U.S. assistance during the 1990s—counter-narcotics support, food aid, and Pakistan NGO Initiative programs—due to congressional restrictions in response to Pakistan's nuclear weapons program. In 1985, the Pressler amendment to the Foreign Assistance Act of 1961 (Section 620E(e)) barred U.S. foreign assistance to Pakistan unless the President determined that Pakistan did not possess nuclear weapons and that U.S. assistance would reduce the risk of Pakistan's obtaining them. In 1990, President George H. W. Bush declined to make such determinations, thus triggering Pressler amendment sanctions against Pakistan. This restriction was eased in 1995 to prohibit only military assistance. In 1998, following nuclear weapons tests carried out by India and Pakistan, President Clinton imposed restrictions on non-humanitarian aid to both countries pursuant to the Arms Export Control Act (Section 102, the Glenn amendment). Furthermore, Pakistan became ineligible for most forms of U.S. foreign assistance due to its delinquency in servicing its debt to the United States and to a 1999 military coup. Following the September 2001 terrorist attacks on the United States, Pakistan was designated as a front-line state in the war on terrorism and received dramatically increased U.S. aid levels. In late September 2001, Congress enacted and the President exercised waivers to nuclear weapons sanctions that had prohibited military and economic aid to India and Pakistan. The Bush Administration rescheduled $379 million of Pakistan's $2.7 billion debt to the United States so that Pakistan would not be considered in arrears, a requirement for further foreign assistance. The President also made $100 million in ESF available before the various sanctions were eased or lifted, exercising authority afforded him under Section 614 of the Foreign Assistance Act of 1961. On October 27, 2001, President Bush signed S. 1465 into law ( P.L. 107-57 ), allowing the United States government to waive sanctions related to the military coup and authorizing presidential waiver authority through 2003, provided the President determined that making foreign assistance available would facilitate democratization and help the United States in its battle against international terrorism. P.L. 107-57 also exempted Pakistan from foreign assistance restrictions related to its default on international loans. Since 2003, President Bush has annually exercised the waiver authority on coup-related sanctions against Pakistan. On March 25, 2008, President Bush waived democracy-related aid sanctions on Pakistan for FY2008, stating that such a waiver would facilitate the transition to democratic rule in Pakistan and was important to U.S. counterterrorism efforts. Following the national and provincial elections of February 2008, which many observers considered free, fair, and credible, the Bush Administration issued an April 2008 determination that a democratically elected government had been restored in Islamabad after a 101-month hiatus. This determination permanently removed coup-related aid sanctions. United States assistance programs aim to promote the peace process between the government of Sri Lanka and Tamil separatists led by the Liberation Tigers of Tamil Eelam (LTTE). In order to help pressure the LTTE to return to the negotiating table, the United States provides assistance to help strengthen the capabilities of the Sri Lankan military. INCLE and NADR programs support the police force and counterterrorism activities. U.S. assistance also promotes economic growth, especially in less developed, conflict-ridden areas, and helps to advance democracy, human rights, and civil society. In 2004, Sri Lanka met eligibility requirements for MCA funding, due in large part to positive governmental, social, and economic indicators in Western provinces. Although a Compact was expected in 2007, the MCC put an agreement on hold in early 2007 pending improvements in the overall human rights and security situations, and in December 2007 the MCC decided not to reselect Sri Lanka for 2008 Compact eligibility. Sri Lanka suffered heavy human losses (an estimated 31,000 dead, 4,100 missing, and 519,000 displaced) and property damage worth approximately $1 billion (or 4.4% of GDP) in the December 2004 earthquake and tsunami. The Bush Administration pledged $134.6 million for disaster relief and reconstruction to Sri Lanka. In 2006, Sri Lanka received Transition Initiative (TI) funding ($1.7 million) for the peace process and $1.1 million in disaster assistance. The Consolidated Appropriations Act for FY2008, Section 699G, withheld FMF from Sri Lanka, with the exception of technology or equipment related to maritime and air surveillance and communications, unless the following conditions were met: the Sri Lankan military is suspending and the Sri Lankan government is bringing to justice members of the military who have been credibly alleged to have committed gross violations of human rights or international humanitarian law, including complicity in the recruitment of child soldiers; the Sri Lankan government is providing access to humanitarian organizations and journalists throughout the country consistent with international humanitarian law; and the Sri Lankan government has agreed to the establishment of a field presence of the Office of the United Nations High Commissioner for Human Rights in Sri Lanka with sufficient staff and mandate to conduct full and unfettered monitoring throughout the country and to publicize its findings. | This report analyzes annual budget justifications and legislation for foreign operations appropriations and discusses U.S. foreign aid trends, programs, and restrictions in 16 East Asian and South Asian countries. It does not cover aid to Pacific Island nations, North Korea, and Afghanistan. Country tables do not include assistance from U.S. State Department programs funded outside the foreign operations budget, such as educational and cultural exchange programs, and assistance from other departments and agencies. Since the war on terrorism began in 2001 and the Millennium Challenge Account (MCA) and Global HIV/AIDS Initiative (GHAI) were launched in 2004, the United States has increased foreign aid spending dramatically in some regions, including East and South Asia. The United States has raised military, economic, and development assistance primarily for counterterrorism objectives in the East Asia-Pacific (EAP) and South Asia regions, with Pakistan, India, the Philippines, and Indonesia receiving the bulk of the increases. In 2007, the Bush Administration restructured U.S. foreign aid programs to better serve the goal of transformational development, which places greater emphasis on U.S. security and democracy building as the chief goals of foreign aid. In the past decade, the United States government has restricted foreign assistance to many countries in East and South Asia in order to encourage democracy and respect for human rights. Some sanctions have been waived or lifted. The Consolidated Appropriations Act for FY2008 (P.L. 110-161) placed human rights conditions upon portions of the U.S. military assistance grants to Indonesia, the Philippines, Pakistan, and Sri Lanka. Since 2003, President Bush has annually exercised the waiver authority on coup-related sanctions against Pakistan. In 2005, the United States government resumed full military assistance to Indonesia, based upon the satisfaction of legislative conditions and national security grounds. The FY2008 budget for the East Asian countries that are covered in this report represented a slight increase compared to FY2007. The FY2008 budget raised assistance to South Asian countries by 8%, according to estimates. In September 2008, the House and Senate passed the continuing resolution (CR), H.R. 2638 (Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009). The bill was signed into law as P.L. 110-329. The House and Senate approved $36.6 billion and $36.7 billion, respectively, for Department of State and Foreign Operations in FY2009, compared to $32.8 billion enacted in FY2008. The CR for FY2009 continues most funding through March 6, 2009, at FY2008 levels. This report will be updated periodically. |
The Department of Homeland Security (DHS) was established by the Homeland Security Act of 2002 (HSA) and became operational January 24, 2003, barely 16 months after the terrorist attacks on the Pentagon and World Trade Center on September 11, 2001. Rather than being as a completely new entity, the department was established by assembling existing parts of 22 different federal agencies and departments into a new framework. The timing and means of establishing DHS, coupled with the perceived urgency of its mission in its early years, hastened the growth and development of the department's operational capabilities. At the same time, these factors hindered potential efforts to more fully integrate the functions of the department's different components. A former Navy facility at the corner of Nebraska and Massachusetts Avenues in northwest Washington, DC (known as "the NAC," short for "the Nebraska Avenue Complex") was designated as the interim DHS headquarters shortly after the confirmation of Tom Ridge as the first secretary of the department. The headquarters functions of the department's components were not physically consolidated at the time, but instead were left scattered across the National Capital Region in accordance with their past history, rather than their new role in the DHS. As a result, DHS today stands as the third-largest department of the federal government, but runs its operations from more than 50 different locations in the National Capital Region. In 2004, the Coast Guard (one of the larger components of the newly minted DHS) began to explore how to meet its needs for new headquarters facilities. The Coast Guard headquarters was housed in several leased locations that were too small for the Coast Guard's needs and prone to flooding. The General Services Administration (GSA), the Office of Management and Budget (OMB), and DHS determined that a federally owned site would be more cost-effective than securing a replacement lease. In the meantime, the interim location of the DHS headquarters was proving to be inadequate. One of the initial assumptions at the time of the establishment of DHS was that the department would only need a headquarters staff of roughly 800 persons. Once the department was established and roles, responsibilities, and management needs became clear, DHS determined that the NAC would not meet mission execution requirements over the long term. In December, 2004, GSA became the landlord of record for the West Campus of St. Elizabeths Hospital in southeast Washington, DC, which had recently been declared excess by the Department of Health and Human Services (HHS). The campus was also a National Historic Landmark, due its architecture and its service since the mid-19 th century. The passage of time and the lack of maintenance and upgrades to the campus over the years had taken a toll. Restoring the buildings to basic operating capacity was estimated by Senate Government Reform Committee investigators as approaching $500 million in 2003. Senator Collins noted in a hearing on federal investments in real property: The deterioration of the West Campus of St. Elizabeths is a particularly tragic example of how the Federal Government's mismanagement of its real property can result in massive waste of taxpayer dollars. This hearing will examine how this once elegant, thriving Federal property has deteriorated to the point that it could cost nearly $500 million to rehabilitate its buildings.... The poor oversight of St. Elizabeths by both HHS and the D.C. Government is inexcusable. What was a valuable asset in the mid-1980's today is a massive liability. Nevertheless, the 182-acre site at the time had 61 buildings with 1.1 million square feet of space and represented, according to GSA, "the last parcel of Federally owned land in the District, with a capacity to house large agencies with high-level security requirements." The decision was made to keep the West Campus of St. Elizabeths as a part of the federal real estate portfolio. President George W. Bush's FY2006 budget request had announced the Administration's plan to consolidate the Coast Guard's headquarters on the West Campus of St. Elizabeths—an initiative that received initial planning funding in GSA's budget that year. The Administration's FY2007 budget request sought the initial tranche of construction funding for the new Coast Guard headquarters through the DHS appropriations bill, but both House and Senate appropriators, when briefed on the idea of a larger consolidation project for DHS headquarters at the site, directed DHS to not proceed on either project until a new headquarters master plan was completed. In October 2006, DHS Secretary Michael Chertoff put forward a master plan for "unifying … core headquarters facilities with those of our operating components," which essentially broadened the Coast Guard project to include the overall DHS headquarters consolidation as well, moving 14,000 of the 22,000 people that were projected to staff headquarters functions for the department and its components to St. Elizabeths. Earlier that year, the White House issued a report entitled "The Federal Response to Katrina: Lessons Learned." While this report did not call for a consolidated DHS headquarters per se , it did state a need to develop a joint departmental operations center with robust command and control functions to promote more efficient incident response. This need would be used to help advocate for the consolidated headquarters project in future years. Since that year, Administrations of both parties have requested funding for this initiative to support a coordinated construction plan. However, this project has not received consistent funding—over 70% of the funding it has received so far came in FY2009 when a surge of supplemental funding combined with the regular appropriations for GSA and DHS provided almost $1.1 billion for the project. Most of these funds were used to construct the new 1.2 million square foot Coast Guard headquarters at St. Elizabeths, which the Coast Guard occupied in 2013. Given this lack of consistent funding, Administration officials indicated in 2012 that the coordinated construction schedule was no longer feasible. The cost estimates for the project, provided in June 2013, present a phased approach of funding individual "useable segments" of roughly 300,000 gross square feet each year. If funding is provided for one segment each year, DHS and GSA indicate the project will cost $4.5 billion to complete, with the final segment completing in FY2026. Even so, GSA estimates $697 million in savings over thirty years solely comparing construction costs to lease costs. The revised baseline for the project does note that if additional funding is provided in earlier years that "segments could be collapsed, shortening the timeline and reducing the estimated project cost." However, even with the revised schedule with potentially more annually affordable structuring of work, each of the first four years of the new plan would require an annual investment of over $330 million by DHS and GSA combined. FY2014 represented the first fiscal year in which funding was requested following this new baseline, and the $190 million provided to GSA and DHS for project construction was more than $164 million short of the request level. In September, 2014, the Government Accountability Office (GAO) reported that DHS and GSA "did not follow relevant GSA guidance and GAO's leading practices when developing the cost and schedule estimates for the St. Elizabeths project, and the estimates are unreliable." Critics pointed to the report as evidence of mismanagement of the project. GSA and DHS testified that improved compliance with these guidelines would be a part of their latest revision of the project plan, which was under development at the time the report was released and which was promised as a part of the FY2016 budget request for DHS. The initial DHS National Capital Region Housing Master Plan stated that increased consolidation and co-location of DHS headquarters functions was needed to accomplish five objectives: Improve mission effectiveness; Create a unified DHS organization; Increase organizational efficiency; Adjust the size of the real estate portfolio to better fit the mission of DHS; and Reduce real estate occupancy costs. In testimony before the House Appropriations Committee Homeland Security Subcommittee on March 25, 2010, Elaine Duke, Under Secretary for Management for the department, simplified this list to three reasons: To increase effectiveness and efficiency; To enhance communication; and To "foster a 'one DHS' culture that would optimize department-wide, prevention, response and recovery capabilities." Former DHS Secretary Michael Chertoff, who signed the original DHS Consolidation Master Plan, recently described the consolidation project as being "very important both from symbolic and operational standpoint. It would provide an enormous amount of leverage in defining the department." Many of DHS's components are in leased facilities, despite the fact that the government's existing policy is to use federally owned sites for national security functions. Consolidation would help bring DHS in line with that policy, which would also reduce the department's overhead costs. According to GSA, over the next 30 years, the St. Elizabeths project would save the government almost $700 million when comparing the costs of its construction to the cost of continued leasing. This analysis of cost savings does not include administrative cost savings or efficiencies made available by co-locating parts of DHS operations. The DHS Housing Master Plan analyzed 15 possible sites to see if they could meet the department's requirements. DHS and GSA determined in their program of requirements for DHS in the National Capital Region that DHS needed a minimum of 4.5 million square feet of office space specifically for headquarters functions on a secure campus, housing nearly 14,000 DHS personnel, out of an overall need for 7.1 million square feet in the region. The NAC, if fully developed, could only provide 1.2 million square feet. Aside from space, the other requirements noted in the study were: Compatibility with DHS security needs; Closeness to the White House and Congress; Availability for development by DHS; Ability to be ready on DHS's timetable; Proximity to major roadways; Proximity to mass transit; Proximity to neighborhood amenities; and Availability of an adjacent parcel that can accommodate additional office development and parking. The analysis found St. Elizabeths was the best match, meeting eight of the nine requirements (neighborhood amenities were not deemed present at the time, but were anticipated to develop). According to GSA, St. Elizabeths was the only site available that was capable of meeting DHS's needs. In addition, under 41 CFR Section 102-73.255, "prior to acquiring, constructing, or leasing buildings (or sites for such buildings), Federal agencies must use, to the maximum extent feasible, historic properties available to the agency." Other benefits often cited for consolidation at the St. Elizabeths Campus include economic benefits to the local community and security benefits to nearby federal facilities. St. Elizabeths, since its establishment, has been a government-controlled closed campus. It overlooks Joint Base Anacostia-Bolling and the Defense Information Systems Agency, which has expressed its desire that the property remain a government-controlled closed campus. With the Coast Guard headquarters becoming operational in a new building at St. Elizabeths customized to their needs, it seems that those that argue for siting DHS headquarters there can argue their case based on the existence of a concrete investment in the property that is now functional—literally, the presence of DHS at St. Elizabeths is now a "fact on the ground." The active policy debate now is how far and how quickly one should go with consolidation of DHS headquarters at St. Elizabeths, rather than where it should be done. On September 23, 2011, the House Committee Transportation and Infrastructure's Subcommittee on Coast Guard and Maritime Transportation held a hearing to review the status of the DHS headquarters consolidation project, focusing on the move of the Coast Guard to St. Elizabeths, and the effect it would have on the Coast Guard's budget and operations. The subcommittee chairman noted that in 2006, the Coast Guard authorization bill required GSA to provide in its master plan for another agency of DHS to move to St. Elizabeths at about the same time. This was done out of concern that the Coast Guard would be "isolated" at the Anacostia site, both in the sense of continuing the pattern of fragmentation of DHS component headquarters, and the lack of needed road infrastructure to access the site, which he noted was a long-standing concern of the subcommittee. Therefore the presence of the Coast Guard becomes an argument for further consolidation efforts, and the road improvements they would require. Opponents of consolidation have questioned the need for a single large headquarters. Some critics have expressed the belief that the single headquarters concept is outdated, proposing "distributed" headquarters facilities connected via the Internet. As is noted in later sections of the report, concerns have been voiced by some Members of Congress about schedule delays and cost increases. Others oppose consolidation on the grounds that the department's establishment was flawed and that its overall structure should be revisited. Some historic preservationists voiced concerns that the project would fail to preserve the historic character of the site, while others have balked at the cost of "constructive reuse" of the site's historic buildings. The 2003 estimate of a nearly $500 million price tag to restore basic functionality to the campus buildings could be read as an indicator of just how difficult and expensive this project could become. In January 2014, the majority staff of the House Committee on Homeland Security released "Reality Check Needed: Rising Costs and Delays in Construction of New DHS Headquarters at St. Elizabeths," a report that expressed concerns about the continuation of the project as envisioned given budgetary constraints, noting in the summary: The Committee recognizes the Department of Homeland Security's (DHS) need to consolidate activities to increase the Department's efficiency and improve its operations and coordination. However, DHS currently lacks vision to adapt the construction of St. Elizabeths to the fiscal challenges facing our Nation. At a September 19, 2014, hearing before the House Committee on Homeland Security's subcommittee on Oversight and Management Efficiency, GAO noted inconsistent oversight of the project by DHS and a failure by both DHS and GSA to plan the project in accordance with either GSA guidelines or industry best practices for major acquisitions. Among the criticisms lodged against the project was a failure to periodically reevaluate alternative approaches to the headquarters consolidation to identify possible less resource-intensive solutions to the capability gaps the project is supposed to help meet. Some in the local community have questioned whether a secure campus like the envisioned DHS headquarters will support significant economic activity in the surrounding area. According to GSA testimony in 2010, the project would create 30,000 direct and indirect jobs during construction. As of the end of 2012, according to GSA's website for the project, 5,653 people have been employed by the project, including 875 District residents. St. Elizabeths was selected in part because of its ability to provide 4.5 million square feet of office space to house 14,000 personnel—a need that was calculated in 2006. Although the original intent was not to bring the entire DHS headquarters workforce to St. Elizabeths, with new constraints on the DHS budget, the department's workforce is unlikely to meet growth projections that formed part of the original justification for the project's size. Additionally, patterns in the usage of federal office space have changed, with increasing use of telework and other space management strategies such as flexible and open office arrangements in recent years. The significance of these arrangements can be seen in through DHS's efforts to reduce its overall real estate footprint. In working to meet a government-wide goal of $3 billion in non-BRAC real estate savings from in FY2011 and FY2012, DHS effected $238 million in savings—$198 million (83%) of which was attributable to space management improvements. DHS has indicated that additional capacity generated by these strategies would be used to bring a larger share of its headquarters functions onto the St. Elizabeths campus. However, these changes could justify revisiting the calculations projecting the footprint needed for DHS's headquarters, and questions could be raised over whether there is a rationale for DHS personnel beyond the 14,000 originally slated for St. Elizabeths to be moved there. Do all of DHS headquarters functions need to be consolidated on a high-security campus like St. Elizabeths, or would it be more cost effective to maintain some of them in another location? Funding for civilian federal government facilities is often provided through two separate sources—through the GSA, which is funded in the Financial Services and General Government Appropriations bill, and through the appropriations bill that funds the agency that will use the facility. When a federal department or agency lacks construction authority, as in the case of DHS, the construction of basic buildings is done through contracts let by and funded through GSA. The department that will use the building pays for "tenant improvements"—security, furniture, mission-specific equipment, amenities, and other finishes that make the building functional for its occupants. Figure 1 shows the funding requests made by previous and present Administrations through GSA and DHS for DHS headquarters consolidation at St. Elizabeths along with enacted funding levels, including funding for infrastructure improvements at the site once the initial headquarters project was announced, and the appropriations provided by Congress in response, from FY2006 through FY2014. The St. Elizabeths project has to date received more than $1.7 billion in appropriations. However, as Figure 1 shows, the project has not been consistently funded to the levels requested under Administrations of either party. As the figure illustrates, requests for funding were made but not fulfilled for the larger consolidation project in FY2007 and FY2008, which slowed the start of the project. The original DHS National Capital Region Master Plan envisioned the Coast Guard moving into its new headquarters in the last quarter of FY2010 —a move instead that began in the last quarter of FY2013. FY2009 was the only year the St. Elizabeths project as presently envisioned received funding of more than $200 million from either the DHS or GSA budget. The first of two consolidated appropriations bills included funding for the Department of Homeland Security, including $98 million for the Coast Guard Headquarters element of the project. Five months later, outside the traditional allocation-constrained debate of regular appropriations bills, the American Recovery and Reinvestment Act of 2009 (ARRA) invested $650 million in this capital project. The FY2009 regular appropriations process concluded about three weeks later with the second of the two consolidated appropriations bills, which included $347 million for the project through GSA, matching the level requested by the Administration through the GSA budget request. Requests for funding for FY2011 through FY2014 were only partially met, as was GSA's request for FY2015. DHS's FY2015 request remains unresolved as of the date of publication. On July 29, 2013, a ceremonial ribbon-cutting took place for the new 1.2 million square foot Coast Guard Headquarters at St. Elizabeths. The Coast Guard is now operating for the first time in its history from a headquarters constructed specifically for its use. In the months before the release of the FY2014 budget request, DHS officials indicated in testimony before Congress that DHS was preparing a new approach to the St. Elizabeths project in light of the limitations on available funding. The original plan for St. Elizabeths was a coordinated approach, intended to maximize cost savings by coordinating construction efforts across the campus. DHS indicated that continuing with that plan given the level of appropriations support received after FY2009 was not feasible. Then-DHS Under Secretary for Management Rafael Borras noted in testimony before the House Appropriations Committee's Homeland Security subcommittee that future requests would be scoped and packaged as individual segments rather than as larger coordinated pieces. One example of how the inability to proceed with the coordinated construction schedule resulted in cost increases is the efficiency lost from construction of the departmental operation's center. The coordinated construction plan called for a consolidated departmental operations center to be excavated and built at the same time as the Coast Guard headquarters. As the Coast Guard headquarters building was built into the side of a hill, the original construction plan would have taken advantage of the availability of the specialized crew and open space created by the construction to facilitate development of this new facility. Funding was not provided for this work. Therefore, this piece of the project will have to be developed at a later date and most likely at a higher cost, according to DHS and GSA. The operations center for the Coast Guard and an interim campus security control center will occupy some of the available space in the interim. A revised cost and schedule estimate was released in June 2013. The original cost estimate for the consolidation of DHS headquarters at St. Elizabeths was $3.4 billion. The cost estimate under the revised 2013 schedule was $4.5 billion. DHS has stated that increases in costs have been the result of delays in funding that have pushed back the construction schedule—not because of changes in the project's design or requirements post-contract. According to DHS, all funded components of the project have proceeded on time and within their budget projections. In additional to the lost efficiencies noted above, the June 2013 baseline for the project incorporated 3.5% annual inflation in construction costs. DHS and GSA indicated that if the project is funded faster than the plan's projection of one 300,000 gross square foot useable segment per year, the total cost for the completed project would be lower. The revised schedule and cost estimate was criticized by GAO in a September 2014 report as being only partially or minimally compliant with leading practices for major capital projects. GSA and DHS indicated a revised plan for St. Elizabeths, including new cost and schedule estimates and more closely conforming to those leading practices, would be released with the President's FY2016 budget request. The Administration's FY2014 budget included requests for funding for the St. Elizabeths project through both GSA and DHS. The GSA request was for $262 million—$202 million for the next phase of the St. Elizabeths project, and $60 million for infrastructure activities left undone from the previous phase. The DHS request included $93 million for the next phase of construction, and $13 million for support costs for campus security. P.L. 113-76 included $155 million through the GSA for the project and $35 million through DHS for development of the project. $13 million for support costs was provided through the Coast Guard operating expenses appropriation. The explanatory statement accompanying the FY2014 Homeland Security Appropriation Act called for an expenditure plan that included a revised schedule and cost estimate on the project and quarterly briefings "to highlight any deviation from the expenditure plan." Combined, the two appropriations represented the largest appropriations provided for the project since FY2009. According DHS, the FY2014 appropriation was sufficient to begin work on the renovation of the central building on the St. Elizabeths campus, where the offices of the executive leadership of the department would be located —however, the funding was not adequate to keep up with the construction schedule outlined in 2013. The Administration's FY2015 budget request also included funding for the St. Elizabeths project through both GSA and DHS. The GSA request was for $251 million—over half of which would go to constructing a new interchange to facilitate access to federal government facilities in the area from Interstate 295. The DHS request included $58 million for the next phase of construction and $15 million for campus operational support costs. The House-passed Financial Services and General Government Appropriations bill for FY2015 included no funding for St. Elizabeths through the GSA. The Senate Appropriations Committee draft of the bill included $251 million for the same. The House-reported Homeland Security Appropriations bill for FY2015 included no funding for headquarters consolidation at St. Elizabeths: Its Senate-reported counterpart included $49 million through a general provision for operational support of the St. Elizabeths campus headquarters consolidation and completion of construction on one of the larger historic buildings on the site. The consolidated appropriations act for FY2015 included $144 million for the GSA—the amount requested for the new highway interchange—while DHS was funded by a short-term continuing resolution through February 27, 2015, which carried no specific direction regarding funding for headquarters consolidation. On September 19, 2014, the House Committee on Homeland Security's Subcommittee on Oversight and Management held a hearing "to receive testimony regarding the Department of Homeland Security's consolidation project at St. Elizabeths." The panel of witnesses included the Government Accountability Office, which released a report that same day that criticized the planning and projection practices used in advancing the headquarters consolidation project, and DHS and GSA, who were invited to respond. DHS and GSA indicated an updated project plan would be released with the President's FY2016 budget request that would incorporate many of GAO's recommendations. The hearing also served as a platform for criticisms of the project lodged by the majority on the subcommittee in a report in January 2014. Among the items entered into the record for the hearing was a Senate Homeland Security and Government Affairs Committee majority staff report released September 19, 2014, that highlighted the importance of proceeding with the project. In August 2013, H.R. 2611 was enacted into law, naming the new Coast Guard Headquarters at St. Elizabeths the "Douglas A. Munro Coast Guard Headquarters Building." Signalman First Class Munro was the only Coast Guardsman to receive the Medal of Honor. The bill passed unanimously in the House, by unanimous consent in the Senate, and no commentary was made on the consolidated headquarters project during floor debate in either body. On May 22, 2013, the House Committee on Transportation and Infrastructure Subcommittee on Economic Development, Public Buildings, and Emergency Management held a hearing on "Saving Taxpayer Dollars: Freezing the Federal Real Estate Footprint." DHS Management Directorate Chief Readiness Support Officer Jeff Orner testified before the subcommittee on DHS's real estate "footprint" and their efforts to improve its management, which costs them $1.6 billion in rent and $310 million in upkeep each year for all departmental real estate. In his testimony, he noted that implementation of flexible workplace strategies across DHS that result in more efficient use of space are expected to result in significant savings. As for St. Elizabeths, he noted that: The Administration remains committed to a consolidated Headquarters in Washington, D.C., and will continue to work with Congress to advance consolidation during these challenging fiscal times. Our goal is to significantly reduce the number of locations in the [National Capital Region] with St. Elizabeths eventually housing the core of DHS leadership and mission functions. As the tenant of the St. Elizabeths campus, we continue to work with GSA to re-evaluate the program's original requirements in order to achieve the overall goals and objectives at the lowest cost to the taxpayer. During its hearings on the FY2013 budget request the House Appropriations Committee's Homeland Security Subcommittee held a hearing on DHS facilities, focusing on two major DHS construction projects for which funding has been sought in recent years with limited success: the consolidated headquarters project and the National Bio- and Agro-defense Facility. Subcommittee Chairman Robert Aderholt pointed out that both projects "are complex and expensive undertakings with multi-year timelines," and "are also operating under significantly tighter budgets than anticipated when planning began several years ago." He went on to say that Congress "must take a more realistic look at [the St. Elizabeths project] and balance delays against possible cost increases," while asking DHS for minimum funding requirements and alternative solutions. In the 112 th Congress, S. 1546 , the Department of Homeland Security Authorization Act of 2011, which was marked up by the Senate Homeland Security and Governmental Affairs Committee on September 21, 2011, included a section on DHS headquarters consolidation, directing that DHS consolidate its headquarters function at St. Elizabeths no later than the end of FY2018, and that all remaining departmental components and activities that be consolidated "to as few locations within the National Capitol [ sic ] Region as possible." Consolidating DHS headquarters anywhere would change the department's current operating patterns in the National Capital Region. These changes would have operational, budgetary and cultural implications for DHS, and the consolidation vision presented in the St. Elizabeths project would provide its own particular texture to these changes. Consolidating the headquarters components of DHS at a single site would facilitate both "vertical" coordination between departmental and component leadership and "horizontal" coordination among the department's components. With headquarters functions operating in spaces designed for a unified department, the structural hurdles to coordination are lowered. Having a single campus makes collaboration with other components easier to accomplish and can facilitate more effective departmental leadership. The lack of a consolidated headquarters has hindered the development of a cohesive, maximally effective department in the eyes of some observers close to DHS. Former Coast Guard Commandant Thad Allen testified on July 12, 2012, before the Senate Committee on Homeland Security and Governmental Affairs: In the Washington Area the Department remains a disjointed collection of facilities and the future of the relocation to the St. Elizabeths campus remains in serious doubt. One of the great opportunity costs that will occur if this does not happen will be the failure to create a fully functioning National Operations Center for the Department that could serve as the integrating node for departmental wide operations and establish the competency and credibility of the Department to coordinate homeland security related events and responses across government as envisioned by the Homeland Security Act. As with the mission support functions discussed earlier, the Department has struggled to evolve an operational planning and mission execution coordination capability. As a result, the most robust command and control functions and capabilities in the Department reside at the component level.… The combination of these factors, in my view, has severely constrained the ability [of] the Department [to] mature as an enterprise. And while there is significant potential for increased efficiencies and effectiveness, the real cause for action remains the creation of unity of effort that enables better mission performance. In this regard, there is no higher priority than removing barriers to information sharing within the department and improved operational planning and execution. Currently, DHS operates a National Operations Center (NOC) at the Nebraska Avenue Complex. However, its ability to provide a robust command and control function and coordinate federal government incident response to an incident is constrained by its limited size and infrastructure. Establishment of the type of NOC described in Admiral Allen's testimony—often referred to as a Departmental Operations Center, or DOC—would have direct impact on both day-to-day and crisis operations of the department. Establishment of a new more capable operations center was recommended in The Federal Response to Katrina: Lessons Learned , the White House's extensive after-action report from the hurricanes that hit the Gulf Coast in 2005. The report's specific recommendation is as follows: In order to strengthen DHS's operational management capabilities, we must structure the Department's headquarters elements to support the Secretary's incident management responsibilities. First and most important, Federal government response organizations must be co-located and strengthened to manage catastrophes in a new National Operations Center (NOC). The mission of the NOC must be to coordinate and integrate the national response and provide a common operating picture for the entire Federal government. In addition, under the plan for the consolidated headquarters, the DOC would be co-located with the operations centers of the individual DHS components. In Homeland Security: Opportunities Exist to Enhance Collaboration at 24/7 Operations Centers Staffed by Multiple DHS Agencies , GAO agreed that DHS's plans to co-locate its headquarters, its component headquarters, and their respective staffs and operations centers at one location "could further enhance collaboration among DHS's component agencies," along with adoption of other key practices. DHS has further indicated that increased operational effectiveness would result from the co-location of operations centers, and real estate efficiencies could be found from shared common functions, support rooms, and incident management spaces. The establishment of the DOC without the presence of a consolidated headquarters would be difficult. The consolidated headquarters project brings, for the first time, the executive leadership of the department and a leadership presence from all its components together. Without consolidation, the DOC would necessarily be separated from either the executive levels of DHS or the leadership of components implementing the response. The slower pace of consolidation under the new project baseline could also prove problematic. The establishment and activation of operations centers in Anacostia before their headquarters presence is established there could reduce efficiencies in some cases. For example, in the past, FEMA's National Response Coordination Center (NRCC) has benefitted from co-location with senior management offices to support their response efforts. Under the new baseline, the NRCC appears to be slated to move to St. Elizabeths four years before the FEMA headquarters component is completed. According to DHS, should the project proceed along the timeline included in the new baseline, senior leadership of the components and component operations centers would move to St. Elizabeths simultaneously, in advance of the other headquarters functions of their components. One operational question that arises in relation to this project is the advisability of a consolidated headquarters capacity from a security standpoint. Does consolidating the leadership of DHS at a single facility make it easier to secure, a more appealing target for efforts to disrupt it, or both? In 1995, the Interagency Security Committee (ISC) was established by Executive Order 12977, and tasked with establishing policies for security of federal facilities, including developing and evaluating security standards. In 2003, it became part of DHS. There are five levels of security standards for federal office buildings. Under the standards developed by the ISC, the proposed consolidated DHS headquarters would be classified as a Level V facility, the highest level on the scale. Buildings at this level are similar to those at the next level below in that they occupy more than 150,000 square feet and host more than 450 employees. The distinguishing characteristics of Level V facilities are that their missions "are considered critical to national security," and the buildings themselves are "high threat/high profile facilities." While the operators of Level V facilities customize their facility security to meet their mission needs, minimum standards for this type of facility include 100-foot perimeter setbacks, 100-foot separation between parking facilities and buildings, and protected ventilation equipment (located away from high-risk areas) for the buildings. It is impossible for DHS to ensure this level of security for all its headquarters components in its current state of dispersal across the National Capital Region. The status quo would leave parts of the headquarters function in facilities that do not meet Level V security standards. The Nebraska Avenue Complex (NAC), where the Secretary's Office is currently located, provides Level V security, but it is too small to accommodate the needs of a consolidated headquarters outlined in the master plan. Planning documents indicate that part of the reasoning behind the selection of the St. Elizabeths site was the ability to implement Level V security standards at this particular location. According to then-Acting DHS Under Secretary for Management Chris Cummiskey, GSA retained the St. Elizabeths campus in their real estate portfolio specifically for the use of agencies with high security requirements. The St. Elizabeths site was the only site in the District able to accommodate the office space requirement and the security standards. The new Coast Guard headquarters and the temporary perimeter meet the standards for a Level V facility. The security question extends beyond DHS headquarters' offices. These offices, for the most part, do not have the same level of security as the NAC, and often occupy leased office space in commercial buildings. If they are targeted by terrorist violence, it is likely neighboring offices, buildings, and their personnel could be affected. CIA headquarters and the Pentagon are high profile, consolidated headquarters that are considered Level V facilities. Both have been the targets of terrorist attacks. In the cases of attacks on both facilities, collateral damage was limited. If attacks using similar methodologies were carried out against DHS headquarters functions in their current locations, collateral damage would likely be greater due to the lack of separation of the DHS elements from the general population. For example, in February 2010 a man flew a private plane into a commercial office building housing IRS offices in leased space. While the IRS was his intended target, the crash and fire affected other tenants in the building, including multiple non-federal businesses. It is also worth noting that both Level V facilities continued to operate in the face of the attacks. It is unlikely that targeted DHS offices with lower levels of security would be able to do the same. One question would then seem to be, as there is already a Level V facility for part of DHS headquarters, does consolidating the headquarters function at St. Elizabeths further raise the profile of DHS, and make it a more likely target? This seems unlikely—DHS is already the third largest component of the federal government and is a well-known entity domestically and overseas. While the new headquarters would be larger, and parts are visible from a distance, it can be argued that the facility is no more intrusive than other defense-related facilities along the Potomac and Anacostia, the campus benefits from a significant setback, and the campus may be deemed a harder target than DHS's existing facilities as it was planned and built with DHS's needs in mind. Regardless of whether the department's profile would be higher at St. Elizabeths, the essential question is whether whatever additional security risk that is entailed by consolidation is counterbalanced by whatever other operational, budgetary, and cultural benefits may accrue, including the additional protection afforded headquarters elements currently outside the NAC that move to the new facility. In previous years, the St. Elizabeths project was treated as a high priority for the Administration. While a shift to a lower public profile for the project might be considered simply a change in legislative tactics, in September 2011, as Congress was working on the FY2012 appropriations bills, Secretary Napolitano said: With respect to DHS, yes, I expect we will flatten out and that's—that's not surprising. I mean, at the beginning of a department, of course you're going to be putting in more and more money until you get things kind of established and set up. There are things we'd like to do that are going to have to be postponed. St. Elizabeths is a good example, that's supposed to be our headquarters. We will have to postpone that.... I'd rather have the money to complete building a National Security Cutter for the Coast Guard and support the Secret Service in its activities, and sustain our efforts at the border than [have] a new building, and so that is why St. Es is on the chopping block for now. I think ultimately it will happen, but not now. The DHS Chief Financial Officer released the following statement shortly thereafter: The Secretary's comments that the DHS Headquarters Consolidation Project [is] on the "budget chopping block" was in context of a conversation on how congressional budget cuts are impacting the Department. The Administration is committed to building a new headquarters for the Department in DC and will continue to work with Congress to move this project forward while maintaining frontline operations. However, we are revisiting the original assumptions on the use of the space as St. Elizabeth's [sic] based on projected budgets and growth of the Department. As the then-Secretary alluded to in the former statement, the headquarters consolidation project was conceived in a different budget environment than exists today. At the time, projections for future budgets for both DHS and GSA could have more easily accommodated such a significant capital investment. In the future fiscal environment influenced by the Budget Control Act (BCA), it is reasonable to expect that the DHS budget will either remain relatively flat in nominal terms or decline over the near future. The estimates and projections for budget authority in the FY2015 budget request are somewhat distorted due to varying levels of spending on disaster relief, but the Administration's budget projection for DHS in FY2019 are for appropriated budget authority that is roughly on par with what the department received in FY2007. While the projections in the Administration's budget request are not binding, the minimal increases projected for FY2014-FY2018 indicate that a significant expansion in available budgetary resources is not anticipated. This project is more significantly affected by the GSA's budget. Over $2 billion of the initially projected $3.4 billion in project costs was to be borne by the GSA through their budget—59% of the cost. Under the revised baseline, GSA's share rises to $2.8 billion of the $4.5 billion total—roughly 63% of the total cost. This due in large part to cost escalations from delaying construction and loss of efficiencies from no longer following the coordinated construction plan. As shown in Figure 1 , as with DHS appropriations, GSA appropriations have not kept pace with the construction plan for the project, either. GSA's budget faces arguably more severe constraints than that of DHS. The amount appropriated for construction and acquisition of facilities declined from nearly $894 million in FY2010 to $50 million in FY2012. The resultant backlog of construction and renovation needs could create more competition for GSA's limited budget—GSA Administrator Dan Tangherlini indicated to reporters that that backlog had grown to $4 billion as of April 2013. The new baseline for the project does call for more than $200 million in new funding for the project for each year from FY2014 to FY2017, including more than $200 million from GSA alone each year. Meeting these projections could be seen as a significant statement on the part of Congress, given the fact that FY2009 and FY2014 represented the only years in which the project received more than $100 million from either GSA or DHS appropriations. Even in this environment of fiscal constraint, however, Congress and the Administration continue to make affirmative choices to invest in a range of projects and services. The projected costs for DHS headquarters at St. Elizabeths could be met within the bounds of a BCA-influenced budget, or even a more limited one—the operative question is what level of priority is placed on this project in the overall budget by the Administration and, ultimately, by Congress. This prioritization could change significantly should the country be faced with a national-level incident where the lack of a more capable department-level operations center appears to constrain an effective federal response. With the new timetable and cost increases outlined in the new baseline for the St. Elizabeths project, it may be useful to reexamine the cost savings that the St. Elizabeths project presents. Generally speaking, government agencies pay lease costs to the GSA or private real estate owners for the facilities they operate from. Reducing these costs by moving from leased properties to government-owned facilities can free up additional resources, alleviating pressure from declining agency budgets over the long term. The up-front costs of these projects in times of tightening budgets can be difficult for agencies to absorb in formulating their budget requests or for Congress to approve in the context of balancing other priorities, as the appropriations process makes no accounting for longer-term savings. GAO, in the cover letter accompanying a 2013 report on GSA leasing practices, framed the issue of overhead costs between leasing and owning real estate to meet agency needs this way: [O]ur work over the years has shown that building ownership often costs less than operating leases, especially for long-term needs for space. In a series of reports since 1995, we found that for 67 of 89 General Services Administration (GSA) leases we examined, the government could have saved almost $1 billion if it had constructed rather than leased space for federal agencies. As we have examined only a small number of GSA's total leasing actions since 1995, the potential savings from construction rather than leasing is likely to have been even higher. Specifically, GSA and DHS have in previous years cited an estimated cost savings of $600 million over 30 years for the St. Elizabeths project. As noted earlier, GSA's most recent estimate of cost savings from new construction versus leasing, before taking into account operational cost savings, is almost $700 million, even with the higher project cost estimate. However, in its September 2014 report on DHS and GSA's management of the headquarters consolidation project, GAO noted that the underlying cost estimates may not be reliable, as they did not fully conform with "leading capital decision-making practices," and did not include full life-cycle costs. As DHS has been attempting to consolidate its headquarters functions and other offices, its components that occupy leased space have faced another complicating factor. In testimony before the House Appropriations Committee's Homeland Security subcommittee in the FY2013 appropriations cycle, DHS noted that they currently have 181 leases in 53 locations for headquarters components, 87% of which were to expire by 2016. As their leases have matured, they have added short-term extensions so they can move to the envisioned new facilities or to space freed up by the movement of other offices. Delays in the completion of new space requires these offices to use more short-term leases, which are more expensive, and thus raise the department's overhead costs. With budgeting tending toward an environment where absorbing rising costs requires matching reductions in spending elsewhere, this could in turn reduce the funding available for front line operations. Aside from savings from lower leasing costs, some savings are to be expected with a consolidated headquarters from increased centralization of some support services. This should not be confused with the benefits of a "shared services" model for supporting the department or federal government. The use of shared services can generate efficiencies as well, but generally involves developing a different internal managerial relationship between enterprise operations and support functions, rather than simply consolidating them. One common line of thought among secretaries of the department from the very beginning has been the need to fuse the diverse components of the department into a single unit—development of "one DHS." DHS Secretary Jeh Johnson reemphasized this point in a memorandum to DHS leadership four months after his swearing in, noting the importance of ensuring the department becomes "greater than the sum of its parts—one that operates with much greater unity of effort." However, the department has yet to accomplish this goal. As retired Coast Guard Commandant Admiral Thad Allen testified before the Senate Homeland Security and Governmental Affairs Committee, "There has been hesitancy by components to relinquish control and resources to a Department that appears to be still a work in progress." The question of whether the Department of Homeland Security should exist is not currently the focus of congressional debate. Although no authorization bill for the entire department has passed either chamber since the department was established, it is also true that no legislation to fundamentally alter the structure of DHS has been marked up since December 2010. Current issues include defining and refining the department's mission, and ensuring that the department can perform these missions effectively and efficiently. However, the persistence of some components' organizational structures from the pre-DHS era, the lack of integration between components with similar missions, and statements by prominent political figures inside and outside Congress suggest that the issue is not completely settled. Completion of a consolidated headquarters and co-location of headquarters functions is not sufficient to create the unified department with strong integrated management capacity across its components that is sought by Congress and the Administration. A repeated theme found in GAO analyses and in observations of witnesses testifying before the department's oversight committees is that successful integration of the department will take a long time to accomplish and require ongoing effort to maintain once it is achieved. Cathleen Berrick, in her capacity as Managing Director for Homeland Security and Justice Issues for the Government Accountability Office (GAO) had this to say in testimony before Congress on this particular challenge: In 2003, we designated the implementation and transformation of DHS as high risk because it represented an enormous and complex undertaking that would require time to achieve in an effective and efficient manner, and it has remained on our high-risk list since. We reported that the components that became part of DHS already faced a wide array of existing challenges, and any failure to effectively carry out the department's mission would expose the nation to potentially serious consequences. In designating the implementation and transformation of DHS as high risk, we noted that building an effective department would require consistent and sustained leadership from top management to ensure the transformation of disparate agencies, program, and mission into an integrated organization, among other needs. Our prior work on mergers and acquisitions, undertaken before the creation of DHS, found that successful transformations of large organizations, even those faced with less strenuous reorganizations than DHS, can take years to achieve. The departmental leadership is aware of this challenge. Speaking at a hearing before the Senate Judiciary Committee, then-Secretary Napolitano noted: We continue to excavate differences in systems and cultures and protocols and procedures. There has been a lot accomplished over the past nine years by my two predecessors, and over the past three-plus years now that I've been Secretary. But given the size and scope of the merger that is underway, it does take time. The Department of Defense took, by most accounts, 40 years to really become unified as a department. My goal is to substantially beat that record. The "unity of effort" initiative launched by Secretary Johnson calls for much greater coordination of planning, procurement, prioritization and mission execution, to be driven by the senior leadership of the various components of DHS. Consolidation of headquarters functions can contribute to this effort, and some observers believe it is a necessary step, but it is no "magic bullet" for the issues facing the department. The department as recently as 2011 viewed consolidation of DHS headquarters operations as only one of seven key initiatives to integrate its management functions. Morale issues at DHS have been a matter of concern for both congressional authorizers and appropriators. According to the 2014 Office of Personnel Management (OPM) Federal Employee Viewpoint Survey and the Partnership for Public Service's "Best Places to Work in the Federal Government" analysis (which is based, in part, on the OPM survey), job satisfaction at DHS declined for the fifth year in a row, and for the second year in a row, DHS received the worst ranking among the 19 largest federal agencies. Not only is DHS the lowest ranking among large federal agencies, the ratings for each category at DHS declined faster than average, except for pay—where the slight uptick in satisfaction did not keep pace with the average. However, morale at DHS is not uniformly low, according to the partnership's analysis. The partnership broke out data for 315 agency subcomponents across the federal government, including 15 at DHS. While several DHS subcomponents scored well, including two in the top 25% of ratings, 7 of the 15 were considered among the 15 worst places to work among the agency subcomponents. Three DHS subcomponents were the worst places to work among all 315 surveyed subcomponents government-wide. Some observers have commented that DHS's low employee morale could be exacerbated by the lack of a unified organizational culture—one of the problems a consolidated headquarters was intended to address. One way of assessing whether low DHS headquarters morale may be contributing to a larger morale problem would be through comparing overall job satisfaction and engagement of DHS headquarters offices to that of DHS field offices. Of the government-wide weighted survey responses, those coming from headquarters employees overall reflected more engagement and more satisfaction with their work than those coming from field personnel—a difference of 5% in scoring. No analysis was available to compare the morale of DHS headquarters employees separate from non-headquarters employees, but the partnership's subcomponent analysis indicated that the Office of the Secretary and the Management Directorate of DHS ranked 301 st and 305 th , respectively, among the 315 subcomponents in terms of places to work. There was no data reported from the OPM survey to either directly confirm or refute the idea that headquarters consolidation would have an impact on morale. However, one question in the survey did speak, albeit obliquely, to the adequacy of facilities. Question #14 asked respondents if they agree or disagree that "Physical conditions (for example, noise level, temperature, lighting, cleanliness in the workplace) allow employees to perform their jobs well." Based on OPM's reported weighted responses, government-wide, 65.6% agreed, while 20.1% disagreed. As for DHS, only 59.4% agreed that physical conditions allowed them to perform their jobs well, while 25.4% disagreed. The partnership's analysis did not examine this specific question, and at the time of publication, subcomponent-specific data on that question were unavailable from OPM. Attitudes of DHS component staff reflected in several questions from the FedView survey could be reasonably expected to be impacted by the projected benefits of a consolidated headquarters. For example, for the roughly 7% of DHS employees who would relocate to St. Elizabeths, the new headquarters is designed to include daycare facilities. This could be expected to improve the department's scores linked to family-friendly culture and benefits among that group of employees. Co-locating headquarters could have a positive effect on teamwork ratings. It is also possible that existence of a consolidated headquarters could change perceptions or performance of leadership more broadly across the department, either symbolically or through actual management efficiencies that develop. However, issues of pay, advancement, diversity, and matching employee skills to their missions would likely remain unaffected. The funding of the project could have an indirect morale effect as well: Congressional decisions on capital investments in the department such as headquarters consolidation could be perceived by the employee base as an indirect validation or criticism of the department's work by Congress, or as a measure of the effectiveness of the departmental leadership in representing DHS interests before Congress. As noted above, the Coast Guard currently operates from a new consolidated headquarters at St. Elizabeths, so its experience may in the future be informative regarding the impact of headquarters consolidation on morale, at some level. According to the partnership's analysis, the Coast Guard already scores relatively well, being the second-highest rated DHS subcomponent, coming in at 66 th out of 315, government-wide. Unfortunately, the one year of survey data that would be derived from comparing the Coast Guard's 2013 and 2014 scores is a very limited sample, and neither the available information from the OPM survey nor the partnership analysis allows us to clearly isolate the impact of the Coast Guard headquarters move on morale. When Congress considers appropriations or authorization for the department, it could take a number of different approaches to the DHS headquarters consolidation process. With the Coast Guard moving into its new headquarters, some previously possible options become significantly less realistic, such as termination of the proposal and disposal of the site. With over a billion dollars invested and the Coast Guard occupying their new consolidated headquarters, one could argue the question is no longer whether to consolidate at St. Elizabeths, but instead how far that consolidation should go, and how quickly. The following four examples of possible ways forward are discussed below: Going No Further —consolidating the Coast Guard headquarters on the St. Elizabeths campus, but not proceeding with the rest of the project; Going Further, with DHS as Sole West Campus Tenant —Proceeding with the next phase of the project as envisioned; Going Further, with DHS Sharing the West Campus —downscoping the projected DHS presence at St. Elizabeths, but developing the rest of the secure campus for use by other federal partners; Going Further, and Expediting C ompletion —going beyond the existing funding baseline and taking steps to accelerate full consolidation. With the Coast Guard moving into its new headquarters, Congress may not choose to invest further in the consolidated headquarters for DHS due to budget constraints or a desire for DHS to rethink the consolidated headquarters model. The Coast Guard's immediate needs for headquarters space have been satisfied, providing operational benefits, as their new headquarters is a single facility built expressly for them, as opposed to multiple leased offices on different sites not built to their specifications. The more modern and capable facility may have positive impacts on the morale of the Coast Guard, although this could be balanced by perceptions of the new headquarters being isolated due to its location, which is not near other DHS components or connected to other federal facilities. However, it is worth noting that the campus would have been designed differently for the Coast Guard as a single tenant—shared facilities at the campus center would have been moved to the Coast Guard building to minimize the footprint, and costly upgrades to the campus utility infrastructure to support follow-on phases of the consolidation and investments in refurbishing the Center Building would not have been made. Capital costs have been incurred to establish a new temporary security perimeter for the current facility. These measures could be made permanent. DHS headquarters functions would remain distributed across the National Capital Region, and thus inefficiencies from the continued distribution of the department's headquarters functions would continue to manifest themselves. The department's headquarters would still be heavily reliant on leased space for its real estate needs, which in addition to bearing higher costs than federally owned space, would run counter to the government's stated preference to use federally owned space for national security real estate needs. An explicit statement from Congress mandating termination of the project could relaunch an exploration of alternatives, but there is no guarantee that any alternatives identified would convey the same benefits as the St. Elizabeths project, or save taxpayer resources. Such a decision could in turn lead to a decision about what to do with the rest of St. Elizabeths. If Congress chooses not to fund DHS use of the facility as a secured space, the GSA would still be responsible for maintaining the campus and putting it to use as a part of the federal real estate portfolio. If no other federal client requires the space, then disposal of the remainder of the site could be considered. GSA would still need to maintain the remainder of the St. Elizabeths campus until the property is disposed of. This would entail continued costs to GSA, and disposal could be complicated by St. Elizabeths' status as a National Historic Landmark and the security concerns of the White House Communications Agency (WHCA), which has facilities overlooked by the St. Elizabeths campus. If Congress chooses to support further DHS consolidation at St. Elizabeths, including the post-Katrina recommendation to establish a more capable department-wide operations center, it could proceed with funding the project. The next step would be to provide additional funding for completion of the departmental operations center and the renovation of the necessary buildings to relocate the executive-level departmental management to the St. Elizabeths campus. This option would address one operational concern raised repeatedly by Admiral Allen—the lack of the department-wide operations center. However, that operations center would not benefit from the full headquarters presence of some of its users for several years under this timeline. Fully funding the reuse of the existing historical buildings to house the Secretary's offices would represent a significant investment, but would take advantage of infrastructure improvements already made on the site and in the Center Building complex. In terms of the cultural impact on the department, this option could show continuing progress toward a more fully integrated DHS, although at a slower pace than the original consolidated construction plan. As noted above, the most current cost and schedule estimate was released in June 2013. The projected funding was not provided in FY2014, and the methodology behind that cost and schedule estimate was criticized by GAO in a September 2014 report. A new plan for DHS headquarters consolidation, including cost and schedule estimates informed by GAO's recommendations, is expected with the FY2016 budget request. However, it is unlikely to include an aggressive coordinated construction schedule due to constraints on annual funding. Given the slower time frame to completion, and the significant investment still required in the first few years of the project, largely through the GSA, some may question the sustainability of congressional commitment to the project over a longer period. Needing Congress to make repeated affirmative actions to fund the project in a tight budget era could jeopardize the project's chances to meet the new schedule. In considering the Administration's new plan, Congress could explore a rescoping of the DHS consolidated headquarters project. Currently, DHS plans to take advantage of workplace efficiencies to increase the share of DHS headquarters functions brought onto the St. Elizabeths campus. Downscoping the final DHS presence instead could possibly open space at St. Elizabeths for other federal agencies that would benefit from residing on a secure campus or collocating with DHS. This could result in a more efficient use of space, but the operational impacts on DHS remain unclear. While DHS has stated that they continue to look at the use of flexible workspace arrangements, the promised new plan could spark public discussion of changes to building usage or footprint for the project. Capping DHS's space to attempt to accommodate another as-yet unidentified Federal agency would bear its own set of risks. The organizational and security benefits of consolidation could be compromised by requiring more of headquarters to be off-campus. The historic re-use of existing buildings represents a significant challenge for any potential clients, whether they are DHS or other government agencies. If limitation is made and no additional partner is identified, cost savings from reductions in leased space would have been lost for no marginal benefit. It is unlikely that such a sharing effort would result in cost savings to GSA, whose budget bears the majority of the project costs, no matter who the ultimate tenants are. Congress could also choose to make this project a higher priority among those in the discretionary budget and fund this project aggressively, in an attempt to expedite its completion and salvage whatever savings are possible from coordinated construction of the remaining elements. This option would seem to provide the maximum operational return, providing the infrastructure requested by DHS in its plans for a consolidated headquarters, establishing the departmental operations center, and shortening the time frame between its stand-up and the move of additional component headquarters functions to the campus. As such, if seen to completion, pursuing this option could help reduce barriers to information flow, support coordinated planning, and promote the development of a "One DHS" culture. It is difficult to assess the precise budgetary impact of this option, as the Administration has only alluded to potential savings from acceleration in its most recent revised cost estimate. The Administration's new plan that may accompany the FY2016 budget request may provide more clarity on this. However, it would clearly require a significant adjustment of priorities across the federal discretionary budget to make room in the DHS and GSA allocations for a level of investment significantly higher than what has been provided since FY2009. While this option could capitalize on some savings from coordinated construction, many of those savings are no longer available. Pursuit of this option could be interpreted as a statement that the general DHS structure is a settled matter for Congress and could provide the benefits outlined in DHS's justifications for this project. However, there is no guarantee of improved departmental performance or enhanced morale with this or any of these options. It can be argued that the creation of DHS was a reaction to a national crisis. After years of reaction, departmental reorganization, and increasing distance from the events that led to the creation of the department, there are issues that remain from that more tumultuous time that have yet to be addressed. The consolidation of DHS headquarters functions is one of those unresolved issues. At the time the Bush Administration unveiled its idea for the department, Stan Collender, writing for National Journal, pointed out that the Administration's plan did not answer the question of how transition costs would be paid for and where the new headquarters would be: [t]he assumption is that there will be moving costs involved as at least the administrative functions of the various homeland security agencies are brought together under one roof. Better coordination is, after all, one of the key reasons for this new department; it would make little sense to leave its disparate parts in different locations. Collender went on to ask questions about building a new building, using an existing federal space, or leasing a private one, and finally noted the irony of the creation of the department and its inevitable transition costs eating into the operational funding for the various components. These questions of real property management and budget constraints remain an active part of the debate today. Congress and the department are operating in a different environment than when the consolidation plan was originally drawn up, both in terms of the security threats the nation perceives and the budgetary situation. Even the expectations of what workspace is required for an agency to function has evolved over this period of time with the growing acceptance of telework and flexible office arrangements. The Administration's pending revised plan for St. Elizabeths may or may not fit these new realities better than the previous plans. It is worth noting that making a decision to proceed or not with DHS headquarters consolidation on the West Campus St. Elizabeths will not make certain costs vanish. Whatever course Congress chooses to follow, costs will be rebalanced between a number of types of expenses: construction and move costs for a consolidated headquarters; continued rents for leases across the National Capital Region for maintaining existing headquarters facilities; or the possible (and more difficult to quantify) security, management, communications, logistics, and command and control impacts presented by both the status quo or any proposed change. GSA would also still be responsible for the not insignificant cost of restoring and maintaining the St. Elizabeths campus. The need for the continuing missions of the DHS components, the existence of DHS as an entity, and the realities of putting St. Elizabeths back to productive use drive these costs—even an optimally efficient mix of these investments will still result in significant costs to the federal government. Given the size of the department, the importance of its missions, and the scale of these costs, how the DHS headquarters functions are housed and managed will be an issue of congressional interest for years to come. Analysis of Fiscal Years with Denied Requests or Partial Funding, FY2007-FY2013 Appropriations for the DHS headquarters consolidation effort are carried in two bills: the construction needs for the basic buildings and infrastructure are typically funded in the Financial Services and General Government appropriations bill, through the General Services Administration (GSA), while the mission-specific needs are typically funded through the Homeland Security appropriations bill. Table A-1 at the end of the Appendix provides a summary of funding requested and ultimately appropriated for the consolidation of Coast Guard and DHS headquarters at St. Elizabeths. FY2007 In the course of developing the FY2007 appropriations bills, the House Appropriations Subcommittee for Homeland Security stated that the initial proposal for Coast Guard headquarters evolved into a consolidated headquarters project without answers being provided to the committee on the reasoning behind the site choice, the full range of costs involved and what components would move. The committee rejected funding for the Coast Guard Headquarters project in the report accompanying the bill. Roughly a month later, the Senate Homeland Security appropriations report took a substantively similar position, which was echoed in the final conference report. Both House and Senate appropriators were concerned that DHS was wasting money on investing in the Nebraska Avenue Complex, which they would then abandon for a newer, larger, more expensive headquarters at St. Elizabeths. When the House Appropriations Committee reported out the Transportation, Treasury, and Housing and Urban Development appropriations bill, which at the time included GSA, the committee report for the bill also rejected the Coast Guard project, but on the basis of their belief that the project would have little positive impact on the local community. The Senate companion report was silent on the project, and the year ending continuing resolution ( P.L. 110-5 ) expressly denied funding for a Coast Guard Headquarters at St. Elizabeths. FY2008 For FY2008, the House Appropriations Committee recommended partial funding for the project, while still expressing concerns about overinvesting in the Nebraska Avenue Complex and the breadth of the St. Elizabeths project. The Senate also provided partial funding for the project, but in the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), $6 million was provided for continuing improvements at the Nebraska Avenue Complex, rather than the $101 million provided in the House bill for the NAC and St. Elizabeths or the $88 million provided in the Senate for St. Elizabeths alone. In FY2008, the GSA appropriations were moved to the Financial Services and General Government Appropriations Act, where they remain today. The House Financial Services Appropriations Subcommittee expressed concern about the size of the Coast Guard project, and about possible overinvestment in the NAC given the impending move, but did not explicitly restrict funding for the projects, despite undesignated cuts to the accounts that would support the projects. The Senate funded the requested projects in full, but in the final version of P.L. 110-161 , only $28 million in funding for the NAC remained. FY2011 For FY2011, the Administration requested $380 million through the GSA for construction, infrastructure, historic preservation efforts, and initial work on the new highway interchange. It also sought almost $288 million through the DHS budget for headquarters consolidation, as well as consolidation of its leases housing more mission support functions outside St. Elizabeths. The combined appropriation for the requested budget for the project was unmet, falling over half a billion dollars short of the total request, despite testimony before the House Appropriations Committee's Homeland Security Subcommittee about the urgency of the need and the potential long-term budget savings. FY2011 appropriations for federal government operations were provided through a year-long continuing resolution (CR), which included $77 million for the headquarters consolidation project through DHS. The GSA had requested $381 million for St. Elizabeths, ultimately provided $30 million to the project from the $82 million it received for construction projects nationwide under the CR. FY2012 For FY2012, the Administration requested $215 million for headquarters consolidation through the DHS budget, including $160 million for new construction at St. Elizabeths, and $55 million for lease consolidation. They also requested $217 million in the General Services Administration budget for the project through the Federal Buildings Fund, including funding for planned highway alterations to provide better motor vehicle access to the campus. The House did not fund the project in the House-passed DHS appropriations bill. In report language, the committee stated: [B]oth costs and schedule of the current project are matters of concern for the Committee. In hearings the Committee held on the St. Elizabeths project in 2010, it became clear that adequate cost controls were essential for this project.… Yet costs have grown in a year from $3,400,000,000 to $3,600,000,000 chiefly due to increases in the General Services Administration share of the project. The Committee notes that dependence on GSA funding requires coordination of funding and management, and that the proposed DHS request, even if resources were available, would likely not coincide with necessary GSA funding. Furthermore, delays are already being factored into the Department's planning, as it has projected it will postpone work on the FEMA section of the facility. In minority views included in the report, the ranking members of the House subcommittee and full committee had a different perspective: Of particular concern is the decision to provide no funding for the new DHS headquarters or for the consolidation of leased property, a penny-wise and pound-foolish decision. Already, based on the delay in finalizing the 2011 bill and the reduced resources provided in that bill for DHS headquarters construction activities, the cost of the headquarters project has grown by $200 million, from a total cost of $3.4 billion to $3.6 billion. The decision to deny an additional $159,643,000 in 2012 to finalize construction of the first phase of the new headquarters project and begin construction on the second phase will result in higher costs in the out years and will delay, by at least one year, when the Coast Guard can move into its new headquarters facility (phase one), which is already under construction. The Senate Appropriations Committee recommended $56 million in Title V of their version of the DHS appropriations bill to complete the Coast Guard headquarters facility, $159 million (74%) below the President's requested funding level. The Senate Appropriations Committee also expressed concern that limited funding would result in no other DHS headquarters components using the St. Elizabeths campus, and included in their bill a requirement that DHS provide within 60 days of enactment an expenditure plan and an initial analysis of the mix of offices to be housed at the headquarters complex. The House Appropriations Committee's Financial Services Subcommittee rejected the Administration's entire $840 million request for construction and acquisition under GSA's Federal Buildings Fund. In zeroing out the request for construction, the report noted "Adding to the Federal inventory of buildings is not welcomed at a time when the management and use of the current inventory is less than optimal." The chairmen of the House subcommittee and full committee expressed concern about the deep cuts in GSA's budget, noting that it reversed a position taken by the current chamber majority in the FY2008 bill. However, the report does not mention the DHS project specifically. The Senate Appropriations Committee's Financial Services Subcommittee provided $65 million for the entire construction and acquisition activity at GSA, rather than the $840 million requested. No mention is made in the bill or report of the DHS headquarters project. In the final consolidated appropriations bill for FY2012, the overall combined request of $377 million for GSA and DHS contributions to St. Elizabeths resulted in only $93 million in appropriations, with $56 million provided to DHS to complete only the construction of the Coast Guard portion of the headquarters. The remaining $37 million for the St. Elizabeths project came from the $50 million GSA received for construction projects nationwide. DHS has indicated that the GSA funding was inadequate to complete work as planned for the Coast Guard to occupy its new headquarters, so several elements of Phase I have been delayed and the funding for those elements redirected to ensure the needed work could be done. FY2013 The Administration's FY2013 budget request for the Department of Homeland Security included $89 million for construction related to St. Elizabeths, and $24.5 million for the Coast Guard to cover operational transition costs for the move to the new facility. The GSA budget included no funding request for the project. However, it is noteworthy that the DHS budget justification indicated the request is "to construct I-295/Malcolm X Avenue interchange improvements and West Campus access road extension from Gate 4 of the U.S. Coast Guard Headquarters Building to Malcolm X Avenue." Funding for this type of infrastructure, which in this case supports access to multiple federal facilities aside from the St. Elizabeths campus, has traditionally been requested and provided in the GSA budget. The House Appropriations Committee recommended no funding for the highway interchange or any part of the St. Elizabeths project through the management accounts, noting in its report 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. 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 … 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. 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 requested. The committee also fully funded the Coast Guard's operational transition costs for the move. No funding was provided for the project through the Coast Guard construction budget. An amendment was offered in full committee markup on May 22, 2012, to use the $89 million for the highway interchange as an offset for an unrelated amendment. The amendment failed on a 15-15 vote, 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. P.L. 113-6 provided $29 million 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. FY2014 Appropriations The Administration's FY2014 budget included requests for funding for the St. Elizabeths project through both GSA and DHS. The GSA request was for $262 million—$202 million for the next phase of the St. Elizabeths project and $60 million for infrastructure activities left undone from the previous phase. The DHS request included $93 million for the next phase of construction and $13 million for support costs for campus security. P.L. 113-76 included $155 million through the GSA for the project and $35 million through DHS for development of the project. $13 million for support costs was provided through the Coast Guard operating expenses appropriation. The explanatory statement accompanying the FY2014 Homeland Security Appropriation Act called for an expenditure plan that included a revised schedule and cost estimate on the project and quarterly briefings "to highlight any deviation from the expenditure plan." Combined, the two appropriations represented the largest appropriations provided for the project since FY2009. According DHS, the FY2014 appropriation was sufficient to begin work on the renovation of the central building on the St. Elizabeths campus, where the offices of the executive leadership of the department would be located —however, the funding was not adequate to keep up with the construction schedule outlined in 2013. FY2015 Appropriations The Administration's FY2015 budget request also included funding for the St. Elizabeths project through both GSA and DHS. The GSA request was for $251 million—over half of which would go to constructing a new interchange to facilitate access to federal government facilities in the area from Interstate 295. The DHS request included $58 million for the next phase of construction and $15 million for campus operational support costs. The House-passed Financial Services and General Government Appropriations bill for FY2015 included no funding for St. Elizabeths through the GSA. The Senate Appropriations Committee draft of the bill included $251 million for the same. The House-reported Homeland Security Appropriations bill for FY2015 included no funding for headquarters consolidation at St. Elizabeths: Its Senate-reported counterpart included $49 million through a general provision for operational support of the St. Elizabeths campus headquarters consolidation and completion of construction on one of the larger historic buildings on the site. The consolidated appropriations act for FY2015 included $144 million for the GSA—the amount requested for the new highway interchange—while DHS was funded by a short-term continuing resolution through February 27, 2015, which carried no specific direction regarding funding for headquarters consolidation. | The Department of Homeland Security (DHS) was established in early 2003, bringing together existing parts of 22 different federal agencies and departments in a new framework of operations. In its first few years, the department was reorganized multiple times, and more focus was given to ensuring its components were addressing the perceived threats facing the country rather than to addressing the new organization's management structure and headquarters needs. Therefore, the consolidation of physical infrastructure that one might expect in creating an operation of such size and breadth did not occur at that time. As the Coast Guard began to plan consolidating its leases on headquarters facilities into secure federally owned space, DHS was finding its original headquarters space at the Nebraska Avenue Complex too limited to meet its evolving needs. In 2006, the George W. Bush Administration proposed combining the two projects into one $3.45 billion headquarters consolidation project on the West Campus of St. Elizabeths Hospital in Anacostia. Since that year, Administrations of both parties have requested funding for this initiative. Thus far, the project has received $495 million from DHS and $1,063 million from the General Services Administration (GSA), for a total of $1,558 million through FY2014. Most of these resources have been allocated to the construction of a new consolidated headquarters for the Coast Guard on the campus, which opened on June 29, 2013. However, this project has not received sustained funding from Congress—70% of the funding it has received so far came in FY2009 when a surge of supplemental funding combined with the regular appropriations for GSA and DHS provided $1.1 billion for the project. With the completion of its first key component, and the release of a new cost estimate reflecting a less aggressive construction plan, the debate over this project enters a new phase. The purpose of this report is to outline the policy considerations to be evaluated in deciding whether to continue funding the consolidation of the remaining DHS headquarters functions at St. Elizabeths, and to explore some of the benefits and consequences of several possible ways forward. The fate of this initiative could have significant impact on the department operationally, budgetarily, and culturally. Operationally, a consolidated headquarters could enhance management efficiency, provide a more capable departmental operations center to help coordinate the federal response to natural disasters and terrorist attacks, and provide a higher level of security for many DHS headquarters functions. Budgetarily, the department would benefit from reduced overhead costs in the long term, but would face significant pressure on its near term budget to see the construction through to completion. Culturally, the new headquarters could help promote the integration of the department's components into "One DHS," and have some direct and indirect contributions to improving departmental morale. This report examines four potential ways forward for the headquarters project: Going no further than the Coast Guard headquarters phase; reducing the future DHS presence on the campus and sharing the site with other government agencies; proceeding with the project as outlined in the June 2013 baseline; and aggressively funding the project to accelerate completion. Making a decision to proceed or not with DHS headquarters consolidation on the West Campus St. Elizabeths will not make certain costs vanish. Whatever course Congress chooses to follow, costs will be rebalanced between a number of types of expenses: construction costs, ongoing lease expenses, the costs of maintaining and restoring the West Campus of St. Elizabeths, and operational and management tradeoffs that are difficult to quantify. The need for the continuing missions of the DHS components, the existence of DHS as an entity, and the realities of putting St. Elizabeths back to productive use drive these costs—even an optimally efficient mix of these investments will still result in significant costs to the federal government. |
Nicaragua began to establish a new democracy in the early 1990s after eight years of civil war in which the United States supported the anti-Sandinista contra movement in the country. Institutions such as a demo cratically elected legislature, a partially independent judiciary (judges are elected by the National Assembly), and an independent electoral council remained weak, however. Since the late 1990s, these institutions have become increasingly politicized. In 1998, the leftist Sandinista National Liberation Front (FSLN, or Sandinistas) and the conservative Constitutionalist Liberal Party (PLC) made a pact intended to limit participation by other political parties. Current President and FSLN leader Daniel Ortega was a member of the junta that took power in 1979 after overthrowing dictator Anastasio Somoza and was elected president in 1984. As part of a regional peace plan, Ortega agreed to democratic elections in 1990, which he lost to Violeta Chamorro. After losing three successive bids to regain the presidency in 1990, 1996, and 2001 elections, Ortega was elected in 2006. Since then the government has grown increasingly authoritarian in nature. He was reelected in 2011 and 2016. As opposition leader in the National Assembly from 1990 to 2006 and during his two subsequent terms as president, Ortega slowly consolidated Sandinista—and his own—control over the country's institutions. The United States and other observers cite municipal and regional elections over this period, and the 2011 presidential elections, as having been flawed and used to strengthen Ortega's control of national institutions. Nonetheless, Ortega and the FSLN have raised the standard of living for much of Nicaragua's poor population, thereby increasing the Sandinistas' popularity and public support. Although numerous observers questioned the legitimacy of the 2011 national elections and the official tally giving Ortega almost 63% of the vote, many also conceded that Ortega most likely would have won even without carrying out fraud. By 2012, the FSLN had achieved "near complete dominance over most of the country's institutions," according to Freedom House. In summer 2016, the government removed some of the last checks on Ortega's power by removing members of the opposition from the legislature, easing Ortega's way to winning a third consecutive presidential term that November. Ortega's popularity may be diminishing, however. Although the official electoral authority reported voter turnout was almost 70%, opponents estimated a much lower turnout of only 30%. Ortega was inaugurated to his third consecutive, and fourth overall, five-year term as president on January 10, 2017. In early September 2016, Nicaragua granted asylum to former El Salvadoran President Mauricio Funes, who is being investigated for alleged corruption. Funes, of the leftist Farabundo Marti National Liberation Front (FMLN), said he is fleeing political persecution from rightist elements and is afraid for his safety. President Ortega further consolidated not only his party's but also his own dominance with 97 constitutional amendments passed by the FSLN-dominated 92-member legislature in January 2014. The changes eliminated presidential term limits, removed the requirement for at least 35% of the vote to win the presidency in the first round of voting, and limited dissent by banning lawmakers from voting against their own party. Ortega also drafted a new military code and pushed it through the legislature the same month. The constitutional amendments and the revised military code gave the president new powers of patronage and expanded the role of the military in public administration. The armed forces had been the one institution that remained independent from the executive branch. The 2014 code, however, gave the president more influence over the appointment of the army's high command and afforded him the power to appoint active-duty officers to civilian government positions, which the previous code had prohibited. The code also expanded the army's role, under a new "national security" framework, in internal security. The military is designated to provide security for the proposed inter-oceanic canal; share management of ports, airports, and telecommunications facilities with civilian agencies; and protect national data systems and ground-based satellite communications. Critics are concerned that these expanded duties could be used to increase surveillance of civilians for political purposes. Ortega further expanded his legal control over state institutions in June 2014, when the legislature approved a reformed law regulating the national police. Although some observers believe Ortega has had de facto control of the police since 2007, the law shifted responsibility for the police from the interior ministry directly to the president. The law also established a vetting process for police recruits through community groups controlled by the ruling FSLN, raising concerns that the police will be used for increased political repression. Opposition groups worry that a prohibition in the police law against "private investigative activities" may be used further to impede investigative reporting by the media. According to Freedom House, the Ortega administration "engages in systematic efforts to obstruct and discredit media critics." Journalists are victims of death threats and violence, and complain that the police fail to protect them when they are attacked by pro-government groups at opposition demonstrations. The Nicaraguan constitution impedes freedom of the press by limiting the right of criticism to "constructive" criticism. In summer 2016, the government removed some of the last checks on Ortega's power. In June 2016, the Sandinista-controlled Supreme Court issued rulings that prevent any major opposition force from running against Ortega and the FSLN. The court removed opposition leader Eduardo Montealegre as the head of the Liberal Independent Party (Partido Liberal Independiente, or PLI), ruling that Pedro Reyes, the head of a weaker faction, should be recognized as the party's leader instead; Montealegre and others say that Reyes is supportive of the FSLN. The PLI was the largest group within the opposition bloc. In July 2016, the Supreme Electoral Council ousted 16 legislators from the PLI and its ally, the Sandinista Renovation Movement (Movimiento Renovador Sandinista, or MRS) from congress for their refusal to recognize Reyes as their party's leader. The MRS called the decision "a new blow to completely liquidate political pluralism and make disappear [stet] the opposition voices in parliament ... that have played an important role in denouncing Ortega's abuses of power." The Sandinista government has defended many of its actions as strengthening the legal system by codifying decrees into law. Opponents and other analysts see the measures as a means to perpetuate Ortega in power indefinitely. Since his long-sought return to the presidency in 2006, Ortega has implemented social welfare programs that have benefited Nicaragua's poor—reducing poverty, raising incomes, and providing subsidies and services—and thereby buoyed his popularity. Today, despite criticism from some quarters within the country and some loss of popularity over the past few years, Ortega remains the most popular political figure in Nicaragua. As his popularity and power increased, so did Ortega's family wealth and influence. Ortega is reputed to be one of the wealthiest men in the country, and his children all own businesses, inviting comparisons to the Somoza family dictatorship the Sandinistas overthrew in 1979. Some press reports claim that President Ortega has lupus or another disease, but he has not disclosed the exact nature of his illness. His wife, Rosario Murillo, has considerable power in his administration and is regarded by many observers as a de facto co-ruler. She is the chief government spokesperson and appears almost daily on national television. Widespread speculation that the couple was positioning Murillo to succeed her husband appeared to be validated when Ortega named Murillo as his vice-presidential running mate in August 2016. Critics charge that the couple runs Nicaragua like a fiefdom —charges that were leveled against the Somoza family dictatorship, which the Sandinistas overthrew. The opposition is weak and divided, and it is handicapped by FSLN control of the legislature, electoral council, and other aspects of Nicaraguan political life. The United States and some other countries have responded in critical but measured terms to Ortega becoming more authoritarian. Several reasons may account for the lack of a stronger response. Perhaps the principal reason is that Ortega has been very pragmatic in international relations. Politically, he has fostered relations, but not joined in lockstep, with governments critical of the United States, such as Venezuela, Russia, and Iran. But he also carefully balances his antagonistic stance against the United States and parts of Europe with cooperation on issues of importance to these countries and to Nicaragua, such as counternarcotics efforts, free trade, and Central American integration. Economically, Ortega's government has pursued macroeconomic policies that enable it to maintain working relationships with multilateral financial institutions such as the World Bank and the International Monetary Fund. For instance, unlike some of his fellow members in the Venezuelan-led Bolivarian Alliance for the Americas (ALBA), Ortega has maintained mostly mainstream macroeconomic policies and has not nationalized resources. Another reason some countries may not want to press Nicaragua on these issues is that Nicaragua is more stable and less violent than most of its Central American neighbors and there is no clear alternative to Ortega. Although opposition exists, it is divided and so far has been unable to present a coherent alternative to Ortega's governance plans and programs. Essentially, in the minds of many Nicaraguans, Ortega's authoritarian tendencies appear to be outweighed by populist measures that have improved their standard of living. Similarly, for many in the international community, the relative stability in Nicaragua seems to outweigh Ortega's perceived provocations and authoritarian proclivities. National elections for president and the legislature were held on November 6, 2016. Ortega, currently 70 years of age, won reelection to a third consecutive term. The constitutional changes he pushed through the legislature mean that presidents have no limit on reelection and can now be elected with a simple plurality. Critics both at home and abroad question the legitimacy of the electoral process. The Consejo Supremo Electoral (CSE, Supreme Electoral Council) issued the electoral calendar without making any changes that the political parties had suggested for improving the process. The regulations did not allow for either domestic or international observation of the elections. In addition, opposition party participation has been eliminated or severely restricted. Ortega began another five-year term when he was inaugurated on January 10, 2017; by 2018, he will have been president for more than 16 years—longer than Anastasio Somoza García, founder of the dictatorial dynasty that Ortega helped to overthrow. In April 2016, two principal opposition candidates withdrew from the race. Fabio Gadea, who officially won 31% of the vote in the 2011 elections, announced that he would not run on the center-right Partido Liberal Independiente (PLI, Liberal Independent Party) ticket again, as had been expected. Gadea, aged 84, cited a lack of transparency in the electoral process as the basis for his decision. The PLC candidate, Noel Vidaurre, also unexpectedly withdrew from the race, reportedly saying that longtime PLC leader Arnoldo Alemán's decision to name his wife and other close associates as candidates for deputy would undermine efforts to revive the party's image. Alemán was president from 1997 to 2002 and was prosecuted by the subsequent Bolaños administration for embezzling about $100 million in public funds while in office. Without these candidates at the head of their ticket, the opposition parties' chances in legislative elections were hurt as well. After the 2011 elections, the PLI had 22 out of 91 seats in the National Assembly and the PLC had 2 seats. A June 2016 poll had each of these parties garnering just 5.6% of the intended votes, to the FSLN's 65%. Despite this sizeable lead, the Sandinista government continued to take steps that further crippled the opposition. The Sandinista-controlled Supreme Court issued rulings in June 2016 that prevent any major opposition force from running against Ortega and the FSLN. The court removed opposition leader Eduardo Montealegre as the head of the PLI, ruling that the head of a weaker faction—but one Montealegre says is supportive of the FSLN—should be recognized as the party's leader instead. The PLI had joined other parties in a Coalición Nacional por la Democracia (National Coalition for Democracy, or CND); Montealegre and the other party leaders denounced the Supreme Court's ruling as an effort to keep them out of the 2016 electoral race. The Supreme Court then invalidated both factions seeking control of the small Partido de Acción Ciudadana (Citizen Action Party), the only other party in the coalition with legal standing under which the coalition might have run candidates. In July 2016, as mentioned above, the government ousted 16 members of the PLI and MRS from the legislature. On September 6, 2016, having been prohibited by the court from participating in the elections, the election-oriented coalition disbanded. Some members of the CND launched a protest movement, Citizens for Liberty, which, along with the MRS and other groups, boycotted the November 6 presidential election, calling it an "electoral farce." Other organizations expressed concern about the Supreme Court's decisions, including the principal private-sector lobby, COSEP; human rights groups, such as the Nicaraguan Human Rights Center; and the Episcopal Conference of Nicaragua. The latter reportedly said that any "intent to create conditions for the implementation of a single party regime ... is harmful for the country." The State Department expressed grave concern over the actions of the Nicaraguan government and Supreme Court to limit democratic space in advance of the presidential and legislative elections and called on the government to take steps to ensure fair and transparent elections and allow opposition parties to operate independently. On November 7, 2016, the State Department said that Nicaragua's "flawed presidential and legislative electoral process ... precluded the possibility of a free and fair election on November 6." Because the FSLN has had a majority in the current National Assembly, it has been able to pass legislation proposed by the Ortega administration without having to compromise with the opposition. The further weakening and exclusion of the largest opposition coalition during the November elections ensured that the FSLN maintained its supermajority in the new session. Nationwide municipal elections are scheduled for 2017. The FSLN is also widely expected to win many of those offices. Nicaragua's establishment of a framework for economic development since the signing of the 1990 Central American Peace Accords, which ended years of armed civil war in Nicaragua, has followed a more consistent path than has its democratic development. The World Bank says Nicaragua stands out for maintaining growth levels above the average for Latin America and the Caribbean. Nicaragua's economic growth reached a high of 6.2% in 2011; the World Bank estimates a drop in growth of 3.9% for 2015 and predicts growth of 4.2% for 2016. President Ortega's stated goal has been to implement socialism in Nicaragua, which he defines as a mixed economy. Nonetheless, he has maintained many elements of a market-based economy, including participation in the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Nicaragua's economy faces two significant challenges. High electricity costs appear to hinder the business community's ability to compete and stifle foreign investment in new businesses. The future of the Trans-Pacific Partnership (TPP) agreement could also have a negative impact on Nicaragua's textile production, a major export commodity for Nicaragua. According to the World Bank, "Nicaragua's macroeconomic stability has allowed the country's decisionmakers to shift from crisis control mode to longer-term, pioneering strategies to fight poverty." Poverty has declined in recent years but remains high. Over the past decade, poverty dropped from almost half the population (48%) in 2005 to 30% in 2014. Since his election in 2006, President Ortega has instituted many social-welfare programs to help the country's poor population, providing free education, free health care, and home-improvement programs. Nevertheless, Nicaragua remains the poorest country in Central America—in terms of per capita GDP—and the second-poorest country in the Western Hemisphere, ahead of Haiti. Many of Ortega's social welfare programs have been paid for in past years with assistance from Venezuela, particularly through low oil prices paid by Nicaragua, a sizeable export of Nicaraguan farm goods to Venezuela, and large-scale Venezuelan investments in Nicaraguan infrastructure. According to some estimates, more than 25% of the Ortega administration's revenues have come from Venezuela in some years. International donors and institutions have raised concerns about the lack of transparency of funds from Venezuela and the use of those funds for political patronage by Ortega, sometimes suspending or reducing aid in response to those concerns. A sharp contraction in funds from Venezuela, a possibility due to the drop of oil prices to historic lows and to political troubles in Venezuela, could seriously harm Nicaragua's economy. The Ortega administration is preparing for that possibility, however. According to the Economist Intelligence Unit, the Ortega administration has "curtailed some subsidies, removed others from off-budget expenditure and attracted new sources of external finance" —including international financial institutions. The Ortega government says it also will be taking fuller advantage of U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) benefits to expand exports further and continuing to attract foreign direct investment to strengthen its economy. Nicaragua became a full member of the Caribbean Community (CARICOM) in July 2016. CARICOM's goals include promoting economic integration and cooperation and coordinating foreign—primarily economic—policy. Controversy and conflict have been growing over Ortega's decision to grant a 100-year concession for an inter-oceanic canal through Nicaragua to a private Chinese company, HK Nicaragua Canal Development Investment Company Ltd. (HKND). The deal was rushed through the legislature for approval in June 2013. It gave HKND powers to expropriate lands, exempted the company from local tax and commercial regulations, and guaranteed HKND that there would be no criminal punishment for breach of contract. The government maintains the project will stimulate the economy and provide jobs. No environmental study was conducted before the deal was made. On June 1, 2015, the government said a just-concluded environmental study—which was paid for by HKND—had found the canal to be "viable," but the government released no details of the report to the public. The government has also kept the technical and financial studies secret. The canal would be 172 miles long, three times the length of the Panama Canal, and twice as deep. The Chinese company estimated the cost would be $50 billion and broke ground in December 2014, but it has made no visible progress since then. The investor with whom the Ortega administration made the canal deal, Chinese billionaire Wang Jing, reportedly lost about 80% of his $10 billion worth, heightening questions about the project's financing. HKND officials say the company is doing preconstruction studies and will begin canal construction in late 2016, but some experts are wondering if the project is dead. Various biologists and scientific organizations have expressed alarm that the canal would cut across Lake Nicaragua, or Cocibolca, endangering Central America's largest source of fresh water. Scientists also express concern that the route would damage networks of internationally protected nature preserves that include wetlands, coral reefs, rainforests, and coastal areas. Noting that international standards require environmental studies to be completed and published before work begins, these scientific organizations have asked the Nicaraguan government to suspend the project until independent studies are completed and publicly debated. The U.S. embassy also expressed concern about the lack of information and urged that all stages of the project be conducted openly and transparently. A British consulting firm issued a study of the project in fall 2015, recommending further studies in many areas before work proceeded. According to another analysis, "[d]rought, declining water levels, expanding deforestation, rising sedimentation, and frequent seismic events do not bode well for an undertaking that requires stable ecological and geological conditions." In early April 2016, an organization called the National Council for the Defense of Land, Lake, and Sovereignty, which includes farmers and environmental organizations, presented a measure to the legislature to repeal the law allowing the canal's construction. Petitioners need 5,000 stamped signatures to ask that any measure be reviewed by the National Assembly; the group collected 7,000 stamped signatures and more than 28,000 non-stamped signatures. The National Assembly rejected the measure on April 11, saying the assembly lacked "jurisdiction" to repeal the law and noting that in 2013 the Supreme Court had already rejected another legal action to prevent the canal's construction. Nicaraguan human rights and indigenous groups have filed a complaint with the Inter-American Court on Human Rights, saying their rights to prior consent have been violated. The canal's proposed route will go through indigenous lands and displace many communities inhabited by indigenous and Afro-Caribbean people. Members of the opposition Sandinista Renovation Movement have been concerned that very little is known about the developers and that because the agreement lacks sufficient oversight or input, it may open the door to corruption. Numerous demonstrations against the canal have occurred, some involving thousands of protesters. Government forces have sometimes responded with force; at least two protesters died in late 2014. On April 22, 2016, thousands of people again marched to protest the proposed canal, saying it would displace rural communities and harm the environment. More protests have occurred and seem likely to continue. The United States has sought to strengthen democratic institutions and practices in Nicaragua since Nicaragua initiated a transition to democracy in 1990. The United States has repeatedly expressed concerns as those institutions became politicized and, according to the State Department, democratic space has narrowed. It has sometimes reduced assistance to sanction the Nicaraguan government. In 2013, for example, the United States moved almost $4 million in counternarcotics assistance away from direct support to the government because of inadequate Nicaraguan government transparency. The funds were shifted to drug eradication and nongovernmental drug demand reduction programs instead. Both houses of Congress are currently considering bills that would oppose loans at international financial institutions for the Nicaraguan government unless it is taking effective steps to hold free, fair, and transparent elections ( H.R. 5708 , S. 3284 ). According to the U.S. Department of State, despite some of the concerns about the direction the Ortega government has taken Nicaragua, increasing numbers of private American citizens, including retirees, reside in Nicaragua. In addition, about 250,000 U.S. citizens visited Nicaragua in 2014. Tensions between the two countries have risen recently. Nicaragua expelled three U.S. officials—two U.S. customs and border control agents and a U.S. Army War college professor researching the canal—from the country on June 14, 2016. The State Department said that such action was "unwarranted" and could have a negative impact on bilateral relations, particularly trade." The Ortega government stated that two officials (it did not mention the third official) were acting without the knowledge of Nicaraguan authorities. The State Department issued a travel alert on June 29, 2016, informing U.S. citizens to increased Nicaraguan government scrutiny of foreigners' activities, new requirements for volunteer groups, and the potential for demonstrations during the fall election season. The Administration's FY2016 foreign aid request for Nicaragua totaled $18.2 million and focused on strengthening independent media and civil society organizations and working with at-risk youth along the Caribbean coast to reverse increasing violence and insecurity. Congress appropriated $10 million for Nicaragua. The FY2017 request of $14.8 million for Nicaragua had the same goals. The request included $14.5 million in Development Assistance (DA) and $300,000 in International Military Education and Training (IMET). The DA funding would support civil society, education, and citizen-security programs. The United States and Nicaragua cooperate on security and counternarcotics issues. According to the Administration's Congressional Budget Justification, IMET assistance would "promote the professional development of the Nicaraguan military and strengthen the military-to-military relationship with the United States." Through the Central America Regional Security Initiative (CARSI), the United States has provided equipment, training, and technical assistance to support law-enforcement operations. The United States has worked with the Nicaraguan police and navy to improve their narcotics interdiction capabilities and supported nongovernmental drug demand reduction programs. From 1994 to 2015, U.S. administrations had to certify to Congress that Nicaragua was resolving property claims by U.S. citizens whose property was expropriated in the 1980s, or issue a property waiver, before Congress would approve aid on an annual basis. In August 2015, the United States announced that Nicaragua had resolved the last of the relevant claims, and that requirement was dropped. On September 21, 2016, the House of Representatives passed the Nicaraguan Investment Conditionality Act of 2016 (NICA; H.R. 5708 ) to oppose loans at international financial institutions for the government of Nicaragua unless the government was taking effective steps to hold free, fair, and transparent elections. The Senate did not pass the bill before the end of the 114 th Congress. For decades, various U.S. administrations and Congresses have expressed concerns about respect for human rights in Nicaragua. According to the State Department's 2015 human rights report on Nicaragua, the principal human rights abuses committed by the Nicaraguan government were restrictions on citizens' rights to vote, obstacles to freedom of speech and press, and increased government harassment and intimidation of nongovernmental and civil society organizations. Other notable abuses included biased policies to promote single-party dominance; arbitrary arrests by police; life-threatening prison conditions; widespread corruption; violence against women and lesbian, gay, bisexual, transgender, and intersex people; trafficking in persons; and violations of trade union rights. Discrimination against ethnic minorities and indigenous people and communities, people with disabilities, and people with HIV/AIDS has also been reported. According to the State Department's human rights report, there were several allegations that the Nicaraguan government or its agents committed arbitrary or unlawful killings and "human rights organizations and independent media alleged some killings ... were politically motivated." Government agents committed "many" of those killings during confrontations with illegal armed groups in the northern part of the country, the report said. According to the State Department, the Nicaraguan government generally did not act on complaints of corruption or human rights abuses—including unlawful killings—allegedly committed by security forces. In addition, the Nicaraguan government limits public information on abuse investigations. Under such conditions, some observers are concerned that it may be difficult for the United States to ensure that officers participating in U.S.-sponsored IMET programs are not human rights abusers. The State Department's report said that human rights organizations reported several cases of arbitrary arrests by the Nicaraguan police and army related to protests in several cities. The State Department also reported that the Ortega government intimidated and harassed journalists, increased restriction of access to public information, and harassed and intimidated nongovernmental and civil society organizations in 2015. Nicaragua made some progress in combatting corruption during earlier democratically elected governments. In 2003, for example, then-president Enrique Bolaños's Administration convicted former president Arnoldo Alemán of embezzling about $100 million in public funds while in office. According to the State Department's 2015 human rights report on Nicaragua, Nicaraguan officials frequently engage in corrupt practices with impunity. As mentioned above, recent U.S. administrations, both Democratic and Republican, have emphasized respect for human rights as a key component of U.S. foreign policy, including regarding Nicaragua. During confirmation hearings for Secretary of State nominee Rex Tillerson, Members on both sides of the aisle and human rights advocates expressed concerns that Tillerson was not committed to human rights. The Senate Foreign Relations Committee voted to send his nomination to the full Senate, where a vote was expected the week of January 30, 2017. The United States and Nicaragua are participants in the U.S.-Central America-Dominican Republic Free Trade Agreement (CAFTA-DR). Since the accord went into effect in 2005, U.S. exports to Nicaragua have increased by 101% and Nicaraguan exports to the United States have grown by 170%. According to the Office of the U.S. Trade Representative, Nicaragua is the United States' 62 nd largest goods trading partner, with $4.4 billion in total (two-way) goods trade during 2015. Although President Trump pledged to renegotiate the North American Free Trade Agreement with Canada and Mexico and withdrew from the Trans-Pacific Partnership process, which includes some South American countries, he has yet to mention any intentions regarding CAFTA-DR. Central American leaders seemed to believe that their trade agreement would remain intact, but Nicaraguan and other officials said they are watching the new Administration for indications otherwise. The top U.S. exports to Nicaragua in 2015 were machinery, articles donated for relief, electrical machinery, mineral fuels, and knitted or crocheted fabrics. Nicaragua was the United States' 72 nd largest goods export market in 2015, with U.S. goods exports up 25% ($248 million) from 2014. U.S. exports of agricultural products to Nicaragua include soybean meal and oil, corn, dairy products, and prepared food. Nicaragua was the 57 th largest supplier of goods imports to the United States in 2015. The top Nicaraguan exports to the United States in 2015 were knit apparel, electrical machinery, woven apparel, precious metal and stone (gold), and coffee. Recent changes in U.S. laws regarding cigars could have a negative impact on future tobacco exports from Nicaragua. The American Chamber of Commerce estimates that more than 125 companies operating in Nicaragua have some relation to a U.S. company, either as wholly or partly owned subsidiaries, franchisees, or exclusive distributors of U.S. products. The companies have more than 300,000 employees in Nicaragua. Some Members of Congress have expressed concern about Nicaragua's relationship with Russia, especially recent military purchases. Russian President Vladimir Putin visited Nicaragua in 2014, saying that he intended to continue strengthening economic ties with Nicaragua. President Ortega pushed through the legislature authorization for a ground station in Nicaragua for a Russian satellite network. The Nicaraguan Army has expressed interest in buying a fleet of Russian-made fighter jets for defense and to prevent aerial drug trafficking. Costa Rican and Honduran analysts have expressed concerns that such an arms purchase would be destabilizing to the region. Nicaragua ordered 50 tanks from Russia to be delivered in 2016-2017, reportedly costing $80 million, which also raised concern among its neighbors. Nicaraguan and Russian military officials reportedly said that delivery of the battle tanks was part of ongoing "military cooperation" between the two countries. The Nicaraguan government has kept many aspects of the canal deal, including the technical and financial studies, secret. This secrecy has contributed to speculation that the Chinese government is involved in the project. China and Nicaragua do not have diplomatic relations; Nicaragua maintains relations with Taiwan. The Chinese government denies involvement in the canal, but some experts claim that it has influence over HKND, the private Chinese company granted the canal concession. Although various reports emerged in 2009 that Iran was expanding its role in Nicaragua, causing concern in Washington, those reports were later shown to be untrue or exaggerated. In late August 2016, Iran's foreign minister, Mohammad Javad Zarif, included a visit to Nicaragua on his Latin American tour. The Iranian government said the trip was part of its efforts to expand economic relations with the region now that international sanctions against Iran have been lifted. Zarif said that areas of cooperation between the two countries could include work on the Nicaraguan canal, agriculture, energy production, and banking, among others. | This report discusses Nicaragua's current politics, economic development, and relations with the United States, and it provides context for Nicaragua's controversial reelection of President Daniel Ortega late last year. After its civil war ended, Nicaragua began to establish a democratic government in the early 1990s. Its institutions remained weak, however, and they have become increasingly politicized since the late 1990s. Ortega was a Sandinista (Frente Sandinista de Liberacion Nacional, FSLN) leader when the Sandinistas overthrew the dictatorship of Anastasio Somoza in 1979. Ortega was elected president in 1984. An electorate weary of war between the government and U.S.-backed contras denied him reelection in 1990. After three failed attempts, he won reelection in 2006 and again in 2011. Ortega consolidated control over national institutions, which facilitated him winning a third consecutive term in the November 6, 2016, presidential elections. The Sandinista-controlled Supreme Court issued rulings that prevented any major opposition force from running against Ortega and the FSLN and allowed Ortega's wife, Rosario Murillo, to run as his vice president despite a constitutional prohibition against relatives of a sitting president running for office. As in previous elections at all levels in recent years, opposition figures and international analysts strongly questioned the legitimacy of this election. As a leader of the opposition in the legislature from 1990 to 2006 and as president since then, Ortega slowly consolidated Sandinista—and personal—control over Nicaraguan institutions. As Ortega has gained power, he reputedly has become one of the country's wealthiest men. His family's wealth and influence have grown as well, inviting comparisons to the Somoza family dictatorship. As president, Ortega has implemented social welfare programs that have benefited Nicaragua's poor—reducing poverty and raising incomes—and thereby buoyed his popularity. The United States and other countries have responded in critical but measured terms to Ortega becoming more authoritarian. For many in the international community, Ortega's cooperation on issues of importance to them, such as counternarcotics efforts and free trade, and the relative stability in Nicaragua seem to outweigh Ortega's perceived provocations and authoritarian proclivities. Similarly, in the minds of many Nicaraguans, Ortega's authoritarian tendencies appear to be outweighed by populist measures that have improved their standard of living. Although President Ortega's stated goal has been to implement socialism in Nicaragua, which he defines as a mixed economy, he has maintained many elements of a market-based economy. Nicaragua has maintained growth levels above the average for Latin America and the Caribbean in recent years. Over the past decade, poverty has declined significantly. Nevertheless, Nicaragua remains the poorest country in Central America and the second-poorest country in the Western Hemisphere, ahead of Haiti. The Ortega administration is taking steps to prepare for a probable sharp contraction in funds from Venezuela, a major source of government revenues in recent years. Controversy and conflict have been growing over Ortega's decision to grant a 100-year concession for an inter-oceanic canal through Nicaragua to a Chinese company. The government maintains the project will stimulate the economy and provide jobs. Critics argue it will displace rural communities and harm the environment. The United States and Nicaragua cooperate on issues such as free trade and counternarcotics. U.S. aid has sometimes been reduced over concern for the narrowing democratic space in Nicaragua. Currently, Nicaragua is part of the U.S. Strategy for Engagement in Central America. Tensions rose recently when Nicaragua expelled three U.S. officials. Other U.S. concerns include violations of human rights, including restriction on citizens' rights to vote; government harassment of civil society groups; arbitrary arrests and killings by security forces; and corruption. The Administration and some Members of Congress have expressed concern about Nicaragua's relationship with Russia, especially recent military purchases. |
February 3 . Federal Reserve Chairman Ben S. Bernanke begins second term. February 2. Greece's prime minister, George Papandreou, makes appeal for unity over its worst financial crisis in decades. The European Commission endorses a fiscal rescue plan. January 27. President Obama pledged to divert $30 billion of money repaid from the Troubled Asset Relief Program to smaller banks to help them make loans to small businesses. January 21 . President Obama proposed that a single bank be allowed to hold no more than 10% of total bank deposits and that banks no longer be allowed to operate hedge funds and private equity funds and to make riskier investments to reap a quick reward. December 30. IHS Global Insight released its top-10 Global Economic Predictions for 2010: (1) The U.S. recovery will start slowly. (2) Europe and Japan will rebound even more slowly than the United States. (3) Most emerging markets—especially in Asia—will outpace the developed economies. (4) Interest rates will remain low—especially in the G7. (5) Fiscal stimulus will begin to ease. (6) Commodity prices will move sideways. (7) Inflation will (mostly) not be a problem. (8) After improving for a while, global imbalances will worsen again. (9) While the dollar may strengthen a little, it is on a downward path. (10) The risk of a double-dip growth profile is still uncomfortably high. December 14 . Abu Dhabi provided Dubai with an infusion of $10 billion that will enable Dubai to pay $4.1 billion to bondholders as well as bills from suppliers and contractors. December 3 . European Central Bank President Jean-Claude Trichet signaled that the bank's planned withdrawal of stimulus measures would proceed gradually. November 14. Eurostat announced that the Euro Zone had officially emerged from recession during the third quarter 2009. The rebound was powered by Germany. November 10 . Senate Banking Committee Chairman Christopher Dodd released a draft of a financial regulation bill. September 24-25. At the Group of 20 Summit held in Pittsburgh, world leaders agreed to make the G-20 the leading forum for coordinating global economic policy; not to withdraw stimulus measures until a durable recovery is in place; to co-ordinate their exit strategies from the stimulus measures; to harmonize macroeconomic policies to avoid imbalances (America's deficits and Asia's savings glut) that worsened the financial crisis; and to eliminate subsidies on fossil fuels (only in the medium term). In trade, there was only a weak commitment to get the Doha round of multilateral trade negotiations at the World Trade Organizations back on track by 2010, and for the International Monetary Fund, the leaders pledged to provide the "under-represented" mostly developing countries at least 5% more of the voting rights by 2011. The other large institutional change was the ascension of the Financial Stability Board, a group of central bankers and financial regulators, to take a lead role in coordinating and monitoring tougher financial regulations and serve, along with the International Monetary Fund, as an early-warning system for emerging risks. Policymaking to deal with the global financial crisis and ensuing global recession has now moved from containing the contagion to specific actions aimed at promoting recovery and changing regulations to prevent a reoccurrence of the problem. Other issues, such as health care and the war in Afghanistan, also are competing for attention. Some have expressed concern that the improving economic and financial outlook may cause regulatory reform of the financial system to lose some traction in the crowded policy agenda. This report provides an overview of the global aspects of the financial crisis, how it developed, proposals for regulatory change, and a review of how the crisis is affecting other regions of the world. According to Global Insight, an econometric forecasting firm, the global financial crisis, or Great Recession of 2007-2009, can now be viewed as a once-in-a-century disaster with more or less unique features. Super-aggressive liquidity injections and reflationary actions during the fourth quarter of 2008 and the early months of 2009 helped stabilize the situation. The global economy's rebound gathered considerable steam during the second half of 2009, when world GDP (gross domestic product) growth accelerated to well above 3.0%, from 1.7% in the second quarter, after having contracted at an alarming pace of 6.5% in the first quarter. Global Insight expects world GDP to be at a below-trend pace of about 2.8% in 2010, after having contracted by 2.0% in 2009 with the economies of Greater China and the United States leading the recovery. The role for Congress in this financial crisis is multifaceted. The overall issue seems to be how to ensure the smooth and efficient functioning of financial markets to promote the general well-being of the country while protecting taxpayer interests and facilitating business operations without creating a moral hazard. The reality, however, is that financial interests are well entrenched, and the existing patchwork system of regulation (or non-regulation) has evolved over the past century largely in response to particular problems. If the United States were to "start from scratch" in designing an optimal regulatory system, it likely would not select the one it has, but making dramatic changes to the existing system invariably will result in someone's "ox being gored" and substantial bureaucratic inertia and lobbying activity. Congress also has a role to play in preventing future crises through legislative, oversight, and domestic regulatory functions. In addition, Congress has been providing funds and ground rules for economic stabilization and rescue packages and informing the public through hearings and other means. Congress also plays a role in measures to reform the international financial system, in recapitalizing international financial institutions, such as the International Monetary Fund, in replenishing funds for poverty reduction arms of the World Bank (International Development Association) and regional development banks, and in providing economic and humanitarian assistance to countries in need. The current crisis began as a bursting of the U.S. housing market bubble and a rise in foreclosures. As it ballooned into a global financial and economic crisis, some of the largest and most venerable banks, investment houses, and insurance companies have either declared bankruptcy or have had to be rescued financially. In October 2008, after the bankruptcy of Lehman Brothers, credit flows froze, lender confidence dropped, and one after another the economies of countries around the world dipped toward recession. The crisis exposed fundamental weaknesses in financial systems worldwide, and despite coordinated easing of monetary policy by governments, trillions of dollars in intervention by central banks and governments, and large fiscal stimulus packages, recovery appears to be just beginning. This financial crisis which began in industrialized countries quickly spread to emerging market and developing economies. Investors pulled capital from countries, even those with small levels of perceived risk, and caused values of stocks and domestic currencies to plunge. Also, slumping exports and commodity prices have added to the woes and pushed economies world wide either into recession or into a period of slower economic growth. For the United States, the financial turmoil touches on the fundamental national interest of protecting the economic security of Americans. It also is affecting the United States in achieving national foreign policy goals, such as maintaining political stability and cooperative relations with other nations and supporting a financial infrastructure that allows for the efficient functioning of the international economy. Reverberations from the financial crisis, moreover, are not only being felt on Wall Street and Main Street but are being manifest in world flows of exports and imports, rates of growth and unemployment, government revenues and expenditures, and in political risk in some countries. The simultaneous slowdown in economic activity around the globe indicates that emerging market and developing economies have not decoupled from industrialized countries and governments cannot depend on exports to pull them out of these recessionary conditions. This global financial and economic crisis has brought to the public consciousness several arcane financial terms usually confined to the domain of regulators and Wall Street investors. These terms lie at the heart of both understanding and resolving this financial crisis and include: Systemic risk ("Too big to fail"): The risk that the failure of one or a set of market participants, such as core banks, will reverberate through a financial system and cause severe problems for participants in other sectors. Because of systemic risk, the scope of regulatory agencies may have to be expanded to cover a wider range of institutions and markets. Deleveraging: The unwinding of debt. Companies borrow to buy assets that increase their growth potential or increase returns on investments. Deleveraging lowers the risk of default on debt and mitigates losses, but if it is done by selling assets at a discount, it may depress security and asset prices and lead to large losses. Hedge funds tend to be highly leveraged. Procyclicality: The tendency for market players to take actions over a business cycle that increase the boom-and-bust effects, e.g. borrowing extensively during upturns and deleveraging during downturns. Changing regulations to dampen procyclical effects would be extremely challenging. Preferred equity: A cross between common stock and debt. It gives the holder a claim, prior to that of common stockholders, on earnings and on assets in the event of liquidation. Most preferred stock pays a fixed dividend. As a result of the stress tests in early 2009, some banks may increase their capital base by converting preferred equity to common stock. Collateralized debt obligations (CDOs): a type of structured asset-backed security whose value and payments are derived from a portfolio of fixed-income underlying assets. CDOs based on sub-prime mortgages have been at the heart of the global financial crisis. CDOs are assigned different risk classes or tranches, with "senior" tranches considered to be the safest. Since interest and principal payments are made in order of seniority, junior tranches offer higher coupon payments (and interest rates) or lower prices to compensate for additional default risk. Investors, pension funds, and insurance companies buy CDOs. Credit default swap (CDS): a credit derivative contract between two counterparties in which the buyer makes periodic payments to the seller and in return receives a sum of money if a certain credit event occurs (such as a default in an underlying financial instrument). Payoffs and collateral calls on CDSs issued on sub-prime mortgage CDOs have been a primary cause of the problems of AIG and other companies. The global financial crisis has brought home an important point: the United States is still a major center of the financial world. Regional financial crises (such as the Asian financial crisis, Japan's banking crisis, or the Latin American debt crisis) can occur without seriously infecting the rest of the global financial system. But when the U.S. financial system stumbles, it may bring major parts of the rest of the world down with it. The reason is that the United States is the main guarantor of the international financial system, the provider of dollars widely used as currency reserves and as an international medium of exchange, and a contributor to much of the financial capital that sloshes around the world seeking higher yields. The rest of the world may not appreciate it, but a financial crisis in the United States often takes on a global hue. Early U.S. policy was aimed at containing the contagion and in dealing with the ensuing recession. The two largest legislative actions were the Troubled Asset Relief Program aimed at providing support for financial institutions and the American Recovery and Reinvestment Act of 2009 aimed at providing stimulus to the economy. Policy proposals to change specific regulations as well as the structure of regulation and supervision at both the domestic and international levels have been coming forth through the legislative process, from the Administration, and from recommendations by international organizations such as the International Monetary Fund, Bank for International Settlements, and Financial Stability Board (Forum). On June 17, 2009, the Obama administration announced its plan for regulatory reform of the U.S. financial system. In Congress, numerous bills have been introduced that deal with issues such as establishing a commission/select committee to investigate causes of the financial crisis, provide oversight and greater accountability of Federal Reserve and Treasury lending activity, deal with problems in the housing and mortgage markets, provide funding for the International Monetary Fund, address problems with consumer credit cards, provide for improved oversight for financial and commodities markets, deal with the U.S. national debt, and establish a systemic risk monitor. The United States, however, cannot be a regulatory island among competing nations of the world. In an international marketplace of multinational corporations, instant transfers of wealth, lightning fast communications, and globalized trading systems for equities and securities, if U.S. regulations are anomalous or significantly more "burdensome" than those in other industrialized nations, business and transactions could migrate toward other markets. Hence, many have emphasized the need to coordinate regulatory changes among nations. The vehicle for forming an international consensus on measures to be taken by individual countries is the G-20 along with the International Monetary Fund and new Financial Stability Board (based in Switzerland), although some developing nations prefer the more inclusive G-30. The third G-20 Summit was held in Pittsburgh on September 24-25, 2009. World leaders there focused on tougher regulation of the financial sector, including limits on bonus payments for bankers, and attempted to decide what comes next, now that there are tentative signs of recovery. Among the issues that were on the U.S. agenda included measures to ease global economic trade imbalances, to prevent a repeat of financial crises through a process of regular consultations, and to have increased cooperation on policies that will ensure a rebalancing of world growth. The April 2009 G-20 London Summit called for a greater role for the IMF and for it to collaborate with the new Financial Stability Board to provide early warning of macroeconomic and financial risks and actions needed to address them. The leaders also agreed that national financial supervisors should establish Colleges of Supervisors consisting of national financial supervisory agencies that oversee globally active financial institutions. (See " G-20 Meetings " section of this report.) Still, work at the international level remains advisory. At the April 2009 G-20 London Summit, a schism arose between the United States and the U.K., who were arguing for large and coordinated stimulus packages, and Germany and France, who considered their automatic stabilizers (increases in government expenditures for items such as unemployment insurance that are triggered any time the economy slows) plus existing stimulus programs as sufficient. In the communiqué, the G-20 leaders decided to add $1.1 trillion in resources to the international financial institutions, including $750 billion for the International Monetary Fund, $250 billion to boost global trade, and $100 billion for multilateral development banks. On June 24, 2009, President Obama signed H.R. 2346 into law ( P.L. 111-32 ). This increased the U.S. quota in the International Monetary Fund by 4.5 billion SDRs ($7.69 billion), provided loans to the IMF of up to an additional 75 billion SDRs ($116.01 billion), and authorized the United States Executive Director of the IMF to vote to approve the sale of up to 12,965,649 ounces of the Fund's gold. On June 17, 2009, the Department of the Treasury presented the Obama Administration proposal for financial regulatory reform. This was followed by twelve titles of proposed legislation to implement the reforms. The proposals focus on five areas (and proposed legislation) as indicated below. Legislation in Congress also addresses these issues. 1. Promote robust supervision and regulation of financial firms. a. A new Financial Services Oversight Council to identify emerging systemic risks and improve interagency cooperation (chaired by Treasury and including the heads of the principal federal financial regulators as members). b. New authority for the Federal Reserve to supervise all firms that could pose a threat to financial stability, even those that do not own banks. c. Stronger capital and other prudential standards for all financial firms, and even higher standards for large, interconnected firms. d. A new National Bank Supervisor (a single agency with separate status in Treasury to supervise all federally chartered banks). e. Elimination of the federal thrift charter and other loopholes that allowed some depository institutions to avoid bank holding company regulation by the Federal Reserve. f. The registration of advisers of hedge funds and other private pools of capital with the SEC. 2. Establish comprehensive supervision of financial markets. a. Enhanced regulation of securitization markets, including new requirements for market transparency, stronger regulation of credit rating agencies, and a requirement that issuers and originators retain a financial interest in securitized loans. b. Comprehensive regulation of all over-the-counter derivatives. c. New authority for the Federal Reserve to oversee payment, clearing, and settlement systems. 3. Protect consumers and investors from financial abuse. a. A new Consumer Financial Protection Agency (an independent entity) to protect consumers across the financial sector from unfair, deceptive, and abusive practices. b. Stronger regulations to improve the transparency, fairness, and appropriateness of consumer and investor products and services. c. A level playing field and higher standards for providers of consumer financial products and services, whether or not they are part of a bank. 4. Provide the government with the tools it needs to manage financial crises. a. A new regime to resolve nonbank financial institutions whose failure could have serious systemic effects. b. Revisions to the Federal Reserve's emergency lending authority to improve accountability. 5. Raise international regulatory standards and improve international cooperation. Treasury proposed international reforms to support U.S. efforts, including strengthening the capital framework; improving oversight of global financial markets; coordinating supervision of internationally active firms; and enhancing crisis management tools. Treasury also proposed the creation of an Office of National Insurance within the Department of the Treasury. In Congress, numerous bills have been introduced that address the above and other financial regulatory issues. In December 2009, the House passed H.R. 4173 , The Wall Street Reform and Consumer Protection Act that addresses many of the issues raised by the financial crisis. (See Text Box below.) The following is a brief listing of the major regulatory issues that have been raised by selected regulatory bills in Congress. ( Appendix D also provides a sketch of problems raised and possible policy options.) Systemic Risk Regulator . With respect to macro-prudential supervision and systemic risk, the Treasury Plan proposed that the U.S. Federal Reserve serve as a systemic regulator. In Congress, H.R. 4173 and H.R. 3996 would create a Financial Services Oversight Council to monitor systemic risk. H.R. 1754 / S. 664 would create a systemic risk monitor for the financial system of the United States, to oversee financial regulatory activities of the federal government, and for other purposes. Among its provisions are to establish an independent Financial Stability Council, to require the Federal Reserve to promulgate rules to deal with systemic risk, and to transfer authorities and functions of the Office of Thrift Supervision to the Comptroller of the Currency. (The Treasury Plan would call this combined agency the National Bank Supervisor.) Too Big to Fail (systemically significant financial companies). The question of what to do about financial firms that become so large that they cannot be allowed to become insolvent without putting the financial system and the economy at risk. It is related to the issue of systemic risk. Under H.R. 4173 and H.R. 3996 mentioned above, the Financial Services Oversight Council would identify financial companies and financial activities that should be subject to heightened prudential standards. S. 2746 , Too Big to Fail, Too Big to Exist Act, would require the breakup of such companies. H.R. 2897 , the Bank Accountability and Risk Assessment Act of 2009, would require premium assessments by the FDIC to reflect relative degrees of risk by banks. The Volker Rule . On January 21, 2010, President Obama proposed that a single bank be allowed to hold no more than 10% of total bank deposits and that banks no longer be allowed to operate hedge funds and private equity funds and to make riskier investments to reap a quick reward. The latter proposal is referred to as the Volcker Rule. It would prevent commercial banks such as Bank of America and JPMorgan Chase from owning hedge funds and private equity funds, as well as bar them from speculative or proprietary trading. Banks have countered that it's impossible to unwind proprietary trading from critical market making operations and that it is "impossible to define so-called prop trading, anyway." The problem as argued by former Federal Reserve Chairman Paul Volker is one of moral hazard and the existence of deposit insurance for banks. The United States has a long-established "safety net" undergirding the stability of commercial banks. After the recent bank rescue programs, however, the implication for the financial community is that really large, complex, and highly interconnected financial institutions can count on public support at critical times. This creates a moral hazard and may provide an incentive for such "too-big-to-fail" institutions to take even greater risks by engaging in speculative activities out of the regulatory purview of banking authorities. Credit Rating Agencies . In Congress, several bills deal with concerns over the perceived failures of credit rating agencies in assigning ratings to derivatives and other financial products. H.R. 4173 and H.R. 3890 , the Accountability and Transparency in Rating Agencies Act would amend the Securities Exchange Act of 1934 to enhance oversight of nationally recognized statistical rating organizations. Other bills include H.R. 74 , H.R. 1181 , H.R. 1445 , S. 927 , and S. 1073 . Derivatives Regulation . The issue of regulation of over-the-counter derivatives is addressed in several bills. These include H.R. 4173 , H.R. 3795 , reported out of both the House Financial Services (October 15, 2009) and House Agriculture (October 21, 2009) committees, H.R. 977 , reported out of the House Agriculture Committee on February 12, 2009, and H.R. 2454 (the cap-and-trade bill) that passed the House on June 26, 2009. Other derivatives bills include H.R. 1754 , H.R. 2448 , H.R. 2869 , H.R. 3145 , H.R. 3153 , H.R. 3300 , S. 221 , S. 272 , S. 447 , S. 664 , S. 807 , S. 961 , S. 1225 , S. 1399 , and S. 1412 . Investor Protection . H.R. 4173 and H.R. 3817 , The Investor Protection Act of 2009 , would provide the Securities and Exchange Commission with additional authorities to protect investors from violations of the securities laws. H.R. 3818 , Private Fund Investment Advisers Registration Act of 2009, would require advisers of certain unregistered investment companies (hedge funds) to register with and provide information to the Securities and Exchange Commission. Commissions . Bills have been introduced that would provide for the establishment of commissions or special committees to study the causes of the financial crisis. S. 386 ( P.L. 111-21 , Section 5) established a 10-member Financial Crisis Inquiry Commission in the legislative branch to examine the causes of the current U.S. financial and economic crisis, taking into account fraud and abuse in the financial sector and other specified factors. It authorized $5 million for the Commission and requires the Commission to submit a final report on its findings to the President and Congress on December 15, 2010, requires the Commission chairperson to appear before the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs within 120 days after the submission of such report, and terminates the Commission 60 days after the submission of such report. It also requires Republican approval before the commission could issue subpoenas. Other bills related to commissions or special committees include H.Res. 345 / S.Res. 62 , H.R. 74 , H.R. 768 , H.R. 2111 , H.R. 2253 / S. 298 , and S. 400 . Housing and Mortgages . Numerous bills have been introduced related to the housing market, mortgages, and foreclosures. They address issues such as: the Troubled Assets Relief Program and its operation and foreclosure prevention initiatives. S. 896 , Helping Families Save Their Homes Act of 2009, became P.L. 111-22 on May 20, 2009. It contained various measures intended to prevent mortgage foreclosures. S. 386 , Fraud Enforcement and Recovery Act of 2009 or FERA became P.L. 111-21 on May 20, 2009. It amends the federal criminal code to include within the definition of "financial institution" a mortgage lending business or any person or entity that makes, in whole or in part, a federally related mortgage loan. For details on housing and mortgages, see the CRS reports cited in the footnote below. Consumer Protection . The protection of consumers from allegedly unscrupulous practices in mortgage, credit card, other financial markets also has risen as a priority issue with the Obama Administration. H.R. 4173 and H.R. 3126 would establish a Consumer Financial Protection Agency (CFPA). Under H.R. 4173 , this independent agency would have the mission of protecting consumers when they borrow money, make deposits, or obtain other financial products and services. CFPA's rules would cover all financial providers, including banks, thrifts, credit unions and non-bank financial institutions, such as subprime mortgage lenders. The bill, however, would exempt entities such as retailers, merchants, and sellers of primarily non-financial goods when providing a non-financial good or service directly to a consumer. It also would exempt accountants, income tax preparers, attorneys, real estate brokers and agents, doctors, automobile dealers and sellers, providers of retirement plans, and others when they are engaged in the normal activities of their respective businesses. Oversight, Investigations, Reports . Several bills would provide for oversight, reports, or other investigations into activities related to the financial crisis. In the 110 th Congress, P.L. 110-343 (§125(b)(1)(B)) established the Congressional Oversight Panel and provides for monthly reports on the Troubled Asset Relief Program (TARP). H.R. 2424 , the Federal Reserve Credit Facility Review Act of 2009, would authorize reviews by the Comptroller General of the United States of any credit facility established by the Board of Governors of the Federal Reserve System or any federal reserve bank during the current financial crisis, and for other purposes. H.R. 1207 would reform the manner in which the Board of Governors of the Federal Reserve System is audited by the Comptroller General of the United States and the manner in which such audits are reported. S. 1223 would require congressional approval before any Troubled Asset Relief Program (TARP) funds are provided or obligated to any entity, on and after May 29, 2009, whose receipt of such funds would result in federal government acquisition of its common or preferred stock. H.R. 4482 / S. 1683 would require recaptured taxpayer investments under TARP be applied toward reducing the national debt. Executive Compensation. The issue of compensation for executives of firms that have received government support during the financial crisis. The American Recovery and Reinvestment Act of 2009 (Title VII of P.L. 111-5 ) restricts the compensation of executives of companies during the period in which any obligation arising from financial assistance provided under the Troubled Assets Relief Program (TARP) remains outstanding and requires the Secretary of the Treasury to develop appropriate standards for executive compensation. Some proposals, such as H.R. 4173 , dubbed "say on pay," would give shareholders a greater voice in compensation and governance decisions. Among legislative initiatives, S. 1074 would provide for greater influence by shareholders in selecting corporate officers and H.R. 3269 (passed the House on July 31, 2009) would authorize federal regulators of financial firms to prohibit incentive pay structures that are seen to encourage inappropriate risk-taking and require them to adopt say on pay. Fiscal Stimulus and Monetary Policy . For legislation related to a fiscal stimulus and monetary policy, see CRS Report R40104, Economic Stimulus: Issues and Policies , by [author name scrubbed], [author name scrubbed], and [author name scrubbed], and CRS Report RL34427, Financial Turmoil: Federal Reserve Policy Responses , by [author name scrubbed]. Fannie Mae, Freddie Mac, and GSEs . For policy related to these issues, see CRS Report RS21663, Government-Sponsored Enterprises (GSEs): An Institutional Overview , by [author name scrubbed]; CRS Report RS22950, Fannie Mae and Freddie Mac in Conservatorship , by [author name scrubbed]; and CRS Report R40800, Options To Restructure Fannie Mae and Freddie Mac , by [author name scrubbed]. International Monetary Fund . For policy related to the IMF, see CRS Report RS22976, The Global Financial Crisis: The Role of the International Monetary Fund (IMF) , by [author name scrubbed] and CRS Report R40578, The Global Financial Crisis: Increasing IMF Resources and the Role of Congress , by [author name scrubbed] and [author name scrubbed]. Insurance Regulation . For policy discussion, see CRS Report R40771, Insurance Regulation: Issues, Background, and Legislation in the 111 th Congress , by [author name scrubbed]. The global financial crisis as it has played out in countries across the globe has been manifest in four overlapping phases. Although each phase has a policy focus, each phase of the crisis affects the others, and, until the crisis has passed, no phase seems to have a clear end point. The first phase has been intervention to contain the contagion and strengthen financial sectors in countries. On a macroeconomic level, this has included policy actions such as lowering interest rates, expanding the money supply, quantitative (monetary) easing, and actions to restart and restore confidence in credit markets. On a microeconomic level, this has entailed actions to resolve immediate problems and effects of the crisis including financial rescue packages for ailing firms, guaranteeing deposits at banks, injections of capital, disposing of toxic assets, and restructuring debt. This has involved decisive (and, in cases, unprecedented) measures both in scope, cost, and extent of government reach. Actions taken include the rescue of financial institutions considered to be "too big to fail" and government takeovers of certain financial institutions, government facilitation of mergers and acquisitions, and government purchases of problem financial assets. Nearly every industrialized country and many developing and emerging market countries have pursued some or all of these actions. Although the "panic" phase of containing the contagion has passed, operations still are continuing, and the ultimate cost of the actions are yet to be determined. In the United States, traditional monetary policy almost has reached its limit as the Federal Reserve has lowered its discount rate to 0.5% and has a target rate for the federal funds rate of 0.0 to 0.25%. The Federal Reserve and Treasury, therefore, have turned toward quantitative monetary easing (buying government securities and injecting more money into the economy) and dealing directly with the toxic assets being held by banks. What has been learned from previous financial crises is that without a resolution of underlying problems with toxic assets and restoring health to the balance sheet of banks and other financial institutions, financial crises continue to drag on. This was particularly the case with Japan. Even Sweden, often viewed as a successful model of how to cope with a financial crisis, had to take decisive action to deal with the nonperforming assets of its banking system. In the United States, the Treasury, Federal Reserve, Federal Deposit Insurance Corporation, Office of Thrift Supervision, and Comptroller of the Currency have worked together to contain the contagion. Under the $700 billion Troubled Asset Relief Program (TARP, H.R. 1424 / P.L. 110-343 ), the Treasury has invested in dozens of banks, General Motors, Chrysler and the insurer A.I.G. The investments are in the form of preferred stock that pays quarterly dividends. On March 23, 2009, The U.S. Treasury released the details of its $900 billion Public Private Partnership Investment Program to address the challenge of toxic (legacy) assets being carried by the financial system. The U.S. Federal Reserve also has conducted about $1.2 trillion in emergency commitments to stabilize the financial sector. Its interventions have included a safety net for commercial banks, the rescue of Bear Stearns, a lending facility for investment banks and brokerages, loans for money-market assets and commercial paper, and purchases of securitized loans and lending to businesses and consumers for purchases of asset-backed securities. The second phase of this financial crisis is less uncommon except that the severity of the macroeconomic downturn confronting countries around the world is the worst since the Great Depression of the 1930s. The financial crisis soon spread to real sectors to negatively affect whole economies, production, firms, investors, and households. Many of these countries, particularly those with emerging and developing markets, have been pulled down by the ever widening flight of capital from their economies and by falling exports and commodity prices. In these cases, governments have turned to traditional monetary and fiscal policies to deal with recessionary economic conditions, declining tax revenues, and rising unemployment. Figure 1 shows the effect of the financial crisis on economic growth rates (annualized changes in real GDP by quarter) in selected nations of the world. The figure shows the difference between the 2001 recession that was confined primarily to countries such as the United States, Mexico, and Japan and the current financial crisis that is pulling down growth rates in a variety of countries. The slowdown—recession for many countries—is global. The implication of this synchronous drop in growth rates is that the United States and other nations may not be able to export their way out of recession. Even China is experiencing a "growth recession." There is no major economy that can play the role of an economic engine to pull other countries out of their economic doldrums. In July-August 2009, there was a growing consensus among forecasters that the world had seen the worst of the global recession and that economies would hit bottom in 2009 and begin a weak recovery as early as the second half of 2009. On June 24, the Organization for Economic Cooperation and Development revised its world economic outlook upwards for the first time in two years. Most of this improved outlook, however, was in higher growth in China (7.7%) and other developing countries and less negative growth in the United States (-2.8%) for 2009. The outlook for the Eurozone (-4.8%) and Japan (-6.8%) for 2009 was slightly worse. The OECD reported that housing prices were falling in all OECD countries except for Switzerland. On November 14, 2009, Eurostat (the EU's statistics agency) reported that the euro area had officially emerged from recession during the third quarter of 2009. In response to the recession or slowdown in economic growth, many countries have adopted fiscal stimulus packages designed to induce economic recovery or at least keep conditions from worsening. These are summarized in Appendix B and include packages by China ($586 billion), the European Union ($256 billion), Japan ($396 billion), Mexico ($54 billion), and South Korea ($52.5 billion).The global total for stimulus packages now exceeds $2 trillion, but some of the packages include measures that extend into subsequent years, so the total does not imply that the entire amount will translate into immediate government spending. The stimulus packages by definition are to be fiscal measures (government spending or tax cuts) but some packages include measures aimed at stabilizing banks and other financial institutions that usually are categorized as bank rescue or financial assistance packages. The $2 trillion total in stimulus packages amounts to approximately 3% of world gross domestic product, an amount that exceeds the call by the International Monetary Fund for fiscal stimulus totaling 2% of global GDP to counter worsening economic conditions world wide. If only new fiscal stimulus measures to be done in 2009 are counted, however, the total and the percent of global GDP figures would be considerably lower. An analysis of the stimulus measures by the European Community for 2009 found that such measures amount to an estimated 1.32% of European Community GDP. The IMF estimated that as of January 2009, the U.S. fiscal stimulus packages as a percent of GDP in 2009 would amount to 1.9%, for the euro area 0.9%, for Japan 1.4%, for Asia excluding Japan 1.5%, and for the rest of the G-20 countries 1.1%. At the G-20 London Summit, a schism arose between the United States and the U.K., who were arguing for large and coordinated stimulus packages, and Germany and France, who considered their automatic stabilizers (increases in government expenditures for items such as unemployment insurance that are triggered any time the economy slows) plus existing stimulus programs as sufficient. In their communiqué, the leaders noted that $5 trillion will have been devoted to fiscal expansion by the end of 2010 and committed themselves to "deliver the scale of sustained fiscal effort necessary to restore growth." In the communiqué, the G-20 leaders decided to add $1.1 trillion in resources to the international financial institutions, including $750 billion more for the International Monetary Fund, $250 billion to boost global trade, and $100 billion for multilateral development banks. The additional lending by the international financial institutions would be in addition to national fiscal stimulus efforts and could be targeted to those countries most in need. Several countries have borrowed heavily in international markets and carry debt denominated in euros or dollars. As their currencies have depreciated, the local currency cost of this debt has skyrocketed. Other countries have banks with debt exposure almost as large as national GDP. Some observers have raised the possibility of a sovereign debt crisis (countries defaulting on government guaranteed debt) or as in the case of Iceland having to nationalize its banks and assume liabilities greater than the size of the national economy. Since November 1, 2008, the IMF, under its Stand-By Arrangement facility, has provided or is in the process of providing financial support packages for Iceland ($2.1 billion), Ukraine ($16.4 billion), Hungary ($25.1 billion), Pakistan ($7.6 billion), Belarus ($2.46 billion), Serbia ($530.3 million), Armenia ($540 million), El Salvador ($800 million), Latvia ($2.4 billion), Seychelles ($26.6 million), Mongolia ($229.2 million), Costa Rica ($735 million), Guatemala ($935 million), and Romania ($17.1 billion). The IMF also created a Flexible Credit Line for countries with strong fundamentals, policies, and track records of policy implementation. Once approved, these loans can be disbursed when the need arises rather than being conditioned on compliance with policy targets as in traditional IMF-supported programs. Under this facility, the IMF board has approved Mexico ($47 billion), Poland ($20.5 billion), and Columbia ($10.5 billion). The third phase of the global financial crisis—to decide what changes may be needed in the financial system—also is underway. (See " Policy and Legislation ," above.) In order to coordinate reforms in national regulatory systems and give such proposals political backing, world leaders began a series of international meetings to address changes in policy, regulations, oversight, and enforcement. Some are characterizing these meetings as Bretton Woods II. The G-20 leaders' Summit on Financial Markets and the World Economy that met on November 15, 2008, in Washington, DC, was the first of a series of summits to address these issues. The second was the G-20 Leader's Summit on April 2, 2009, in London, and the third was the Pittsburgh Summit on September 24-25, 2009, with President Obama as the host. In this third phase, the immediate issues to be addressed by the United States and other nations center on "fixing the system" and preventing future crises from occurring. Much of this involves the technicalities of regulation and oversight of financial markets, derivatives, and hedging activity, as well as standards for capital adequacy and a schema for funding and conducting future financial interventions, if necessary. In the November 2008 G-20 Summit, the leaders approved an Action Plan that sets forth a comprehensive work plan. The leaders instructed finance ministers to make specific recommendations in the following areas: Avoiding regulatory policies that exacerbate the ups and downs of the business cycle; Reviewing and aligning global accounting standards, particularly for complex securities in times of stress; Strengthening transparency of credit derivatives markets and reducing their systemic risks; Reviewing incentives for risk-taking and innovation reflected in compensation practices; and Reviewing the mandates, governance, and resource requirements of the International Financial Institutions. Most of the technical details of this work plan have been referred to existing international standards setting organizations or the National Finance Ministers and Central Bank Governors. These organizations include the International Accounting Standards Board, the Financial Accounting Standards Board, Basel Committee on Banking Supervision, the International Organization of Securities Commissions, and the Financial Stability Forum (Board). At the London Summit, the leaders addressed the issue of coordination and oversight of the international financial system by establishing a new Financial Stability Board (FSB) with a strengthened mandate as a successor to the Financial Stability Forum with membership to include all G-20 countries, Financial Stability Forum members, Spain, and the European Commission. The FSB is to collaborate with the IMF to provide early warning of macroeconomic and financial risks and the actions needed to address them. The Summit left it to individual countries to reshape regulatory systems to identify and take account of macro-prudential (systemic) risks, but agreed to regulate hedge funds and Credit Rating Agencies. The results of the Pittsburgh Summit are summarized in the G-20 section of this report. For the United States, the fundamental issues may be the degree to which U.S. laws and regulations are to be altered to conform to recommendations from the new Financial Stability Board and what authority the Board and IMF will have relative to member nations. Although the London Summit strengthened regulations and the IMF, it did not result in a "new international financial architecture." The question still is out as to whether the Bretton Woods system should be changed from one in which the United States is the buttress of the international financial architecture to one in which the United States remains the buttress but its financial markets are more "Europeanized" (more in accord with Europe's practices) and more constrained by the broader international financial order? Should the international financial architecture be merely strengthened or include more control, and if more control, then by whom? What is the time frame for a new architecture that may take years to materialize? For the United States, some of these issues are being addressed by the President's Working Group on Financial Markets (consisting of the U.S. Treasury Secretary, Chairs of the Federal Reserve Board, the Securities and Exchange Commission, and the Commodity Futures Trading Commission) in cooperation with international financial organizations. Appendix C lists the major regulatory reform proposals and indicates whether they have been put forward by various U.S. and international organizations. Those that have been proposed by both the U.S. Treasury and the G-20 include the following: System ic Risk : All systemically important financial institutions should be subject to an appropriate degree of regulation. Use of stress testing by financial institutions should be more rigorous. Capital Standards : Large complex systemically-important financial institutions should be subject to more stringent capital regulation than other firms. Capital decisions by regulators and firms should make greater provision against liquidity risk. Hedge Funds : Hedge funds should be required to register with a national securities regulator. Systemically-important hedge funds should be subject to prudential regulation. Hedge funds should provide information on a confidential basis to regulators about their strategies and positions. Over-the-Counter Derivatives : Credit default swaps should be processed through a regulated centralized counterparty (CCP) or clearing house. Tax Havens: Minimum international standards—a regulatory floor—should apply in all countries, including tax havens and offshore banking centers. Among the proposals put forward by the Treasury but not mentioned by the G-20 included creating a single regulator with responsibility over all systemically important financial institutions with power for prompt corrective action, strengthening regulation of critical payment systems, processing all standardized over-the-counter derivatives through a regulated clearing house and subjecting them to a strong regulatory regime, and providing authority for a government agency to take over a failing, systemically important non-bank institution and place it in conservatorship or receivership outside the bankruptcy system. (For the June 17, 2009, Obama Administration proposal for financial market regulation, see the " Policy " section of this report.) The fourth phase of the financial crisis is in dealing with political, social, and security effects of the financial turmoil . These are secondary impacts that relate to the role of the United States on the world stage, its leadership position relative to other countries, and the political and social impact within countries affected by the crisis. For example, on February 12, 2009, the U.S. Director of National Intelligence, Dennis Blair, told Congress that instability in countries around the world caused by the global economic crisis and its geopolitical implications, rather than terrorism, is the primary near-term security threat to the United States. The financial crisis works on political leadership and regimes within countries through two major mechanisms. The first is the discontent from citizens who are losing jobs, seeing businesses go bankrupt, losing wealth both in financial and real assets, and facing declining prices for their products. In democracies, this discontent often results in public opposition to the existing establishment or ruling regime. In some cases it can foment extremist movements, particularly in poorer countries where large numbers of unemployed young people may become susceptible to religious radicalism that demonizes Western industrialized society and encourages terrorist activity. The precipitous drop in the price of oil holds important implications for countries, such as Russia, Mexico, Venezuela, Yemen, and other petroleum exporters, who were counting on oil revenues to continue to pour into their coffers to fund activities considered to be essential to their interests. While moderating oil prices may be a positive development for the U.S. consumer and for the U.S. balance of trade, it also may affect the political stability of certain petroleum exporting countries. The concomitant drop in prices of commodities such as rubber, copper ore, iron ore, beef, rice, coffee, and tea also carries dire consequences for exporter countries in Africa, Latin America, and Asia. In Pakistan, a particular security problem exacerbated by the financial crisis could be developing. The IMF has approved a $7.6 billion loan package for Pakistan, but the country faces serious economic problems at a time when it is dealing with challenges from suspected al Qaeda and Taliban sympathizers, when citizen objections are rising to U.S. missile strikes on suspected terrorist targets in Pakistan, and the country faces a budget shortfall that may curtail the ability of the government to continue its counterterror operations. The second way that the crisis works on ruling regimes is through the actions of existing governments both to stay in power and to deal with the adverse effects of the crisis. Any crisis generates centrifugal forces that tend to strengthen central government power. Most nations view the current financial crisis as having been created by the financial elite in New York and London in cooperation with their increasingly laissez faire governments. By blaming the industrialized West, particularly the United States, for their economic woes, governments can stoke the fires of nationalism and seek support for themselves. As nationalist sentiments rise and economic conditions worsen, citizens look to governments as a rescuer of last resort. Political authorities can take actions, ostensibly to counter the effects of the crisis, but often with the result that it consolidates their power and preserves their own positions. Authoritarian regimes, in particular, can take even more dictatorial actions to deal with financial and economic challenges. In the basic economic philosophies that guide policy, expediency seems to be trumping free-market ideologies in many countries. The crisis may hasten the already declining economic neoliberalism that began with President Ronald Reagan and British Prime Minister Margaret Thatcher. Although the market-based structure of most of the world economies is likely to continue, the basic philosophy of deregulation, non-governmental intervention in the private sector, and free and open markets for goods, services, and capital, seems to be subsumed by the need to increase regulation of new financial products, increased government intervention, and some pull-back from further reductions in trade barriers. Emerging market countries, particularly those in Eastern Europe, moreover, may be questioning their shift toward the capitalist model away from the socialist model of their past. State capitalism in which governments either nationalize or own shares of companies and intervene to direct parts of their operations is rising not only in countries such as Russia, where a history of command economics predisposes governments toward state ownership of the means of production, but in the United States, Europe, and Asia. Nationalization of banks, insurance companies, and other financial institutions, as well as government capital injections and loans to private corporations have become parts of rescue and stimulus packages and have brought politicians and bureaucrats directly into economic decision-making at the company level. While state ownership of enterprises may affect the efficiency and profitability of the operation, it also raises questions of equity (government favoring one company over another) and the use of scarce government resources in oversight and management of companies. When taxpayer funds have been used to invest in a company, the public then has an interest in its operations, but protecting that interest takes time and resources. This has already been illustrated in the United States by the attention devoted to executive compensation and bonuses of companies receiving government loans or capital injections and by the threatened bankruptcy of Chrysler and General Motors. The ideological debate over the role of the government in the economy also has been manifest in public opposition to a larger government role in health care. In the G-20 and other meetings, world representatives have been vocal in calling for countries to avoid resorting to protectionism as they try to stimulate their own economies. Still, whether it be provisions to buy domestic products instead of imports, financial assistance to domestic producers, or export incentives, countries have been attempting to protect national companies often at the expense of those foreign. Overt attempts to restrict imports, promote exports, or impose restrictions on trade are limited by the rules of the World Trade Organization (WTO), but there is ample scope for increases in trade barriers that are consistent with the rules and obligations of the WTO. These include raising applied tariffs to higher bound levels as well as actions to impose countervailing duties or to take antidumping measures. Certain sectors also are excluded from trade agreements for national security or other reasons. Moreover, there are opportunities to favor domestic producers at the expense of foreign producers through industry-specific relief or subsidy programs, broad fiscal stimulus programs, buy-domestic provisions, or currency depreciation. Several countries have imposed trade related measures that tend to protect or assist domestic industries. In July, 2009, the WTO reported that in the previous three-month period, there had been "further slippage towards more trade-restricting and distorting policies" but resort to high intensity protectionist measures had been contained overall. There also had been some trade-liberalizing and facilitating measures, but there had been no general indication of governments unwinding or removing the measures that were taken early on in the crisis. The WTO also noted that a variety of new trade-restricting and distorting measures had been introduced, including a further increase in the initiation of trade remedy investigations (anti-dumping and safeguards) and an increase in the number of new tariffs and new non-tariff measures (non-automatic licenses, reference prices, etc.) affecting merchandise trade. The WTO also compiled a list of new trade and trade-related policy measures that had been taken since September 2008. These included increases in steel tariffs by India, increases in tariffs on 940 imported products by Ecuador, restrictions on ports of entry for imports of certain consumer goods by Indonesia, imposition of non-automatic licensing requirements on products considered as sensitive by Argentina, increase in tariffs on imports of crude oil by South Korea, re-introduction of export subsidies for certain dairy products by the European Commission, and a rise in import duties on cars and trucks by Russia. According to the Centre for Economic Policy Research, an independent London think tank, between the G-20 Summit in November 2008 and November 2009, the governments of the world implemented 297 discriminatory trade measures, of which 184 were by the G-20 member states. The ratio of "blatantly discriminatory" measures to liberalizing measures over this period of time was nearly six to one. China was the most frequent target of protectionism under the financial crisis. They were hit with 146 protectionist measures from 58 trading partners. The European Union was the target of 140 measures, the United States 118 measures, and Japan 99 protectionist measures. The nations that have adopted the most protectionist measures are Russia, China, and Indonesia. The Centre, however, also emphasized that a repeat of the 1930s protectionism has—to date—been avoided. The China has announced a number of policy responses to deal with the crisis, including a pledge to spend $586 billion to boost domestic spending. However, China has also announced rebates of value added taxes for exports of certain products (such as steel, petrochemicals, information technology products, textiles, and clothing) and "Buy Chinese" for its stimulus package spending. Also, despite calls to allow its currency to appreciate, in 2009, the Chinese government held its currency stable relative to the dollar even though the dollar, itself, was depreciating against major currencies. In the United States, the Buy America provision in the February 2009 stimulus package has been widely criticized. Even though the provision applies only to steel, iron, and manufactured goods used in government funded construction projects and language was included that the provision "shall be applied in a manner consistent with United States obligations under international agreements," many nations have protested the Buy America language as "protectionist" and as possibly starting down a slippery slope that could lead to WTO-inconsistent protectionism by countries. The United States also imposed anti-dumping duties on imports of tires from China. A concern also is rising among developing nations that a type of "financial protectionism" may arise. Governments may direct banks that have received capital injections to lend more domestically rather than overseas. Borrowing by the U.S. Treasury to finance the growing U.S. budget deficit also pulls in funds from around the world and could crowd out borrowers from countries also seeking to cover their deficits. Also of concern to countries such as Vietnam, China, and other exporters of foreign brand name exports is that private flows of investment capital may decline as producers face rising inventories and excess production capacity. Why build another factory when existing ones sit idle? Another issue raised by the global financial crisis has been the role of the United States on the world stage and the U.S. leadership position relative to other countries. The Obama Administration has placed more emphasis on diplomacy while still yielding a "big stick" in areas such as Afghanistan. The rest of the world seems to be expressing ambivalent feelings about the United States. On one hand, many blame the United States for the crisis and see it as yet another of the excesses of a country that had emerged as the sole superpower in a unipolar world following the end of the Cold War. Although not always explicit, their willingness to follow the U.S. lead appears to have diminished. On the other hand, countries recognize that the United States is still one of a scant few that can bring other nations along and induce them to take actions outside of their political comfort zone. In determining solutions to the financial crisis, the United States presence and leadership appears to be indispensible. The combination of U.S. military power, extensive economic and financial clout, its diplomatic clout, and its veto power in the IMF has put the United States at the center of any resolution to the global financial turmoil. During the early phase of the crisis, European leaders (particularly British Prime Minister [author name scrubbed], French President Nicolas Sarkozy, and German Chancellor Angela Merkel) played a major role and were influential in crafting international mechanisms and policies to deal with initial adverse effects of the crisis as well as proposing long-term solutions. Also, dealing with the financial crisis has enabled countries with rich currency reserves, such as China, Russia, and Japan, to assume higher political profiles in world financial circles. As China helps to finance budget deficits in the United States and as Beijing increasingly sees its economic and financial system as "superior" to that of the West, Washington appears to be losing leverage with China on issues such as climate change, human and labor rights, and product safety. Also, the inclusion of China, India, and Brazil in the G-20 Summits rather than just the G-7 or G-8 countries as originally proposed, reflects the growing influence of the non-industrialized nations in addressing global financial issues. However, as the crisis has played out and with rising approval of the Obama Administration abroad, it appears that the U.S. image is on the rise. According to a July 2009 Pew Research poll, the image of the United States (a key factor in the ability to sway world opinion) has improved markedly in most parts of the world. Improvements in the U.S. image were most pronounced in Western Europe, where favorable ratings for both the nation and the American people have soared, but opinions of America have also become more positive in key countries in Latin America, Africa, and Asia. The financial crisis has brought international financial organizations and institutions into the spotlight. These include the International Monetary Fund, the Financial Stability Board (an enlarged Financial Stability Forum), the Group of Twenty (G-20), the Bank for International Settlements, the World Bank, the Group of 7 (G-7), and other organizations that play a role in coordinating policy among nations, provide early warning of impending crises, or assist countries as a lender of last resort. The precise architecture of any international financial structure and whether it is to have powers of oversight, regulatory, or supervisory authority is yet to be determined. However, the interconnectedness of global financial and economic markets has highlighted the need for stronger institutions to coordinate regulatory policy across nations, provide early warning of dangers caused by systemic, cyclical, or macroprudential risks and induce corrective actions by national governments. A fundamental question in this process, however, rests on sovereignty: how much power and authority should an international organization wield relative to national authorities? As a result of the global financial crisis, the IMF has expanded its activities along several dimensions. The first is its role as lender of last resort for countries less able to access international capital markets. It also is attempting to become a lender of "not-last" resort by offering flexible credit lines for countries with strong economic fundamentals and a sustained track record of implementing sound economic policies. The second area of expansion by the IMF has been in oversight of the international economy and in monitoring systemic risk across borders. The IMF also tracks world economic and financial developments more closely and provides countries with the forecasts and analysis of developments in financial markets. It additionally provides policy advice to countries and regions and is assisting the G-20 with recommendations to reshape the system of international regulation and governance. Although the London Summit provided for more funding for the IMF and international development banks, some larger issues, such as governance of and reform of the IMF are now being determined. (For further discussion of the IMF, see sections below on " The Challenges " and " International Policy Issues ." On June 24, 2009. President Obama signed H.R. 2346 into law ( P.L. 111-32 ). This increased the U.S. quota in the International Monetary Fund by 4.5 billion SDRs ($7.69 billion), provided loans to the IMF of up to an additional 75 billion SDRs ($116.01 billion), and authorized the United States Executive Director of the IMF to vote to approve the sale of up to 12,965,649 ounces of the Fund's gold. H.R. 2346 was the $105.9 billion war supplemental spending bill that mainly funds military operations in Iraq and Afghanistan but also included the IMF provisions. On June 26, the President released a signing statement that included: However, provisions of this bill within sections 1110 to 1112 of title XI, and sections 1403 and 1404 of title XIV, would interfere with my constitutional authority to conduct foreign relations by directing the Executive to take certain positions in negotiations or discussions with international organizations and foreign governments, or by requiring consultation with the Congress prior to such negotiations or discussions. I will not treat these provisions as limiting my ability to engage in foreign diplomacy or negotiations. This signing statement has been addressed in H.Amdt. 311 to H.R. 3081 , the Fiscal 2010 State-Foreign Operations spending bill passed on July 7, 2009. The Washington Action Plan from the G-20 Leader's Summit in November 2008 contained specific policy changes that were addressed in the April 2, 2009 Summit in London. The regulatory and other specific changes have been assigned to existing international organizations such as the Financial Stability Forum (now Financial Stability Board) and Bank for International Settlements, as well as international standard setting bodies such as the Basel Committee on Banking Supervision, International Accounting Standards Board, International Organization of Securities Commissions, and International Association of Insurance Supervisors. The global crisis is causing huge losses and dislocation in the industrialized countries of the world, but in many of the developing countries it is pushing people deep into poverty. The crisis is being transmitted to the poorer countries through declining exports, falling commodity prices, reverse migration, and shrinking remittances from citizens working overseas. This could have major effects in countries which provide large numbers of migrant workers, including Mexico, Guatemala, El Salvador, India, Bangladesh, and the Philippines. The decline in tax revenues caused by the slowdown in economic activity also is increasing competition within countries for scarce budget funds and affecting decisions about the allocation of national resources. This budget constraint relates directly to the ability to finance official development assistance to poorer nations and other programs aimed at alleviating poverty. In the United States, the economic downturn and the vast resources being committed to provide stimulus to the U.S. economy and rescue trouble financial institutions could clash with some policy priorities of the new Administration. In foreign policy, President Obama and top officials in his Administration—including Secretary of State Clinton and Secretary of Defense Gates—have pledged to increase the capacity of civilian foreign policy institutions and levels of U.S. foreign assistance. However, financial constraints could impose difficult choices between foreign policy priorities—for example, between boosting levels of non-military aid to Afghanistan and increasing global health programs–or changes to planned levels of increases across the board. The global reach of the economic downturn further complicates the resource problem, as it both limits what other countries can do to address common international challenges and potentially exacerbates the scale of need in conflict areas and the developing world. The actions of the United States and other nations in coping with the global financial crisis first aimed to contain the contagion, minimize losses to society, restore confidence in financial institutions and instruments, and lubricate the economic system in order for it to return to full operation. Attention now is focused on stimulating the economy and stemming the downturn in macroeconomic conditions that is increasing unemployment and forcing many companies into bankruptcy. As of early 2009, as much as 40% of the world's wealth may have been destroyed since the crisis began, although equity markets have recovered somewhat since then. There still is uncertainty, however, over whether the nascent economic recovery will fade once the government stimulus measures end. It also is unknown whether the current crisis is an aberration that can be fixed by tweaking the system, or whether it reflects systemic problems that require major surgery. What has become evident is that entrenched interests are so strong that even relatively "small" changes in, for example, the structure of financial regulation in the United States, is difficult. The world now is working its way through the third phase of the crisis. The goal is to change the regulatory structure and regulations, the global financial architecture, and some of the imbalances in trade and capital flows to ensure that future crises do not occur or, at least, to mitigate their effects. Judging from policy proposals to cope with the financial crisis in both the United States and in Europe, it appears that solutions are taking a multipronged approach. They are being aimed at the different levels in which financial markets operate: globally, nationally, and by specific financial sector. On the global side, there exists no international architecture capable of coping with and preventing global crises from erupting. The financial space above nations basically is anarchic with no supranational authority with firm oversight, regulatory, and enforcement powers. Since financial crises occur even in relatively tightly regulated economies, the likelihood that a supranational authority could prevent an international crisis from occurring is questionable. International norms and guidelines for financial institutions exist, but most are voluntary, and countries are slow to incorporate them into domestic law. As such, the system operates largely on trust and confidence and by hedging financial bets. The financial crisis has been a "wake-up call" for investors who had confidence in, for example, credit ratings placed on securities by credit rating agencies operating under what some have referred to as "perverse incentives and conflicts of interest." Between 2007 and November 2009, for example, the credit rating agency, Standard & Poor's, has downgraded nearly $1.5 trillion of U.S. residential-mortgage-backed bonds from AAA to junk. The financial crisis crossed national boundaries and spread from individual financial institutions to the wider economy. Not only did countries of the world not directly complicit in the original financial problems suffer "collateral damage," but the ensuing downturn in economic activity affected millions of "innocent bystanders" because of their being connected through trade, financial, and investment flows. To some extent, the International Monetary Fund, World Bank, or the Organization for Economic Cooperation and Development monitored the global economy, but they tended to focus on macroeconomic flows and not on macroprudential regulation. Since the onset of the crisis, the IMF has undertaken more programs to provide macroprudential oversight. The global financial crisis resulted from a confluence of factors and processes at both the macro-financial level (across financial sectors) and at the micro-financial level (the behavior of individual institutions and the functioning of specific market segments). This joint influence of both macro and micro factors resulted in market excesses and the emergence of systemic risks of unprecedented magnitude and complexity. In the United States, regulation tends to be by function. There has been no macroprudential or systemic regulation and oversight. Separate regulatory agencies oversee each line of financial service: banking, insurance, securities, and futures. This is microprudential regulation under which no single regulator possesses all of the information and authority necessary to monitor systemic and synergistic risk or the potential that seemingly isolated events could lead to broad dislocation and a financial crisis so widespread that it affects the real economy. Also no single regulator can take coordinated action throughout the financial system. In a report on systemic regulation, the Council on Foreign Relations explained the problem as follows: One regulatory organization in each country should be responsible for overseeing the health and stability of the overall financial system. The role of the systemic regulator should include gathering, analyzing, and reporting information about significant interactions between and risks among financial institutions; designing and implementing systemically sensitive regulations, including capital requirements; and coordinating with the fiscal authorities and other government agencies in managing systemic crises. We argue below that the central bank should be charged with this important new responsibility. Analysis by the European Central Bank suggests three main considerations on the way in which systemic risks should be monitored and analyzed. First, macroprudential analysis needs to capture all components of financial systems and how they interact. This would include all intermediaries, markets, and infrastructures underpinning them. Second, macroprudential risk assessment should cover the interactions between the financial system and the economy at large. Third, financial markets are not static and are continuously evolving as a result of innovation and international integration. Several financial crises in history have resulted from financial liberalizations or innovations that were neither sufficiently understood nor managed. A related consideration in policymaking is that centers of financial activity, such as New York, London, and Tokyo, compete with each other, and multinational firms can choose where to conduct particular financial transactions. Unless the regulatory framework and the supervisory arrangements in the United States, Europe, and other large financial centers are broadly compatible with each other, business may flow from the United States to the area of minimal regulation and supervision. The interconnectedness of financial centers across the world also implies that systemic risk can be amplified because of actions occurring in different countries, often out of sight or reach of national regulators. One challenge is that the world economy depends greatly on large financial (and other) institutions that may be deemed "too large to fail." If an institution is considered to be "too big to fail," its bankruptcy would pose a significant risk to the system as a whole. Yet, if there is an implicit promise of governmental support in case of failure, the government may create a moral hazard, which is the incentive for an entity to engage in risky behavior knowing that the government will rescue it if it fails. Another challenge is that innovative financial instruments may not be well understood or regulated. Some of the early proposals have been designed to bring hedge funds, off-balance sheet financial entities, and, perhaps, credit default swaps under regulatory authority. A further challenge is that existing micro-prudential regulation, by and large, did not identify the nature and size of accumulating financial and systemic risks and impose appropriate remedial actions. Even though some analysts and institutions were sounding alarms before the crisis erupted, there were few regulatory tools available to cope with the accumulation of risk in the system as a whole or the risks being imposed by other firms either in the same or different sectors. There also seemed to be insufficient response to these risks either by market participants or by the authorities responsible for the oversight of individual financial institutions or specific market segments. Under a free-enterprise system, a fundamental assumption is that markets will self-correct, and that individuals, in pursuing their own financial interests, like an "invisible hand," tend also to promote the good of the global community. If losses occur, investors and institutions naturally become more prudent in the future. A complex challenge remains to determine how much further regulation and oversight is necessary to moderate behavior by institutions that may be in their own financial interest but may pose excessive risk to the system as a whole. Also, how can supervisory authorities preclude a repeat of the same mistakes in the future as personnel and firms change and as memories of financial crises become distant? Also, how should the system be improved to fill gaps in information and technical expertise in order to compensate for faulty or incomplete methods of modeling risk or to provide more resilience in the system to offset human error? For other nations of the world, what has become clear from the crisis is that U.S. financial ailments can be highly contagious. Foreign financial institutions are not immune to ill health in American banks, brokerage houses, and insurance companies. The financial services industry links together investors and financial institutions in disparate countries around the world. Investors seek higher risk-adjusted returns in any market. In financial markets, moreover, innovations in one market quickly spread to another, and sellers in one country often seek buyers in another. The revolution in communications, moreover, works both ways. It allows for instant access to information and remote access to market activity, but it also feeds the herd instinct and is susceptible to being used to spread biased or incomplete information. The linking of economies also transcends financial networks. Flows of international trade both in goods and services are affected directly by macroeconomic conditions in the countries involved. In the second phase of the financial crisis, markets all over the world have been experiencing historic declines. Precipitous drops in stock market values have been mirrored in currency and commodity markets. Another issue is the mismatch between regulators and those being regulated. The policymakers can be divided between those of national governments and, to an extent, those of international institutions, but the resulting policy implementation, oversight, and regulation almost all rest in national governments (as well as sub-national governments such as states, e.g. New York, for insurance regulation). Yet many of the financial and other institutions that are the object of new oversight or regulatory activity may themselves be international in presence. They tend to operate in all major markets and congregate around world financial centers (i.e., London, New York, Zurich, Hong Kong, Singapore, Tokyo, and Shanghai) where client portfolios often are based and where institutions and qualified professionals exist to support their activities. The major market for derivatives, for example, is London, even though a sizable proportion of the derivatives, themselves, may be issued by U.S. companies based on U.S. assets. A further issue is to what extent the U.S. government and Federal Reserve as "domestic lenders of last resort" should intervene in the day-to-day activities of corporations that have received federal support funds. Traditionally, financial regulations have been aimed at ensuring financial stability, transparency, and equity. Issues such as executive compensation and bonuses, or, in the case of General Motors, whether executives travel by private jet, traditionally have not been subject to regulation. Yet once the government provides public support for companies, public pressure rises to intervene in such matters. A fundamental issue deals with the nature of regulation and supervision. Banking regulation tends to be specific and detailed and places requirements and limits on bank behavior. Federal securities regulation, however, is based primarily on disclosure. Registration with the Securities and Exchange Commission is required, but that registration does not imply that an investment is safe, only that the risks have been fully disclosed. The SEC has no authority to prevent excessive risk taking. Financial crises of some kind occur sporadically virtually every decade and in various locations around the world. Financial meltdowns have occurred in countries ranging from Sweden to Argentina, from Russia to Korea, from the United Kingdom to Indonesia, and from Japan to the United States. As one observer noted: as each crisis arrives, policy makers express ritual shock, then proceed to break every rule in the book. The alternative is unthinkable. When the worst is passed, participants renounce crisis apostasy and pledge to hold firm next time. Each financial crisis is unique, yet each bears some resemblance to others. In general, crises have been generated by factors such as an overshooting of markets, excessive leveraging of debt, credit booms, miscalculations of risk, rapid outflows of capital from a country, mismatches between asset types (e.g., short-term dollar debt used to fund long-term local currency loans), unsustainable macroeconomic policies, off-balance sheet operations by banks, inexperience with new financial instruments, and deregulation without sufficient market monitoring and oversight. As shown in Figure 2 , the current crisis harkens back to the 1997-98 Asian financial crisis in which Thailand, Indonesia, and South Korea had to borrow from the International Monetary Fund to service their short-term foreign debt and to cope with a dramatic drop in the values of their currency and deteriorating financial condition. Determined not to be caught with insufficient foreign exchange reserves, countries subsequently began to accumulate dollars, Euros, pounds, and yen in record amounts. This was facilitated by the U.S. trade (current account) deficit and by its low saving rate. By mid-2008, world currency reserves by governments had reached $4.4 trillion with China's reserves alone approaching $2 trillion, Japan's nearly $1 trillion, Russia's more than $500 billion, and India, South Korea, and Brazil each with more than $200 billion. The accumulation of hard currency assets was so great in some countries that they diverted some of their reserves into sovereign wealth funds that were to invest in higher yielding assets than U.S. Treasury and other government securities. Following the Asian financial crisis, much of the world's "hot money" began to flow into high technology stocks. The so-called "dot-com boom" ended in the spring of 2000 as the value of equities in many high-technology companies collapsed. After the dot-com bust, more "hot investment capital" began to flow into housing markets—not only in the United States but in other countries of the world. At the same time, China and other countries invested much of their accumulations of foreign exchange into U.S. Treasury and other securities. While this helped to keep U.S. interest rates low, it also tended to keep mortgage interest rates at lower and attractive levels for prospective home buyers. This housing boom coincided with greater popularity of the securitization of assets, particularly mortgage debt (including subprime mortgages), into collateralized debt obligations (CDOs). A problem was that the mortgage originators often were mortgage finance companies whose main purpose was to write mortgages using funds provided by banks and other financial institutions or borrowed. They were paid for each mortgage originated but had no responsibility for loans gone bad. Of course, the incentive for them was to maximize the number of loans concluded. This coincided with political pressures to enable more Americans to buy homes, although it appears that Fannie Mae and Freddie Mac were not directly complicit in the loosening of lending standards and the rise of subprime mortgages. In order to cover the risk of defaults on mortgages, particularly subprime mortgages, the holders of CDOs purchased credit default swaps (CDSs). These are a type of insurance contract (a financial derivative) that lenders purchase against the possibility of credit event (a default on a debt obligation, bankruptcy, restructuring, or credit rating downgrade) associated with debt, a borrowing institution, or other referenced entity. The purchaser of the CDS does not have to have a financial interest in the referenced entity, so CDSs quickly became more of a speculative asset than an insurance policy. As long as the credit events never occurred, issuers of CDSs could earn huge amounts in fees relative to their capital base (since these were technically not insurance, they did not fall under insurance regulations requiring sufficient capital to pay claims, although credit derivatives requiring collateral became more and more common in recent years). The sellers of the CDSs that protected against defaults often covered their risk by turning around and buying CDSs that paid in case of default. As the risk of defaults rose, the cost of the CDS protection rose. Investors, therefore, could arbitrage between the lower and higher risk CDSs and generate large income streams with what was perceived to be minimal risk. In 2007, the notional value (face value of underlying assets) of credit default swaps had reached $62 trillion, more than the combined gross domestic product of the entire world ($54 trillion), although the actual amount at risk was only a fraction of that amount (approximately 3.5%). By July 2008, the notional value of CDSs had declined to $54.6 trillion and by October 2008 to an estimated $46.95 trillion. The system of CDSs generated large profits for the companies involved until the default rate, particularly on subprime mortgages, and the number of bankruptcies began to rise. Soon the leverage that generated outsized profits began to generate outsized losses, and in October 2008, the exposures became too great for companies such as AIG.. The origins of the financial crisis point toward three developments that increased risk in financial markets. The first was the originate-to-distribute model for mortgages. The originator of mortgages passed them on to the provider of funds or to a bundler who then securitized them and sold the collateralized debt obligation to investors. This recycled funds back to the mortgage market and made mortgages more available. However, the originator was not penalized, for example, for not ensuring that the borrower was actually qualified for the loan, and the buyer of the securitized debt had little detailed information about the underlying quality of the loans. Investors depended heavily on ratings by credit agencies. The second development was a rise of perverse incentives and complexity for credit rating agencies. Credit rating firms received fees to rate securities based on information provided by the issuing firm using their models for determining risk. Credit raters, however, had little experience with credit default swaps at the "systemic failure" tail of the probability distribution. The models seemed to work under normal economic conditions but had not been tested in crisis conditions. Credit rating agencies also may have advised clients on how to structure securities in order to receive higher ratings. In addition, the large fees offered to credit rating firms for providing credit ratings were difficult for them to refuse in spite of doubts they might have had about the underlying quality of the securities. The perception existed that if one credit rating agency did not do it, another would. The third development was the blurring of lines between issuers of credit default swaps and traditional insurers. In essence, financial entities were writing a type of insurance contract without regard for insurance regulations and requirements for capital adequacy (hence, the use of the term "credit default swaps" instead of "credit default insurance"). Much risk was hedged rather than backed by sufficient capital to pay claims in case of default. Under a systemic crisis, hedges also may fail. However, although the CDS market was largely unregulated by government, more than 850 institutions in 56 countries that deal in derivatives and swaps belong to the ISDA (International Swaps and Derivatives Association). The ISDA members subscribe to a master agreement and several protocols/amendments, some of which require that in certain circumstances companies purchasing CDSs require counterparties (sellers) to post collateral to back their exposures. It was this requirement to post collateral that pushed some companies toward bankruptcy. The blurring of boundaries among banks, brokerage houses, and insurance agencies also made regulation and information gathering difficult. Regulation in the United States tends to be functional with separate government agencies regulating and overseeing banks, securities, insurance, and futures. There was no suprafinancial authority. The plunge downward into the global financial crisis did not take long. It was triggered by the bursting of the housing bubble and the ensuing subprime mortgage crisis in the United States, but other conditions have contributed to the severity of the situation. Banks, investment houses, and consumers carried large amounts of leveraged debt. Certain countries incurred large deficits in international trade and current accounts (particularly the United States), while other countries accumulated large reserves of foreign exchange by running surpluses in those accounts. Investors deployed "hot money" in world markets seeking higher rates of return. These were joined by a huge run up in the price of commodities, rising interest rates to combat the threat of inflation, a general slowdown in world economic growth rates, and increased globalization that allowed for rapid communication, instant transfers of funds, and information networks that fed a herd instinct. This brought greater uncertainty and changed expectations in a world economy that for a half decade had been enjoying relative stability. An immediate indicator of the rapidity and spread of the financial crisis has been in stock market values. As shown in Figure 3 , as values on the U.S. market plunged, those in other countries were swept down in the undertow. By mid-October 2008, the stock indices for the United States, U.K., Japan, and Russia had fallen by nearly half or more relative to their levels on October 1, 2007. The downward slide reached a bottom in mid-March 2009, although there still is concern that the subsequent slow recovery in stock values has been a "bear market bounce" and that these stock markets may again go into sustained decline. the close tracking of the equities markets in the United States, Japan, and the U.K. provides further evidence of the global nature of capital markets and the rapidity of international capital flows. Declines in stock market values reflected huge changes in expectations and the flight of capital from assets in countries deemed to have even small increases in risk. Many investors, who not too long ago had heeded financial advisors who were touting the long term returns from investing in the BRICs (Brazil, Russia, India, and China), pulled their money out nearly as fast as they had put it in. Dramatic declines in stock values coincided with new accounting rules that required financial institutions holding stock as part of their capital base to value that stock according to market values (mark-to-market). Suddenly, the capital base of banks shrank and severely curtailed their ability to make more loans (counted as assets) and still remain within required capital-asset ratios. Insurance companies too found their capital reserves diminished right at the time they had to pay buyers of or post collateral for credit default swaps. The rescue (establishment of a conservatorship) for Fannie Mae and Freddie Mac in September 2008 potentially triggered credit default swap contracts with notional value exceeding $1.2 trillion. In addition, the rising rate of defaults and bankruptcies created the prospect that equities would suddenly become valueless. The market price of stock in Freddie Mac plummeted from $63 on October 8, 2007 to $0.88 on October 28, 2008. Hedge funds, whose "rocket scientist" analysts claimed that they could make money whether markets rose or fell, lost vast sums of money. The prospect that even the most seemingly secure company could be bankrupt the next morning caused credit markets to freeze. Lending is based on trust and confidence. Trust and confidence evaporated as lenders reassessed lending practices and borrower risk. One indicator of the trust among financial institutions is the Libor, the London Inter-Bank Offered Rate. This is the interest rate banks charge for short-term loans to each other. Although it is a composite of primarily European interest rates, it forms the basis for many financial contracts world wide including U.S. home mortgages and student loans. During the worst of the financial crisis in October 2008, this rate had doubled from 2.5% to 5.1%, and for a few days much interbank lending actually had stopped. The rise in the Libor came at a time when the U.S. monetary authorities were lowering interest rates to stimulate lending. The difference between interest on Treasury bills (three month) and on the Libor (three month) is called the "Ted spread." This spread averaged 0.25 percentage points from 2002 to 2006, but in October 2008 exceeded 4.5 percentage points. By the end of December, it had fallen to about 1.5%. The greater the spread, the greater the anxiety in the marketplace. As the crisis has moved to a global economic slowdown, many countries have pursued expansionary monetary policy to stimulate economic activity. This has included lowering interest rates and expanding the money supply. Currency exchange rates serve both as a conduit of crisis conditions and an indicator of the severity of the crisis. As the financial crisis hit, investors fled stocks and debt instruments for the relative safety of cash—often held in the form of U.S. Treasury or other government securities. That increased demand for dollars, decreased the U.S. interest rate needed to attract investors, and caused a jump in inflows of liquid capital into the United States. For those countries deemed to be vulnerable to the effects of the financial crisis, however, the effect was precisely the opposite. Demand for their currencies fell and their interest rates rose. Figure 4 shows indexes of the value of selected currencies relative to the dollar for selected countries. For much of 2007 and 2008, the Euro and other European currencies had been appreciating in value relative to the dollar; but the crisis pushed them down until the dollar began to decline. The Japanese yen continues to appreciate, while the Chinese RMB has risen slightly but, by and large, has been constant. Other currencies, such as the Korean won and Icelandic krona, had been steadily weakening over the previous year and experienced sharp declines as the crisis evolved. Recently, however, the won has recovered somewhat. For a country in crisis, a weak currency increases the local currency equivalents of any debt denominated in dollars and exacerbates the difficulty of servicing that debt. The greater burden of debt servicing usually has combined with a weakening capital base of banks because of declines in stock market values to further add to the financial woes of countries. National governments have had little choice but to take fairly draconian measures to cope with the threat of financial collapse. As a last resort, some have turned to the International Monetary Fund for assistance. As economies weakened, governments moved from shoring up their financial institutions to coping with rapidly developing recessionary economic conditions. While actions to assist banks, insurance companies, and securities firms recover or stave off bankruptcy continued, stimulus packages became policy priorities. In the fourth quarter of 2008, economic growth rates dropped in some countries at rates not seen in decades.(See Figure 1 ) China alone has estimated that 20 million workers have become unemployed. Table 1 shows stimulus packages by selected major countries of the world. While the $787 billion package by the United States is the largest, China's $586 billion, the European Union's $256 billion, and Japan's $396 billion packages also are quite large. The global credit crunch that began in August 2007 has led to a financial crisis in emerging market countries ( see box ) that is being viewed as greater in both scope and effect than the East Asian financial crisis of 1997-98 or the Latin American debt crisis of 2001-2002, although the impact on individual countries may have been greater in previous crises. Of the emerging market countries, those in Central and Eastern Europe appear, to date, to be the most impacted by the financial crisis. The ability of emerging market countries to borrow from global capital markets has allowed many countries to experience incredibly high growth rates. For example, the Baltic countries of Latvia, Estonia, and Lithuania experienced annual economic growth of nearly 10% in recent years. However, since this economic expansion was predicated on the continued availability of access to foreign credit, they were highly vulnerable to a financial crisis when credit lines dried up. Of all emerging market countries, Central and Eastern Europe appear to be the most vulnerable. On a wide variety of economic indicators, such as the total amount of debt in the economy, the size of current account deficits, dependence on foreign investment, and the level of indebtedness in the domestic banking sector, countries such as Hungary, Ukraine, Bulgaria, Kazakhstan, Kyrgyzstan, Latvia, Estonia, and Lithuania, rank among the highest of all emerging markets. Throughout the region, the average current account deficit increased from 2% of GDP in 2000 to 9% in 2008. In some countries, however, the current account deficit is much higher. Latvia's estimated 2008 current account deficit is 22.9% of GDP and Bulgaria's is 21.4%. The average deficit for the region was greater than 6% in 2008 ( Figure 5 ). Due to the impact of the financial crisis, several Central and Eastern European countries have already sought emergency lending from the IMF to help finance their balance of payments. On October 24, the IMF announced an initial agreement on a $2.1 billion two-year loan with Iceland (approved on November 19). On October 26, the IMF announced a $16.5 billion agreement with Ukraine. On October 28, the IMF announced a $15.7 billion package for Hungary. On November 3, a staff-level agreement on an IMF loan was reached with Kyrgyzstan, and on November 24, the IMF approved a $7.6 billion stand-by arrangement for Pakistan to support the country's economic stabilization. The quickness with which the crisis has impacted emerging market economies has taken many analysts by surprise. Since the Asian financial crisis, many Asian emerging market economies enacted a policy of foreign reserve accumulation as a form of self-insurance in case they once again faced a "sudden stop" of capital flows and the subsequent financial and balance of payments crises that result from a rapid tightening of international credit flows. Two additional factors motivated emerging market reserve accumulation. First, several countries have pursued an export-led growth strategy targeted at the U.S. and other markets with which they have generated trade surpluses. Second, a sharp rise in the price of commodities from 2004 to the first quarter of 2008 led many oil-exporting economies, and other commodity-based exporters, to report very large current account surpluses. Figure 6 shows the rapid increase in foreign reserve accumulation among these countries. These reserves provided a sense of financial security to EM countries. Some countries, particularly China and certain oil exporters, also established sovereign wealth funds that invested the foreign exchange reserves in assets that promised higher yields. While global trade and finance linkages between the emerging markets and the industrialized countries have continued to deepen over the past decade, many analysts believed that emerging markets had successfully "decoupled" their growth prospects from those of industrialized countries. Proponents of the theory of decoupling argued that emerging market countries, especially in Eastern Europe and Asia, have successfully developed their own economies and intra-emerging market trade and finance to such an extent that a slowdown in the United States or Europe would not have as dramatic an impact as it did a decade ago. A report by two economists at the IMF found some evidence of this theory. The authors divided 105 countries into three groups: developed countries, emerging countries, and developing countries and studied how economic growth was correlated among the groups between 1960 and 2005. The authors found that while economic growth was highly synchronized between developed and developing countries, the impact of developed countries on emerging countries has decreased over time, especially during the past twenty years. According to the authors: In particular, [emerging market] countries have diversified their economies, attained high growth rates and increasingly become important players in the global economy. As a result, the nature of economic interactions between [industrialized and emerging market] countries has evolved from one of dependence to multidimensional interdependence. Despite efforts at self-insurance through reserve accumulation and evidence of economic decoupling, the U.S. financial crisis, and the sharp contraction of credit and global capital flows in October 2008 affected all emerging markets to a degree due to their continued dependence on foreign capital flows. According to the Wall Street Journal , in the month of October, Brazil, India, Mexico, and Russia drew down their reserves by more than $75 billion, in attempt to protect their currencies from depreciating further against a newly resurgent U.S. dollar. A key to understanding why emerging market countries have been so affected by the crisis (especially Central and Eastern Europe) is their high dependence on foreign capital flows to finance their economic growth ( Figures 7-8 ). Even though several emerging markets have been able to reduce net capital inflows by investing overseas (through sovereign wealth funds) or by tightening the conditions for foreign investment, the large amount of gross foreign capital flows into emerging markets remained a key vulnerability for them. For countries such as those in Central and Eastern Europe which have both high gross and net capital flows, vulnerability to financial crisis is even higher. Once the crisis occurred, it became much more difficult for emerging market countries to continue to finance their foreign debt. According to Arvind Subramanian, an economist at the Peterson Institute for International Economics, and formerly an official at the IMF: If domestic banks or corporations fund themselves in foreign currency, they need to roll these over as the obligations related to gross flows fall due. In an environment of across-the-board deleveraging and flight to safety, rolling over is far from easy, and uncertainty about rolling over aggravates the loss in confidence. As emerging markets have grown, Western financial institutions have increased their investments in emerging markets. G-10 financial institutions have a total of $4.7 trillion of exposure to emerging markets with $1.6 trillion to Central and Eastern Europe, $1.5 trillion to emerging Asia, and $1.0 trillion to Latin America. While industrialized nation bank debt to emerging markets represents a relatively small percentage (13%) of total cross-border bank lending ($36.9 trillion as of September 2008), this figure is disproportionately high for European financial institutions and their lending to Central and Eastern Europe. For European and U.K. banks, cross-border lending to emerging markets, primarily Central and Eastern Europe accounts for between 21% and 24% of total lending. For U.S. and Japanese institutions, the figures are closer to 4% and 5%. The heavy debt to Western financial institutions greatly increased central and Eastern Europe's vulnerability to contagion from the financial crisis. In addition to the immediate impact on growth from the cessation of available credit, a downturn in industrialized countries will likely affect emerging market countries through several other channels. As industrial economies contract, demand for emerging market exports will slow down. This will have an impact on a range of emerging and developing countries. For example, growth in larger economies such as China and India will likely slow as their exports decrease. At the same time, demand in China and India for raw natural resources (copper, oil, etc) from other developing countries will also decrease, thus depressing growth in commodity-exporting countries. Slower economic growth in the industrialized countries may also impact less developed countries through lower future levels of bilateral foreign assistance. According to analysis by the Center for Global Development's David Roodman, foreign aid may drop precipitously over the next several years. His research finds that after the Nordic crisis of 1991, Norway's aid fell 10%, Sweden's 17%, and Finland's 62%. In Japan, foreign aid fell 44% between 1990 and 1996, and has never returned to pre-crisis assistance levels. Financial crises are not new to Latin America, but the current one has two unusual dimensions. First, as substantiated earlier in this report, it originated in the United States, with Latin America suffering shocks created by collapses in the U.S. housing and credit markets, despite minimal direct exposure to the "toxic" assets in question. Second, it spread to Latin America in spite of recent strong economic growth and policy improvements that have generally increased economic stability and reduced risk factors, particularly in the financial sector. Repercussions from the global financial crisis have varied by country based in part on policy differences, but also on exposure to two major risks, the degree of reliance on the U.S. economy, and/or dependence on commodity exports. Investors, nonetheless, were initially very hard on the region as a whole, perhaps historically conditioned to be leery of its capacity to weather short-term financial contagion, let alone a protracted global recession. A year after the crisis began, however, it appears that the financial and economic repercussions have stabilized, and that in many Latin American countries, a return to growth is evident. While the downturn was, and still is, very severe by many measures, relatively sound macroeconomic fundamentals and policy responses by many Latin American countries and international financial organizations may have ameliorated what could have been a deeper and longer regional decline. Nonetheless, it is still early in the recovery process to predict an unencumbered reversal of economic fortune and some countries face a steeper climb out of recession than others. The economies of Latin America and the Caribbean grew at an average annual rate of nearly 5.5% for the five years 2004-2008, lending credence to the once prominent idea that they were "decoupling" from slower growing developed economies, particularly the United States. Domestic policy reforms have been credited with achieving macroeconomic stability, stronger fiscal positions, sounder banking systems, and lower sovereign debt risk levels. Others note, however, that Latin America's growth trend is easily explained by international economic fundamentals, questioning the importance of the decoupling theory. The sharp rise in commodity prices, supportive external financing conditions, and high levels of remittances contributed greatly to the region's improved economic welfare, reflecting gains from a strong global economy. In addition, all three trends reversed even before the financial crisis began, suggesting that Latin America remains very much tied to world markets and trends. Latin America has experienced two levels of economic problems related to the crisis. First order effects from financial contagion were initially evident in the high volatility of financial market indicators. All major indicators fell sharply in the fourth quarter of 2008, as capital inflows reversed direction, seeking safe haven in less risky assets, many of them, ironically, dollar denominated. Regional stock indexes fell by over half from June to October 2008. Currencies followed suit in many Latin American countries. They depreciated suddenly from investor flight to the U.S. dollar reflecting a lack of confidence in local currencies, the rush to portfolio rebalancing, and the fall in commodity import revenue related to sharply declining prices and diminished global demand. In Mexico and Brazil, where firms took large speculative off-balance sheet derivative positions in the currency markets, currency losses were compounded to a degree requiring central bank intervention to ensure dollar availability. Debt markets followed in kind, as credit tightened and international lending contracted, even for short-term needs such as inventory and trade finance. Borrowing became more expensive, as seen in widening bond spreads. In 2008, bond spreads in the Emerging Market Bond Index (EMBI) and corporate bond index for Latin America jumped by some 600 basis points, half occurring in the fourth quarter. This trend suggests first, that Latin America was already beginning to experience a slowdown prior to the financial crisis, and second, that the crisis itself was a sudden subsequent shock to a deteriorating economic trend in the region. Some countries, including Brazil, Mexico, and Colombia, had continued access to international debt markets. Many others, however, have had to rely more heavily on domestic debt placements. Signs of financial market stabilization appeared by the summer of 2009. Both regional stock and currency indexes recovered 60% of their losses by September 2009, indicating renewed interest and confidence in Latin America's ability to weather the downturn and perhaps emerge from it ahead of many developed economies, including the United States. Overall, after spiking in the fall of 2008 at around 800 basis points, sovereign bond spreads have retreated to under 400 basis points, still off the 200 basis point level prior to the crisis, but a significant trend reversal. The exceptions are in Argentina, Ecuador, and Venezuela, all of which share a heavy dependence on commodity exports and weak economic policy frameworks. In each of these countries, bond spreads rose to over 1,500 basis points as the crisis unfolded, and although the spreads have narrowed to a range of 750 to 950 basis points, the difference still reflects a lack of confidence in their financials systems and their capacity to service debt. The more serious effects of the global crisis for Latin America appear in second order effects, which point to a deterioration of broader economic fundamentals. These will take much longer to recover than financial indicators. GDP growth for the region is expected to be a negative 2% in 2009, with an estimated growth of 3.4% in 2010. The fall in global demand, particularly for Latin America's commodity exports, has been a big factor, as seen in contracting export revenue. Latin American exports are expected to fall by 11% in 2009, the largest decline since 1937. Similarly, imports may fall by 14%, reflecting the decline in world demand in general. The trade account, along with rising unemployment, point to the most severe aspects of the crisis for Latin America. Remittances have also fallen, ranging between 10% and 20% by country. Although still important financial inflows, the decline in remittances is expected to diminish family incomes and fiscal balances, contributing to the regional slowdown. Public sector borrowing is expected to rise and budget constraints may threaten spending on social programs in some cases, with a predictably disproportional effect on the poor. Social effects are also seen in the rising unemployment throughout the region. Policy responses have materialized from many quarters, including multilateral organizations, which have adopted programs to ameliorate the credit crisis and stimulate demand. The International Monetary Fund (IMF), World Bank, Inter-American Development Bank (IDB), Andean Development Corporation (CAF), and Latin American Reserve Fund (LARF) have all increased lending to the region, particularly on an expedited and short-term basis. The goal is to provide credit to the private sector and to support, in selective cases, bank recapitalization. Funds will also be made available for public sector spending (infrastructure and social programs) as a form of fiscal stimulus, primarily through the World Bank and IDB. The United States took steps to provide dollar liquidity (reciprocal currency "swap" arrangement) on a temporary bilateral basis to many central banks of "systemically important" countries with sound banking systems. In Latin America, this group includes Mexico and Brazil, each of which had access to a $30 billion currency swap reserve with the U.S. Federal Reserve System, initially through April 30, 2009, but which was extended to February 1, 2010. The swap arrangement is intended to ensure dollar availability in support of the large trade and investment transactions conducted with the United States, and perhaps more importantly, reinforce confidence in the financial systems of the two largest Latin American economies. National governments are also relying on monetary, fiscal, and exchange rate policies to stimulate their economies. The capacity to undertake any of these options varies tremendously among the Latin American countries. Fiscal capacity is constrained in many countries by high debt levels, as well as the recession itself. Among the countries adopting a fiscal stimulus, estimates of their size range from 2.5% GDP in Mexico to 6.0% for Argentina and 8.5% for Brazil. Direct government spending is the primary vehicle for fiscal stimulus, but Brazil has devoted 20% to tax cuts or increased benefits (transfers). Many countries are also limited in their use of monetary policy to expand liquidity. In particular, reducing interest rates is difficult for those experiencing significant currency depreciations, which can increase inflationary pressures. Nonetheless, those countries with flexible exchange rates have relied on currency depreciations to shoulder much of the adjustment process, without experiencing severe financial instability. There has been some concern that countries may eventually resort to nationalistic policies that will reduce the flows of goods, services, and capital, but these types of policies have generally been avoided, and the risk of their use likely diminishes as economies improve. The magnitude of the global economic downturn and adequacy of policy responses vary by country, as illustrated by three examples discussed below. The Mexican economy contracted for four consecutive quarters beginning in the fourth quarter of 2008, and the government forecasts an economic decline of 7%-8% for 2009. This would be the worst recession in six decades, making Mexico the hardest hit country in Latin America. Output fell in both industry and service sectors, with the 13% decline in industrial production over the past year the worst recorded since the 1995 "peso crisis." Remittances, which amounted to $25 billion in 2008, may fall by 15% in 2009. Mexico faces a number of problems: heavy reliance on the U.S. economy, falling foreign investment, and low (until recently) oil prices, and declining oil output, the largest source of national revenue. The United States accounts for half of Mexico's imports, 80% of its exports, and most of its foreign investment and remittances income. A nascent recovery was measurable by the summer of 2009, signaling for many analysts the possibility of a solid turnaround in the downward trend. Analysts are forecasting a sharp increase in economic growth in the second half of 2009, with an annual expansion in economic activity of 3.3% for 2010. The sustainability of such a trend will depend heavily on recovery of the U.S. and global economies. The financial crisis hit Mexico hard and fast. At the outset, Mexico experienced a run on the peso, which caused its value to fall at one point by 40% from its August 2008 high (currently down by 20% from September 2008). The decline was unrelated to investments in U.S. mortgage-backed securities. Investor portfolio re-balancing away from emerging markets, the dramatic fall in commodity prices, and decline in U.S. demand for Mexican exports were the main causes. The peso also suffered from large private positions taken in the belief that the peso's strength would not be eroded by the U.S. financial crisis. Many firms had gone beyond hedging to taking large derivative positions in the peso. As the peso began to depreciate, companies had to unwind these off-balance-sheet positions quickly, accelerating its fall. One large firm had losses exceeding $1.4 billion and filed for bankruptcy, indicative of the severity of the problem. The Mexican government responded by selling billions of dollars of reserves and using a temporary currency swap arrangement with the U.S. Federal Reserve to assure dollar liquidity, but the peso remains the hardest hit of all emerging market currencies. In the non-financial sectors, industrial production was severely hit by the fall in U.S. demand for Mexican exports. The industrial sector, however, rebounded with 2.8% monthly growth in July 2009, and is expected to lead the recovery as it did the recession. Mexico's long-term economic prospects, however, hinge on recovery of U.S. aggregate demand. Because Mexico's trade is poorly diversified, the effects of the U.S. downturn were particularly noticeable, with Mexican exports to the United States on a monthly basis falling 37% from October 2008 to February 2009, hitting the lowest level since January 2005. U.S. imports from Mexico began to recover in June 2009, and are up nearly 15% from February 2009, but stand at only 70% of the peak reached in October 2007. The trade effect has been compounded by a nearly 20% annual decline in remittances from Mexican workers living in the United States. Employment figures for the formal economy at home are also registering large job losses. To date, the Mexican government has adopted supportive monetary and fiscal policies. The central government has increased liquidity in the banking system, including multiple cuts in the prime policy lending rate. It has also increased its credit lines with the World Bank, International Monetary Fund, and Inter-American Development Bank. Mexico's fiscal stimulus amounts to 2.5% of GDP and is targeted on infrastructure spending and subsidies for key goods of household budgets, particularly those reducing energy costs. Government programs to support small and medium-sized businesses, worker training, employment generation, and social safety nets have been maintained and expanded in some cases. The costs of these responses has placed additional strain on Mexico's public finances. The overall fiscal deficit is expected to reach 3.5% of GDP for 2009 and 2010, estimated to be near the maximum that Mexico can afford. Recent downward revisions of Mexico's credit rating (still investor grade) reflect growing concern over Mexico's financial position in light of weak economic fundamentals and Mexico's recovery relying so heavily on a U.S. economic rebound. Mexico appears to have reached the financial limits of its fiscal and monetary responses, but some analysts speculate that at the margin, lagged effects of these policies may continue to support Mexico's nascent recovery. Brazil entered the financial crisis from a position of relative macroeconomic and fiscal strength, and although it has not been immune to the global contraction, data suggest Brazil will experience only a two-quarter recession, with recovery solidly in place by in the second half of 2009. The economy grew by 5.1% in 2008 and is expected to contract by less than 1.0% over the full year 2009. Second quarter growth registered 1.9% on an annualized basis, indicating a technical end to recession. Commodity price rebound has contributed to growth in Brazilian output and exports, and industrial production has begun to rise as well. Still, a number of indicators in the real economy remain weak and fiscal pressures from the stimulus package present a short-term financial burden. Financial repercussions sparked the crisis and affected Brazil in ways similar to Mexico. Brazil's stock market index tumbled by half in 2008 as investors fled both equities and the Brazilian currency (the real ). The Brazilian government sold billions of dollars to fight a rapidly depreciating currency, which fell at one point by over 35% from its August 2008 high. Brazil, like Mexico, also has a large currency derivatives market, where speculative trades contributed to the real's decline, although to a lesser degree than in Mexico. Brazil's central bank agreed to the temporary currency swap arrangement with the U.S. Federal Reserve. It also has some $200 billion in international reserves, which have served as an effective cushion against financial retreat from the financial markets. Brazil also has a sound and well-regulated banking system and experienced central bank leadership and staff that has helped maintain confidence in the financial system in the face of rising defaults and declining balance sheet quality. Financial indictors have all improved, reflecting a return to stability and portending a near-term broader economic recovery. Brazil's real has appreciated against the U.S. dollar, fully recovering any losses over the past year. The stock index has recovered 17% from January 2009 and the bond spreads on Brazilian debt are only 200 basis points above U.S. treasuries, reflecting confidence in Brazil's economic prospects. Brazilian government debt was upgraded from speculative to investment grade by the major ratings agencies in late September, lending further support for confidence in the country's financial and economic outlook. The real (nonfinancial) economy faces deeper challenges. Domestic demand is still weak and the unemployment rate has risen from 6.8% in December 2008 to an estimated 9.2%. July employment figures, however, showed a net job increase of 292,000 across all sectors, indicating the real economy is beginning to experience recovery as well. Although Brazil also experienced declines in exports, the recovery of commodity prices and strong demand from China, now the largest consumer of Brazil's exports, have helped improve Brazil's trade account. Capital inflows, which were strong in 2008, have also slowed, despite Brazil's recent solid macroeconomic performance and its investment grade rating. As with other countries, the extent to which global demand diminishes will ultimately affect all these variables. Brazil, however, has a large internal market and is well-positioned on the macroeconomic front, which has helped soften the effects of the global financial crisis. On the fiscal side, Brazil enacted a sizeable fiscal stimulus estimated at 8.5% of GDP. Tax cuts and direct government spending have been credited with ameliorating the effects of the global downturn. Brazil has maintained fiscal support for its social programs, expanded unemployment insurance, and made provisions for low-income housing and other support. To accommodate its increased fiscal commitments, it has reduced its primary fiscal surplus target from 3.8% to 2.5% of GDP, and will likely see its deficit and debt positions deteriorate in the short term. Observers, however, are beginning to raise concerns over Brazil's growing deficit, and have suggested that the government has reached the edge of its capacity for fiscal stimulus. In addition to a fiscal response, Brazil has emphasized enhancing financial sector liquidity through monetary policy. The Central Bank has injected billions of dollars into the banking system, lowered reserve requirements, and reduced the key short-term interest rate many times, from 13.75% to 8.75%. The Brazilian government has authorized state-owned banks to purchase private banks, approved stricter accounting rules for derivatives, extended credit directly to firms through the National Development Bank (BNDES) and the Central Bank, and exempted foreign investment firms from the financial transactions tax. Unibanco, one of Brazil's largest banks, has also procured a $60 million credit extension from the World Bank's International Finance Corporation to support trade financing. Argentina, because of its shaky economic and financial position at the outset of the crisis, has been poorly positioned to deal with a protracted downturn compared to most other Latin American countries. Although until recently it has experienced dramatic economic growth since 2002, this trend reflects a rebound from the previous severe 2001-2002 financial crisis and rise in commodity prices that benefitted Argentina's large agricultural sector. This trend ended when Argentina experienced a contraction of -0.8% for the second quarter of 2009 (on an annualized basis). The collapse of commodity prices in late 2008 diminished export and fiscal revenues and Argentina is also experiencing declines in investment, domestic consumer demand, and industrial production. Installed capacity utilization fell from 79% in October 2008 to 67.4% in January 2009, recovering to 74.6% by August 2009. Particularly hard hit were motor vehicles, metallurgy, and textiles. Economists forecast the economy will contract by 2% to 4% in 2009 and recovery will be slow with unemployment still rising to nearly 9.0% in the summer of 2009. Argentina has been financially isolated from global markets since its 2001 crisis and is also hampered by a litany of questionable policy choices, which combined with the global recession and a prolonged draught, has further diminished confidence in its financial system. Although the banks remain liquid and solvent, the stock market fell at one point by 37% from last fall and the peso has depreciated by 18%. Among the highly questionable policies that have diminished confidence in the country is the 2002 historic sovereign debt default and failure to renegotiate with Paris Club countries and private creditor holdouts. Others include government interference in the supposedly independent government statistics office (particularly with respect to inflation reporting), price controls, high export taxes, and nationalization of private pension funds to bolster public finances. These policies have isolated the economy from international capital markets despite the need to finance a growing debt burden and public and private sector investments. Price controls and export restrictions (quotas and taxes) have led to market distortions, protests over government policies, and declining consumer confidence. Argentina's exports declined by 21% year-over-year in the first six months of 2009. In response to falling demand for Argentine exports and the government's questionable financial policies and position, Argentina's currency has depreciated by 20% from September 2008, in spite of exchange rate intervention. In recognition that industrial production and exports fell rapidly and have stagnated until very recently, Argentina has also adopted administrative trade restrictions to limit imports, some of which it has reversed rather than face disputes in the World Trade Organization. These affected Brazilian goods in particular, including textiles and various machinery exports, raising tensions between the two major trade partners of the regional customs union, Mercosur. Risk assessment was swift and punishing. Bond ratings have fallen, yields on short-term public debt exceeded 30%, and the interest rate spread on Argentina's bonds rose to over 1,700 basis points, but have since settled around 750-800 basis points, nearly four times higher than Mexico's or Brazil's spreads. The interest rate spread on credit default swaps peaked at 4,500 basis points in December 2008, indicating the high cost required to insure against bond defaults. All these indicators point to a global perception of Argentina as a high-risk country, likely reinforcing its ostracism from international capital markets. Argentina has adopted a number of policies to address the domestic effects of the global economic crisis. The first initiative is a large fiscal stimulus equal to 9% of GDP focused almost entirely on public works spending, exasperating fiscal problems in the short run. Given Argentina's large expected public spending outlays for the coming year, the high and growing cost of its debt, falling revenues from imports, and its inability to access international credit markets, it had to take dramatic action to finance these programs. It did so by nationalizing, with the approval of the Congress, the private-sector pension system, effective January 1, 2009. The pension system provided $29 billion in assets immediately and access to an estimated $4.6 billion in annual pension contributions. In addition, Argentina has conducted two bond swaps (with 15.4% yields) for guaranteed loans maturing in 2009 to 2011. Although these two moves have provided Argentina with increased fiscal capacity to meet short- and perhaps medium-term financing needs, the costs entail increased fiscal outlays in the future and heightened investor skepticism. Analysts estimate that Argentina has little room for additional fiscal expansion given its history of fiscal largesse over the past six years, which could temper a budding recovery. Russia tends to be in a category by itself. Although by some measures, it is an emerging market, it also is highly industrialized. As the case with most of the world's economies, the Russian economy has been hit hard by the global economic crisis. However, unlike the emerging economies of East Asia and some major developed economies, Russia's recovery from the crisis is proceeding slowly, reflecting fundamental structural problems, including a high dependence on production of oil and other commodities and a very weak banking system. The long-term challenge for Russian policymakers will be to address these problems once the immediate effects the global crisis have receded. For about a decade (1999-2008) Russia experienced impressive growth rates and economic stability that allowed it to emerge from the chaos of the immediate post-Soviet period (1992-1998) and to improve the standard of living of most Russian citizens. The growth was due in part to a rapid decline in the value of the ruble in the late 1990s that stimulated demand for and production of domestic goods and services as substitutes for imports. However, for most of the period, economic growth was rooted in the surge in world oil prices and resulting export revenues. The economic growth came to an abrupt end with the global financial crisis and recession, which led to a decline in demand for energy and thus in world oil prices. Russia has also been adversely affected by the world-wide credit crunch. Because low interest credit was not available domestically, many Russian firms and banks depended on foreign loans to finance investments. As credit tightened, foreign loans became harder to obtain. The economic downturn has been showing up in Russia's performance indicators. Although Russia's real GDP increased 5.6% in 2008, it increased more slowly than it did in 2007 (8.1%) and grew only 1.2% in the fourth quarter of 2008. Russia's GDP declined 9.8% during the first quarter of 2009 and 10.9% during the second quarter. Declining revenues have forced the government to tighten fiscal policy but still incur budget deficits for the first time since 1999, a projected deficit of 8.0% of GDP by the end of 2009. And for the first time since 1998, the government will likely have to obtain budget financing through the international debt market but the size of the bond issue will depend on world oil prices which have begun to rise. The Russian government has responded to the crisis with various measures to prop up the stock market and the banks and to stimulate domestic demand. In mid-September 2008, the government made available $44 billion in funds to Russia's three largest state-owned banks to boost lending and another $16 billion to the next 25 largest banks. It also lowered taxes on oil exports to reduce costs to oil companies and made available $20 billion for the government to purchase stocks on the stock market. In late September 2008, the government announced that an additional $50 billion would be available to banks and Russian companies to pay off foreign debts coming due by the end of the year. On October 7, 2008, the government announced another package of $36.4 billion in credits to banks. In 2009, the government changed strategies by focusing on macroeconomic measures rather than measures to assist specific industries or firms. For example, the government reduced the corporate tax rate from 24% to 20% and the tax rate on small companies to try to stimulate investment. The government expects to rein in expenditures. While, on the one hand, cutting expenditures might be considered fiscally responsible, on the other hand, it could retard government investment in necessary items such as modernizing the infrastructure and in pensions and other social income transfers, contributing to a drag on the rest of the economy. The IMF projects that Russia's real GDP will decline over 7.5% in 2009. INS Global Insight, and the Economist Intelligence Unit (EIU), both private economic forecasting firms, project Russia's GDP to decline in 2009 by 7.5%-8.0% and 7.4%, respectively. These forecasts are supported by data showing a continuing decline in both domestic and external demand (exports), among other things, although the rates of decline have slowed possibly indicating bottoming out, if not a full-fledged economic recovery. INS Global Insight, Inc. and the EIU each forecast modest recoveries in 2010 of 1.5% and 2.5%, respectively. Russia remains highly dependent on oil and natural gas exports as a source of income. If world oil prices continue to be depressed or increase only modestly, the Russian economy would likely experience slow growth, if any. Many economists have argued that, in the long run, for Russia to achieve sustainable growth, it must reduce its dependence on exports of oil, natural gas, and other commodities and diversify into more stable production. In September 2009, President Medvedev published an article –"Russia, Forward"—in which he criticized Russia's failures to diversify and modernize its economy and pledged to change Russian economic policy in order to remedy the situation. He reiterated these views in his address to the state on November 12, 2009. It is not clear if Prime Minister Putin, Medvedev's successor and presumptive holder of power in Russia, shares these views. Some European countries initially viewed the financial crisis as a purely American phenomenon. That view changed as economic activity Europe declined at a fast pace over a short period of time. Making matters worse, global trade declined sharply, eroding prospects for European exports providing a safety valve for domestic industries that are cutting output. In addition, public protests, sparked by rising rates of unemployment and concerns over the growing financial and economic turmoil, have increased the political stakes for European governments and their leaders. The global economic crisis is straining the ties that bind together the members of the European Union and has presented a significant challenge to the ideals of solidarity and common interests. In addition, the longer the economic downturn persists, the greater the prospects are that international pressure will mount against those governments that are perceived as not carrying their share of the responsibility for stimulating their economies to an extent that is commensurate with the size of their economy. Since the start of the financial crisis, the European Union has taken a number of steps to improve supervision of financial markets. These actions include: Strengthened the Committee of European Securities Regulators. The Committee is an advisory body without any regulatory authority within the European Commission. The January 23, 2009 Directive strengthened the Committee's authority to mediate and coordinate securities regulations between EU members. Strengthened the Committee of European Banking Supervisors. The Committee is an advisory body without any regulatory authority that coordinates on banking supervision. The January 23, 2009 EU Directive broadened the role of the Committee to include supervision of financial conglomerates. Strengthened the Committee of European Insurance and Occupational Pensions Supervisors. The Committee is an advisory body without any regulatory authority within the European Commission in the areas of insurance, reinsurance, and occupational pensions fields. The January 23, 2009 Directive authorizes the Committee to coordinate policies among EU members and between the EU and other national governments and bodies. The European Parliament and the European Council approved on April 23, 2009, new regulations on credit rating agencies that are expected to improve the quality and transparency of the ratings agencies. Approved direct funding by the European Union to the International Accounting Standards Committee Foundation, the European Financial Reporting Advisory Group, and the Public Interest Oversight Body. The European Commission proposed a set of measures to register hedge fund managers and managers of alternative investment funds and measures to regulate executive compensation. Expressed support for a new European Systemic Risk Council and a European System of Financial Supervisors. European countries have been concerned over the impact the financial crisis and the economic recession are having on the economies of East Europe and prospects for political instability as well as future prospects for market reforms. Worsening economic conditions in East European countries are compounding the current problems facing financial institutions in the EU. Although mutual necessity may eventually dictate a more unified position among EU members and increased efforts to aid East European economies, some observers are concerned these actions may come too late to forestall another blow to the European economies and to the United States. Governments elsewhere in Europe, such as Iceland and Latvia, have collapsed as a result of public protests over the way their governments have handled their economies during the crisis. The crisis has underscored the growing interdependence between financial markets and between the U.S. and European economies. As such, the synchronized nature of the current economic downturn probably means that neither the United States nor Europe is likely to emerge from the financial crisis or the economic downturn alone. The United States and Europe share a mutual interest in developing a sound financial architecture to improve supervision and regulation of individual institutions and of international markets. This issue includes developing the organization and structures within national economies that can provide oversight of the different segments of the highly complex financial system. This oversight is viewed by many as critical to the future of the financial system because financial markets generally are considered to play an indispensible role in allocating capital and facilitating economic activity. Within Europe, national governments and private firms have taken noticeably varied responses to the crisis, reflecting the unequal effects by country. While some have preferred to address the crisis on a case-by-case basis, others have looked for a systemic approach that could alter the drive within Europe toward greater economic integration. Great Britain proposed a plan to rescue distressed banks by acquiring preferred stock temporarily. Iceland, on the other hand, had to take over three of its largest banks in an effort to save its financial sector and its economy from collapse. The Icelandic experience has raised important questions about how a nation can protect its depositors from financial crisis elsewhere and about the level of financial sector debt that is manageable without risking system-wide failure. According to reports by the International Monetary Fund (IMF) and the European Central Bank (ECB), many of the factors that led to the financial crisis in the United States created a similar crisis in Europe. Essentially low interest rates and an expansion of financial and investment opportunities that arose from aggressive credit expansion, growing complexity in mortgage securitization, and loosening in underwriting standards combined with expanded linkages among national financial centers to spur a broad expansion in credit and economic growth. This rapid rate of growth pushed up the values of equities, commodities, and real estate. Over time, the combination of higher commodity prices and rising housing costs pinched consumers' budgets, and they began reducing their expenditures. One consequence of this drop in consumer spending was a slowdown in economic activity and, eventually, a contraction in the prices of housing. In turn, the decline in the prices of housing led to a large-scale downgrade in the ratings of subprime mortgage-backed securities and the closing of a number of hedge funds with subprime exposure. Concerns over the pricing of risk in the market for subprime mortgage-backed securities spread to other financial markets, including to structured securities more generally and the interbank money market. Problems spread quickly throughout the financial sector to include financial guarantors as the markets turned increasingly dysfunctional over fears of under-valued assets. As creditworthiness problems in the United States began surfacing in the subprime mortgage market in July 2007, the risk perception in European credit markets followed. The financial turmoil quickly spread to Europe, although European mortgages initially remained unaffected by the collapse in mortgage prices in the United States. Another factor in the spread of the financial turmoil to Europe has been the linkages that have been formed between national credit markets and the role played by international investors who react to economic or financial shocks by rebalancing their portfolios in assets and markets that otherwise would seem to be unrelated. The rise in uncertainty and the drop in confidence that arose from this rebalancing action undermined the confidence in major European banks and disrupted the interbank market, with money center banks becoming unable to finance large securities portfolios in wholesale markets. The increased international linkages between financial institutions and the spread of complex financial instruments has meant that financial institutions in Europe and elsewhere have come to rely more on short-term liquidity lines, such as the interbank lending facility, for their day-to-day operations. This has made them especially vulnerable to any drawback in the interbank market. Estimates developed by the International Monetary Fund in January 2009 provide a rough indicator of the impact the financial crisis and an economic recession are having on the performance of major advanced countries. Economic growth in Europe is expected to slow by nearly 2% in 2009 to post a 0.2% drop in the rate of economic growth, while the threat of inflation is expected to lessen. Economic growth, as represented by gross domestic product (GDP), is expected to register a negative 1.6% rate for the United States in 2009, while the euro area countries could experience a combined negative rate of 2.0%, down from a projected rate of growth of 1.2% in 2008. The drop in the prices of oil and other commodities from the highs reached in summer 2008 may have helped improve the rate of economic growth, but the length and depth of the economic downturn has challenged the ability of the IMF projections to accurately estimate projected rates of economic growth. In mid-February, the European Union announced that the rate of economic growth in the EU in the fourth quarter of 2008 had slowed to an annual rate of negative 6%. By mid-summer 2009, the pace of economic growth had picked up in both France and Germany. Central banks in the United States, the Euro zone, the United Kingdom, Canada, Sweden, and Switzerland staged a coordinated cut in interest rates on October 8, 2008, and announced they had agreed on a plan of action to address the ever-widening financial crisis. The actions, however, did little to stem the wide-spread concerns that were driving financial markets. Many Europeans were surprised at the speed with which the financial crisis spread across national borders and the extent to which it threatened to weaken economic growth in Europe. This crisis did not just involve U.S. institutions. It has demonstrated the global economic and financial linkages that tie national economies together in a way that may not have been imagined even a decade ago. At the time, much of the substance of the European plan was provided by the British Prime Minister [author name scrubbed], who announced a plan to provide guarantees and capital to shore up banks. Eventually, the basic approach devised by the British arguably would influence actions taken by other governments, including that of the United States. On October 10, 2008, the G-7 finance ministers and central bankers, met in Washington, DC, to provide a more coordinated approach to the crisis. At the Euro area summit on October 12, 2008, Euro area countries along with the United Kingdom urged all European governments to adopt a common set of principles to address the financial crisis. The measures the nations supported are largely in line with those adopted by the U.K. and include: Recapitalization: governments promised to provide funds to banks that might be struggling to raise capital and pledged to pursue wide-ranging restructuring of the leadership of those banks that are turning to the government for capital. State ownership: governments indicated that they will buy shares in the banks that are seeking recapitalization. Government debt guarantees: guarantees offered for any new debts, including inter-bank loans, issued by the banks in the Euro zone area. Improved regulations: the governments agreed to encourage regulations to permit assets to be valued on their risk of default instead of their current market price. In addition to these measures, EU leaders agreed on October 16, 2008, to set up a crisis unit and they agreed to a monthly meeting to improve financial oversight. Jose Manuel Barroso, President of the European Commission, urged EU members to develop a "fully integrated solution" to address the global financial crisis, consistent with France's support for a strong international organization to oversee the financial markets. The EU members expressed their support for the current approach within the EU, which makes each EU member responsible for developing and implementing its own national regulations regarding supervision over financial institutions. The European Council stressed the need to strengthen the supervision of the European financial sector. As a result, the EU statement urged the EU members to develop a "coordinated supervision system at the European level." This approach likely will be tested as a result of failed talks with the credit derivatives industry in Europe. In early January 2009, an EU-sponsored working group reported that it had failed to get a commitment from the credit derivatives industry to use a central clearing house for credit default swaps. As an alternative, the European Commission reportedly is considering adopting a set of rules for EU members that would require banks and other users of the CDS markets to use a central clearing house within the EU as a way of reducing risk. On October 29, 2008, the European Commission released a "European Framework for Action" as a way to coordinate the actions of the 27 member states of the European Union to address the financial crisis. The EU also announced that on November 16, 2008, the Commission will propose a more detailed plan that will bring together short-term goals to address the current economic downturn with the longer-term goals on growth and jobs in the Lisbon Strategy. The short-term plan revolves around a three-part approach to an overall EU recovery action plan/framework. The three parts to the EU framework are: A new financial market architecture at the EU level . The basis of this architecture involves implementing measures that member states have announced as well as providing for (1) continued support for the financial system from the European Central Bank and other central banks; (2) rapid and consistent implementation of the bank rescue plan that has been established by the member states; and (3) decisive measures that are designed to contain the crisis from spreading to all of the member states. Dealing with the impact on the real economy . The policy instruments member states can use to address the expected rise in unemployment and decline in economic growth as a second-round effect of the financial crisis are in the hands of the individual member states. The EU can assist by adding short-term actions to its structural reform agenda, while investing in the future through: (1) increasing investment in R&D innovation and education; (2) promoting flexicurity to protect and equip people rather than specific jobs; (3) freeing up businesses to build markets at home and internationally; and (4) enhancing competitiveness by promoting green technology, overcoming energy security constraints, and achieving environmental goals. In addition, the Commission will explore a wide range of ways in which EU members can increase their rate of economic growth. A global response to the financial crisis . The financial crisis has demonstrated the growing interaction between the financial sector and the goods-and services-producing sectors of economies. As a result, the crisis has raised questions concerning global governance not only relative to the financial sector, but the need to maintain open trade markets. The EU would like to use the November 15, 2008 multi-nation G-20 economic summit in Washington, DC, to promote a series of measures to reform the global financial architecture. The Commission argues that the measures should include (1) strengthening international regulatory standards; (2) strengthen international coordination among financial supervisors; (3) strengthening measures to monitor and coordinate macroeconomic policies; and (4) developing the capacity to address financial crises at the national regional and multilateral levels. Also, a financial architecture plan should include three key principles: (1) efficiency; (2) transparency and accountability; and (3) the inclusion of representation of key emerging economies. European leaders, meeting prior to the November 15, 2008 G-20 economic summit in Washington, DC, agreed that the task of preventing future financial crisis should fall to the International Monetary Fund, but they could not agree on precisely what that role should be. The leaders set a 100-day deadline to draw up reforms for the international financial system. British Prime Minister [author name scrubbed] reportedly urged other European leaders to back fiscal stimulus measure to support the November 6, 2008 interest rate cuts by the European Central Bank, the Bank of England, and other central banks. Reportedly, French Prime Minister Nicolas Sarkozy argued that the role of the IMF and the World Bank needed to be rethought. French and German officials have argued that the IMF should assume a larger role in financial market regulation, acting as a global supervisor of regulators. Prime Minister Sarkozy also argued that the IMF should "assess" the work of such international bodies as the Bank of International Settlements. Other G-20 leaders, however, reportedly have disagreed with this proposal, agreeing instead to make the IMF "the pivot of a renewed international system," working alongside other bodies. Other Ministers also were apparently not enthusiastic toward a French proposal that Europe should agree to a more formalized coordination of economic policy. In an effort to confront worsening economic conditions, German Chancellor Angela Merkel proposed a package of stimulus measures, including spending for large-scale infrastructure projects, ranging from schools to communications. The stimulus package represents the second multi-billion euro fiscal stimulus package Germany has adopted in less than three months. The plan, announced on January13, 2009, reportedly was doubled from initial estimates to reach more than 60 billion Euros (approximately $80 billion) over two years. The plan reportedly includes a pledge by Germany's largest companies to avoid mass job cuts in return for an increase in government subsidies for employees placed temporarily on short work weeks or on lower wages. Other reports indicate that Germany is considering an emergency fund of up to 100 billion Euros in state-backed loans or guarantees to aid companies having problems getting credit. Overall, Germany's response to the economic downturn changed markedly between December 2008 and January 2009 as economic conditions continued to worsen. In a December 2008 article, German Finance Minister Peer Steinbruck defended Germany's approach at the time. According to Steinbruck, Germany disagreed with the EU plan to provide a broad economic stimulus plan, because it favored an approach that is more closely tailored to the German economy. He argued that Germany is providing a counter-cyclical stimulus program even though it is contrary to its long-term goal of reducing its government budget deficit. Important to this program, however, are such "automatic stabilizers" as unemployment benefits that automatically increase without government action since such benefits play a larger role in the German economy than in other economies. Steinbruck argued that, "our experience since the 1970s has shown that ... stimulus programs fail to achieve the desired effect.... It is more likely that such large-scale stimulus programs—and tax cuts as well—would not have any effects in real time. It is unclear whether general tax cuts can significantly encourage consumption during a recession, when many consumers are worried about losing their jobs. The history of the savings rate in Germany points to the opposite." France, which has been leading efforts to develop a coordinated European response to the financial crisis, has proposed a package of measures estimated to cost over $500 billion. The French government is creating two state agencies that will provide funds to sectors where they are needed. One entity will issue up to $480 billion in guarantees on inter-bank lending issued before December 31, 2009, and would be valid for five years. The other entity will use a $60 billion fund to recapitalize struggling companies by allowing the government to buy stakes in the firms. On January 16, 2009, President Sarkozy announced that the French government would take a tougher stance toward French banks that seek state aid. Up to that point, France had injected $15 billion in the French banking system. In order to get additional aid, banks would be required to suspend dividend payments to shareholders and bonuses to top management and to increase credit lines to such clients as exporters. France reportedly was preparing to inject more money into the banking system. On December 4, 2008, President Sarkozy announced a $33 billion (26 billion euros) package of stimulus measures to accelerate planned public investments. The package is focused primarily on infrastructure projects and investments by state-controlled firms, including a canal north of Paris, renovation of university buildings, new metro cars, and construction of 70,000 new homes, in addition to 30,000 unfinished homes the government has committed to buy in 2009. The plan also includes a 200 Euro payment to low-income households. On December 15, 2008, France agreed to provide the finance division of Renault and Peugeot $1.2 billion in credit guarantees and an additional $250 million to support the car manufacturers' consumer finance division. In an interview on French TV on January 14, 2009, French Prime Minister Francois Fillon indicated that the French government is considering an increase in aid to the French auto industry, including Renault and Peugeot. The auto industry and its suppliers reportedly employ about 10% of France's labor force. When the European Union released its "Framework for Action" in response to the immediate needs of the financial crisis, it was moving to address the long-term requirements of the financial system. As a key component of this approach, the EU commissioned a group within the EU to assess the weaknesses of the existing EU financial architecture. It also charged this group with developing proposals that could guide the EU in fashioning a system that would provide early warning of areas of financial weakness and chart a way forward in erecting a stronger financial system. As part of this way forward, the European Union issued two reports in the first quarter of 2009 that address the issue of supervision of financial markets. The first report, issued on February 25, 2009 and commissioned by the European Union, was prepared by a High-Level Group on financial supervision headed by former IMF Managing Director and ex-Bank of France Governor Jacques de Larosiere and, therefore, is known as the de Larosiere Report. The second report was published by the European Commission to chart the course ahead for the members of the EU to reform the international financial governance system. The de Larosiere Report focuses on four main issues: (1) causes of the financial crisis; (2) organizing the supervision of financial institutions and markets in the EU; (3) strengthening European cooperation on financial stability, oversight, early warning, and crisis mechanisms; and (4) organizing EU supervisors to cooperate globally. The Report also proposes 31 recommendations on regulation and supervision of financial markets. As the financial crisis unfolded, the de Larosiere Report concludes, the regulatory response by the European Union and its members was weakened by, "an inadequate crisis management infrastructure in the EU." Furthermore, the Report emphasizes that an inconsistent set of rules across the EU as a result of the closely guarded sovereignty of national financial regulators led to a wide diversity of national regulations reflecting local traditions, legislation, and practices. While micro-prudential supervision focused on limiting the distress of individual financial institutions in order to protect the depositors, it neglected the broader objective of macro-prudential supervision, which is aimed at limiting distress to the financial system as a whole in order to protect the economy from significant losses in real output. In order to remedy this obstacle, the Report offers a two-level approach to reforming financial market supervision in the EU. This new approach would center around new oversight of broad, system-wide risks and a higher-level of coordination among national supervisors involved in day-to-day oversight. The de Larosiere Report recommends that the EU create a new macro-prudential level of supervision called the European Systemic Risk Council (ESRC) chaired by the President of the European Central Bank. A driving force behind creating the ESRC is that it would bring together the central banks of all of the EU members with a clear mandate to preserve financial stability by collectively forming judgments and making recommendations on macro-prudential policy. The ESRC would also gather information on all macro-prudential risks in the EU, decide on macro-prudential policy, provide early risk warning to EU supervisors, compare observations on macroeconomic and prudential developments, and give direction on the aforementioned issues. Next, the Report recommends that the EU create a new European System of Financial Supervision (ESFS) to transform a group of EU committees known as L3 Committees into EU Authorities. The three L3 Committees are: the Committee of European Securities Regulators (CESR); the Committee of European Banking Supervisors (CEBS); and the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS). The ESFS would maintain the decentralized structure that characterizes the current system of national supervisors, while the ESFS would coordinate the actions of the national authorities to maintain common high level supervisory standards, guarantee strong cooperation with other supervisors, and guarantee that the interests of the host supervisors are safeguarded. The main tasks of the ESFS authorities would be to: provide legally binding mediation between national supervisors; adopt binding supervisory standards; adopt binding technical decisions that apply to individual institutions; provide oversight and coordination of colleges of supervisors; license and supervise specific EU-wide institutions; provide binding cooperation with the ESRC to ensure that there is adequate macro-prudential supervision; and assume a strong coordinating role in crisis situations. The main mission of the national supervisors would be to oversee the day-to-day operation of firms. "Driving European Recovery," issued by the European Commission, presents a slightly different approach to financial supervision and recovery than that proposed by the de Larosiere group, although it accepts many of the recommendations offered by the group. The recommendations in the report were intended to complement the economic stimulus measures that were adopted by the EU on November 27, 2008, under the $256 billion Economic Recovery Plan that funds cross-border projects, including investments in clean energy and upgraded telecommunications infrastructure. The plan is meant to ensure that, "all relevant actors and all types of financial investments are subject to appropriate regulation and oversight." In particular, the EC plan notes that nation-based financial supervisory models are lagging behind the market reality of a large number of financial institutions that operate across national borders. The European Commission praised the de Larosiere report for contributing "to a growing consensus about where changes are needed." Of particular interest to the EC were the recommendations to develop a harmonized core set of standards that can be applied throughout the EU. The EC also supported the concept of a new European body similar to the proposed European Systemic Risk Council to gather and assess information on all risks to the financial sector as a whole, and it supported the concept of reforming the current system of EU Committees that oversee the financial sector. The EU plan, however, would accelerate the plan proposed by the de Larosiere group by combining the two phases outlined in the report. Using the de Larosiere report as a basis, the EC is attempting to establish a new European financial supervision system. These efforts to reform the EC's financial supervision system would be based on five key objectives: First, provide the EU with a supervisory framework that detects potential risks early, deals with them effectively before they have an impact, and meets the challenge of complex international financial markets. At the end of May 2009 the EC presented a European financial supervision package to the European Council for its consideration. The package included two elements: measures to establish a European supervision body to oversee the macro-prudential stability of the financial system as a whole; and proposals on the architecture of a European financial supervision system to undertake micro-prudential supervision. Second, the EC will move to reform those areas where European or national regulation is insufficient or incomplete by proposing: a comprehensive legislative instrument that establishes regulatory and supervisory standards for hedge funds, private equity and other systemically important market players; a White Paper on the necessary tools for early intervention to prevent a similar crisis; measures to increase transparency and ensure financial stability in the area of derivatives and other complex structured products; legislative proposals to increase the quality and quantity of prudential capital for trading book activities, complex securitization, and to address liquidity risk and excessive leverage; and a program of actions to establish a more consistent set of supervisory rules. Third, to ensure European investors, consumers, and small and medium-size enterprises can be confident about their savings, their access to credit and their rights, the EC will: advance a Communication on retail investment products to strengthen the effectiveness of marketing safeguards; provide additional measures to reinforce the protection of bank depositors, investors, and insurance policy holders; and provide measures on responsible lending and borrowing. Fourth, in order to improve risk management in financial firms and align pay incentives with sustainable performance, the EC intends to strengthen the 2004 Recommendation on the remuneration of directors; and bring forward a new Recommendation on remuneration in the financial services sector followed by legislative proposals to include remuneration schemes within the scope of prudential oversight. Fifth, to ensure more effective sanctions against market wrongdoing, the EC intends to: review the Market Abuse Directive and make proposals on how sanctions could be strengthened in a harmonized manner and better enforced. On October 8, 2008, the British Government announced a $850 billion multi-part plan to rescue its banking sector from the current financial crisis. Details of this plan are presented here to illustrate the varied nature of the plan. The Stability and Reconstruction Plan followed a day when British banks lost £17 billion on the London Stock Exchange. The biggest loser was the Royal Bank of Scotland, whose shares fell 39%, or £10 billion, of its value. In the downturn, other British banks lost substantial amounts of their value, including the Halifax Bank of Scotland which was in the process of being acquired by Lloyds TSB. The British plan included four parts: A coordinated cut in key interest rates of 50 basis, or one-half of one percent (0.5) between the Bank of England, the Federal Reserve, and the European Central Bank. An announcement of an investment facility of $87 billion implemented in two stages to acquire the Tier 1 capital, or preferred stock, in "eligible" banks and building societies (financial institutions that specialize on mortgage financing) in order to recapitalize the firms. To qualify for the recapitalization plan, an institution must be incorporated in the UK (including UK subsidiaries of foreign institutions, which have a substantial business in the UK and building societies). Tier 1 capital often is used as measure of the asset strength of a financial institution. The British Government agreed to make available to those institutions participating in the recapitalization scheme up to $436 billion in guarantees on new short- and medium-term debt to assist in refinancing maturing funding obligations as they fall due for terms up to three years. The British Government announced that it would make available $352 billion through the Special Liquidity Scheme to improve liquidity in the banking industry. The Special Liquidity Scheme was launched by the Bank of England on April 21, 2008 to allow banks to temporarily swap their high-quality mortgage-backed and other securities for UK Treasury bills. On November 24, 2008, Britain's majority Labor party presented a plan to Parliament to stimulate the nation's slowing economy by providing a range of tax cuts and government spending projects totaling 20 billion pounds (about $30 billion). The stimulus package includes a 2.5% cut in the value added tax (VAT), or sales tax, for 13 months, a postponement of corporate tax increases, and government guarantees for loans to small and midsize businesses. The plan also includes government plans to spend 4.5 billion pounds on public works, such as public housing and energy efficiency. Some estimates indicate that the additional spending required by the plan will push Britain's government budget deficit in 2009 to an amount equivalent to 8% of GDP. To pay for the plan, the government would increase income taxes on those making more than 150,000 pounds (about $225,000) from 40% to 45% starting in April 2011. In addition, the British plan would increase the National Insurance contributions for all but the lowest income workers. On January 14, 2009, British Business Secretary Lord Mandelson unveiled an additional package of measures by the Labor government to provide credit to small and medium businesses that have been hard pressed for credit as foreign financial firms have reduced their level of activity in the UK. The three measures are: (1) a 10 billion pound (approximately $14 billion) Capital Working Scheme to provide banks with guarantees to cover 50% of the risk on existing and new working capital loans on condition that the banks must use money freed up by the guarantee to make new loans; (2) a one billion pound Enterprise Finance Guarantee Scheme to assist small, credit-worthy companies by providing guarantees to banks of up to 75% of loans to small businesses; and (3) a 75 million pound Capital for Enterprise Fund to convert debt to equity for small businesses. In an effort to address the prospect that large banks or financial firms may become insolvent or fail and thereby cause a major disruption to the financial system, the British Parliament in February 2009 passed the Banking Act of 2009. The act makes permanent a set of procedures the U.K. government had developed to deal with troubled banks before they become insolvent or collapse. Such procedures are being considered by other EU governments and others as they amend their respective supervisory frameworks. The failure of Iceland's banks has raised some questions about bank supervision and crisis management for governments in Europe and the United States. As Icelandic banks began to default, Britain used an anti-terrorism law to seize the deposits of the banks to prevent the banks from shifting funds from Britain to Iceland. This incident raised questions about how national governments should address the issue of supervising foreign financial firms that are operating within their borders and whether they can prevent foreign-owned firms from withdrawing deposits in one market to offset losses in another. In addition, the case of Iceland raises questions about the cost and benefits of branch banking across national borders where banks can grow to be so large that disruptions in the financial market can cause defaults that outstrip the resources of national central banks to address. On November 19, 2008, Iceland and the International Monetary Fund (IMF) finalized an agreement on an economic stabilization program supported by a $2.1 billion two-year standby arrangement from the IMF. Upon approval of the IMF's Executive board, the IMF released $827 million immediately to Iceland with the remainder to be paid in eight equal installments, subject to quarterly reviews. As part of the agreement, Iceland has proposed a plan to restore confidence in its banking system, to stabilize the exchange rate, and to improve the nation's fiscal position. Also as part of the plan, Iceland's central bank raised its key interest rate by six percentage points to 18% on October 29, 2008, to attract foreign investors and to shore up its sagging currency. The IMF's Executive Board had postponed its decision on a loan to Iceland three times, reportedly to give IMF officials more time to confirm loans made by other nations. Other observers argued, however, that the delay reflected objections by British, Dutch, and German officials over the disposition of deposit accounts operated by Icelandic banks in their countries. Iceland reportedly smoothed the way by agreeing in principle to cover the deposits, although the details had not be finalized. In a joint statement, Germany, Britain, and the Netherlands said on November 20, 2008, that they would "work constructively in the continuing discussions" to reach an agreement. Following the decision of IMF's Executive Board, Denmark, Finland, Norway, and Sweden agreed to provide an additional $2.5 billion in loans to Iceland. Between October 7 and 9, 2008, Iceland's Financial Supervisory Authority (FSA), an independent state authority with responsibilities to regulate and supervise Iceland's credit, insurance, securities, and pension markets took control, without actually nationalizing them, of three of Iceland's largest banks: Landsbanki, Glitnir Banki, and Kaupthing Bank prior to a scheduled vote by shareholders to accept a government plan to purchase the shares of the banks in order to head off the collapse of the banks. At the same time, Iceland suspended trading on its stock exchange for two days. In part, the takeover also attempted to quell a sharp depreciation in the exchange value of the Icelandic krona. The demise of Iceland's three largest banks is attributed to an array of events, but primarily stems from decisions by the banks themselves. Some observers argued that the collapse of Lehman Brothers set in motion the events that finally led to the collapse of the banks, but this conclusion is controversial. Some have argued that at the heart of Iceland's banking crisis is a flawed banking model that is based on an internationally active banking sector that is large relative to the size of the home country's GDP and to the fiscal capacity of the central bank. As a result, a disruption in liquidity threatens the viability of the banks and overwhelms the ability of the central bank to act as the lender of last resort, which undermines the solvency of the banking system. On October 15, 2008, the Central Bank of Iceland set up a temporary system of daily currency auctions to facilitate international trade. Attempts by Iceland's central bank to support the value of the krona are at the heart of Iceland's problems. Without a viable currency, there was no way to support the banks, which have done the bulk of their business in foreign markets. The financial crisis has also created problems with Great Britain because hundreds of thousands of Britons hold accounts in online branches of the Icelandic banks, and they fear those accounts will default. The government of British Prime minister [author name scrubbed] has used powers granted under anti-terrorism laws to freeze British assets of Landsbanki until the situation is resolved. Many Asian economies have been through wrenching financial crises in the past 10-15 years. Although most observers say the region's economic fundamentals have improved greatly in the past decade, this crisis has provided a worrying sense of deja vu , and an illustration that Asian policy changes in recent years—including Japan's slow but comprehensive banking reforms, Korea's opening of its financial markets, China's dramatic economic transformation, and the enormous buildup of sovereign reserves across the region—have not fully insulated Asian economies from global contagion. However, in the second quarter of 2009, there were signs that many Asian economies were rebounding sharply from the slowdowns and contractions they suffered in the previous months. Many observers have attributed this recovery to the rapid implementation of large fiscal and monetary stimulus programs that were possible because of the comparatively strong fiscal positions that most Asian governments were in, and the fact that many Asian banking systems are considered healthy. Still, Asian governments remain deeply concerned about the state of their economies, and those in countries whose economies depend heavily on exports worry about the sustainability of their recoveries if the United States and other developed economies recover more slowly. This has been reflected in bilateral relations between the United States and some, including China, whose officials are seen as increasingly assertive in their discussions with U.S. economic officials on policies the United States should follow to emerge from the recession. In the early months of the crisis, Asian nations did not have to deal with outright bankruptcies or rescues of major financial institutions, as Western governments did. With only a few exceptions—most notably in South Korea—leverage within Asian financial systems was comparatively low and bank balance sheets were comparatively healthy at the outset of the crisis. Nearly all East Asian nations run current account surpluses, a reversal from their state during the Asian financial crisis of the late 1990s. These surpluses have been one reason for the buildup of enormous government reserves in the region, including China's $2.1 trillion and Japan's $996 billion—the two largest reserve stockpiles in the world. Such reserves have given Asian governments resources to provide fiscal stimulus, inject capital into their financial systems, and provide backstop guarantees for private financial transactions where needed. So overall, Asian economies were much healthier at the outset of the current crisis than they were before the Asian Financial Crisis of 1997-1998, when several Asian countries burned through their limited reserves quickly trying to defend currencies from speculative selling. The initial stage of the crisis, which centered around losses directly from subprime assets in the United States, gave way to a broader global crisis marked by slowing economies and dried-up liquidity. Asia and the United States are deeply linked in many ways, including trade (primarily Asian exports to the United States), U.S. investments in the region, and financial linkages that entwine Asian banks, companies and governments with U.S. markets and financial institutions. As a result, even though Asian banks disclosed relatively low direct exposures to failed institutions and toxic assets in the United States and Europe, Asian economies were caught in a second phase of the crisis. With Western economies slowing and global investors short of cash and pulling back from any markets deemed risky, many Asian economies suffered sharp slowdowns or dipped into recession in the fourth quarter of 2008 or the first quarter of 2009. However, several Asian countries—including China, Japan, South Korea, Thailand, Malaysia, Taiwan and Singapore—implemented large fiscal stimulus programs that have shown signs of stimulating domestic investment and consumption. Japan announced several stimulus packages that amounted to 5% of the nation's GDP, while China implemented a package worth 12% of GDP. China also mandated an easing of lending by its state banks, opening up credit lines that had been frozen in the crisis's early stages. By early August, China, Indonesia, South Korea and Singapore had each reported second quarter GDP growth of at least 2.5% over the previous quarter. China's rebound has been particularly striking. The country's industrial production in the January-July period was up 11% from the same period a year earlier. Stock markets around the region are up, most by amounts larger than in the United States. Between January and July, markets in China, Hong Kong, Taiwan, South Korea, Singapore, and Indonesia were each up by more than 40%. Still, in Asia, a belief that held sway in recent years that Asian economies were starting to "decouple" from the United States and Europe, generating growth that didn't depend on the rest of the world, has given way to a realization that a crisis that originated in the West can sweep up the region as well. Most Asian economies are showing signs of recovery, some of it based on purely domestic conditions or trade within the region, but Asian officials continue to stress that the strength of their economies is highly dependent on recoveries in the United States and Western Europe. One worrying development is that Pakistan, already coping with severe political instability, has been forced to seek emergency loans from the IMF because of dwindling government reserves. This points to the limits of bilateral solutions to the crisis: For much of October and early November, Pakistan reportedly sought support from China, Saudi Arabia and other Middle Eastern states before being forced to the IMF. On November 13, well into discussions with the IMF, Pakistan officials announced they had received a $500 million aid package from Beijing, far short of the $10 billion-$15 billion that Pakistani leaders say they need over the next two years. Then on November 15, Pakistani and IMF officials confirmed that Pakistan would receive $7.6 billion in emergency loans, including $4 billion immediately to avoid sovereign default. But this remains short of what Pakistan says it needs. Some analysts argue that substantial Asian reserves could be one source of relief for the global economy. Japan has contributed funding for the IMF support package of Iceland, and on November 14, 2008, Prime Minister Taro Aso said Japan would lend the IMF $100 billion to support further packages that might be needed before the IMF increases its capital in 2009. Many wonder if China and other reserve-rich developing nations will find ways to use those reserves to support financially-strapped governments. As noted previously, Pakistan reportedly approached China and several Gulf states for such support. One key question is whether Asian countries will seek to play a larger role in setting multilateral moves to shore up regulation, and international support for troubled countries. Five Asian countries—Japan, China, South Korea, India and Indonesia, were present at the G-20 summit. But Asian approaches to multilateral regulation are still unclear. At an October 25-26 meeting of the Asia Europe Forum (ASEM), Chinese Premier Wen Jiabao said China generally agrees with many European governments which seek an expansion of multilateral regulations. "We need financial innovation, but we need financial oversight even more," Wen reportedly told a press conference. In late January, speaking at an annual gathering of economic and political leaders in Davos, Switzerland, Wen blamed the crisis on an "excessive expansion of financial institutions in blind pursuit of profit," a failure of government supervision in the financial sector, and an "unsustainable model of development, characterized by prolonged low savings and high consumption." Many analysts saw this as a criticism of the United States, which has much lower savings and higher consumption rates than China. Previous Asian attempts to play a leadership role have been unsuccessful. In 1998, in the midst of the Asian Financial Crisis, Japan and the Asian Development Bank proposed the creation of an "Asian Monetary Fund" through which wealthier Asian governments could support economies in financial distress. The proposal was successfully opposed by the U.S. Treasury Department, which argued that it could be a way for countries to bypass the conditions that the IMF demands of its borrowers and go straight to "easier" sources of credit. Two years later, in 2000, Finance Ministers from the ASEAN+3 nations (the 10 members of the Association of Southeast Asian Nations , plus Japan, South Korea and China) announced the Chiang Mai Initiative (CMI), whose primary measure was to provide a swap mechanism that countries could tap to cover shortfalls of foreign reserves. This was a less aggressive proposal than the Asian Monetary Fund. Although a small portion of the swap lines could be tapped in an emergency, most would likely be subject to IMF conditions for recipients. On October 26, Japan, China, South Korea, and ASEAN members agreed to start an $80 billion multilateral swap arrangement in 2009, which would allow countries with substantial balance of payments problems to tap the reserves of larger economies. There remains, however, disagreement within the region about whether the IMF should play an active role in setting conditions for countries that use these swap lines. Asian leaders have sought to start other regional discussions. On October 22, a Japanese government official floated the idea of a pan-Asian financial stability forum, modeled after the Financial Stability Forum at the BIS, which was discussed in May at a meeting of Finance Ministers from Japan, South Korea and China. On December 13, the leaders of Japan, China, and South Korea held a trilateral summit in Fukuoka, Japan, agreeing on bilateral swap lines between South Korea and the two others – a new renminbi-won swap line worth the equivalent of $28 billion and an expansion of an existing yen-won swap line to the equivalent of $20 billion. Beyond this measure of support for South Korea, however, the summit did not provide broader multilateral initiatives. So far, the national-level responses among Asian governments include the following: Japan was part of the early moves among major economies to flood markets with liquidity, in the "crisis containment" part of the global response, and the Bank of Japan has continued its aggressive monetary stimulus in the months since. Alongside other major central banks, the Bank of Japan pumped tens of billions of dollars into financial markets in late September and early October. It followed these moves with an announcement on October 14 that it would offer an unlimited amount of dollars to institutions operating in Japan, to ensure that Japanese interbank credit markets continued to function. The BOJ did not lower interest rates in the crisis's early stages, but on October 31, it joined other global central banks, including the U.S. Federal Reserve, by cutting a key short-term interest rate to 0.3%, from 0.5%, and on December 19 it cut the rate to 0.1%. For a time, Japan was considered relatively insulated, because of its well capitalized banks, substantial reserves and current account surplus. Japan spent nearly $440 billion between 1998 and 2003 to assist and recapitalize its banking system, and most observers say Japan's financial system emerged from the experience fairly sound. Healthy capital positions helped Mitsubishi UFG Group, Japan's largest bank, and Nomura, the country's largest brokerage, to buy pieces of distressed U.S. investment banks as the crisis was deepening in October. Mitsubishi UFG bought 21% of Morgan Stanley for $9 billion, and Nomura purchased the Asian, European and Middle Eastern operations of Lehman Brothers. But as Western economies began to slow, Japan's financial insulation thinned. The Japanese economy is highly exposed to slowdowns in export markets, particularly in the U.S. and Europe. The U.S. accounted for 20.1% of Japan's exports in 2007. Japan has sought to provide fiscal stimulus: The government unveiled a $107 billion stimulus package in August, and on January 27, the Japanese parliament passed a second package, valued at $54 billion. The package—and, more broadly, Prime Minister Taro Aso's response to the crisis—has been the subject of severe infighting within Aso's ruling Liberal Democratic Party. Aso's government currently faces extremely low support ratings of around 20%, and he now faces an August 30 Parliamentary election in which the LDP could lose its hold on power, which it has held almost continuously since the 1950s. Despite China's large-scale holdings of U.S. securities, its exposure to the fallout from the U.S. sub-prime mortgage crisis is believed to have been relatively small. China's numerous restrictions on capital flows to and from China limit the ability of individual Chinese citizens and many firms to invest their savings overseas. Most of Chinese investment flows are controlled by government entities, such as state-owned banks, State Administration of Foreign Exchange (which administers China's foreign exchange reserves), and the China Investment Corporation (a $200 billion sovereign wealth fund created in 2007), and state-owned enterprises. Such entities have maintained relatively conservative investment strategies. The Chinese government generally does not release detailed information on the holdings of its financial entities, although some of its banks have reported on their supposed level of exposure to sub-prime U.S. mortgage securities. Such entities have generally reported that their exposure to troubled sub-prime U.S. mortgages has been minor relative to their total investments, that they have liquidated such assets or have written off losses, and that they continue to earn high profit margins. However, China's economy has not been immune to the effects of the global financial crisis, given its heavy reliance on trade and foreign direct investment (FDI) for its economic growth. Numerous sectors have been hard hit. To illustrate: The real estate market in several Chinese cities exhibited signs of a bursting bubble, including a slowdown in construction, falling prices and growing levels of unoccupied buildings. China's trade plummeted. Both exports and imports declined each month from November 2008 to October 2009 on a year-on-year basis (see Figure 11 ). The 26.4% decline in exports (year-on-year basis) in May 2009 was the biggest monthly decline ever recorded (since such data were collected). The level of FDI flows to China fell for 10 straight months from October 2008 to August 2009 on a year-on-year basis. For example, FDI flows to China dropped by nearly a third in January 2009). Numerous Chinese press reports in 2008 and early 2009 indicated sharp reductions of production and employment in China. The Chinese government in January 2009 estimated that 20 million migrant workers had lost their jobs in 2008 because of the global economic slowdown. China responded to the crisis on a number of fronts. On September 27, 2008, Chinese Premier Wen Jiabao reportedly stated in a speech that "What we can do now is to maintain the steady and fast growth of the national economy and ensure that no major fluctuations will happen. That will be our greatest contribution to the world economy under the current circumstances." On October 8, 2008, China's central bank announced plans to cut interest rates and the reserve-requirement ratio in order to help stimulate the economy. The announcement coincided with announcements by the U.S. Federal Reserve and other central banks of major economies around the world to lower their benchmark interest rates, although, neither China's central bank or the media stated that these measures were taken in conjunction with the other major central banks. On October 21, 2008, China's State Council announced it was considering implementing a new economic stimulus package, which would include an acceleration of construction projects, new export tax rebates, a reduction in the housing transaction tax, increased agriculture subsidies, and expanding lending to small and medium enterprises. On November 9, 2008 the Chinese government announced it would implement a two-year $586 billion stimulus package, mainly dedicated to infrastructure projects. The package would finance programs in 10 major areas, including affordable housing, rural infrastructure, water, electricity, transport, the environment, technological innovation and rebuilding areas hit by disasters (especially, areas that were hit by the May 12, 2998 earthquake). Table 2 provides a breakdown of China's stimulus program spending priorities. In addition, the government directed banks to loosen credit requirements, which resulted in sharp increase in bank lending. It is estimated that Chinese banks made $1.27 trillion in new loans during the first nine months of 2009. China's stimulus package and easy monetary policies appear to have produced positive results for China's economy. For example: China's real quarterly GDP on a year-on-year basis, which rose by only 6.1% in the first quarter of 2009, increased by 7.9% in the 2 nd quarter, 8.9% in the 3 rd quarter of 2009, and is projected by the IMF to grow by 10.1% in the 4 th quarter. China's monthly FDI flows on a year on year basis, showed positive growth for three straight months (August-October 2009). During the first 10 months of 2009, investment in real estate development was up 18.9% on a year-on-year basis. Although China's trade in 2009 has not rebounded to 2008 growth levels, it has shown gradual growth since around February 2009. The IMF in October 2009 projected China's real GDP would rise by 8.5% in 2009 (and by 9.0% in 2010), a level significantly higher than most of the other major world economies (see Figure 12 ). Despite these positive growth projections, some economies warn that long-term economic growth will depend largely on the ability of the government to rebalance the economy away from trade and fixed investment to domestic consumption. Many have also raised concerns that easy money policies could lead to overcapacity n some industries, create asset bubbles in certain sectors, such as in real estate and the stock market, and result in a sharp increase in the amount of non-performing loans held by China's banks. For example, in June 2009, a Chinese government agency estimated that 20% of new bank credit was going into China's stock markets. Some analysts contend that China's refusal to appreciate its currency against the dollar could result in growing trade frictions with the United States. South Korea, Asia's fourth largest economy, was deeply affected by the crisis, with both the South Korean stock market and the won tumbling throughout the months, sometimes precipitously. On October 28, the won reached its lowest point since 1998, when South Korea was in the middle of its IMF support package. Oxford Analytica estimates that foreign investors withdrew a net $25 billion from the Korean stock market between January and late September. Experts say South Korean banks have large dollar-denominated debts, and therefore need to protect their holdings of dollars. This has contributed to the won's fall, and in early October, President Lee Myung-bak invoked patriotism to encourage Korean banks to stop hoarding dollars and buy won. South Korea has announced several packages to stimulate the economy and shore up the domestic banking industry. The government announced a broad economic rescue package on October 19, 2008, promising to guarantee $100 billion in South Korean banks' foreign-currency debt and provide another $30 billion to directly support South Korean banks. (The total amount was equivalent to 14% of the country's GDP.) Struggling with its plunging stock market and currency, President Lee's government has also announced policies to spend up to $9.2 billion to support real-estate developers struggling with unsold apartments, and to provide further financial support to small businesses. On October 27, Korea's central bank cut its prime interest rate by 0.75 percentage points to 4.25%, the largest cut it has made since it began setting base interest rates in 1999. The rate has since been cut two more times, to 3%. On December 17, the government said it would launch a $15 billion fund to boost the capital of Korean banks. South Korea has been an enormous economic success, and has bounced back strongly from the Asian Financial Crisis that forced it to turn to the IMF for a $58 billion support package in December 2007. After contracting by 6.9% in 1998, South Korea's GDP bounced back by 9.5% and 8.5% in the ensuing two years. Since 2002, GDP growth has been in the 3%-6% range. However, President Lee has said the current situation is more severe than the 1997 crisis. Economically, South Korea is an outlier within Asia. It is one of the few Asian countries that is running a current account deficit ($12.6 billion in January-August 2008). Its banks are unusually leveraged, with loan-deposit ratios of more than 130%, higher than that in the United States and the EU, and the only East Asian country over 100%. Pakistan's economy went into a steady decline in 2008. After several years of strong and comparatively stable growth, Pakistan quickly slid into a severe economic crisis in 2008. Growth in real GDP declined sharply from about 8% to 3-4%; inflation rose to nearly 24%; and Pakistan's rupee depreciated by over 23% against the U.S. dollar. Pakistan's unemployment rate rose, and the United Nations reported that 10 million Pakistanis were undernourished. In the words of Pakistan President Asif Ali Zardari, "The greatest challenge this government faces is an economic one." Rising trade and current account deficits generated a "capital crisis" in the autumn of 2008. Pakistan's foreign reserves slid from $14.2 billion in October 2007 to $4.1 billion at the end of October 2008. According to President Zardari's chief economic advisor, Shaukat Tarin, Pakistan needed $4 to $5 billion by the end of November 2008 to avoid defaulting on maturing sovereign debt obligations. In addition, even if Pakistan does secure the money it needs by the end of November, Tarin stated that Pakistan requires $10 to $15 billion in assistance over the next two to three years to continue to service its account deficits and outstanding debt. Several factors, in addition to the current global financial crisis, are contributing to the recent downturn in Pakistan's economy. Pakistan's continuing struggle against Islamist militancy in its tribal areas along the border with Afghanistan has led to high federal deficits and uncertainty about the stability of the Pakistan government. A recent escalation of bombings and violence in Pakistan has raised the risk for and scared off many foreign investors and businesses. This has worsened the nation's capital shortage. In addition, the flight from risk that has followed the U.S. financial crisis has apparently contributed to some capital flight from Pakistan, especially among overseas Pakistanis and investors from the Middle East. Pakistan has sought the required assistance from several countries (including China, Saudi Arabia, and the United States), international financial institutions (including the Asian Development Bank (ADB), the International Monetary Fund (IMF), the Islamic Development Bank (IDB), and the World Bank), and an informal group of nations called the "Friends of Pakistan." Although the ADB, the World Bank and others did offer some support, the total amount was insufficient to avoid the default risk. As a consequence, Pakistan reluctantly began negotiating a loan with the IMF. On November 15, Tarin announced that Pakistan had reached a tentative agreement with the IMF to borrow $7.6 billion over the next 23 months. The first installment of the loan—up to $4 billion—was expected by the end of November; Pakistan is to repay the loan by 2016. Assuming Pakistan and the IMF formally conclude the agreement, the $7.6 billion loan is well short of the estimated $10 billion to $15 billion Pakistan says it needs over the next two years to avoid a financial crisis. Some observers speculate that the IMF agreement will spur help from other potential donors, such as China, Saudi Arabia, and the United States. However, given the continuing economic problems of the potential donor nations, Pakistan may not be able to secure the full amount of assistance it says it needs. As a result, the IMF loan may end up being only a short-term patch to a long-term economic problem. In the meantime, Pakistan has announced some changes in economic policy designed to alleviate their capital crisis. On September 19, 2008, acting finance minister Naveed Qamar released new economic policies designed to bring about macroeconomic stability and avoid seeking IMF assistance that included the elimination of fuel, electricity and food subsidies, and a reduction in the government deficit. On November 3, 2008, Tarin announced reforms of Pakistan's tax system, including the politically sensitive taxation of large landowners, to reduce the incidence of tax evasion. There has also been talk of cutting Pakistan's defense budget. According to some analysts, the new economic policies may foster popular discontent and threaten political stability. The elimination of fuel, electricity and food subsidies may cause significant harm to Pakistan's poor, many of whom are already undernourished. The tax on large landowners may undermine support for Zardari's Pakistan People's Party among its party members and its coalition partners. A cut in Pakistan's defense budget also could harm its military efforts against Islamist militants and weaken the military's political support for the current coalition government. In making policy changes, Congress faces several fundamental issues. First is whether any long-term policies should be designed to restore confidence and induce return to the normal functioning of a self-correcting system or whether the policies should be directed at changing a system that may have become inherently unstable, a system that every decade or so creates bubbles and then lurches into crisis. For example, in Congressional testimony on October 23, 2008, former Federal Reserve Chairman Alan Greenspan stated that a "once-in-a-century credit tsunami"' had engulfed financial markets, and he conceded that his free-market ideology shunning regulation was flawed. In a recent book, the financier George Soros stated that the currently prevailing paradigm, that financial markets tend towards equilibrium, is both false and misleading. He asserted that the world's current financial troubles can be largely attributed to the fact that the international financial system has been developed on the basis of that flawed paradigm. Could this crisis mark the beginning of the end of "free market capitalism?" On the other hand, the International Monetary Fund has observed that market discipline still works and that the focus of new regulations should not be on eliminating risk but on improving market discipline and addressing the tendency of market participants to underestimate the systemic effects of their collective actions. A second question deals with what level any new regulatory authority should reside. Should it primarily be at the state, national, or international level? If the authority is kept at the national level, how much power should an international authority have? Should the major role of the IMF, for example, be informational, advisory, and technical, or should it have enforcement authority? Should enforcement be done through a dispute resolution process similar to that in the World Trade Organization, or should the IMF or other international institution be ceded oversight and regulatory authority by national governments? As of mid-2009, the primary role of the IMF in the financial crisis appears to be twofold. The first is of lender of last resort, and the second is to provide analysis and advice to member countries. The IMF has been tracking economic and financial developments worldwide in order to provide policymakers with forecasts and analysis of developments in financial markets. It also is providing policy advice to countries and regions and is assisting the Group of 20 and other international organizations with recommendations to reshape the system of international regulation and governance. The June 17 Treasury proposal for financial regulation cedes no sovereignty to the IMF. It calls for international reforms to support U.S. efforts. Even the IMF recognizes that its authority over countries comes primarily through its advisory capacity and through the conditions it places on loans to borrowing countries. The second question above is central for those calling for a new Bretton Woods conference. U.K. Prime Minister [author name scrubbed] called for such a conference to have the specific objective of remaking the international financial architecture. In the declaration of the G-20 Summit on Financial Markets and the World Economy, world leaders stated: We underscored that the Bretton Woods Institutions must be comprehensively reformed so that they can more adequately reflect changing economic weights in the world economy and be more responsive to future challenges. Emerging and developing economies should have greater voice and representation in these institutions. The G-20 is an informal forum that promotes open and constructive discussion between industrial and emerging-market countries on key issues related to global economic stability. The members include the finance ministers and central bankers from the member nations. A G-20 leaders' summit is a new development. On September 24-25, 2009, a G-20 Summit was held in Pittsburgh . At the summit, the G-20 members agreed to support six broad policy goals: 1. The new G-20 "Framework for Strong, Sustainable and Balanced Growth" will launch by November 2009. This framework promotes shifting from public to private sources of demand, establishing a pattern of growth that is sustainable and balanced, avoiding destabilizing booms and busts in asset and credit prices, and adopting macroeconomic policies that are consistent with stable prices. In order to achieve this framework, the G-20 members agreed to implement a "cooperative process of mutual assessment." This cooperative process is comprised of: shared policy objectives; a medium-term policy framework and an assessment of the impact national policies have on global economic growth and financial stability; and actions to meet common objectives. Within this framework, the G-20 members agreed to: implement responsible fiscal policies, attentive to short-term flexibility considerations and longer-run sustainability requirements; strengthen financial supervision to prevent the re-emergence in the financial system of excess credit growth and excess leverage and undertake macro prudential and regulatory policies to help prevent credit and asset price cycles from becoming forces of destabilization; promote more balanced current accounts and support open trade and investment to advance global prosperity and growth sustainability, while actively rejecting protectionist measures; undertake monetary policies consistent with price stability in the context of market oriented exchange rates that reflect underlying economic fundamentals; undertake structural reforms to increase potential growth rates and, where needed, to improve social safety nets; and promote balanced and sustainable economic development in order to narrow development imbalances and reduce poverty. 2. To strengthen the regulatory system for banks and other financial firms by raising capital standards, implementing strong international compensation standards, improving the over-the-counter derivatives market, and holding large global firms accountable for their risks. As components of this process, the G-20 agree to: building high quality bank capital and mitigating procyclical actions; reforming compensation practices to strengthen financial stability; improving over-the-counter derivatives markets; and addressing cross-border resolutions and systemically important financial institutions. In addition, the G-20 leaders indicated their support for efforts to improve the financial system by taking actions against non-cooperative jurisdictions, including using "countermeasures against tax havens," and by tasking the Financial Action Task Force (FATF) to issue a list of high risk jurisdictions by February 2010. 3. To modernize the global architecture by designating the G-20 as the premier forum for international economic cooperation, by establishing the Financial Stability Board (FSB), by having the FSB include major emerging economies, and by having the FSB coordinate and monitor progress in strengthening financial regulation. Also, the G-20 agreed to shift the IMF quota share to dynamic emerging markets and developing countries of at least 5%, using the current IMF quota formula. The change in quotas is keyed to the IMF's quota review that is scheduled to be completed by January 2010. In addition to reviewing the quotas, the G-20 indicated its support for reviewing the size of any increase in IMF quotas, the size and composition of the Executive Board, ways of enhancing the Board's effectiveness, the Fund Governors' involvement in the strategic oversight of the IMF, and the diversity of IMF staff, and the appointment of department heads and senior leadership through an open, transparent and merit-based process. The G-20 countries also agreed to contribute over $500 billion to a renewed and expanded New Arrangements to Borrow facility in the IMF. Additional IMF funding will also be available through gold sales and through additional Special Drawing Rights (SDRs). The G-20 also called for reforming the mission, mandate, and governance of the development banks, including the IMF, which the G-20 indicated must play a "critical role in promoting global financial stability and rebalancing growth." They also called on the World Bank to play a leading role in responding to problems whose nature requires globally coordinated action, such as climate change and green technology, food security, human development, and private-sector led growth. 4. To take new steps to increase access to food, fuel, and finance among the world's poorest economies, while clamping down on illicit outflows. The G-20 also agreed to improve energy market transparency and stability, and to improve regulatory oversight of energy markets. 5. To phase out and rationalize over the medium term inefficient fossil fuel subsidies while providing targeted support for the poorest. Agreed to stimulate investment in clean and in renewable energy and in energy efficiency, and to take steps to diffuse and transfer clean energy technology. 6. To maintain openness and move toward greener, more sustainable growth. In addition, the G-20 countries are addressing a number of issues related to correcting abuses in the financial markets, particularly those involving non-bank financial institutions and complex financial instruments. Analysts and policymakers generally agree that the lack of regulation of new non-bank financial institutions, such as hedge funds and private equity firms, and the lack of transparency of new complex financial instruments, such as derivatives, were key factors in the current financial crisis. The G-20 leaders also called for common principles for reforming financial markets. These principles include: strengthening the transparency and accountability of firms and financial products, extending regulation to all financial market institutions, promoting the integrity of financial markets (such as bolstering consumer protection) and consistent regulations across national borders, and reforming international financial institutions to better monitor the health of the financial system. The G-20 London Summit reiterated the need for financial supervision, regulation, and transparency of financial products. The role of the G-20 in dealing with the global financial crisis began on November 15, 2008, with the G-20 Summit on Financial Markets and the World Economy that was held in Washington, DC. This was billed as the first in a series of meetings to deal with the financial crisis, discuss efforts to strengthen economic growth, and to lay the foundation to prevent future crises from occurring. This summit included emerging market economies rather than the usual G-7 or G-8 nations that periodically meet to discuss economic issues. It was not apparent that the agenda of the emerging market economies differed greatly from that of Europe, the United States, or Japan. The G-20 Washington Declaration to address the current financial crisis was both a laundry list of objectives and steps to be taken and a convergence of attitudes by national leaders that concrete measures had to be implemented both to stabilize national economies and to reform financial markets. The declaration established an Action Plan that included high priority actions to be completed prior to March 31, 2009. Details are to be worked out by the G-20 finance ministers. The declaration also called for a second G-20 summit that was held in London on April 2, 2009. Since the attendees now include the Association for Southeast Asian Nations, the G-20 no longer refers to just 20 nations. At the April 2009 G-20 London Summit , leaders agreed on establishing a new Financial Stability Board (incorporating the Financial Stability Forum) to work with the IMF to ensure cooperation across borders; closer regulation of banks, hedge funds, and credit rating agencies; and a crackdown on tax havens. The leaders could not agree on the need for additional stimulus packages by nations, but they considered the additional funding for the IMF and multilateral development banks as key stimulus directed at developing and emerging market economies. The leaders reiterated their commitment to resist protectionism and promote global trade and investment. At the November G-20 summit, the leaders agreed on common principles to guide financial market reform: Strengthening transparency and accountability by enhancing required disclosure on complex financial products; ensuring complete and accurate disclosure by firms of their financial condition; and aligning incentives to avoid excessive risk-taking. Enhancing sound regulation by ensuring strong oversight of credit rating agencies; prudent risk management; and oversight or regulation of all financial markets, products, and participants as appropriate to their circumstances. Promoting integrity in financial markets by preventing market manipulation and fraud, helping avoid conflicts of interest, and protecting against use of the financial system to support terrorism, drug trafficking, or other illegal activities. Reinforcing international cooperation by making national laws and regulations more consistent and encouraging regulators to enhance their coordination and cooperation across all segments of financial markets. Reforming international financial institutions (IFIs) by modernizing their governance and membership so that emerging market economies and developing countries have greater voice and representation, by working together to better identify vulnerabilities and anticipate stresses, and by acting swiftly to play a key role in crisis response. At the London Summit, the leaders reviewed progress on the November G-20 Action Plan that set forth a comprehensive work plan to implement the above principles. The Plan included immediate actions to: Address weaknesses in accounting and disclosure standards for off-balance sheet vehicles; Ensure that credit rating agencies meet the highest standards and avoid conflicts of interest, provide greater disclosure to investors, and differentiate ratings for complex products; Ensure that firms maintain adequate capital, and set out strengthened capital requirements for banks' structured credit and securitization activities; Develop enhanced guidance to strengthen banks' risk management practices, and ensure that firms develop processes that look at whether they are accumulating too much risk; Establish processes whereby national supervisors who oversee globally active financial institutions meet together and share information; and Expand the Financial Stability Forum to include a broader membership of emerging economies. The leaders instructed finance ministers to make specific recommendations in the following areas: Avoiding regulatory policies that exacerbate the ups and downs of the business cycle; Reviewing and aligning global accounting standards, particularly for complex securities in times of stress; Strengthening transparency of credit derivatives markets and reducing their systemic risks; Reviewing incentives for risk-taking and innovation reflected in compensation practices; and Reviewing the mandates, governance, and resource requirements of the International Financial Institutions. The leaders agreed that needed reforms will be successful only if they are grounded in a commitment to free market principles, including the rule of law, respect for private property, open trade and investment, competitive markets, and efficient, effectively-regulated financial systems. The leaders further agreed to: Reject protectionism, which exacerbates rather than mitigates financial and economic challenges; Strive to reach an agreement this year on modalities that leads to an ambitious outcome to the Doha Round of World Trade Organization negotiations; Refrain from imposing any new trade or investment barriers for the next 12 months; and Reaffirm development assistance commitments and urge both developed and emerging economies to undertake commitments consistent with their capacities and roles in the global economy. Policy proposals for changes in the international financial architecture have included a major role for the IMF. As a lender of last resort, coordinator of financial assistance packages for countries, monitor of macroeconomic conditions worldwide and within countries, and provider of technical assistance, the IMF has played an important role during financial crises whether international or confined to one member country. The financial crisis has shown that the world could use a better early warning system that can detect and do something about stresses and systemic problems developing in world financial markets. It also may need some system of what is being called a macro-prudential framework for assessing risks and promoting sound policies. This would not only include the regulation and supervision of financial instruments and institutions but also would incorporate cyclical and other macroeconomic considerations as well as vulnerabilities from increased banking concentration and inter-linkages between different parts of the financial system. In short, some institution could be charged with monitoring synergistic conditions that arise because of interactions among individual financial institutions or their macroeconomic setting. However, the IMF's current system of macroeconomic monitoring tends to focus on the risks to currency stability, employment, inflation, government budgets, and other macroeconomic variables. The IMF, jointly with the Financial Stability Board, has recently stepped up its work on financial markets, macro-financial linkages, and spillovers across countries with the aim of strengthening early warning systems. The IMF has not, however, traditionally pressed countries to counter specific risks such as how macroeconomic variables, potential synergisms and blurring of boundaries among regulated entities, and new investment vehicles affect prudential risk for insurance, banking, and brokerage houses. The Bank for International Settlements makes recommendations to countries on measures to be undertaken (such as Basel II) to ensure banking stability and capital adequacy, but the financial crisis has shown that the focus on capital adequacy has been insufficient to ensure stability when a financial crisis becomes systemic and involves brokerage houses and insurance companies as well as banks. The financial crisis has created an opportunity for the IMF to reinvigorate itself and possibly play a constructive role in resolving, or at the least mitigating, the effects of the global downturn. It has been operating on two fronts: (1) through immediate crisis management, primarily balance of payments support to emerging-market and less-developed countries, and (2) contributing to long-term systemic reform of the international financial system. The IMF also has a wealth of information and expertise available to help in resolving financial crises and has been providing policy advice to member countries around the world. IMF rules stipulate that countries are allowed to borrow up to three times their quota over a three-year period, although this requirement has been breached on several occasions in which the IMF has lent at much higher multiples of quota. In response to the current financial crisis, the IMF has activated its Emergency Financing Mechanism to speed the normal process for loans to crisis-afflicted countries. The emergency mechanism enables rapid approval (usually within 48-72 hours) of IMF lending once an agreement has been reached between the IMF and the national government. As of April 2009, the IMF, under its Stand-By Arrangement facility, has provided or is in the process of providing financial support packages for Iceland ($2.1 billion), Ukraine ($16.4 billion), Hungary ($25.1 billion), Pakistan ($7.6 billion), Belarus ($2.46 billion), Serbia ($530.3 million), Armenia ($540 million), El Salvador ($800 million), Latvia ($2.4 billion), and Seychelles ($26.6 million). The IMF also created a Flexible Credit Line for countries with strong fundamentals, policies, and track records of policy implementation. Once approved, these loans can be disbursed when the need arises rather than being conditioned on compliance with policy targets as in traditional IMF-supported programs. The IMF board has approved Mexico for $47 billion under this facility. Poland has requested a credit line of $20.5 billion. The IMF also may use its Exogenous Shocks Facility (ESF) to provide assistance to certain member countries. The ESF provides policy support and financial assistance to low-income countries facing exogenous shocks , events that are completely out of the national government's control. These could include commodity price changes (including oil and food), natural disasters, and conflicts and crises in neighboring countries that disrupt trade. The ESF was modified in 2008 to further increase the speed and flexibility of the IMF's response. Through the ESF, a country can immediately access up to 25% of its quota for each exogenous shock and an additional 75% of quota in phased disbursements over one to two years. The increasing severity of the crisis has led world leaders to conclude that the IMF needs additional resources. At the 2009 February G-7 finance ministers summit, the government of Japan lent the IMF $100 billion dollars. At the April 2009 London G-20 summit leaders of the world's major economies agreed to increase resources of the IMF and international development banks by $1.1 trillion including $750 billion more for the International Monetary Fund, $250 billion to boost global trade, and $100 billion for multilateral development banks. For the additional IMF resources, $250 billion was to be made available immediately through bilateral arrangements between the IMF and individual countries, while an additional $250 billion would become available as additional countries pledged their participation. The increased resources include the $100 billion loan from Japan, and the members of the European Union had agreed to provide an additional $100 billion. Subsequently, Canada ($10 billion), South Korea ($10 billion), Norway ($4.5 billion), and Switzerland ($10 billion) agreed to subscribe additional funds. The Obama Administration has asked Congress to approve a U.S. subscription of $100 billion to the IMF's New Arrangements to Borrow. China reportedly has said it is willing to provide $40 billion through possible purchases of IMF bonds. The sources for the remaining $145.5 billion of the planned increase in the NAB have not been announced. The IMF reportedly is considering issuing bonds, something it has never done in its 60-year history. These would be sold to central banks and government agencies and not to the general public. According to economist and former IMF chief economist Michael Mussa, the United States and Europe previously blocked attempts by the IMF to issue bonds since it could potentially make the IMF less dependent on them for financial resources and thus less willing to take policy direction from them. However, several other multilateral institutions such as the World Bank and the regional development banks routinely issue bonds to help finance their lending. The IMF is not alone in making available financial assistance to crisis-afflicted countries. The International Finance Corporation (IFC), the private-sector lending arm of the World Bank, has announced that it will launch a $3 billion fund to capitalize small banks in poor countries that are battered by the financial crisis. The Inter-American Development Bank (IDB) announced on October 10, 2008 that it will offer a new $6 billion credit line to member governments as an increase to its traditional lending activities. In addition to the IDB, the Andean Development Corporation (CAF) announced a liquidity facility of $1.5 billion and the Latin American Fund of Reserves (FLAR) has offered to make available $4.5 billion in contingency lines. While these amounts may be insufficient should Brazil, Argentina, or any other large Latin American country need a rescue package, they could be very helpful for smaller countries such as those in the Caribbean and Central America that are heavily dependent on tourism and property investments. Appendix A. Major Recent Actions and Events of the Global Financial Crisis 2010 February 17 . The global crisis made many banks dependent on government support . This succeeded in averting financial catastrophe, but aggravated the problem of moral hazard: banks have an incentive to take risks if they believe that losses will ultimately be borne by the taxpayer. Some progress has been made in the policy debate to design a more resilient financial system. Proposals seek to ensure that the costs of bank failure fall on the banking industry rather than on the taxpayer. Former Federal Reserve chairman Paul Volcker has proposed a separation between commercial and investment banking. This approach has been adopted by the Obama administration. A separation between deposit taking and risky trading might have prevented the failure of RBS, which had to be bailed out by the UK government. However, it would not have prevented the failure of investment banks, such as Lehman Brothers, which filed for bankruptcy in September 2008 If approved by Congress, the U.S. scheme would restrict the ability of deposit banks to engage in proprietary trading on their own account and participate in other risky activities, such hedge funds and private equity. An international levy is an attractive idea, but practical changes are more likely to be implemented at the country level. Oxford Analytica. February 17 . Net capital flows to developing countries fell to $780 billion in 2008, reversing an upward trend that began in 2003 and peaked at $1,222 billion in 2007, according to a new report from the World Bank, Global Development Finance 2010: External Debt of Developing Countries. Particularly hard hit were private capital flows, which fell by almost 40%. All developing regions were affected, with emerging market economies in Europe and Central Asia experiencing the sharpest downturn. Some trends and developments from the report follow: Official creditors stepped in to offset the decline in private capital flows, increasing their support to low- and middle-income countries. The net inflow of medium- and long-term financing from official creditors, including grants, rose by 54% in 2008 to $114 billion. Almost 75% of these funds took the form of grants. Foreign direct investment (FDI) rose moderately in 2008 to $594 billion. But it remained concentrated: the top ten recipient countries received 70% of FDI inflows, with China alone commanding one quarter of the total. Increased concessional financing in 2008, including $6.7 billion from the International Development Association (IDA), helped support low-income countries with limited or no access to market-based financing. Official grants (excluding technical cooperation grants) from bilateral and multilateral sources rose by 13%. In addition, bilateral creditors restructured claims of $3.1 billion with six low-income countries, canceling more than half of them. External debt indicators improved. Since 2000 the rate of growth in developing countries outpaced the accumulation of new external obligations. Developing countries registered a ratio of outstanding external debt to export earnings of 57.8% in 2008, down from 122.2% in 2000. The ratio of debt to gross national income (GNI) fell to 22.1%, compared to 37.2% at the start of the decade. The debt service to exports ratio was 9.5% in 2008, half the 2000 level. World Bank: Global Development Finance 2010. February 16 . To mark the one year anniversary of the signing into law of the American Recovery and Reinvestment Act (ARRA) , the Committee for a Responsible Federal Budget released a review of the ARRA. The ARRA was enacted as the fiscal centerpiece of a set of wide-ranging policy efforts designed to stabilize the financial sector and the macro-economy; these efforts also included stimulus from the Economic Stimulus Act of 2008 and Troubled Asset Relief Program, among other initiatives. Originally projected to provide $787 billion in stimulus, the Congressional Budget Office (CBO) now puts the ten-year costs of the ARRA at $862 billion. Read the report at http://crfb.org/sites/default/files/ARRA_One_Year_Later.pdf . Committee for a Responsible Federal Budget. February 16 . Greek fiscal difficulties provoke concerns over Eurozone fiscal stability despite EU's Pledge to Greece. Deep economic recession has exposed serious fault lines within the Eurozone that will require major corrective action over both the short and longer term. Failure to take such action would threaten the very existence of the Eurozone in its current make-up, and there is growing talk that one or more countries may end up leaving the single currency altogether. The trigger for the current tensions within the Eurozone has been the plight of Greece, following revelations that its fiscal deficit is substantially higher than previously reported. Meanwhile, markets have fundamentally reappraised risk as central banks have looked to start unwinding the various emergency measures that were introduced when the recession was at its deepest and financial market dislocation was compounding problems. Consequently, markets have come to the conclusion that the risk spreads of the "Club Med" countries (Spain, Portugal, Greece, and Italy) and Ireland had converged far more with German bunds than was justified by economic fundamentals. Despite the brinkmanship of Germany, in particular, and concerns over "moral hazard," it is now evident that the European Union (EU) will eventually do whatever is necessary to save Greece. The implicit indication that a Eurozone country will not be left to default on its debt will ease market pressure on Spain, Portugal, Ireland, and Italy. If Greece were to leave the Eurozone, a precedent would be set and attention would immediately focus on the next candidate. This would be massively destabilizing for the single currency area. Support for Greece does not guarantee that it will be able to get its finances in order. There remains great uncertainty as to how the government will proceed and overcome major public unrest, even if opinion polls suggest that there is broad acceptance that difficult decisions are required. Even if the EU's pledge to support Greece leads to a near-term easing of pressures on it, as well as on Spain, Portugal, Ireland, and Italy, the Eurozone will be prone to persistent tensions until structural problems are properly addressed and tighter fiscal coordination is achieved. IHS Global Insight. January 29 . In the fourth quarter of 2009 American G ross D omestic P roduct (GDP) grew by a 5.7%, annual rate, the best quarterly performance since 2003. Expansion was driven by growth in private inventories and an increase in exports. For all of 2009 output declined by 2.4%. Government economic support will fade during 2010. Mark Zandi, an economist with Moody's Economy.com, estimates that the federal stimulus contributed about two percentage points of growth in the fourth quarter. That will drop below one percentage point by mid-year and fall to nothing thereafter. State budget cuts will also be a drain on output, as they have been for most of the recession. Drops in state-government spending subtracted 0.1% from output for all of 2009. Economist. January 27 . U.S. lawmakers in a hearing before the U.S. House of Representatives Oversight Committee challenged Treasury Secretary Timothy Geithner's credibility after he said he was not involved with AIG 's decision to withhold details on $62 billion the bailed-out insurer paid to banks. Geithner insisted the government-funded rescue which cost more than $180 billion had been necessary to avert an economic collapse. Lawmakers questioned why a better deal for taxpayers could not have been negotiated when money was being poured into the stricken insurer. Geithner maintained that he had withdrawn from decisions by the New York Fed after he was nominated to the Treasury post in late 2008. Defending his role in helping rescue American International Group Geithner stated, "For the first time since the Great Depression you were seeing a full-scale run on the financial system." Reuters. January 26 . GM signed a deal to sell Saab to Spyker Cars NV for $74 million in cash plus $326 million worth of preferred shares in Saab. The deal hinges on a $550 million loan from the European Investment Bank, which the Swedish government on Tuesday committed to guaranteeing. The sale is a coup for Spyker, which is based in Zeewolde, Netherlands, and a lifeline for Saab, which has lost money ever since GM bought a 50% stake and management control for $600 million in 1989. The Detroit automaker gained full ownership in 2000 for $125 million more. Saab employs around 3,500 people in Sweden and was within days of liquidation as part of GM's restructuring. GM will continue providing vehicles and parts to the new company, to be called Saab Spyker Automobiles NV. Associated Press. January 26 . In its latest World Economic Outlook , the IMF reported the global economy, battered by two years of crisis, is recovering faster than previously anticipated, with world growth bouncing back from negative territory in 2009 to a forecast 3.9 % this year and 4.3% in 2011. Major findings include: the world economy bouncing back, but advanced economies drag; global recovery from recession is led by emerging markets; and countries should maintain stimulus measures while recovery is not yet well established. Highlights below. IMF. 2009 December 14 . Abu Dhabi has sprung to the rescue of its heavily indebted fellow emirate with a timely cash infusion of US$10 billion. This will enable Dubai to pay off US$4.1 billion to Nakheel bondholders as well as unpaid bills from suppliers and contractors. There are no obvious strings attached, but Dubai has been obliged to bring forward legislation that would allow Dubai World to be declared insolvent. Dubai has striven over the past 15 months to sustain the fiction that it could deal with the debts of its government-related entities through a combination of refinancing and streamlining, until its November 25 th request for a standstill on US$26 billion of debts owed by Dubai World and its two real estate affiliates, Nakheel and Limitless. The Abu Dhabi government has agreed to provide US$10 billion to the Dubai Financial Support Fund to pay the Nakheel sukuk-holders, and other accounts. The Dubai government said that Dubai World must satisfy the condition of negotiating a standstill on the remaining US$22 billion of debts declared as being subject to restructuring. The support fund has now received US$25 billion in total. That appears insufficient to cover Nakheel's sukuk redemption, and other payments already or soon to be in arrears. At the same time as it announced the Abu Dhabi funding, the Dubai government issued a decree setting up a tribunal under the jurisdiction of the Dubai International Finance Centre (DIFC) to decide on disputes related to financial obligations of Dubai World and its subsidiaries. This move implicitly acknowledges the possibility that Dubai World may need to declare bankruptcy to obtain protection from its creditors. Abu Dhabi has stepped in at the last minute in order to safeguard the reputation and credit status of the UAE as a whole. There will undoubtedly be a price to pay, whether in the form of the transfer of assets to Abu Dhabi or through subjecting Dubai to closer administrative and political control by the federal government in the capital. Economist/Global business Portfolio. December 8 . U.S. President Barack Obama called for a major new burst of federal spending to jolt the wobbly economy into a stronger recovery and reduce painfully persistent double-digit unemployment. Obama said the U.S. must continue to "spend our way out of this recession" as long as so many people are out of work. More than 7 million Americans have lost their jobs since the recession began two years ago, and the jobless rate stands at 10%, a statistic Obama called "staggering." Congressional approval would be required for the new spending, the amount unspecified but sure to be at least tens of billions of dollars. "We avoided the depression many feared," Obama said in a speech at the Brookings Institution, a Washington think tank. But, he added, "Our work is far from done." Obama proposed new spending for highway and bridge construction, for small business tax cuts and for retrofitting millions of homes to make them more energy-efficient. He said he wanted to extend economic stimulus programs to keep unemployment insurance from expiring for millions of out-of-work Americans and to help laid-off workers keep their health insurance. He proposed an additional $250 apiece in stimulus spending for seniors and veterans and aid to state and local governments to discourage them from laying off teachers, police officers and firefighters. Proposals in Congress that cover much the same ground would add up to $170 billion or more. Administration aides suggested the infrastructure proposals alone being weighed by the president could cost about $50 billion. Reuters. December 7 . Kuwait 's sovereign wealth fund said on Sunday it had sold its stake in Citigroup Inc. for a profit of $1.1 billion, becoming the latest Gulf investor to sell foreign shares as markets improve. Kuwait Investment Authority (KIA) transferred the preferred stock it owned in Citigroup to common shares and sold all of them for $4.1 billion, KIA said in a statement. KIA said it made a 37 % return on its initial January 2008 investment of $3 billion in Citigroup's preferred stock. It did not disclose the number of shares it had sold or what it planned to do with proceeds from the sale. Citigroup's stock closed at $4.12 on the New York Stock Exchange on Friday. KIA follows Singapore's wealth fund, GIC, which halved its stake in Citigroup in September, cashing in on a market rally for a profit of $1.6 billion. Reuters. December 7 . Efforts by Japanese officials to boost the world's second-biggest economy and a U.S. jobs report led to the currency's biggest weekly decline in a decade . Japan's currency plunged 2.5% against the dollar and 1.3% versus the euro on December 4 after the U.S. Labor Department said employers cut the fewest jobs since the recession began. The yen rose against the dollar today, after sinking last week by the most since February 1999, extending a retreat from a 14-year high. Traders sold yen and bought dollars on speculation U.S. interest rates will increase before June. This is causing options traders to become less bullish on the yen. Options showed declining bets the yen will rise. The odds for a gain to 84.5 yen per dollar by the end of March from 90.56 last week fell to 38% from 80% on November 30, data compiled by Bloomberg show. Chances of a decline to 92 versus the dollar by December 31 reached 63%. Bloomberg. December 7 . The Obama administration, buoyed by a resurgent Wall Street, plans to cut the projected long-term cost of the Troubled Asset Relief Program by more than $200 billion, in a move that could smooth the way for the introduction of a new jobs program. The White House and leaders in Congress are debating whether to use any of the remaining TARP funds for other domestic efforts, such as a jobs bill. Congress authorized $700 billion for the program during the height of the financial crisis. The Treasury now estimates that over the next 10 years TARP will cost $141 billion at most, down from the $341 billion the White House projected in August. The reduction stems in large part from faster-than-expected repayments by some of the nation's largest banks, as well as less spending on programs to help shore up the financial sector. The government's efforts appear to have helped stabilize the financial sector, and banks have already repaid the Treasury about $70 billion. Wall Street Journal. December 4 . Federal Reserve Chairman Ben S. Bernanke made the case for a strong, independent central bank during a hearing on his nomination to a second four-year term. Some senators urged him to do more to resuscitate the economy while others pressed him to roll back efforts before they provoke vicious inflation. Senators noted the highest unemployment rate in a generation and continuing reluctance of banks to stimulate economic activity by lending to businesses. But as he faced sometimes hostile questions about the Fed's recent actions, he also acknowledged its failure to spot problems in the financial system before they exploded into a crisis last year, and he vowed that it would not happen again. Testifying before the Senate Banking, Housing and Urban Affairs Committee , Bernanke repeatedly steered the conversation toward what he considers the potential dangers of financial regulation proposals moving through Congress. Two issues dominated his testimony—a proposal by Banking Chairman Christopher J. Dodd, D-Conn., to strip the Fed of its authority to regulate the banking system and one from Rep. Ron Paul, R-Texas, that would give the government expanded audit authority over Fed decision-making. Bernanke has argued that the measures would hinder the central bank's ability to carry out monetary policy and subject it to undue political pressure. When Utah Republican Robert F. Bennett spoke of his experience as a business owner in the inflation-ravaged late 1970s, Bernanke used the opportunity to address then-Fed Chairman Paul A. Volcker's politically unpopular—but highly successful—efforts to whip inflation by substantially raising interest rates. Despite intense pressure from Congress to ease rates, support for Volcker's policies from presidents Jimmy Carter and Ronald Reagan "let him do what he had to do," Bernanke said, and that "was the reason inflation was conquered." CQ Today, Washington Post. December 4 . The U.S. unemployment rate edged down to 10.0% in November , from 10.2% in October 2009, the Bureau of Labor Statistics reported. Nonfarm payroll employment was essentially unchanged, with a loss of 11,000 jobs. In the prior three months, payroll job losses had averaged 135,000 a month. In November, employment fell in construction, manufacturing, and information, while temporary help services and health care added jobs. In November, both the number of unemployed persons, at 15.4 million, and the unemployment rate, at 10.0%, edged down. At the start of the recession in December 2007, the number of unemployed persons was 7.5 million, and the jobless rate was 4.9%. BLS press release. December 4 . Bank of America Corp ., the largest U.S. lender, raised $19.3 billion selling securities at $15 apiece in the biggest sale of stock or preferred shares by a U.S. public company since at least 2000. In May, Bank of America raised $13.5 billion issuing 1.25 billion common shares at $10.77 each in response to government stress tests. The bank, which plans to repay $45 billion of U.S. rescue funds, sold 1.286 billion so-called common equivalent securities, according to Bloomberg data. The security is made up of one depositary share and one warrant and is convertible into one common share, subject to stockholder approval, according to a regulatory filing by the Charlotte, North Carolina-based bank. Bank of America plans to use the proceeds to free itself from government restrictions after accepting funds from the Troubled Asset Relief Program. Banks, brokerages and insurers have raised $1.5 trillion to shore up capital after the biggest financial crisis since the Great Depression spurred more than $1.7 trillion in writedowns and credit losses globally. Bloomberg.com December 4 . General Motors has reached an agreement to sell about half of its India operations and a small stake in its China business to its main joint-venture partner in China, people with a detailed knowledge of the transaction said on Thursday evening. G.M.'s main partner in China, the Shanghai Automotive Industry Corporation, better known as S.A.I.C., suspended trading in its shares on the Shanghai stock market on Thursday pending an announcement, but declined to release details. G.M. said in a statement that it was constantly in discussions with S.A.I.C. on various issues, but also did not disclose any details. G.M.'s international operations have been in a quiet but intense search for cash this autumn to cover losses incurred when its South Korean subsidiary, Daewoo, lost $2 billion last year on a bad bet on financial derivatives based on the Korean won and then burned through its remaining lines of credit during the recent global downturn. New York Times. December 4 . The Nile Delta is one of the regions most at risk from the anticipated rise in sea levels associated with global warming. One of Egypt's most accomplished hydraulic engineers has made a thorough study of the dimensions of the potential problems, and has drawn up proposals for preserving the Delta. Agricultural land will not be the only loss. Roads, railways, schools, hospitals, offices, and factories will be damaged beyond use. Especially devastating will be the loss of housing, particularly in the heavily populated rural and urban areas with a high concentration of the very poor, and of several hundred thousand jobs. It is estimated that if the sea rise occurred today, an estimated 3.5 million inhabitants would become "climate refugees," unless the government of Egypt takes action to protect the Delta. At current prices, the cost of constructing the proposed scheme would be in the range of €5 billion/US$7.5 billion; the time needed to construct the protective system would be between eight and ten years. This cost is in addition to that required to raise the embankment along the 160-km length of the Suez Canal. The question this poses is who should pay the price—the victims or those who induced the suffering? Economist/Global business Portfolio. December 4 . Mexico's recession , the steepest in the Western Hemisphere and among the worst in the world, has yet to hit bottom in some sectors of the economy, even as some other regional economies began growing steadily months ago. Besides having a lagging recovery, Mexico's growth prospects in 2010-2011 will be very modest. Poor labor market indicators are also fuelling concerns about longer-term growth prospects. Given the very poor performance of the economy for most of the year, the Economist Intelligence Unit estimates that GDP will contract by at least 7% in full-year 2009. We do not expect real GDP to return to 2008 levels until the end of 2011, reflecting both continuing dependence on the US and internal structural weaknesses. We project growth of 3% in 2010, with a fallback to 2.7% in 2011 in line with trends in the United States. Economist/Global business Portfolio. December 4 . Azerbaijan will be the fastest-growing economy during 2009 according to the Economist Intelligence Unit. For this, Azerbaijan can thank its international oil consortium, the government's wage policies and the country's free-spending consumers. Azerbaijan's GDP will grow by nearly 13% this year, according to the government. The Economist Intelligence Unit estimates that, Azerbaijan aside, the fastest-growing economies in 2009 will be China at 8.2%, Zambia at 8.3%, and Malawi at 7.6%. The oil sector accounts for over 50% of Azerbaijan's GDP. The increase in international oil prices in the second and third quarters of 2009 has been supportive of real GDP growth. So too has been a sharp rise in output from the BP-operated Azeri-Chirag-Guneshli (ACG) oil complex in the Caspian Sea. Economist/Global business Portfolio. December 4 . Dubai symbolizes the arrival of the financial crisis in the Middle East , in a unique economy. No other country built a ski resort in a desert. No other country constructed an archipelago of 300 artificial islands, complete with a man-made reef colonized by parrot fish. But even if Dubai is a gaudy outlier—a sort of Donald Trump of a nation—the bankruptcy of its flagship investment company, Dubai World, holds a warning for others. The nonchalance with which global financial markets have reacted is not reassuring in the least. The lack of alarm is alarming. Start with the size of the Dubai bankruptcy. Most analysts reckon the emirate will end up defaulting on more than $30 billion. That's up from the $26 billion advertised at Dubai World but perhaps less than half of the city-state's accumulated $80 billion debt. Dubai's bust will be larger than South Korea's 1998 debt restructuring, which involved $22 billion worth of loans, and not much smaller than Russia's default that year (which affected loans worth $40 billion). The South Korean and Russian traumas spread panic around the world. Nowadays, investors yawn at losses that don't run into the hundreds of billions. This is a touch complacent. Washington Post. December 3 . By a vote of 421-0, the U.S. House of Representatives on December 2 passed a bill aimed at bolstering oversight of the government's 2008 financial industry bailout , which has become increasingly unpopular with lawmakers from both parties. Sponsored by New York Democrat Carolyn B. Maloney, the measure, 111 th Congress H.R. 1242 , would broaden government oversight of the bailout law, P.L. 110-343 , known as the Troubled Asset Relief Program (TARP). The bill would require the Treasury Department, which administers the program, to provide continuous data on money spent under the bailout to the TARP special inspector general, the comptroller general, and the Congressional Oversight Panel. The Treasury Department would have to present the funding updates through a standardized electronic database. CQ Today. December 3 . U.S. nonfarm business sector labor productivity increased at an 8.1% annual rate during the third quarter of 2009, as unit labor costs fell 2.5%, the U.S. Bureau of Labor Statistics reported. This was the largest gain in productivity since the third quarter of 2003, and reflects a 2.9% increase in output and a 4.8% decline in hours worked. BLS press release. December 3 . President Obama 's invited 130 business leaders, union chiefs, economists and others to a jobs summit aimed at producing ideas to battle a surging unemployment problem. The event highlighted the tough dilemma he confronts: jobs versus funding. Obama says he does not have the money for the plan many liberal supporters say packs the biggest employment punch—direct federal investment in job creation. Instead, he came close to embracing a to-do list for the private sector: weatherization, small-business incentives, regulatory and other help for exporters, and tax credits for employers who hire new workers. The President said the proposals could create jobs immediately, while providing long-term benefit at a relatively small expense to the federal government. "Overall, we generated a lot of important ideas," he said. "Some of them, I think, can translate immediately into administration plans and, potentially, legislation." Washington Post. December 3 . European Central Bank (ECB) President Jean-Claude Trichet signaled that the bank's planned withdrawal of stimulus measures would proceed gradually, as signs emerged of a split within the ECB's governing council over the timing of the move. "The improved conditions in financial markets have indicated that not all our liquidity measures are needed to the same extent as in the past," Mr. Trichet said. He stressed the bank would "gradually phase out" the programs. The ECB said it would hold its main policy rate steady at 1% , as expected. The ECB also stated that its upcoming one-year refinancing operation on December 16 will be the last of its kind. The six-month tender will end March 31, 2010. Regarding the terms of allotment, the ECB specifies that the interest rate on the last 12-month long term refinancing operation (LTRO) "will be fixed at the average minimum bid rate of the main refinancing operations (MROs) over the life of this operation." This is a departure from the previous two one-year LTROs where the interest rate was fixed at 1.0% with full allotment. Wall Street Journal, Roubini Global Economics. December 3 . After nearly nine months of negotiations, Comcast , the nation's largest cable operator, announced an agreement to acquire NBC Universal from the General Electric Company . The deal valued NBC Universal at about $30 billion. The agreement will create a joint venture, with Comcast owning 51% and G.E. owning 49%. Comcast will contribute to the joint venture its stable of cable channels, which includes Versus, the Golf Channel and E Entertainment, worth about $7.25 billion, and will pay G.E. about $6.5 billion in cash, for a total of $13.75 billion. For now, the network will remain NBC Universal, but ultimately Comcast could decide to change the name. Almost immediately, the transaction reshapes the nation's entertainment industry, giving a cable provider a huge portfolio of new content, even as it raises the sector's anxieties about the future. New York Times. December 2 . The House Financial Services Committee voted for a bill that creates a council of regulators to monitor systemic risk , shifts costs of a failure to the financial industry, and gives regulators the power to break up even healthy firms, an amendment demanded by Rep. Paul Kanjorski (D-PA). The bill also includes a provision first recommended by Sheila Bair that would require secured creditors to bear losses of as much as 20% to cover costs to unwind a failed systemically important firm. The industry is lobbying hard to remove the latter provision and Chairman Frank said that it may still be revised. The Senate Finance Committee similarly voted for a measure to break up any institutions that may pose a systemic risk. Chairman Frank said the House Finance Committee will vote on a measure to police the $605 trillion over-the-counter derivatives market when it takes up broader legislation giving regulators more authority to police financial companies that pose a risk to the U.S. economy. Bloomberg.com. December 2 . Government-owned Dubai World spearheaded the emirate's rapid growth for decades, then disclosed its debt woes. On November 25, the government of Dubai announced the restructuring of Dubai World, one of the emirate's three state-owned investment giants, which would "ask all providers of financing to Dubai World and Nakheel to 'stand still' and extend maturities until at least 30 May 2010." Dubai World's overall liabilities total almost $60 billion, including those of units not part of its restructuring. Banks from Britain are the most exposed to the conglomerate. Banks Standard Chartered, HSBC, Lloyds and Royal Bank of Scotland, along with local lenders Emirates NBD and Abu Dhabi Commercial Bank are on the creditors' panel. Dubai World will meet its main creditors next week to discuss payment delay on $26 billion in debt. The most urgent question is the fate of Nakheel's $3.52 billion Islamic bond, which matures on December 14. Foreign banks had lent to Dubai government-linked firms on the implicit understanding that they were backed by the UAE—the world's third largest oil exporter flush with cash from a six-year boom in oil prices. "Something that has irritated international investors is that the government distanced itself from Dubai World, which legally speaking is true, but morally speaking, they had gone out of their way before to make that tie," one investor said. Moody's estimated the Dubai government and its related entities have debt of $100 billion—higher than the market estimate of around $80 billion. Dubai now has the tallest building in the world, and 11 skyscrapers that are taller than any European building. Edward Glaeser/Economix, Reuters. December 2 . Last week, state-owned Dubai World requested a six-month standstill on its debts , calling into question the emirate's ability and willingness to service the debt of its state-owned enterprises. This followed months of the emirate reassuring creditors and issuing over US$15 billion in sovereign debt. The debt standstill suggests the emirate had run out of options for a preemptive comprehensive bail-out from the well-resourced region. While the debt in question, including a US$3.5 billion bond issued by a property development subsidiary, was not sovereign-guaranteed, investors had treated it as such, relying on the fact that the size of Dubai World and the profile of the underlying projects would imply a government rescue. Uncertainty was heightened by illiquidity and poor price action from the holiday period while the lack of information and communication at the time of the request added to concerns about the complete scale of Dubai's implicit and explicit obligations—with on and off balance sheet debts by some estimates as high as $200 billion, or over 400% of GDP. Capital support makes an outright default of Dubai World's debt unlikely. Dubai World's restructuring implies that the creditors will take a share of the pain for the most distressed assets in the holding company's portfolio. The Dubai property development model will need to be reassessed in a lower-leverage world. Beyond the UAE, the reassessment of government support could draw further attention to other countries where state support is murkier. Attention has returned to sovereign credit risk, particularly in the Eurozone and its periphery, where weaker countries, like Greece and the more indebted of the Central and Eastern European countries, are under pressure. While Dubai World's financing issues are not a surprise and are relatively small given global credit losses, they are a reminder that the vulnerabilities and imbalances that contributed to the credit crunch have not disappeared. A fundamental message from Dubai World's problems is that investors should never assume implicit government support. Credit ratings for Dubai-owned companies now reflect this lesson, based on a fundamental credit outlook, not an implicit government backstop. Roubini Global Economics. December 1 . After Dubai, many wonder where the next debt bomb will be found. Even in rich nations like the United States and Japan, which are increasing government spending to shore up slack economies, mounting budget deficits are raising concern about governments' ability to shoulder their debts, especially once interest rates start to rise again. In Germany, long the bastion of fiscal rectitude in Europe, government debt outstanding is expected to increase to the equivalent of 77% of the nation's economic output next year, from 60% in 2002. In Britain, that figure is expected to more than double over the same period, to more than 80%. Public debt in Ireland is expected to soar to 83% of gross domestic product next year, from just 25% in 2007. Latvian borrowings will reach the equivalent of nearly half the economy next year, up from 9% a mere two years ago. Lithuania, Estonia, Bulgaria and Hungary all carry foreign debt that exceeds 100% of their GDPs, said Ivan Tchakarov, chief economist for Russia and the former Soviet states at Nomura bank. External debt is often held in a foreign currency, which means governments cannot use devaluation of their own currencies as a tool to reduce their debt when they run into trouble. Dubai's refusal to guarantee the debts of its investment arm, Dubai World, may set a precedent for other indebted governments to abandon companies that investors had in the past assumed enjoyed full state backing. Harvard economist Kenneth Rogoff said he expected a wave of defaults about two years from now, when the countries now serving as implicit guarantors turn their focus to economic problems at home. Some governments have taken on increasingly short-term debt . In the United States, for example, Treasury debt maturing within one year has risen from around 33% of total debt two years ago to around 44% this summer, while falling slightly since then, according to Wrightson ICAP. The United States will soon have debt problems of its own. "In another couple years as industrialized countries' own debts—in places like Germany, Japan and the United States—get worse, they will become more reluctant to open up their wallets to spendthrift emerging markets, or at least countries they view that way," Mr. Rogoff said. This might spell trouble for struggling nations. Facing a need to roll over their maturing debts, emerging markets may have to borrow around $65 billion in 2010 alone, according to Gary N. Kleiman of Kleiman International. But while government debt may be a problem, corporate debt may set off a crisis that is already unfolding. Corporate borrowing surged over the last five years. According to Mr. Kleiman, $200 billion of corporate debt is coming due this year or next year. He estimates that companies in Russia and the United Arab Emirates account for about half of that borrowing. New York Times. December 1 . The U.S. government promised tougher scrutiny of lenders participating in its marquee foreclosure-prevention effort and threatened to penalize companies that don't do enough to help struggling homeowners. The move is aimed at breaking a bottleneck in the Making Home Affordable program, which was launched in March but has been slow to reach many borrowers. Most of the 650,000 homeowners enrolled in the program are stuck in its initial phase and still must prove that they qualify for reduced mortgage payments. Moving those borrowers from trial modifications into permanent ones is a key test of the effort's effectiveness. Treasury Department officials would not say Monday how many loans have been permanently modified. But a recent report by the Congressional Oversight Panel, which is monitoring the government's Troubled Assets Relief Program, found that only about 1% of borrowers had moved from a trial modification into a permanent one. Washington Post. December 1 . U.S. manufacturing expanded in November for a fourth consecutive month, propelled by gains in orders and exports that signal growth will be sustained. The Institute for Supply Management's manufacturing index fell to 53.6, lower than forecast, from October's three-year high of 55.7, according to the Tempe, Arizona-based group. Readings above 50 signal expansion. Another report showed home sales will probably rise further. A report showing factory output in China rose at the fastest pace in five years, lifted earnings prospects at U.S. exporters including Caterpillar Inc. Growing demand from overseas and lean inventories may keep American assembly lines running into 2010, when government stimulus efforts begin to wane. Bloomberg.com. December 1 . Bread for the World published its latest annual report, the 2010 Hunger Report, titled A Just and Sustainable Recovery. It chronicles the U.S. socioeconomic effects of the worst recession in 75 years. A lot remains unclear as to how recovery will unfold, whether it will be just or sustainable. "Business as usual" would be neither. How the country recovers will be a de facto verdict on many of the actions that made this recession worse than it had to be. In the long run, the greatest threat to a sustainable recovery may come from a looming crisis: global climate change. The actions that drove the economy into recession are in a sense magnified by the exploitation of this one, irreplaceable natural resource. "We created a way of raising standards of living that we can't possibly pass on to our children," remarked one analyst. Continuing the reckless consumption of fossil fuels mirrors the actions of speculators who wrecked the economy by creating an unsustainable asset bubble. Climate change is both a huge challenge—and a huge economic opportunity. The 2010 Hunger Report embraces the job-creating potential of greening the economy, thereby creating the potential to reduce poverty. A green economy may mean different things to different people, but in this report we mean the transformation of the nation's energy infrastructure from today's heavy reliance on carbon-intensive fossil fuels to a much stronger embrace of clean, renewable forms of energy such as solar, wind, and geothermal. Creating a green economy also means investing in cost-effective strategies to boost energy efficiency, such as weatherizing homes and office buildings. In fact, this is the quickest way to reduce the greenhouse gas emissions that are causing climate change. Clean energy and energy efficiency can engage a sizeable share of the U.S. workforce for at least a generation and probably several. Public and private investments in greening the economy will ensure that the recovery is sustainable for years to come. A family's path out of poverty has several key elements. A job is still the best anti-poverty program there is. On the Internet: http://www.hungerreport.org/2010/ . November 29 . The Obama Administration asked Congress to pass legislation requiring SEC registration of advisers to hedge funds and other private pools of capital, including private equity funds and venture capital funds, with assets under management over a certain threshold. The Administration's proposal is broadly in line with proposals advanced by the G-20, which recommended the adoption of a confidential reporting regime pursuant to which hedge funds would be required to register and provide a regulator with information relevant to the assessment of systemic risk. Because many hedge funds fall within certain exemptions of the Investment Company Act and the Investment Advisers Act, those hedge fund are required neither to register with the SEC nor to disclose publicly all their investment positions. The exemption has enabled private funds to operate largely outside the framework of the financial regulatory system even as they have become increasingly interwoven with the financial markets. As a result, there is no data on the number and nature of these firms or ability to calculate the risks they pose to the broader markets and the economy. Thus, hedge funds and other private funds are not currently subject to the same set of standards and regulations as banks and mutual funds, reflecting the traditional view that their investors are more sophisticated and therefore require less protection. Jim Hamilton's World of Securities Regulation. On the Internet: http://jimhamiltonblog.blogspot.com/2009/11/acting-on-obama-proposal-house.html . November 25 . General Motors cast around for fresh options for Sweden's loss-making Saab after the collapse of its sale added a fresh complication to GM's attempts to restructure Opel. On November 24, GM's deal to sell Saab to niche luxury carmaker Koenigsegg, backed by China's BAIC, collapsed after the buyer walked away. Trolhattan, Sweden-based Saab, which has not made a profit since 2001, was facing uncertainty on Wednesday. Joran Hagglund, state secretary at Sweden's Industry Ministry, said GM appeared to still harbor hope of being able to sell Saab. The Swedish government had effectively ruled out a state bailout of the 60-year-old auto brand, saying on Tuesday that a private buyer was the only option for Saab. Earlier this month the U.S. automaker backtracked on months of talks to sell a majority stake in Opel to a consortium led by Canada's Magna International, opting to keep and revamp the business itself. GM was due to present Opel labor leaders with a restructuring plan. GM had said that the group would cut between 9,000 and 9,500 jobs out of the 50,000 strong workforce at Opel in Germany and in Belgium and British sister brand Vauxhall as part of the 3.3 billion euro/US$4.92 billion plan. GM said the turmoil unleashed by the failure of the Saab deal would not affect Opel. Some analysts say the European market in which Opel and Saab operate is burdened with as much as 20% too much production capacity. Reuters. November 25 . The global economy is recovering, helped by massive fiscal stimulus in many countries. Now attention is turning to what will happen after such programs are withdrawn. Most governments cannot afford to keep the economy on life support indefinitely, but the more effective stimulus is now, the greater the slowdown will be when it inevitably comes to an end. Although the global crisis originated in the rich world, developed and developing countries alike have primed the pumps. In the OECD fiscal stimulus has been worth about 2% of GDP in 2009 , and is expected to dip only moderately to 1.6% in 2010. Among OECD economies, South Korea has had the most aggressive stimulus , but the United States and Japan have been close behind. The OECD estimates that U.S. stimulus measures between 2008 and 2010 will be the equivalent of 5.6% of GDP . Germany is also spending substantially in an effort to boost the economy, but some European countries are less enthusiastic. The stimulus in France is worth only 0.7% of GDP, and in Italy there is no stimulus. Many non-OECD countries have also implemented large stimuli. China 's is the most prominent, with the country's direct fiscal measures amounting to 8% of GDP , according to Economist Intelligence Unit estimates. The boost to the economy has been amplified by the fact that Chinese banks, under government guidance, have increased lending to the private sector by a staggering US$1.4 trillion since the start of 2009, according to end-September data. Some of the loans would have been made anyway, but the amount of the increase is equivalent to 29% of GDP and almost double the previous record for a full year. The high costs of stimulus have polarized political opinion in several countries—most notably in the United States, where there is a fierce ideological debate about the effectiveness of state intervention. Despite such concerns, it seems clear that fiscal measures have contributed substantially to economic recovery in most countries, including the United States. For an indication of what might have happened without such support, U.S. housing starts fell by nearly 11% at an annualized rate in October because tax credits for new home-buyers were due to expire at the end of November (even though the government ultimately extended it to April 2010). Similarly, in Japan government incentives encouraged spending on durable consumer goods in the second and third quarters of 2009, but areas of consumer spending that did not benefit from fiscal support continued to languish. What is likely to happen as governments start to unwind stimulus programs? In most countries, the amounts being spent are already peaking or will do so in the first half of 2010, before gradually declining in the second half of that year and in 2011. The time lag between the disbursement of stimulus funds and their impact on the economy means that GDP growth in many countries in 2010 will still be inflated by government support. But the reversal will be fierce in 2011. This is why we expect U.S. GDP growth to fall from 2.5% in 2010 to just 1.3% in 2011. Economist. November 23 . Dominique Strauss-Kahn, Managing Director, International Monetary Fund , said in a speech in London, "the global economy remains very much in a holding pattern—stable, and getting better, but still highly vulnerable. The major advanced country areas in particular remain fragile, still dependent on policy support. Financial conditions have improved, but are far from normal. Signs show confidence returning, but banking systems in many advanced economies remain undercapitalized, weighed down by leaden legacy assets and, increasingly, non-performing loans. On the household side, weak financial positions and high unemployment will damp down on consumption for some time. And large public deficits add to vulnerabilities. So then, if we are to have sustained global growth, somebody else needs to step into the breach. The leading candidates are the surplus countries. And we can see some shifts in the right direction. China and other emerging Asian economies are shifting from exports toward domestic demand, aided by expansionary fiscal policy. But they have some way to go. This shift would be helped by stronger social security systems and higher spending on health and education, as well as reforms to boost access to credit. An appreciation of China's exchange rate, along with some other Asian currencies, will also need to be part of the package." IMF press release. November 23 . Japan 's public debt is approaching 200% of GDP, by far the highest in the OECD, as the global economic crisis has increased pressure on the government's fragile finances. Investors are concerned that the country's fiscal position is unsustainable, as a recent spike in Japanese government bond (JGB) yields uncomfortably suggested. But the Economist Intelligence Unit believes that Japan is not in imminent danger of crossing a "tipping point," beyond which the government's debt would be unmanageable. As in many other rich countries, the downturn has battered the Japanese government's finances. The contraction in the economy has hit tax revenues, while stimulus measures have pushed up government spending. We expect the fiscal deficit to rise sharply, to around 8% of GDP in both 2009 and 2010. Where Japan differs is that its public finances were already in bad shape—much worse than in other rich countries—when the crisis began. Public debt has been on a steady upward trend since the bursting of Japan's asset-price bubble in the late 1980s and early 1990s. Gross public debt was equal to 65% of GDP in 1990 but has risen to an estimated 192%. We think the ratio will continue to rise, exceeding 200% within the next two years. In the past, ill-conceived public-works spending in the "bridges to nowhere" mould has contributed to the problem. The fiscal accounts have run a deficit every year since 1993. But a greater factor has been the stagnation of nominal GDP as Japan became mired in a deflationary cycle. All this has increased the real burden of the country's debt. The new government of the Democratic Party of Japan (DPJ) has social-spending proposals for the fiscal year starting next April; these are expected to cost some ¥7 trillion (US$79 billion). The DPJ claims, somewhat dubiously, that it can find the requisite funds internally. There is clearly no prospect of an improvement any time soon. Economist. November 19 . Treasury Secretary Timothy F. Geithner testified before the Joint Economic Committee regarding the economic collapse of 2008 and the subsequent bailout of Wall Street firms by TARP ( P.L. 110-343 ). Rep. Peter A. DeFazio, D-Ore., previously, and Rep. Kevin Brady, R-Texas, at the hearing, expressed lack of confidence in Treasury actions and Geithner. The Treasury Secretary replied that regulators simply had no other choice, given the panic and near meltdown of the financial system that started with the failure of Lehman Brothers Holdings Inc. "The judgment made at the time was that we had the ability to prevent that, and that was the necessary and prudent thing to do," he said. "In acting that way, we were going to save the economy from even greater devastation than you saw in the wake of Lehman's collapse." CQ Today. November 19 . Fed eral Reserve auditing provision added to U.S. systemic risk bill. The House Financial Services Committee approved a series of amendments designed to enhance oversight of the Federal Reserve Board and create a government fund to pay for the failure of systemic institutions. The Committee voted to broaden the ability of the Government Accountability Office (GAO) to audit the Federal Reserve, despite concerns from the central bank that such scrutiny might lead investors to believe that its decisions on interest rates and other monetary policy would now be subject to political interference. This is due to Committee approval of a measure proposed by Representative Ron Paul of Texas that would allow Congress to order audits of all the Fed's lending programs as well as of its basic decisions to set monetary policy by raising or lowering interest rates. Rep. Paul has proposed this legislation before to no effect. The panel added these provision to a bill, H.R. 3996 , designed to stem economic risks posed by the failure of major financial institutions and create an orderly process for restructuring such institutions. It also approved by voice vote an amendment that would cap the Fed's emergency lending authority at $4 trillion. The Committee approved several amendments which would give the Federal Reserve Board oversight of systemically crucial companies and let the Federal Deposit Insurance Corp. resolve them. American Banker, New York Times, CQ Today. November 18 . Parent banks reaffirm commitment to Romania , European Commission and IMF say. The parent banks of the nine largest banks operating in Romania reaffirmed their commitment to maintain their exposure to the country and ensure adequate capital levels over 10% for their affiliates. The nine parent banks with subsidiaries in Romania are: Erste Group Bank, Raiffeisen International, Eurobank EFG, National Bank of Greece, UniCredit Group, Société Générale, Alpha Bank, Volksbank, and Piraeus These banks emphasized the need for the availability of appropriate investment instruments. All parent banks complied with their commitments to provide additional capital needs for 2009 as of end-September 2009, thus ensuring the capital-adequacy ratio of their affiliates to remain above 10%. IMF press release. November 12 . Foreclosure filings were down 3% in October , the third consecutive month-over-month dip, according to RealtyTrac, the online seller of foreclosed homes. Foreclosure rates are still up 18% compared with October 2008. But the month-over-month decrease followed a 4% drop in filings during September and a 1% fall in August. James Saccacio, RealtyTrac's CEO, said "The fundamental forces driving foreclosure activity in this housing downturn—high-risk mortgages, negative equity, and unemployment—continue to loom over any nascent recovery." Broad economic distress, such as the rising unemployment rate, has RealtyTrac spokesman Rick Sharga thinking that declining foreclosures may be artificial rather than a real trend. "Processing delays and legislative actions are slowing down foreclosures," not actual improvement in the market, he said. The slowdowns include banks taking time to judge whether some loans are eligible for the Making Home Affordable program, President Obama's foreclosure-prevention initiative that was passed last spring. New state-level regulations have also lowered foreclosure statistics. Those factors may have especially delayed bank repossessions. RealtyTrac reported 77,077 REOs in October, down 12.2% compared to September, when nearly 88,000 homes were lost. For the year, there have been a total of 700,929 properties taken back by banks.Foreclosures require a double trigger, said Sharga. The first is that mortgage borrowers must have experienced a financial setback, such as medical bills, divorce, unemployment, and the like. The second trigger is owing more on the mortgage than the home is worth. Millions of borrowers are in that position: More than 20% of borrowers are underwater, according to Zillow. Most will continue to pay off their mortgages. However, if a family member loses their job or someone gets sick or the loan resets to a much higher interest rate, that's when the home may be lost. The "sand states," Nevada, California, Florida, and Arizona, continued to suffer the worst foreclosure problems. Nevada had the highest foreclosure rate in the nation, one filing for every 80 housing units. In second place was California, where filings dipped 1% to one filing for every 156 households. The state, by far the most heavily populated, had more filings, 85,420, than any other. Florida, with 51,911 filings, had the third highest foreclosure rate, one for every 168 households. Arizona was fourth with one for every 200. Las Vegas is still the worst hit metro area. More than one in every 68 households received a filing during October, five times the national average. CNNMoney.com November 12 . The American dollar is in the midst of a large fall in its value , or depreciation, as measured against other major currencies. The decline has been steady since 2002 and our currency is down about 35% from that peak. After strengthening slightly more than 10% during the global financial crisis of the past 18 months, the dollar is again falling back toward its pre-crisis lows, representing its weakest international value since 1967. There is a definite possibility that the dollar could soon decline further or faster. In addition to a financial crisis, we also have a large current-account deficit, meaning that we buy more from the world than we sell. The deficit was $100 billion in the latest available (second quarter) data, which is around 3% of gross domestic product, and we finance that with capital inflows from abroad. (The current-account deficit is down from around 6%, but two-thirds of the decline is due to the lower price of oil.) In the past, many of those inflows have been private investments of various kinds, but as investors around the world question whether U.S. government debt, and its dollars, are really worth the paper, it is increasingly difficult for us to finance our deficit with the outside world. The 1980s classic, Stephen Marris's "Deficits and the Dollar: The World Economy at Risk," stresses that a rapidly falling dollar would push up United States inflation, resulting in higher interest rates and a deep recession (pp. lx-lxi). Writing in the latest edition of Foreign Affairs, Fred Bergsten emphasizes that such outcomes are still possible today. A weakening dollar will cause inflation fears, so yields on long-term government bonds will rise to compensate investors for inflation, and we will need to pay more and more to finance our large debts. The idea that the American dollar might follow emerging markets such as Russia in 1998 and Argentina in 2002, or Britain in the 1970s—and so depreciate by 50% or more in a relatively short time—is certainly implausible now. But such a "doom scenario" is not unrealistic in the future without change. In this context, the American government needs to control its budget deficit to keep this adjustment on track, and to stop confidence in the dollar from falling further. Our government collects far too little in taxes for what it spends. There is no choice but to raise taxes soon and rein in spending. Peter Boone and Simon Johnson, New York Times/Economix November 12 . Wen Jiabao, Chi na 's premier , pledged U.S.$10 billion in cheap loans to Africa over the next three years, and refuted claims that the Asian powerhouse is only looking to exploit Africa's resources. The loan pledge for Africa was double a U.S.$5 billion commitment made in 2006. Wen said eight new Chinese policy measures aimed at strengthening relations with Africa were "more focused on improving people's livelihoods," underlining what he called Beijing's "selfless" engagement in Africa, the Washington Post reported. He said China will construct 100 new clean-energy projects on the continent and gradually lower customs duties on 95% of products from African states with which it has diplomatic ties. The IMF has expressed concern about African governments taking on too much debt from Chinese lenders. But Wen said China would write off some loans it had made to the poorest and most heavily indebted countries. African heads of state, including Zimbabwe's Robert Mugabe and Sudan's Omar Hassan al-Bashir, lauded China's support. But others said African nations needed to devise their own development plans to take full advantage of Chinese finance. Last year, European Union lawmakers assailed China for courting "oppressive" African governments, such as Sudan, to satisfy its soaring demand for oil and raw materials. "China is very stung by criticism from so-called Western quarters in recent years," Martyn Davies, CEO of Frontier Advisory, a Johannesburg-based research and strategy consulting company, told Bloomberg news. China is trying "to have a softer approach" in an effort to rebut the notion that its interest in Africa is "extractionist in nature." The pattern of trade—raw materials going to China and Chinese finished goods flooding Africa—has angered some Africans. "We are sick and tired of the old model, where China comes to Africa and extracts raw materials and goes back to China," Zimbabwean Deputy PM Arthur Mutambara said in the Zimbabwe Times in September. "We are not now interested in that." Source: Global Development Briefing. November 12 . Senegal has hailed the completion of an assembly plant for Chinese buses in its western city of Thies, Agence France-Presse (AFP) reports. The construction of the plant was funded by a loan of 11 billion CFA francs/U.S. $24.7 million from China, and spearheaded by Chinese company King Long. The Chinese buses to be assembled at the plant are part of a partnership with Senegalese company Senbus, which supplies the public transport system in Dakar. AFP reports that King Long's operations in Senegal are replacing those of India's Tata Motors, which assembled more than 500 minibuses over 2005–2008 for public transport. The significance of this project is that Senegal continues to benefit from its diplomatic ties to China. Since 2005, when it changed its position on Taiwan to favor China's "One China" policy, Senegal has been the recipient of numerous aid and loan packages. IHS Global Insight. November 11 . Strong data from China released November 11, especially in factory output and retail sales, underscored the speed of the giant economy's rebound , thanks to extensive government stimulus measures that have put the economy on track to grow more than 8% in 2009. Industrial output and retail sales for October jumped 16.1% and 16.2%, respectively, from a year earlier. The increases also were higher than in September, showing that the pace of recovery was continuing to increase. Separately, the customs office said exports in October had been 13.8% below the level of a year earlier, while imports had fallen 6.4%, more than expected. China's trade surplus for the month swelled to $24 billion, nearly double the level in September. The data confirmed a picture that has been emerging over the past few months: buoyed by a huge stimulus package announced a year ago, as well as by lower interest rates and greatly increased lending by state-owned banks, China has recovered much more forcefully than other leading economies. The World Bank and the International Monetary Fund upgraded their growth forecasts for the country—to 8.4% and 8.5% for this year. Data also out Wednesday, showed that bank lending had slowed to 253 billion yuan, or $37 billion, in October, from 516.7 billion yuan in September. China said Wednesday that it would consider major currencies in guiding the yuan, suggesting a departure from an effective peg to the dollar that has been in place since the middle of last year, Reuters reported from Beijing. It was the first time since a revaluation and establishing of exchange rate changes in July 2005 that the People's Bank of China had strayed from the language of keeping the yuan "basically stable at a reasonable and balanced level" in quarterly reports. The comments came before a visit to China next week by President Barack Obama and amid growing pressure from other countries for Beijing to be more flexible in handling the yuan in the face of dollar weakness. New York Times November 11 . The relationship between AIG and some of its U.S. government paymasters has come close to breaking point over compensation at the stricken company. Tensions between the new board of AIG, and Kenneth Feinberg, the administration's special master on pay, came out into the open during a three-hour meeting in New York last week. AIG's directors, led by chief executive Robert Benmosche, told Mr. Feinberg his recent decision to slash salaries for 12 of its top executives by more than 90% was triggering high-level departures, upsetting employees' morale and reducing the chances the company will repay federal aid. Mr. Feinberg replied that AIG "did not get" the fact it has been bailed out with billions of dollars in taxpayers' funds and had to show restraint on compensation. Financial Times November 10 . The U.S. government lost the first major criminal trial spawned by the financial crisis as two former Bear Stearns hedge-fund managers were acquitted of securit ies fraud . Wall Street Journal October 7 . A U.S. House of Representatives' plan to impose rules on the enormous and largely unregulated financial derivatives market is getting a cautious thumbs up from industry groups, who had worried that the bill could cripple some businesses. House Financial Services Committee Chairman Barney Frank, D-MA, released draft legislative text late last week that would apply federal scrutiny to specially tailored financial instruments that are used by companies from airlines to manufacturers to insure against unanticipated costs and other risks. Currently, much of the $580 trillion market in so-called over-the-counter derivatives operates outside of government oversight. Congressional lawmakers, along with the Obama administration, are looking to change that after some companies, notably insurance giant American International Group Inc., took huge losses on bad derivatives bets during the financial crisis. Frank's proposal would give broad authority to regulators to require that a third-party clearinghouse approve such derivative contracts and guarantee that both parties to these contracts will fulfill their terms. The goal is to limit threats to the broader financial system. If a clearinghouse accepts the particulars of a derivative contract, it will cover any losses if one of the parties defaults. For companies that are big participants in this market, the bill would encourage the use of clearinghouses by imposing higher amounts of collateral be held in reserve for trades that aren't cleared. When setting the rules for what derivatives need to be cleared, the bill requires regulators to consider trading liquidity, total exposure, and questions of systemic risk. Congressional Quarterly. CQ Today. October 7 . The idea of a tax credit for companies that create new jobs , something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation. The proposal has some bipartisan appeal among politicians eager both to help their unemployed constituents and to encourage small-business development. Legislators on Capitol Hill and President Obama's economic team have been quietly researching the policy for several weeks. "There is a lot of traction for this kind of idea," said Representative Eric Cantor of Virginia, the Republican whip. "If the White House will take the lead on this, I'm fairly positive it would be welcomed in a bipartisan fashion." In addition to the economists working on the proposal, some heavyweights support the concept, including the Nobel laureate Edmund S. Phelps, Dani Rodrik of Harvard, and former Labor Secretary Robert B. Reich. New York Times. October 7 . A U.S. Federal Reserve report found that U.S. banks are slow to take losses on their commercial real estate loans that have been hit by slumping property values and rental payments, the Wall Street Journal said. Citing a September 29 presentation made by Fed analyst K.C. Conway to banking regulators, the paper said the report's remarks suggested that regulators were preparing for a rerun of housing-related losses that plagued many banks after the residential property bubble burst. Conway is a senior real estate analyst at the Federal Reserve Bank of Atlanta. The Journal said a Fed official had confirmed the authenticity of the document, but added it did not represent the central bank's formal opinion. Conway's report predicted that commercial real-estate losses would reach roughly 45% next year, the Journal said. CNBC.com/Reuters. October 6 . The Reserve Bank of Australia (RBA) emerged as the trend-setter among the G-20 with its decision to increase the official cash rate from 3% to 3.25%. Australia's economy stared down recession and it was the only developed nation to grow in the first half of 2009, despite the global economic downturn, with the help of massive counter-cyclical macroeconomic stimulus. At the start of the rate-cutting cycle the official cash rate (OCR) stood at 7.25%, then between September 2008 and April 2009, the OCR was reduced 425 basis points to the 49-year low of 3.00%. Monetary policy was then supported by an aggressively expansionary fiscal stance implementing two major stimulus packages worth a cumulative A$50 billion/U.S.$41.2 billion, and an expansionary fiscal year 2009/10 budget. The combination of monetary and fiscal stimulus fuelled private consumption and business investment and allowed the Australian economy to grow by 0.6% quarter on quarter in the three months to June. Beyond macroeconomic stimulus, growth has also been driven by continued strong demand from China for commodities exports such as coal and iron ore. Following a string of better-than-expected data releases the RBA moved to a neutral policy bias at its August meeting. IHS Global Insight. October 6 . The U.S. dollar's value plunged on October 6, while the price of gold simultaneously hit a record high ($1,045 per ounce). The near-term causes of the latest round of dollar decline are obvious. Australia's central bank raised interest rates slightly on October 6. By itself, this would not be an exciting development, but it comes fast on the heels of the G-20 Pittsburgh summit in which all participants (including Australia) seemed to imply that "tightening monetary policy" (i.e., raising rates) was some way off. So if Australia begins to tighten—an implication that its economy is picking up—market participants reckon that more commodity producers and other parts of the Pacific Rim will soon feel the need to do likewise. At the same time, the United States has signaled that interest rates here will remain low for the foreseeable future. If you can borrow in dollars and buy Australian (or Korean or Chinese, etc) government debt, you are in what is known as a positive "carry trade"—because of low interest rates here, you pay close to zero to borrow the dollars and you can invest in Australia at more than 3% interest (or you can plunge into speculative Chinese automotive stocks). The United States could counteract all of this by making warning noises about potential intervention in the currency market: If you borrow heavily in dollars to lend in Chinese renminbi, you can be easily rattled by the prospect that G-7 industrialized nations will intervene in a coordinated manner to strengthen the dollar. But the G-7 met this weekend and made no statement about the dollar—despite what must have been considerable pressure from Japan, France, Germany, and Italy, all of which are always worried about a rapid weakening of the dollar because they are so dependent on exports. The U.S. officials can continue to allow the dollar to float because ... we're not currently afraid of inflation. Simon Johnson, The Daily Beast. October 6 . IMF Managing Director Dominique Strauss-Kahn told policymakers from 186 countries gathered for the IMF-World Bank Annual Meetings in Istanbul that global cooperation had saved the world from a far worse crisis and leaders should now seize the opportunity to shape a post-crisis world. A year ago, people feared the worst. But after concerted action to combat the crisis, the world had pulled back from the brink. "Even if it is much too early to declare victory, we have at least stepped onto the road to recovery." Strauss-Kahn told the world's economic and monetary policymakers they have an historic opportunity to create the conditions necessary for "a virtuous cycle of peace and prosperity" if they continue to work together and with the IMF on key policy measures. Strauss-Kahn noted the "profound change" that formal and informal cooperation among nations had brought, adding that "in the face of crisis, countries came together to face common challenges with common solutions, focusing on the global common good." The IMF chief pointed to fiscal stimulus amounting to nearly 2% of world gross domestic product in the past year as a critical factor in staunching the crisis, and he stated that countries are moving to address key weaknesses in their financial sectors, which will further underpin recovery if they stay the course on these reforms.He asked the Fund to address four key reform areas—the IMF's mandate, its financing role, multilateral surveillance, and governance. These " Istanbul Decisions ," he said, will be a focal point of IMF activities for the coming year. The four decisions comprise: (1) a review of the mandate of the IMF, through all macroeconomic and financial sector policies that affect global stability; (2) assessing how to build on the success of the Flexible Credit Line (FCL) and provide insurance to more countries as the lender of last resort and reduce the need for countries to self-insure against crisis by building up large reserves; (3) endorsement of the G-20 proposal for the IMF to help with their mutual assessment of policies. This represents a new kind of multilateral surveillance for the IMF; and endorsement of IMF governance reform agreed by the G-20. This would shift quota shares toward dynamic emerging markets and developing countries by at least 5% from over-represented to under-represented countries, by January 2011. IMF press release. October 6 . The General Motors path out of bankruptcy isn't proving to be as smooth as its quick trip through it. In the past week, the company's plans to sell its Saturn brand to auto retailer Penske Auto Group fell through, forcing GM to start winding down a network of about 350 dealerships. Then, its plans to sell Hummer to a Chinese industrial company missed a target date of closing by Sept. 30. CNN.com. October 6 . The Obama administration's pay czar is planning to clamp down on compensation at firms receiving large sums of government aid by cutting annual cash salaries for many of the top employees under his authority, according to people familiar with the matter. Instead of awarding large cash salaries, Kenneth Feinberg is planning to shift a chunk of an employee's annual salary into stock that cannot be touched for several years. This move would mark the government's first effort to curb the take-home pay of managers from auto executives to financial traders. Mr. Feinberg is expected to issue by mid-October his determination on compensation packages for 175 of the most-highly compensated executives and employees at the seven firms he oversees. The companies are: American International Group Inc., Bank of America Corp., Citigroup Inc., General Motors Co., GMAC Financial Services Inc., Chrysler LLC and Chrysler Financial. Wall Street Journal. October 2 . American nonfarm payroll employment continued to decline in September, losing 263,000 jobs, and the unemployment rate rose from 9.4% in July to 9.7% in August, and now to 9.8% in September, the U.S. Bureau of Labor Statistics reported. The largest job losses were in construction, manufacturing, retail trade, and government. Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.6 million to 15.1 million, and the unemployment rate has doubled to 9.8%. Though the job market continued to worsen, the pace of deterioration remained markedly slower than earlier in the year, when roughly 700,000 jobs a month were disappearing. U.S. Bureau of Labor Statistics, New York Times. October 1 . International Monetary Fund (IMF) releases its World Economic Outlook (WEO). Key WEO projections include: World growth. After contracting by about 1% in 2009, global activity is forecast to expand by about 3% in 2010 (see table). Advanced economies are projected to expand sluggishly through much of 2010. Average annual growth in 2010 will be only modestly positive at about 1¼, following a contraction of 3½% during 2009. Emerging and developing economies. Real GDP growth is forecast to reach 5 percent in 2010, up from 1¾% in 2009. The rebound is driven by China, India, and a number of other emerging Asian countries. Economies in Africa and the Middle East are also expected to post solid growth of close to 4%, helped by recovering commodity prices. Visit the World Economic Outlook on the internet at http://www.imf.org/external/pubs/ft/weo/2009/02/index.htm . September 28 . According to an IMF staff study of 15 emerging market countries with IMF-supported programs, recent IMF programs in these countries are delivering the support needed to help these countries weather the worst of the global financial crisis, through increased resources, supportive policies, and more focused conditionality. "What this study tells us is that, with IMF support, many of the severe disruptions characteristic of past crises have so far been either avoided or sharply reduced," IMF Managing Director Dominique Strauss-Kahn said. The study finds that support from the IMF has enabled countries to lessen the effects of the crisis by avoiding currency overshooting and bank runs—traits of past crises. At a time when capital flows were severely curtailed, the IMF provided large-scale financial assistance to countries in need. The IMF has sharply increased the resources it has available to lend, from about $250 billion to $750 billion, following pledges made by the Group of Twenty leading emerging and advanced economies after the London Summit in April 2008. As part of its efforts to support countries during the global economic crisis, the IMF also conducted a major overhaul of how it lends money by offering higher loan amounts and tailoring loan terms to countries' circumstances. The IMF has been instrumental in bringing down borrowing costs for emerging markets that had spiked following the bankruptcy of Lehman Brothers. September 28 . World Trade Organization , WTO, Director-General Pascal Lamy, in his address to the WTO Public Forum, said the G20 must now "walk the talk" on Doha (multilateral trade negotiations). He stated that G20 leaders at their Pittsburgh Summit agreed that "their negotiators now embark on the work programs that we have established for the next three months, and that they then assess our collective ability to achieve our 2010 target". World Trade Organization. September 24-25 . G20 Pittsburgh summit . The leaders of the Group of Twenty (G20) met in Pittsburgh to "turn a page on the era of irresponsibility" by adopting reforms to "meet the needs of the 21 st century economy." The final communiqué pledged not to withdraw stimulus measures until a durable recovery is in place; to co-ordinate their exit strategies, while also acknowledging that timing will vary from country to country depending on the forcefulness of measures in place; for macroeconomic policies to be harmonized to avoid imbalances—America's spendthrift ways and deficits; Asia's savings glut—that made the financial crisis so much worse; for the G20 to replace the narrower, Western-dominated G8 as the primary global economic facilitator, providing China, India and Brazil a permanent seat at the table. In return, it is hoped that they will be more flexible in other areas, such as climate change and trade; for the G20 to eliminate subsidies on fossil fuels, but only "in the medium term"; and for trade, a weak commitment to get the Doha round back on track by next year. The governance structure of the rejuvenated IMF also is to change with "under-represented," mostly developing, countries getting at least 5% more of the voting rights by 2011. The Financial Stability Board (FSB) , a group of central bankers and financial regulators, also was broadened to include the big developing countries, and from now on it is to take a lead role in coordinating and monitoring tougher financial regulations and serve, along with the IMF, as an early-warning system for emerging risks. The FSB is to help ensure that the rules governing big banks are commensurate with the cost of their failure. The main tool for this could be higher capital requirements. All agree that banks need more capital and that a greater share of it should be pure equity, the strongest buffer against loss. The G20 communiqué also supported forcing banks to hold especially high levels of capital in good times so they are better prepared to ride out the bad—though it did not endorse an American proposal for big banks to hold more than smaller ones. The G20 has set a deadline of the end of 2012 for new standards to be adopted, with exact figures to be decided by the end of 2010. France and Germany had pushed hard for firm numerical limits on bonuses as a proportion of revenues or capital. The communiqué was closer to the Americans' position to tie bankers' pay more closely to long-term value creation—more paid in restricted shares, with employers able to claw back a portion if trades lead to big losses and multi-year bonus guarantees to be avoided. The Economist. September 25 . Why did hedge funds , supposedly the bad boys of the financial world, come through last year's crisis in relatively good shape ? HedgeFund Intelligence data shows that U.S.-based funds suffered an average loss of 12.7% in 2008. That's nothing like the 38.5% decline for the Standard & Poor's 500. Losses for banks were much higher still. Some hedge funds got pounded because they made bad bets or because investors decided to pull out their money. Nearly 500 funds disappeared last year, according to HedgeFund Intelligence, but that's out of a universe of roughly 7,000. The salvation of the hedge fund industry was that its existential crisis came 10 years earlier, with the 1998 implosion of Long-Term Capital Management. After that fund went down, the hedge funds' lenders got nervous and tightened their standards. As a result, in the past decade the supposedly go-go hedge funds were actually less leveraged than many banks. To see how the borrowing mania hit banking, look at confidential numbers for big Swiss banks, once renowned for their caution. Debt ratios at the two largest banks rose in the past dozen years from 90% to 97%—meaning that they had 97 Swiss francs of borrowed money for every three francs of capital. In the banks' trading accounts, the use of borrowed money was even greater. One study calculated that by 2006, the traders at big Swiss banks were borrowing 400 times their capital—which was about 100 times as high as the leverage ratio of a typical hedge fund. Washington Post. September 24 . The Shared National Credit Program (SNC) 2009 Review, an annual inter-agency report, stated that U.S. credit quality deteriorated to record levels with respect to large loans and loan commitments. The report says that the level of losses from syndicated loans facing banks and other financial institutions tripled to $53 billion in 2009, due to poor underwriting standards and the continuing weakness in economic conditions. According to the report, classified assets rated 'special mention', 'substandard', 'doubtful' and 'loss', touched $642 billion, representing 22.3% of the SNC portfolio, compared with 13.4% a year ago. The report also said foreign banks held about 38% of the $2.9 trillion in loans, while hedge funds, pension funds, insurance companies and other entities held about 21%. The report also said that non-banks continued to hold a "disproportionate share" of classified assets compared with their total share of the SNC portfolio. They hold 47% of loans seen as 'substandard', 'doubtful' and 'loss'. The SNC review is prepared by the Federal Reserve Board of Governors, Federal Deposit Insurance Corp (FDIC), Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). Reuters. September 24 . The U.S. National Association of Realtors reported sales of existing U.S. homes fell a seasonally adjusted 2.7% in August following four months of increasing sales. Economists said it was too soon to say whether the drop represented a hiccup in the market or a sign of deeper problems for the housing market. In August, median home prices across the country fell by nearly $4,000, to $177,700, and were down 12.5% from a year earlier. New York Times. September 24. Former Federal Reserve chairman Paul Volcker testified before the House Financial Services Committee that the Obama administration's proposed overhaul of financial rules would preserve the policy of "too big to fail" and could lead to future banking bailouts. He endorsed a stricter separation between banks that hold deposits and investment banks . He said the "safety net" should be limited clearly to commercial banks, while investment banks should be excluded. He urged lawmakers to make clear that nonbank companies would not be saved with federal money. Mr. Volcker said he did not differ with the administration on most of its proposals and that he took "as a given" that banks would be bailed out in times of crisis. But he said he opposed bailouts of insurance companies like the American International Group, the automakers' finance arms and others. "The safety net has been extended outside the banking system," Mr. Volcker said. "That's what I want to change." New York Times. September 24 . China has been an essential player in fostering global economic recovery . As one of the first countries to announce a massive stimulus package last November, China brought increased stability to markets when it was needed. Today's conventional wisdom holds that in order to ensure a stable global recovery, Chinese consumers must increase their consumption patterns to fill the economic void left by their battered American counterparts. In regards to stimulating domestic consumption, assertions that the Chinese aren't spending enough may be overblown. For example, Morgan Stanley released a report last week arguing that China's under-consumption is over-stated, and that Chinese consumption is likely to increase. This week, China took two steps towards assuming a greater international leadership role in putting the global economy back on its feet. First, Hu Xiaolian, deputy governor of China's central bank, proposed the formation of a multinational sovereign wealth fund to assist developing countries gain access to capital. Second, in a speech to the U.N. yesterday, Chinese president Hu Jintao announced that China will take an active role in providing assistance to the developed economies most hit by the crisis. The English-language China Daily reports: that China will increase support for those hit hard by the global financial crisis, earnestly implement relevant capital increase and financing plans, intensify trade and investment cooperation and help raise their capacity for risk-resistance and sustainable development. Crisis Talk (World Bank). September 24 . The McKinsey Global Institute in its sixth annual survey of the world's capital markets says that the mature financial markets of North America, Europe and Japan may have reached an "inflection point," beyond which their growth will be much slower than the breakneck expansion of the past two decades. In emerging markets, though, they still see plenty of room to grow. The report estimates that the total value of global financial assets—including stocks, bonds, government debt and bank deposits—fell by $16 trillion in 2008, the largest setback since at least 1990. Financial globalization also took a big hit, as total global capital flows fell to $1.9 trillion in 2008, down 82% from 2007. Among developed nations, the shrinkage of financial markets was particularly pronounced. The total value of U.S. financial assets declined $5.5 trillion in 2008 to $54.9 trillion, putting an end to a two-decade run during which the value of the U.S. financial markets, expressed as a percentage of the country's annual economic output, grew more than twice as much as it did in the previous 80 years. In Russia, the total value of financial assets stood at only 68% of gross domestic product as of the end of 2008, compared to nearly 4 times GDP in the U.S. The ratio of financial assets to GDP for all of Eastern Europe was 99%, for Latin America 119%, for India 162%, and for emerging Asia 232%. Wall Street Journal. Real Time Economics. September 24 . In preparation for the Pittsburgh G20 meeting, U.S. negotiators propose to press Group-of-20 world leaders to raise the stakes in the Doha Development Agenda negotiations by directing their negotiators to start identifying the "gaps" in the still incomplete modalities texts in agriculture, nonagricultural market access and services. The fate of the Doha agreement would largely depend on two major players—the United States and China, commented one envoy. He argued that if there is an agreement between the two members, others—including India, Brazil, and South Africa—will follow. Brazil is considering hosting another Group-of-20 trade ministerial summit November 28 and 29 near Geneva for what trade diplomats describe as a crucial final attempt to increase pressure on key members to enter into hard bargaining on the few issues left in Doha negotiations on agriculture and market-opening for industrial goods. The ministerial reportedly will take place just before the scheduled biennial meeting of the World Trade Organization on November 30. Washington Trade Daily. September 23 . Representative Barney Frank, of Massachusetts announced a plan that preserved the core of the White House's proposal for a new U.S. consumer financial protection agency , while jettisoning a smaller though symbolically significant provision. The agency's core mission would be to protect consumers from deceptive or abusive credit cards, mortgages and other loans. Mr. Frank also announced an ambitious schedule to complete the House's work on the legislation over the next two months. The Obama administration embraced the changes. New York Times. September 23 . Switzerland and the United S tates have signed a treaty to increase the amount of tax information they share to help crack down on tax evasion, Swiss officials said Wednesday. The agreement follows a model set out by the Paris-based Organization for Economic Co-operation and Development, OECD, designed to make it harder for taxpayers to hide money in offshore tax havens. U.S. tax authorities will be able to request information on Americans suspected of concealing Swiss bank accounts, the Swiss Finance Ministry said. Associated Press. September 23 . The United Steelworkers union filed a new petition asking for U.S. duties on coated paper from both China and Indonesia . The steelworkers union is joined in its latest trade case by paper manufacturers NewPage Corp of Miamisburg, Ohio; Appleton Coated LLC of Kimberly, Wisconsin; and Sappi Fine Paper North America of Boston, Massachusetts, which together employ about 6,000 union workers at paper mills in nine states. "Neither the companies nor the union will tolerate being obliterated without asking our government to investigate and enforce the rules of fair trade," Steelworkers President Leo Gerard said in a statement. Reuters. September 22 . The United States wants world leaders to agree this week to launch a major rethink of the world economy in November as they try to strengthen the global economy after its near meltdown, Reuters news service reported. Documents outlining the U.S. position ahead of the September 24-25 Pittsburgh summit of Group of 20, G20, leaders said exporters, which include China, Germany and Japan, should consume more, while debtors like the United States must boost savings. "The world will face anemic growth if adjustments in one part of the global economy are not matched by offsetting adjustments in other parts of the global economy," said the document obtained by Reuters. President Obama, cutting through the coded diplomatic courtesies, made the case more bluntly for a change in business as usual. "We can't go back to the era where the Chinese or Germans or other countries just are selling everything to us, we're taking out a bunch of credit card debt or home equity loans, but we're not selling anything to them," he said on September 20. European Central Bank President Jean-Claude Trichet said on September 21 that persuading Europe, the United States and China to accept International Monetary Fund advice on economic polices may be difficult. G7 sources told Reuters there was a renewed determination to act to stem the global imbalances because the crisis had underlined the interconnectedness of the financial system and how joint action could be more effective. China has long been the target of calls from the West to get its massive population to spend more. It may be reluctant to offer a significant change in economic policy when Chinese President Hu Jintao meets Obama this week. Washington Trade Daily. September 16 . Reports on industrial production and consumer prices today showed the U.S. economy is emerging from the economic slump without spurring inflation. Output at factories, mines, and utilities climbed 0.8% last month, exceeding the median estimate of economists surveyed by Bloomberg News, data from the Federal Reserve in Washington showed. The Fed revised July's increase up to 1% from the previously reported 0.5%. The back-to- back gain was the biggest since late 2005. The Labor Department said the cost of living climbed 0.4%, and was down 1.5% from August 2008. Another report today showed an index of homebuilder confidence climbed in September for a third consecutive month. The National Association of Home Builders/Wells Fargo's measure climbed to 19, the highest level since May 2008, from 18 in August, the Washington-based group said. A reading below 50 means most respondents view conditions as poor. Bloomberg.com. September 16 . Japan 's parliament named Yukio Hatoyama as the country's new P rime M inister , a move that formalizes the first change of government by a political party with a solid majority for over half a century. Mr. Hatoyama is president of the center-left Democratic Party of Japan, DPJ. He told a news conference after his appointment, "History has not changed yet. Whether history will really change will hinge on our future works." The DPJ's rise to power marks the end of the Liberal Democratic Party's, LDP's, almost unbroken rule since 1955. Although the LDP helped to engineer Japan's economic revival in the post-war era, the party has not had the same success in reviving the country's economy following the bursting of an asset bubble in the early 1990s. The LDP also become mired in a number of financial scandals that chipped away at voter trust. The DPJ hopes to steer the economy back to prosperity while restoring trust in politics. Hatoyama's coalition government, with its two junior partners the Social Democratic Party and the People's New Party, is expected to try to boost domestic demand by giving money to families with children, cutting highway tolls and gasoline taxes and offering increased aid to the unemployed. Wall Street Journal. September 16 . New York Attorney General Andrew Cuomo subpoenaed five members of Bank of America Corp.'s board of directors amid a probe of the bank's purchase of Merrill Lynch & Co., said a person close to the investigation. The board members will be asked to testify under oath, the person said. The Wall Street Journal reported on its website today the five directors are Thomas May, chief executive officer of NStar; William Barnet III, a Spartanburg, South Carolina, developer; retired Morehouse College President Walter Massey; Boston investment firm owner John Collins; and retired Army General Tommy Franks. The bank will "cooperate with the attorney general's office as we maintain that there is no basis for charges against either the company or individual members of the management team," according to a statement by the Charlotte, North Carolina-based Bank of America. The subpoenas reflect continuing pressure on bank Chief Executive Officer Kenneth Lewis after U.S. District Judge Jed Rakoff in New York this week refused to accept a settlement between the bank and the Securities and Exchange Commission. The $33 million agreement would have resolved the SEC's claim that the bank deceived investors in November about bonuses to be paid to executives at Merrill Lynch & Co. Bank of America bought Merrill in January. Bloomberg.com. September 16 . Investors turned the most bearish on the U.S. dollar in 18 months as signs of a recovery in the global economy reduced demand for the currency as a refuge, a survey of Bloomberg users showed. The world's main reserve currency will fall and Treasury yields will rise over the next six months, according to 1,851 respondents in the Bloomberg Professional Global Confidence Index. Sentiment toward the greenback fell to 30.8 in September, from 38.8 in August, according to the survey. The reading is the lowest since it dropped to 30.3 in March 2008, and has tumbled from a high of 68.86 a year ago. The measure is a diffusion index, meaning a reading below 50 indicates Bloomberg users expect the dollar to weaken. Bloomberg.com. September 16 . When the U.S. Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as shock therapy during a crisis. Now the question is becoming whether the housing market can function without it. As many as 40% of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February. New York Times. September 15 . The heads of the Organization for Economic Cooperation and Development, OECD, the United Nations Conference on Trade and Development, UNCTAD, and the World Trade Organization, WTO, have drafted a joint report to G-20 leaders meeting in Pittsburgh later this month concerning protectionist acts by G-20 nations. The report states that G-20 and advanced developing countries have refrained from extensive use of restrictive trade and investment measures in recent months but have continued – "in a limited way" – to apply tariffs and non-tariff instruments that have hindered trade flows. The report also said that trade rules and investment agreements have prevented wide-scale protectionist policies. But tariffs, nontariff measures, subsidies and burdensome administrative procedures regarding imports have been applied in recent months and have acted as "sand in the gears of international trade that may retard the global recovery," the report said. "It is urgent that governments start planning a coordinated exit strategy that will eliminate these elements as soon as possible," the statement continued. Washington Trade Daily. September 15 . One year ago, Lehman Brothers filed for bankruptcy, triggering the most acute phase of the financial crisis. The precipitating cause of Lehman's demise was a decision—by Treasury Secretary Henry Paulson, Federal Chairman Ben Bernanke and New York Fed President Timothy Geithner—to send a message. Paulson is quoted in David Wessel's "In Fed We Trust" as saying: "I'm being called Mr. Bailout. I can't do it again." Geithner, for his part, was more circumspect, saying, "There is no political will for a federal bailout ." This made sense on the surface. Not only is it questionable public policy to use taxpayer money to bail out private companies, but, more important, it creates a moral hazard : the incentive for those companies to take excessive risks with the knowledge that the government will save them should things go wrong. The plan backfired. The chaos that ensued forced the government to step in to protect almost every financial instrument involved in the credit markets, from money market funds to commercial paper to asset-backed securities, and to ride to the rescue of some of America's largest banks. In the process, the government created moral hazard on an epic scale, transforming a vague expectation that certain financial institutions were "too big to fail" into a virtual government guarantee. Moral hazard had at least three aspects: Bank employees and managers had asymmetric compensation structures. In good years, they stood to make huge amounts of money; in bad years, even if the bank lost money, they would still make healthy sums. This gave employees the incentive to take excessive risks because they could shift their potential losses to shareholders. Shareholders had the same payoff structure. Banks are highly leveraged institutions; every dollar contributed by shareholders is magnified by 10 to 30 dollars from creditors. This meant that in good years, shareholders benefited from profits magnified by leverage, but should things go wrong, they could shift their potential losses to creditors. As a result, paying bank executives in stock did not mitigate their behavior; in fact, the most senior executives at both Bear Stearns and Lehman had and lost enormous amounts of money tied up in their companies. Creditors had only limited incentives to watch over major banks. Ordinarily, creditors should demand high interest rates on loans to highly leveraged institutions. However, the expectation that large banks would not be allowed to fail made creditors more willing to lend to them. Washington Post. September 14 . President Obama sternly admonished the financial industry and lawmakers to accept his proposals to reshape financial regulation to protect the nation from a repeat of the excesses that drove Lehman Brothers into bankruptcy and wreaked havoc on the global economy last year. But with the markets slowly healing, Mr. Obama's plan to revamp financial rules faces a diminishing political imperative. Disenchantment by many Americans with big government, along with growing obstacles from financial industry lobbyists pressing Congress not to do anything drastic, have also helped to stall his proposals. Big institutions and community banks have unified against a central provision of the plan to create a new consumer finance protection agency . Lawmakers, particularly in the Senate but also in the House, have been skeptical of a second major plank that would give the Federal Reserve more explicit authority to monitor the markets for systemwide problems. Opponents prefer an enlarged role for a council of regulators. The Obama plan creates such a council, but makes the Fed the first among equals and acknowledges, as the Treasury secretary, Timothy F. Geithner, has said, that you cannot put out a fire by committee. New York Times. September 14 . Euro zone industrial output fell in July and employment dropped again in the second quarter, pointing to continued weakness in the economy despite signs that euro zone recession may be ending. Industrial output in the 16 countries using the euro fell 0.3% month on month in July for a 15.9% year-on-year fall, the European Union's statistics office Eurostat said on Monday. The annual numbers showed clearly the contractions in output are becoming smaller. In June, production was 16.7% lower than a year earlier and in May it was 17.6% , better than the 21.3% in April. Eurostat also said employment in the euro zone fell 0.5% in the second quarter against the previous three months, and was 1.8% lower than the year before. This points to continued weakness of the labor market, as companies scale down production capacity because of weak demand. Economists say that more people without jobs mean less demand in the economy and therefore a slower recovery. Reuters. September 14 . U.S. President Barack Obama announced on September 11 that he will impose duties of 35% on $1.8 billion of automobile tires from China . Then on September 14 the President defended his decision, saying he was simply enforcing a trade agreement and not resorting to protectionism. His decision sparked a complaint by China to the World Trade Organization. China also said it will begin dumping and subsidy probes of chicken and auto products from the United States. Bloomberg.com, Washington Trade Daily. September 11 . U.S. poverty increased, median household income fell, and the percentage of Americans with employer-based health coverage continued to decline in 2008, according to Census data for 2008 issued today. The figures reflect the initial effects of the recession. Median household income declined 3.6% in 2008 after adjusting for inflation, the largest single-year decline on record, and reached its lowest point since 1997. The poverty rate rose to 13.2%, its highest level since 1997. The number of people in poverty hit 39.8 million, the highest level since 1960. These data include only the early months of the recession. Poverty is expected to rise more in 2009 but would be worse without the Recovery Act. Though the increases in poverty in 2009 are likely to be large, they would have been much greater without the economic recovery legislation. A Center analysis issued on September 9 that examines the effects of seven Recovery Act provisions finds those provisions will keep an estimated 6.2 million Americans—including 2.4 million children—from falling into poverty and will reduce the severity of poverty for 33 million others. Economist's View. September 11 . The U.S. government is concerned about overall demand for U.S. Treasury securities , not appetite from individual countries, said David Dollar, the U.S. Treasury Department's economic and financial emissary to China. "The interest rate on long-term treasury bonds is at a very low level by historical standards," Dollar said. "That says that the market has confidence the U.S. will get the fiscal problem under control." Chinese Premier Wen Jiabao said in March that the Asian nation was "worried" about the safety of its investment in U.S. debt, as a weakening dollar erodes the value of its record U.S. $2.1 trillion of foreign-exchange reserves. President Barack Obama is relying on China to sustain buying of Treasuries amid record amounts of debt sales to fund a $787 billion stimulus spending package. Treasuries of all maturities have lost 2.8% so far this year, after returning 14% in 2008, indexes from Merrill Lynch & Co. show. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, fell September 11 to its lowest level since September, 2008. Chinese investors have doubled their holdings of U.S. government bonds in the past three years to $776 billion as of June, according to Treasury data. Diversification of currency reserves by China "makes some sense" due to their huge scale, said Dollar, who was formerly the World Bank's country director for China and Mongolia and was named emissary to China in June. "It is healthy to have a variety of different reserve-type of currencies," he said. Bloomberg.com. September 11 . General Motors is hoping to jump-start its revitalization by guaranteeing car buyers that if they don't like their new Chevrolet, GMC, Buick or Cadillac, they have 60 days to bring it back for a full refund . Associated Press. September 11 . The People's Republic of China announced that it has developed its own large-body jetliner . The government-owned Commercial Aircraft Corp. of China, or Comac, unveiled a model of the C919, whose fuel efficiency will challenge Boeing Co. and EADS Co.'s Airbus. Analysts say it's unlikely any of the world's airlines—including China's own domestic carriers—will ever want to buy one. This project began in 2007, when the State Council, China's Cabinet, first outlined plans to build a 150 seat regional jet to lessen the nation's dependence on Airbus and Boeing. The creation of Comac was approved in February 2007, and the new firm was given an initial investment of 19 billion yuan/U.S. $2.7 billion. Comac produced the C919, a narrow-body, single-aisle regional jet that will seat as many 200 passengers. A prototype is planned to take off five years from now. MarketWatch. September 10 . The U.S. is starting to pare back its emergency support for banks and financial markets, Treasury Secretary Tim Geithner declared, saying that the financial system no longer needed extensive government props. Almost a year since the collapse of Lehman Brothers triggered a financial panic that tipped the world into a deep recession, Secretary Geithner said it was time to move from crisis response to recovery. Banks have repaid more than $70 billion in emergency bail-out funds and Secretary Geithner said "we now estimate that banks will repay another $50 billion over the next 12 to 18 months." He also said, "we must continue reinforcing recovery until it is self-sustaining and led by private demand." Financial Times. September 10 . General Motors is expected to sell its Saab Co. subsidiary to Swedish sports car maker Koenigsegg Automotive AB and Beijing Automotive Industry Holdings Co. Ltd., China's fastest-growing carmaker. Beijing Automotive will take a minority stake in the team bidding for Saab and help the unprofitable GM division find opportunities to expand in China, the group said. Bloomberg. September 9 . China National Petroleum Corp., parent of the state-run oil and natural gas giant PetroChina , announced that it had received a low-interest $30 billion loan to finance overseas acquisitions—the latest sign that Beijing was deploying its vast cash reserves to ensure that its economy had the resources it needed to keep growing. The five-year loan from the China Development Bank, a state-run lender, serves a long-term strategy to protect growth and stability. This year, China has spent $12 billion on overseas oil and refining assets alone. The deals include the one that Athabasca Oil Sands announced late last month, in which PetroChina will acquire 60% in two oil sands projects in northeastern Alberta for $1.7 billion, with further plans to build a pipeline to the coast to transport crude to China. China's strategy has an eye on Australia. On September 8, China Railway Materials closed deals to buy stakes in FerrAus and United Minerals, two miners of iron ore in Australia, while China Guangdong Nuclear Power agreed to acquire Energy Metals, a uranium explorer in the country. Half of Australia's iron ore exports are already exported to China's steel mills, and more than half its wool is exported to the mainland as well. New York Times. September 9 . China is stepping up efforts to internationalize its parochial currency, the yuan or renminbi . That's prompted concern about the future of the U.S. dollar, the dominant global currency for trade and investment. But just how far can China push others to use the yuan? One precedent for what China is doing with its currency is Japan, which also tried to broaden international use of the yen in earlier decades as its economy took on greater global heft. Tomo Kinoshita, an economist for Nomura, says Japan's experience with the yen could help predict how far China will get with the yuan, since the two economies are of similar size and share a heavy focus on exports. Japanese companies had definite success in convincing many of their trading partners to do business in the yen rather than the dollar – something that China is also now starting to look at. But the use of yen in trade eventually hit an upper limit: according to Nomura's figures, the share of Japan's exports that are settled in yen has been roughly stable for the past two decades, at 35% to 40% of the total. Similarly, Japan has paid for about 20% to 25% of its imports in yen for the last decade or so. Chinese exporters adjust their prices to match prevailing levels in their target markets—what's called pricing-to-market – to a similar degree as exporters from Japan and the Czech Republic. That level is typically associated with 20% to 30% of exports being priced in the exporter's currency, they say, based on comparative figures from other countries. So in the near term, an "upper bound" for the use of yuan in China's exports is likely to be about a third of total exports, the Hong Kong Monetary Authority paper concludes. Wall Street Journal. Real Time Economics. September 9 . The World Bank issued its annual Doing Business report, which ranks 183 economies on the ease of doing business by comparing quantitative measures of regulations of the life cycle of a small or medium-size enterprise. Regulations related to registering property, employing workers, dealing with construction permits, and paying taxes are measured. Getting electricity and worker protection were added to this year's metrics. In 2008-2009 more governments implemented regulatory reforms aimed at making it easier to do business than in any year since 2004, when Doing Business started to track reforms through its indicators. Doing Business recorded 287 such reforms in 131 economies between June 2008 and May 2009, 20% more than in the year before. The top slots are occupied by the usual suspects: Singapore, New Zealand, Hong Kong, United States, United Kingdom, and Denmark are the easiest places to do business. Each country was in the top six last year. Indonesia is the top reformer of business regulations in the East Asia and Pacific region, but judicial reform is urgently needed to attract new investment. Reuters/Forbes and World Bank Crisis Talk. September 8 . Gold bullion surged as high as $1,009.70 in New York, within 3% of the record of $1,033.90 set in March 2008. Silver climbed to a 13-month high as a weaker dollar and concern that inflation may accelerate boosted the appeal of precious metals. Gold is headed for a ninth annual gain. Crude oil and all six industrial metals on the London Metal Exchange rallied as the U.S. Dollar Index fell as much as 1.2% to an 11-month low. Raw materials typically rise when the greenback falls. Equity indexes climbed from Tokyo to London and New York. "The market thinks inflation is coming," Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois, said by telephone. He has been trading gold for more than 30 years and believes gold won't stay above $1,000 for long. "With interest rates so low, money is chasing money and the dollar is getting murdered." Bloomberg. September 8 . Lawyers and tax advisers from London to Hong Kong have had a surge in inquiries from expatriate Americans worried about whether they have correctly declared offshore assets ahead of the September 23 deadline. Concerns have been fuelled by the Swiss government's decision to reveal the names of 4,450 wealthy Americans who hold offshore accounts at UBS, the country's biggest bank. Financial Times. September 2 . The U.S. Institute for Supply Management's survey of factories and industry had been edging higher this spring, as the blistering pace of economic declines began to level off. In August, the group's manufacturing index turned positive, rising to 52.9, from 48.9 in July. A reading above 50 indicates expansion and growth; a number below 50 means economic contraction. Four industry groups said their payrolls were growing while nine reported decreases. Manufacturing jobs have been devastated by the recession, with some two million positions lost since the downturn's official beginning in December 2007. New York Times. September 2 . European Union finance ministers will press for clearly defined restrictions on bonus pay for bankers when they hold talks with their U.S. and other G20 counterparts this month. "The bankers are partying like it's 1999, and it's 2009," said Anders Borg, finance minister of Sweden, which holds the EU's rotating presidency. "Obviously, there's a need for stronger muscles and sharper teeth. It won't be satisfactory for Europe to end up with broad principles and guidelines." Financial Times. September 2 . Senior International Monetary Fund and World Bank economists at a Washington panel discussion on Tuesday said the world recovery was starting to gain momentum, though a number of challenges remain. The IMF now expected the global economy to expand at slightly less than 3% in 2010, said Jörg Decressin, an IMF forecaster, a upward revision from the IMF's July estimate of 2.5%. "The recovery is for real but it is very heavily policy dependent," he said at a session at the Carnegie Endowment for International Peace. At some point, he said, private demand would have to replace the boost to the global economy from government monetary and fiscal expansion. Hans Timmer, a World Bank forecaster, didn't give an estimate, but said the strength of the recovery depends "on how sustainable the rebound in developing countries is." He especially cited the role of China in boosting global demand. Wall Street Journal's Real time Economics. September 1 . Nine of 10 U.S. cities are forced to cut spending as sales and income taxes decline reports the National League of Cities. Future prospects look grim with property taxes expected to drop in 2010 and 2011. To combat declining revenues, 62% of cities are delaying or canceling infrastructure projects, the study found. CNNMoney.com. August 31 . India 's gross domestic product accelerated to 6.1% from a year earlier in the April-June quarter from 5.8% in the previous quarter as government spending helped to overcome the worst of the global downturn but drought threatens to stall the recovery. The worst effects of the global financial crisis may have passed for Asia's third-largest economy. India's relatively low dependence on exports meant that it weathered the global economic storm better than other countries. Associated Press. August 31 . The Chinese government has been struggling to find enough infrastructure projects to finance in Sub-Saharan Africa , according to the Business Day . The China-Africa Development Fund was founded in June 2007 after the 2006 Beijing Summit of the Forum on China-Africa Co-operation and established offices for the Southern African Development Community in Johannesburg, South Africa in March 2009. However, the fund is finding it increasingly challenging to fund infrastructure programs in most African states because of the "lack of essential facilities like sound telecommunications systems." IHS Global Insight. August 31 . Mauritius, Seychelles, Zimbabwe and Madagascar have signed an interim trade agreement with the European Union (EU). These south-east African economies have had full access to the European consumer market since 2008 (except for rice and sugar, with trade barriers being gradually removed). The countries have agreed to phase out tariffs on all European imported goods over the next 15 years. The agreement excludes trade on certain agricultural products, such as milk, meat, vegetables, textiles, footwear and clothing. Zambia and the Comoros have agreed to sign an interim agreement with the EU at a later date. The EU imports mostly textiles, clothes, sugar, fish products and copper from Eastern and Southern Africa, while European exports to the region consist mostly of mechanical and electrical machinery and vehicles. IHS Global Insight. August 31 . The Croatia n central budget in January–May 2009 posted a deficit of 4.553 billion kuna/U.S. $810 million. The gap was a sharp, negative turnaround from the same period of 2008, when the budget had been in surplus by 3.936 billion kuna/U.S. $824 million. Over the first five months of 2009, budgetary revenues declined 8.6% year on year, undermined by a sharp decline in economic activity, which caused tax revenues to fall 17.8% year on year. Meanwhile, government expenditures grew at an annual rate of increase of 9.3%. Croatia remains on track to post a deficit for the year as a whole of less than 4% of GDP, quite manageable in comparison to other economies of the region in 2009. IHS Global Insight. August 28 . The International Monetary Fund implemented a general allocation of Special Drawing Rights, SDRs , equivalent to about U.S. $250 billion. This was the allocation initially requested at the G-20 meeting this spring in London. It was formally approved by the IMF's Board of Governors on August 7, and is designed to provide more global liquidity to the world economy by supplementing IMF members' foreign exchange reserves. It represents a quick multilateral response to the world financial crisis. Nearly $100 billion of this $250 billion will go to emerging markets and developing countries, and over $18 billion to low-income countries. This general allocation is made in proportion to members' existing quotas and will count immediately toward their reserves. Member nations can either hold them in their reserves or sell all or part of their allocations to others in order to finance immediate hard currency imports. It is also possible to buy SDRs from another member. Separately, the IMF will implement, on September 9, a special, one-time allocation of 21.5 billion SDRs, about U.S. $33 billion. This allocation, which is sometimes called the Fourth Amendment Allocation because it required an amendment to the Fund's Articles of Agreement, will mean that every member country has an SDR allocation. IMF Press Briefing. August 28 . The IMF Executive Board completed the first review of the Latvia n program. This enabled immediate disbursement of about €195.2 million/U.S. $278.5 million, bringing the level of total disbursements from the IMF under the stand-by arrangement to €780.7 million/U.S. $1.2 billion. IMF support for Latvia is part of a coordinated package together with the European Union, the World Bank, Nordic countries and other program partners. The program was originally approved in December 2008. Latvia's economic strategy is centered around keeping the exchange rate peg and achieving euro adoption as soon as possible. The very dramatic economic downturn over the last few months required program revision. The most important is that the fiscal deficit ceiling has been revised upward to up to 13% from the original target of 5%. This allows for 1% of GDP in additional resources for social safety nets. IMF. August 28 . Toyota will shut down the joint venture it operated with General Motors in Fremont, California, in March 2010, eliminating 4,700 jobs. The plant, which makes Corolla compact cars and Tacoma pickups for Toyota and, until last week, Pontiac Vibe hatchbacks for GM, was the Japanese company's only U.S. auto plant with a union workforce. Sagging sales and GM's bankruptcy are blamed. Los Angeles Times. August 28 . The inspector general of the U.S. Securities and Exchange Commission said in a report that the SEC has "historically been slow to act" in regulating the nation's credit ratings agencies before the financial crisis and recommended a broad range of improvements to the SEC's oversight. The report also called for further evaluation of several controversial policies, such as the ability of debt issuers to shop among different rating agencies for the highest possible rating. The financial crisis raised serious questions about the rating agencies, including Moody's, Fitch and Standard and Poor's, which often gave top ratings to mortgage-backed securities that now may be worthless. The audit report found that the commission delayed adopting rules on the rating agencies, and sometimes failed to follow the rules that existed. August 28 . Iceland decided Friday to repay Britain and the Netherlands the $5.7 billion it borrowed to compensate savers in those countries who lost money in the collapse of an Icelandic Internet bank last year. The Icelandic government overcame heavy opposition to the compensation plan, securing backing from a majority of lawmakers by pledging to link the pace of debt repayment to the rate of growth in the island nation. Iceland will begin repaying £2.3 billion (U.S. $3.8 billion) to Britain and 1.3 billion euros ($1.9 billion) to the Netherlands from 2016, with payments spread over nine years. Iceland must settle the claims arising from the collapse of the Icesave online bank before it can draw on $4.6 billion in promised bailout funds from the International Monetary Fund and Nordic countries. Iceland was an early victim of the credit crunch, which sent its debt-fueled economy into a tailspin. Landsbanki collapsed in October, as did Glitnir and Kaupthing, the country's two other leading banks. New York Times. August 27 . U.S. Gross Domestic Product shrank at a seasonally adjusted 1% annual rate from April through June, unrevised from an estimate on second-quarter GDP a month ago. This was far less than the 6.4% decline experienced in the first quarter of 2009. Wall Street economists expected the second quarter revision to be a decline of 1.5%. Corporate earnings rose by the most in four years, the department also said. This means that the U.S. economy took a first step toward recovering from the worst recession since the 1930s in the second quarter as companies reduced inventories, spending started to climb and profits grew. Bloomberg, Wall Street Journal. August 27 . The Federal Deposit Insurance Corporation, FDIC, revealed that the number of U.S. banks at risk of failing reached 416 during the second quarter. The numbers were published as part of a broader survey on the nation's banking system. The number of institutions on the government's so-called "problem bank" list surpassed 400 in the latest quarter, climbing to its highest level in 15 years, since June 1994. The FDIC, which insures bank deposits, has been hit by a wave of relatively large and costly failures recently, prompting concerns about the size of the agency's insurance fund. The FDIC reported that the fund decreased by $2.6 billion, or 20%, during the quarter to $10.4 billion. The number of banks under scrutiny by regulators has moved steadily higher since the recession began in late 2007. A year ago, the number of banks on the FDIC's watch list was 117. At the end of this year's first quarter, the number stood at 305. CNNMoney.com. August 27 . The U . S . banking system will lose some 1,000 institutions over the next two years, said John Kanas, whose private equity firm bought BankUnited of Florida in May. "We've already lost 81 this year," Kanas told CNBC. "The numbers are climbing every day. Many of these institutions nobody's ever heard of. They're smaller companies." Failed banks tend to be smaller and private, which exacerbates the problem for small business borrowers, said Kanas, the former chairman and CEO of North Fork bank. "Government money has propped up the very large institutions as a result of the stimulus package," he said. "There's really very little lifeline available for the small institutions that are suffering." CNBC.com. August 27 . European companies are objecting against proposed reforms of the derivatives markets, saying that new rules requiring contracts to be routed through clearing houses could impose a huge drain on corporate cash. U.S. companies ranging from Caterpillar and Boeing to 3M – which use derivatives contracts to hedge interest rate, currency and commodity price risks – have been lobbying lawmakers to highlight the potential higher costs of a proposed overhaul of rules on derivatives. Financial Times. August 26 . Toyota Motor Corp, the world's largest automaker, said it would halt a production line in Japan as it cuts excess capacity to return to profitability amid an industrywide sales slump. Car plants around the world are idle or running below capacity as the industry copes with a slide in sales that sent General Motors Co and Chrysler Group LLC into bankruptcy and has Toyota headed for a record loss this year. Total cuts could reach 700,000 cars, or 7% of Toyota's global capacity. Nikkei business daily reported that Toyota planned to reduce its global capacity by 10%, or 1 million vehicles, as early as the current financial year to March 2010. Reuters. August 26 . Eighteen of the 20 cities tracked by Standard & Poor's Case-Shiller U.S. Home Price Index showed improvement in June, up from eight in May, four in April and only one in March. In a convincing sign that the worst housing slump of modern times is coming to an end, prices are starting to rise in nearly all of the nation's large cities. The trend, displayed in newly released data for June, is both pronounced and wide-ranging. It is affecting the high-priced coastal cities, with a 3.8% jump for the month in San Francisco and a 2.6% rise in Boston; the industrial Midwest, with Cleveland prices up 4.2%; and even the epicenter of the crash, the Sun Belt, with Phoenix homes up 1.1%. New York Times. August 25 . The White House Office of Management and Budget (OMB) now forecasts a $9 trillion U.S. federal deficit from 2010-1019. The Congressional Budget Office (CBO) in its Budget and Economic Outlook: An Update , http://www.cbo.org/ftpdocs/105xx/doc10521/08-25-BudgetUpdate.pdf , is more optimistic, projecting a 10-year budget deficit of $7.14 trillion. The Congressional Budget Office (CBO) estimates that the federal budget deficit for 2009 will total $1.6 trillion, which, at 11.2% of gross domestic product (GDP), will be the highest since World War II. That deficit figure results from a combination of weak revenues and elevated spending associated with the economic downturn and financial turmoil. The deficit has been boosted by various federal policies implemented in response, including the stimulus legislation and aid for the financial, housing, and automotive sectors. New American Foundation says the U.S. needs renewed economic growth—not austerity. That is the true lesson to be drawn from new government projections of long-term federal budget deficits. Congressional Budget Office, New American Foundation. August 18 . Israel emerges from recession with GDP growth of 1% in Q2, after two quarters of negative growth. Seasonally adjusted GDP rose at a 1% annual rate. The second quarter's growth was driven in large part by an increase in exports of goods and services which rose at a 5.8% annual rate. Excluding diamonds and start-up companies, exports rose at an even higher rate of 7.1%. IHS Global Insight. August 18 . U . S . industrial production increased by 0.5% in July, while manufacturing output rose by 1.0%. The industrial production report was good for the first time in almost a year and a half, with no hidden causes for concern. Total output of mines, utilities, and factories rose 0.5%, and would have been much better if electric utilities did not have to dial back output because of the milder-than-normal summer, pushing utility output down 2.4%. The motor vehicle industry provided the biggest upward push to output, and boosted the manufacturing sector to a 1.0% gain. The good showings were not confined to vehicles. Core manufacturing (excluding high technology and motor vehicles) recorded an output gain of 0.1%. While that seems tepid, this was only the second increase since March 2008; the other was a feeble bounce-back last October, when refining and chemicals were recovering from hurricane outages. The output gains lifted total capacity utilization to 68.5%, and the manufacturing operating rate to 65.4%. Both readings were noticeable improvements over June, but still 11–12 percentage points below a year ago. IHS Global Insight. August 17 . Demand for U.S. Treasuries grew in June, despite sales by China. Foreign investors bought $90.7 billion more in long-term U.S. securities than they sold in June. In May, foreign investors sold $19.4 billion more securities than they bought. China, the largest U.S. creditor, reduced its June U.S. Treasury holdings by $25.1 billion or 3.1% to $776.4 billion from May's $801.5 billion. China Daily reported the 3.1% decrease was the largest percentage cut in nine years. China's June holdings were still larger than April's $763.5 billion and $767.9 billion in March. Japan, the second largest holder of U.S. Treasuries, increased its holdings to $711.8 billion, up $34.6 billion from May. Britain, the third largest holder, held $214 billion in June, up $50.2 billion from May. UPI.com and Wall Street Journal's Real Time Economics. August 17 . Economists typically say every recession is different in its own way, but recoveries are all alike, driven by the housing sector and consumer spending . If so, this recovery may be on very shaky ground. Consumer spending, roughly 70% of economic activity, and housing, about 20% of GDP, have been hit with the equivalent of 100-year storms. "Is the consumer back in the game? No, not yet," says John J. Castellani, chief economist and president of the business roundtable. "When we look at our members who are tied to the housing market, they are nowhere near a recovery, while our [consumer products] companies are still moving to downscale." Between June 2007 and December 2008, for instance, inflation-adjusted personal wealth fell by 22.8%—the most since the Federal Reserve began collecting data almost 60 years ago. Some $6 trillion in housing wealth alone was lost in 2008. Consumer spending shrank for two consecutive quarters for the first time in half a century. "Consumers simply have to retrench, save more, spend less," says David Jones of DMJ Advisors. "That in itself will give us a much slower, longer and uneven recovery." CNBC.com. August 17 . Japan returned to growth in the second quarter, as gross domestic product expanded a seasonally adjusted 0.9% quarter on quarter between April and June. This follows a year of contraction, and is its first rise since the first quarter of 2008 and the equivalent of 3.7% growth on an annual basis. Economists warned that the recovery remained vulnerable to any faltering in export demand or tightening of the government's fiscal stimulus. Financial Times. August 17 . U.S. Banks and other financial institutions are lobbying against fair-value accounting for their asset holdings. They claim many of their assets are not impaired, that they intend to hold them to maturity anyway and that recent transaction prices reflect distressed sales into an illiquid market, not what the assets are actually worth. Legislatures and regulators support these arguments, preferring to conceal depressed asset prices rather than deal with the consequences of insolvent banks. This is not the way forward. While regulators and legislators are keen to find simple solutions to complex problems, allowing financial institutions to ignore market transactions is a bad idea. Financial Times. August 17 . Being in debt is about to get a lot more expensive for millions of Americans. Credit card issuers have been rushing to raise rates in advance of August 20, when the first provisions of the U.S. Credit Card Accountability Responsibility and Disclosure Act (CARD) will go into effect, with other protections starting in February 2010. Starting this week, card issuers need to give you more time to pay your bills. Also, instead of mailing bills 14 days before the due date, issuers must send bills 21 days in advance of the payment date. That will mean fewer people will get hit with late fees because of postal delays. Another provision effective this week requires card issuers to give you 45 days' notice when they plan to raise your rate, instead of the current 15-day advance notice. That's behind the rash of notifications sent in recent weeks, advising you that no matter what your credit history, you'll be paying higher rates. Next year's requirements include a ban on marketing to students or anyone under age 21. They'll be required to have a parent or guardian as a co-signer. Individual bankruptcies are up 36% for the first half of this year, compared with last year. And that translates into more defaults on card balances. Bank of America, the largest bank in the country, reported its default rate jumped to 13.8% in June from 12.5% in May. Other issuers such as JPMorgan Chase, Citigroup, Capitol One, Discover and American Express have reported default rates around the 10% level. Chicago Sun Times. August 17 . China attracted foreign direct investment of $5.36 billion in July, a 35.7% decline from a year earlier, according to data released Monday by the Ministry of Commerce. July's figures marked the tenth straight monthly decline, and far outpaced June's one-year drop of 6.8%. In the January-July period, foreign direct investment totaled $48.3 billion, a decrease of 20.3% from that period a year earlier. Dow Jones Newswires. August 16 . Nearly three years into the deepest U.S. housing slump in generations, lenders are modifying only a small number of problem mortgages , and rising foreclosures are restraining the economy's recovery. The Obama administration has stepped up pressure on lenders and their mortgage servicers, who act as bill collectors on behalf of investors who own mortgage bonds. The administration on August 4 unveiled the first of what will be monthly "name and shame" exercises, publishing data on the loan-modification efforts of about three dozen companies. The administration thinks that about 2.7 million U.S. homeowners are at least two months behind on their mortgage payments, roughly equal to the population of Kansas. Yet only 9% of eligible borrowers had been offered trial loan modifications through June. Borrowers from across the nation say they were encouraged, directly or indirectly, by their lenders to fall behind on their mortgage payments in order to qualify for loan modifications. The modifications never came. For example, 47% of South Florida homeowners are behind on mortgages. The U.S. mortgage lending industry reports in June 2009 it helped about 10% of eligible homeowners complete "workout plans" to stay in their homes. Of 3.1 million eligible homeowners, with loans 60 days or more past due, 310,000 completed plans. Of the 3.1 million eligible homeowners, 96,000, or 3%, received loan modifications. McClatchy Washington Bureau. August 14 . German GDP expanded 0.3% in the second quarter, the first increase since the first quarter of 2008. This represents a clear reversal from the 3.5% contraction in the first quarter, which was a post-reunification record low. Net exports boosted activity as imports fell more rapidly than exports, while consumer spending and housing investment also provided positive growth impulses. IHS Global Insight. August 14 . Hong Kong's economy grew by 3.3% on a seasonally adjusted quarter-to-quarter basis in the second quarter of 2009. The territory benefited from strong growth in mainland China and better conditions in the West, the government said Friday. Higher demand for Hong Kong's exports, particularly from mainland China, where massive stimulus spending and relaxed monetary policy is driving growth, helped explain the turnaround. Exports dropped 12.4% in the second quarter compared to the same period last year. Washington Post. August 3 . America 's manufacturing base has not entirely vanished. Americans continue to make things. Manufacturing employment has shrunk considerably since peaking in the late 1970s, but this has largely been a product of productivity growth. America remains the world's largest manufacturer, responsible for 20% of global manufacturing. China's share is currently around 12%. This ratio has been moving steadily in favor of China, and it seems fairly clear that within a decade China's share will overtake America's. America, with 5% of the world's population, produces 20% of the world's manufactures; China, with 20% of the world's population produces 12% of the world manufactures. Developed nations tend to devote between 20% and 30% of employment to industry; China as a developing nation employs 50% of workers to industry. Free Exchange Economist.com. July 31 . China is spearheading the recovery in both the auto market and the global economy. Car sales in China accelerated to a 48% year on year surge in June, lifting purchases above an annualized 7.0 million units for the first time on record, and well above the 5.9 million unit peak reached in March 2008 prior to the sharp global economic downturn. Noteworthy, our data only include cars. If trucks and buses are included, vehicle purchases in China are on the way to exceed 10.5 million units this year and surpass the United States as the world's largest vehicle market…. Auto sales in China have been increasing rapidly since 2001, and this pace is expected to continue well into the next decade. General Motors might be well positioned to take advantage of this growth. GM—the top-selling brand in China—padded its lead this year, with first-half sales soaring 38% to 814,000 units—a level fast approaching the 948,000 vehicles it sold in the United States. As recently as 2004, GM sold roughly 10 vehicles in the United States for each model sold in China. Highlighting the importance of China in GM's revival strategy, the company expects to double its sales to 2 million units over the next five years, and plans to launch more than 30 new models in the country. Other automakers, including Nissan and Honda, also continue to expand their assembly facilities in China. Scotiabank. Global Auto Report. July 31 . French recession less severe but recovery tepid, IMF reports. The IMF projects French real GDP to drop by 3% in 2009, followed by a gradual recovery starting in 2010. France has been shielded from the worst effects of the crisis by its generous social safety net, which has protected domestic demand, and the country's limited reliance on exports, which has shielded it from the worst effects of falling global demand. Relatively rigid labor markets and high social protection are likely to slow the pace of recovery. Credit default swap spreads of French banks have increased considerably, but somewhat less than for other European banks. The relative resilience of French banks can be partly attributed to their conservative lending practices and to the consistent supervision of all lending institutions. The authorities also undertook a number of measures to recapitalize banks and support liquidity. This has resulted in no French bank coming under majority state ownership. Strong automatic stabilizers and appropriate fiscal stimulus measures have helped cushion the downturn in France. A fiscal stimulus package—worth more than 1½ percent of GDP for 2009–10—contains measures that are mostly front loaded and relatively well diversified, with an emphasis on temporary investment expenditures and various tax breaks. IMF Survey Magazine, by Erik De Vrijer and Boriana Yontcheva. July 31 . U.S. real Gross Domestic Product declined 1.0% in the second quarter, much shallower than the 6.4% decline in the first quarter. These figures are consistent with a return to modest growth in the second half of 2009. However, revised historical data show that the recession has been deeper than previously thought and weak positive growth in the second half may not be sufficient to prevent employment from continuing to fall. Major factors for U.S. second quarter GDP growth include: Business fixed investment and exports declined much less steeply than in the first quarter. Government spending bounced higher, probably in part due to the stimulus package, although the biggest contributor was a sharp rise in defense spending, often volatile. Inventories fell more sharply than in the first quarter, but were a smaller drag on growth. Foreign trade boosted growth as imports fell faster than exports. Some of the import decline reflects the big drop in inventories. Consumer spending fell 1.2%, after a small 0.6% increase in the first quarter. Inflation was near zero. The GDP price index rose 0.2%. Historical revision reveals this recession to be deeper than previously thought. The decline in real GDP from its peak in the second quarter of 2008 stands at 3.9%, which is the most severe drop in postwar history. Real GDP rose just 0.4% in calendar 2008, rather than rising 1.1% as previously announced. Consumer spending declined 0.2% in calendar 2008, instead of rising 0.2% as previously announced. The saving rate in 2008 was 2.7%, rather than 1.8%. Previous years were also revised up. However, the saving rate for the first half of 2009 is lower than previously reported because personal incomes decreased more than previously thought, not good for future spending prospects. IHS Global Insight. July 31 . U.S. Treasury Secretary Timothy Geithner issued a stern warning to U.S. regulators to end turf battles and support President Obama's plan to overhaul financial regulation. Geithner told Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro, and Federal Deposit Insurance Corp. Chairman Sheila Bair to end public criticism and stop airing concerns over their potential loss of authority. A Treasury Department spokesman said the message to regulators was to work together to get reform done. Reuters. July 8-10. The G8 Summit in Italy included a dialogue with five developing countries (Brazil, China, India, Mexico, and South Africa). The summit resulted in declarations or statements dealing with Responsible leadership for a sustainable future, Non Proliferation, Counter Terrorism, Promoting the global agenda, Energy and Climate, G8-Africa Partnership on Water and Sanitation, and Global Food Security. During the summit, on July 9, China pressed for new international exchange rules. China criticized the dominant role of the U.S. dollar as a global reserve currency and urged diversification of the reserve currency system aiming at relatively stable exchange rates among leading currencies. Chinese state councilor Dai Bingguo's remarks caused concern among western leaders, some of whom fear that even discussion of long-term currency issues could unsettle markets and undercut economic recovery. (G-8 Chair's Summary and Financial Times ) July 10. A new General Motors emerged from bankruptcy protection (filed for bankruptcy on June 1) as a leaner automaker and with 60.8% government ownership. The new company will include the Chevrolet, Cadillac, Buick, and GMC Brands, with its overseas operations. About 4,100 of its 6,000 U.S. dealerships will remain with the new company, while other dealerships will be shed over the next 14 months. The company will have only a fraction of the $54 billion in unsecured debt it previously held. Other holdings, contracts and liabilities that GM needed to divest as part of the bankruptcy process will be held by the old company, to be known as Motors Liquidation Co. (GMGMQ). The process of disposing of those assets and liabilities could take two to three years. These holdings include about 16 U.S. plants and facilities that employ about 20,000 workers. Some of the plants will stay open through 2012. The federal government will initially hold 60.8% of the stock in the new company, with a union-controlled health care trust fund owning 17.5%, the Canadian and Ontario governments owning 11.7% and bondholders of the old GM eventually getting about 10%. (CNNMoney.com) July 10 . Treasury Secretary Timothy Geithner urged Congress to rein in the $592 trillion derivatives market with new U.S. laws that are "difficult to evade." The complexity of over-the-counter derivatives contracts and industry growth let corporations take on excessive risk and caused a "very damaging wave of deleveraging" that exacerbated the global credit crisis, Geithner said in prepared testimony at a joint hearing of the House Agriculture and Financial Services committees. Geithner repeated the President's call to force "standardized" contracts onto exchanges or regulated trading platforms, and regulate all dealers. Contracts would be subject to new disclosure rules, and "conservative" capital and margin requirements, as well as business-conduct standards, would be imposed on market participants. The market, which grew almost seven-fold since 2000, complicated government efforts throughout the credit crisis to assess potential losses at U.S. banks and corporations because regulators lacked adequate data to measure their risk, Geithner said. (Bloomberg) July 9 . The U.S. House of Representatives passed 111 th Congress bill H.R. 3081 that contained H.Amdt. 311 , a provision designed to overrule the President with respect to his signing statement of June 24, 2009. That Presidential statement rejected certain congressional conditions on the funding for the International Monetary Fund contained in 111 th Congress bill H.R. 2346 , The Supplemental Appropriations Act, 2009, P.L. 111-32 . (CQ Today) July 9 . A report from the McKinsey Global Institute (MGI) found that big oil investors and Asia's central banks and sovereign wealth funds are poised to grow twice as fast as other institutional investors, underscoring how financial power is continuing to shift away from the West. According to MGI, petrodollar investors—including central banks, sovereign wealth funds, and individual magnates based mostly in the Middle East and Russia—will see the value of their foreign assets soar to at least $9 trillion by 2013, up from an estimated $5 trillion at the end of 2008. Similarly, foreign financial assets held by Asia's sovereign investors will collectively swell to $7.5 trillion by 2013, up from $4.8 trillion in 2008. The projected rate of growth between 2009 and 2013 will be the slowest since 2000, but, "impressive" nonetheless. What explains these two group's ability to sail right through financial turmoil that wrecked some of the West's biggest and boldest investors? Mostly, it's the nature of the assets they hold. As the economy rebounds, oil prices will go up responding to growing demand for gasoline products tied to greater economic activity. Likewise, when global trade picks up again, Asian reserves will resume building up, reflecting those countries' ample trade surpluses. In other words, both petrodollar and Asian investors have a hedge over other institutional investors not so much because of the investment decisions they'll make but because their existing portfolios will benefit from "structural flows that will bring money in," as the world economy heads toward recovery. At least some of these structural advantages may wind down in the long run –China, for example, is slowly steering its economy more towards satisfying domestic demand—but in the short-term, they'll help tick the financial power balance increasingly toward the economic power centers in the developing world. One risk connected to continued growth in petrodollars and Asian sovereign investment assets is that so much idle money will end up, again, feeding assets bubbles around the world as it did in the run-up to the current recession, warns the MGI report. ( Wall Street Journal—Real Time Economics ) July 8 . The International Monetary Fund (IMF) and Canada have signed an agreement to provide the Fund with up to the equivalent of US$10 billion/about SDR 6.5 billion. The Fund can now add these resources to those already available from borrowing agreements with Japan and Norway to provide balance of payments assistance to its members in the current crisis. (IMF) July 6 . The world's top wealth management firms were reported by Reuters from a survey of 14,000 private bankers and 7,000 wealthy individuals by Scorpio Partnership. Private wealth managed by banks and investment managers around the world dropped nearly 17% to $14.5 trillion in 2008 from 2007. (CNBC.com) Top 10 Wealth Managers July 6 . U.S. manufacturing output from factories has contracted for four consecutive quarters and analysts now expect manufacturing output to fall as much as 12% this year, the worst contraction since 1946. Nearly 1.7 million manufacturing workers—or one in eight—have lost their jobs in the last 18 months alone. (Reuters) July 5 . A bankruptcy judge said late Sunday, July 5, that General Motors Corporation (GM) can sell the bulk of its assets to a new government-backed company, clearing the way for the automaker to quickly emerge from bankruptcy protection. GM and the government are reportedly preparing to complete the sale transaction within this week. Chrysler's assets were recently sold to a new company led by Italian automaker Fiat. If GM is able to execute its sale this week, both automakers would have completed their trips through bankruptcy in about 40 days—an unusually speedy process. The government and GM have argued that a quick sale was critical to preserve the automaker's value. (AP and Washington Post ) July 2 . The American economy lost 467,000 jobs in June and the unemployment rate edged up to 9.5% in a sobering indication that the most painful downturn since the Great Depression continues. The number of unemployed persons, 14.7 million and the unemployment rate (9.5%) were little changed in June. Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points. "The numbers are indicative of a continued, very severe recession," said Stuart G. Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. (U.S. Bureau of Labor Statistics and New York Times ) July 2 . Eurozone unemployment rose above 15 million in May; unemployment rate at 10 year high of 9.5%, the highest level since February 1999. The number of jobless across the Eurozone spiked up by a further 273,000 in May. This followed increases of 398,000 in April and 423,000 in March. May witnessed the 14 th successive monthly rise in unemployment. This took the number of Eurozone jobless up to 15.0 million, the highest level since the bloc's inception in January 1999. It was also up by 3.95 million from the five-and-a-half-year low of 11.063 million seen in March 2008. (IHS Global Insight) July 2 . The Federal Deposit Insurance Corporation (FDIC) plans to issue new rules that could make it slightly easier for private equity firms to buy failed banks. Under a new directive the agency is expected to demand that investment firms like the Carlyle Group or Kohlberg Kravis Roberts provide support to the banks they acquire if the banks get into more trouble and need additional capital. The new rules represent a balancing act for the F.D.I.C, which is responsible for protecting depositors from losses. Government officials have been eager to recruit private investors to stretch out Congressional bail-outs. Bank regulators remain concerned about permitting comparatively high-risk investor groups take control of banks with billions of dollars in government-guaranteed deposits. The agency has seized 45 failing banks this year, and more than 60 since last fall. ( New York Times ) July 2 . China 's tax administration reports that the total value-added tax (VAT) refund for exporting goods rose 23.4% year on year during the first five months, hitting 290 billion yuan/U.S.$42.5 billion, as a result of progressive rebate rate increases since last year. China has introduced seven consecutive export tax rebate hikes since the second half of last year to rein in the freefall of the country's exports. (IHS Global Insight) July 1 . Planned job cuts announced by U.S. employer s totaled 74,393 in June, down 33% from 111,182 in May, according to a report released on Wednesday by global outplacement firm Challenger, Gray & Christmas, Inc. June marked the fifth consecutive month of declining planned layoffs at U.S. firms, hitting the lowest level since March 2008 and providing another hopeful sign that the U.S. economy is attempting to end its worst recession in decades. (Reuters) July 1 . The contraction in euro zone manufacturing output moderated for the fourth consecutive month in June, a fresh sign that the severe economic downturn in the currency block is gradually bottoming out, final data from Markit Economics showed. However, there were marked differences in the pace of recovery in the region's largest economies, with Germany, Spain, and Italy still suffering sharp downturns in manufacturing, while France and the Netherlands moved closer to stabilization. (Wall Street Journal) July 1 . Asian economic data from Japan, China and South Korea indicate possible stabilization , or a hesitant steps with a considerable distance to full recovery. In Japan, the Tankan survey of big manufacturers, conducted quarterly by the Bank of Japan, bounced back from a record low it hit in March, recording minus 48 in its June survey. Below 50 indicates economic recession, while above 50 indicates growth. In China, an important official purchasing managers' index, rose for the fourth month in a row in June. And South Korea reported that exports in June were 11.3% lower than a year earlier, up from a 28.5% fall recorded in May. (New York Times) July 1 . Home prices in 20 major U.S. metropolitan areas fell in April at a slower pace than forecast, the S&P/Case-Shiller home- price index showed today. Today's Case-Shiller numbers are the latest sign that that the worst of the housing slump may be passing. Sales of existing homes posted gains in April and May, while housing starts jumped in May from a record low. Home prices saw a "striking improvement in the rate of decline" in April and trading in funds launched today indicates investors believe the U.S. housing slump is nearing a bottom, said Yale University economist Robert Shiller. "At this point, people are thinking the fall is over," Shiller, co-founder of the home price index that bears his name, said in a Bloomberg Radio interview today. "The market is predicting the declines are over." (Bloomberg) July 1 . California 's lawmakers failed to agree on a balanced budget by the start of its new fiscal year, clearing the way to suspend payments owed to the state's vendors and local agencies, who instead will get "IOU" notes promising payment. The notes will mark the first time in 17 years the most populous U.S. state's government will have to resort to the unusual and dramatic measure. Democrats who control the legislature could not convince Republicans late Tuesday night to back their plans to tackle a $24.3 billion budget shortfall or a stopgap effort to ward off the IOUs. The two sides agree on the need for spending cuts but are split over whether to raise taxes. Democrats have pushed for new revenues while Republican lawmakers and Governor Arnold Schwarzenegger, also a Republican, have ruled out tax increases. (CNBC) July 1 . The Turkish economy declined by 13.8% year on year in the first quarter of 2009. The drop was the largest ever recorded for the country. This follows a 6.2% year on year fourth-quarter decline, placing the Turkish economy officially in recession. This deep contraction is among the steepest in the region, surpassed by only Estonia and Latvia. (IHS Global Insight) July 1 . Ukraine 's GDP dropped by 20.3% in the first quarter, following a decline by 7.9% in the final quarter 2008. The first quarter's decline was the steepest since 1994, when the economy slumped by 22.3% for the year as a whole. The key driving force for the downturn was gross fixed capital formation, which fell -48.7% year on year. (IHS Global Insight) July 1 . China granted a U.S. $950 million credit line to Zimbabwe . According to Agence France-Presse, the loan will be used primarily in assisting the Zimbabwean government to rebuild its shattered economy, which is expected to cost around US$10 billion in the near term. The Zimbabwean prime minister also received pledges of US$500 million from Europe and the United States. (IHS Global Insight) June 30 . The United Kingdom 's first quarter GDP contraction was deeper than previously reported at 2.4% quarter on quarter and 4.9% year on year. These statistics represent the sharpest decline since the second quarter of 1958 and the deepest since quarterly records began in 1948. Consumer spending, investment, exports, and imports all fell substantially and inventories were slashed. The revised data show that the recession began in the second quarter of 2008 rather than the third, and has been deeper than previously thought. Problems unique to the United Kingdom included the sharp housing-market downturn, high levels of consumer debt, and the relative importance of the financial sector. June 30 . In the first quarter of 2009, Croatian GDP shrank by 6.7% year-on-year, its greatest economic contraction in over 16 years. This represents its most severe economic downturn since its post-Yugoslav violence in 1992. The Croatian economy was undermined by severe downturns in household consumption and fixed capital formation. Exports of goods and services dropped 14.2% year on year. Imports of goods and services fell an even sharper 20.9% year on year. The Croatian kuna depreciated by 1.8% over this period. Lack of export orders forced manufacturers to begin laying off thousands of workers. June 30 . The International Monetary Fund (IMF) approved an increase of 40% in financial assistance for Belarus , bringing total support to some US$3.5 billion. The increase in financial support of US$679 million will supply Belarus with vital liquidity relief. This increase signals the IMF's trust in Belarus's ability and willingness to pursue responsible macroeconomic policy and further structural reforms. In the longer term, challenges remain extensive and economic and financial risks high. June 30 . Iran was reported to plan to scrap domestic gasoline subsidies for private vehicles. No time frame for implementation was given. It was announced that the government would still provide gasoline subsidies for fishing vessels and domestic trucks. Iranians currently purchase up to 20 gallons per month at the subsidized price of US$0.40 per gallon, and unlimited quantities at $1.60 per gallon. Iran's gasoline imports of 130,000 barrels per day and profitable crude oil exports are considered to be potential sanctions targets over Iran's nuclear program. June 29 . Kosovo formally joined the IMF and World Bank . This gives Kosovo increased international legitimacy, which is important since support for its 2008 unilateral declaration of independence has been questioned by some. It is hoped that membership in the international financial institutions will bring new investment to the country, the poorest in Europe. It suffers widespread corruption and massive infrastructure problems. Kosovo has an unemployment rate near 60%, and a massive trade deficit. Almost half its population lives in poverty. June 26 . United States real GDP declined a revised 5.5% in the first quarter. Profits from current production increased US$48.1 billion, or increased 3.8% quarter on quarter. It is the first quarterly increase since the second quarter of 2007. All profits came from the financial sector. Earnings in other industries declined. June 26 . The French gross domestic product contracted by 1.2% quarter on quarter during the first three months of 2009. This follows a revised contraction of 1.4% during the final quarter of 2008, and falls of 0.2% and 0.4% during the third and second quarters of last year. Investment and exports continued to perform particularly badly during the first quarter. June 26 . New Zealand's gross domestic product contracted 0.7% quarter-on-quarter in the three months through March and by 2.2% for the year, marking it as the deepest recession on record. In March growth contracted for the fifth consecutive quarter. A slump in domestic demand despite positive net exports has driven New Zealand's economic drop. June 25 . American International Group (AIG) announced that it has reached a deal to reduce its debt to the Federal Reserve Bank of New York by $25 billion. AIG said that it would give the New York Fed preferred stakes in Asian-based American International Assurance (AIA) and American Life Insurance Company (Alico), which operates in more than 50 countries. Under the agreement, AIG will split off AIA and Alico into separate company-owned entities called "special purpose vehicles," or SPVs. The New York Fed will receive preferred shares now valued at $25 billion—$16 billion in AIA and $9 billion in Alico—and in exchange will forgive an equal amount of AIG debt. The Fed is now in the insurance business. June 24. H.R. 2346 ( P.L. 111-32 ) established a $1 billion program to provide $3,500 to $4,500 rebates for the purchase of new, fuel-efficient vehicles, provided the trade-in vehicles are scrapped (Cash for Clunkers program). On August 7, H.R. 3435 ( P.L. 111-47 ) increased the amount by $2 billion, tapping funds from the economic recovery act (American Recovery and Reinvestment Act ( P.L. 111-5 )). June 24 . H.R. 2346 was signed to become P.L. 111-32 , increasing the U.S. quota in the International Monetary Fund by 4.5 billion SDRs ($7.69 billion), providing loans to the IMF of up to an additional 75 billion SDRs ($116.01 billion), and authorizing the United States Executive Director of the Fund to vote to approve the sale of up to 12,965,649 ounces of the Fund's gold. On June 18, Congress had cleared H.R. 2346 , the $105.9 billion war supplemental spending bill, that mainly funds military operations in Iraq and Afghanistan through September but also included the IMF provisions. The President's signing statement rejected certain congressional conditions on the funding, but a provision in H.R. 3081 that passed the house on July 9, 2009, was designed to overrule the President on this issue. June 24 . The United States and the European Union lodged a complaint in the World Trade Organization (WTO) against China, accusing Beijing of unfairly helping their domestic steel, aluminum, and chemical industries by limiting overseas exports of raw materials. The United States and the EU allege that while Chinese companies get primary access low priced raw materials from domestic producers, non-Chinese companies must buy the products in the open market, where prices are higher due to the lack of Chinese output restricting supplies. EU Trade Commissioner Catherine Ashton said that the Chinese restrictions on raw materials "distort competition and increase global prices." China responded that the curbs were put in place to protect the environment, and retaliated with a request for the WTO to investigate U.S. restrictions on the import of Chinese poultry products. The case represents the first trade action taken by the United States against China, or any country, under President Barack Obama. The U.S. president is aware that China is the largest creditor to the United States. Washington frequently complains about China flooding the world market with cheap exports, rather than holding them back. June 24 . The International Monetary Fund (IMF) approved an increase in assistance to Armenia. Armenia may now immediately withdraw an additional U.S. $103 million under its stand-by program approved in March. June 23 . The Chinese Ministry of Commerce (MofCOM) reported new measures to promote domestic consumption. The government plans to subsidize consumer durable trade-ins, reduce electricity prices for commercial enterprises, and promote credit cards. The trade-in of home appliances and automobiles will be emphasized. June 23 . The IMF froze Bosnia and Herzegovina's 1.2 billion euro/U.S. $1.66 billion stand-by arrangement when the country failed to implement agreed fiscal tightening. The IMF suspended the loan following the Bosnian government agreement with protests by war veterans and invalids to reverse planned cuts in benefits and pensions. The situation may be reviewed by the IMF in September. June 23 . Airbus displayed the first A320 aircraft made outside Europe at a factory in Tianjin, China. It was delivered to Dragon Aviation Leasing and will be used by Sichuan Airlines, a regional Chinese airline. Airbus began assembling the A320 in Tianjin in September, shipping components from Europe to China. The company has invested nearly U.S. $1.47 billion in the plant, a joint venture that is 51% owned by Airbus and 49% owned by a Chinese aviation consortium. Another 10 aircraft will be assembled this year in China, with Airbus planning to assemble four planes per month by the end of 2011. Airbus decided to construct the China plant based on predictions the country will purchase up to 2,800 passenger and transport planes over the next twenty years. Passenger travel is expected to expand five-fold during the next 20 years. The company's target is to gain more than 50% market share from now until 2012, a significant increase from its 39% market share in 1995. June 23 . The World Bank approved an U.S. $8 million grant for Guinea-Bissau's poverty reduction and reform program. The grant will be provided under the country's Interim Strategy Note (ISN), for the 2009-2010 period. The grant aims to improve economic management, foster economic growth and strengthen the delivery of basic services. It also seeks to support the government's reform agenda, targeting greater efficiency, transparency, and accountability in the management of public finances. Guinea-Bissau continues to be one of the most fragile states in sub-Saharan Africa, trapped in a cycle of political instability, weak institutional capacity and poor economic growth since the 1998-1999 civil war. The World Bank's grant is part of a broader initiative to support the country's stabilization and recovery. June 18 . Congress cleared H.R. 2346 , the U.S. $105.9 billion war supplemental spending bill, sending it to the President's desk. House leaders advanced the measure on June 16, on a 226-202 vote. The Senate voted, 91-5, on June 18 to adopt the report, clearing the bill. The legislation mainly funds military operations in Iraq and Afghanistan through September. It includes $5 billion in borrowing authority for the International Monetary Fund (IMF). June 17 . The U.S. Treasury released a white paper containing proposals to reorganize the financial regulatory system. Key areas of reform include systemic risk, securitization, derivatives, and consumer protection. Visit the full document at http://www.financialstability.gov/docs/regs/FinalReport_web.pdf . June 1 . General Motors Corp. declares bankruptcy, filing for chapter 11. By asset value, GM was the second largest industrial bankruptcy in history, after WorldCom in 2002. Costs to the U.S. government to save GM Corp. and Chrysler LLC now exceed $62 billion. GM's bankruptcy filing declared assets of $82 billion and liabilities of $172 billion. On the same day Chrysler's sale of assets to Italian Fiat SpA was approved by bankruptcy court. May 13 . The U.S. Treasury in a two-page letter to Congress outlined plans to regulate the over-the-counter (OTC) derivatives market, in order to quantify and regulate risks that led to the global financial crisis. According to Treasury Secretary Tim Geithner, the CFTC and SEC are reviewing the participation limits in current law to recommend how the Commodity Exchange Act and the securities laws should be amended. Treasury is coordinating with foreign governments to promote the implementation of similar measures to ensure U.S. regulation is not undermined by weaker standards abroad. May 12 . Standard & Poor's (S&P) lowered Mexico's credit rating outlook to negative from stable. Economists are reducing forecasts for real GDP growth in 2009. The central bank now estimates a 3.8%-4.8% annual contraction in 2009. S&P forecasts a 5.5% drop for Mexican real GDP this year. The Mexican economy is hampered by oil and trade. Mexico has long relied on oil revenues which are now falling. International oil prices and domestic production are down. The Constitution keeps the oil industry a state monopoly and the financial weakness of the state oil company, Pemex, has prevented development of deep water reserves in the Gulf of Mexico. Mexico's total trade, imports plus exports, equaled 62% of total Mexican GDP in 2008. Over 85% of Mexico's total trade is with the United States. In the United States, trade accounts for less than 30% of GDP. In the first quarter of 2009, Mexico's exports to the United States fell at a 26% annual rate, less than Canada's exports decline to the United States of 37%. April 30 . Chrysler, the third-largest U.S. vehicle manufacturer, filed for bankruptcy. The firm announced that it would shut four of its U.S. plants, located at Sterling Heights, Michigan; St. Louis, Missouri; Twinsburg, Ohio; and Kenosha, Wisconsin, by the end of 2010. Production at these, and five other U.S. plants (Newark, Delaware, Conner Avenue Detroit, North St. Louis, and its axle plant in Detroit) will be shifted to Canada and Mexico. The U.S. auto industry has been losing jobs for years. In 2008, the industry employed 711,000 people in the United States, down from 1.3 million in 1999. In 2008 U.S. automakers closed 230,000 jobs. Standard & Poor's estimates that even including component manufacturers, the U.S. auto industry accounts for just over 1% of non-farm employment. Outside Mexico, all of Chrysler's North American plants are temporarily closed while Chrysler is reorganized. The new company to emerge is likely to be 20% owned by the Italian firm Fiat, with a majority stake held by the U.S. United Autoworkers Union (UAW). Chrysler is the first bankruptcy filing by a major U.S. auto company since Studebaker in 1933. In Mexico, Chrysler is the fourth largest vehicle maker after Volkswagen, General Motors and Nissan. Chrysler claims that Mexican production may be unaffected. In the first quarter of 2009, total output of 33,998 units was 51% less than the same period of 2008. Mexico's total automobile production fell 41% annually in the first quarter of 2009, to 291,800 units. May 7. The government's "stress tests" indicated that ten of the largest U.S. banks would have to raise a combined $74.6 billion in capital to cushion themselves against economic under-performance. May 5. The European Commission lowered its growth forecast for the European Union to -4% in 2009 and -0.1% in 2010. May 4. The International Monetary Fund approved a 24-month $17.1 billion Stand-By Arrangement for Romania. The total international financial support package will amount to $26.4 billion, with the European Union providing $6.6 billion, the World Bank $1.3 billion, and the European Bank for Reconstruction and Development, the European Investment Bank, and the International Finance Corporation a combined $1.3 billion. April 30. Chrysler announced merger with Fiat and filed for bankruptcy. Separately, the Financial Accounting Standards Board changed the mark-to-market accounting rule to give banks more discretion in reporting value of assets. April 28 . Swine flu epidemic hits Mexican economy. April 22. The International Monetary Fund projected global economic activity to contract by 1.3% in 2009 with a slow recovery (1.9% growth) in 2010. Overall, the advanced economies are forecast to contract by 3.8% in 2009, with the U.S. economy shrinking by 2.8%. April 21 . The IMF estimated that banks and other financial institutions faced aggregate losses of $4.05 trillion in the value of their holdings as a result of the crisis. Of that amount, $2.7 trillion is from loans and assets originating in the United States, the fund said. That estimate is up from $2.2 trillion in the fund's interim report in January, and $1.4 trillion last October. April 14 . The IMF granted Poland a $20.5 billion credit line using a facility intended to backstop countries with sound economic policies that have been caught short by the global financial crisis. On April 1, Mexico said that it was tapping the new credit line for $47 billion. April 2. At the G-20 London Summit , leaders of the world's largest economies agreed to tackle the global financial crisis with measures worth $1.1 trillion including $750 billion more for the International Monetary Fund, $250 billion to boost global trade, and $100 billion for multilateral development banks. They also agreed on establishing a new Financial Stability Board to work with the IMF to ensure cooperation across borders; closer regulation of banks, hedge funds, and credit rating agencies; and a crackdown on tax havens, but they could only agree on additional stimulus measures through IMF and multilateral development bank lending and not through country stimulus packages. The leaders reiterated their commitment to resist protectionism and promote global trade and investment. April 1. The U.S. Conference Board's Consumer Confidence Index inched 0.7 of a point higher in March, virtually unchanged from the 42-year low reached in February. The present situation index has fallen from a cyclical peak of 138.3 in July 2007 to 21.5 this month. Its record low was 15.8 in December 1982, when the unemployment rate stood at a post-war high of 10.8%. April 1. Japan's economy shrank 3.3%, or by 12.7% in annual terms. This marked the deepest contraction in the economy since the first quarter of 1974, when the global economy was reacting to the oil shock, and the second-biggest decline in growth in the post-war era. Japan has experienced a record decline in exports. Total exports fell 13.9% in quarterly comparisons and by a stunning 45.0% in annual terms. These declines were mirrored by the Bank of Japan's quarterly business confidence survey, or tankan. The tankan results for the first quarter of 2009's headline Diffusion Index (DI) of business conditions for large manufacturing companies dropped to a reading of -58 in the three months through March from the -24 results recorded in the December quarter. The DI surveys respondents' business conditions expectations over the next three to six months. The reading for the first quarter was the worst on record. April 1. Mexico's President Felipe Calderón claimed yesterday that his country was willing to take up a new credit line from the International Monetary Fund (IMF). He confirmed that government finances were "in order", allowing the country to boost central bank reserves via a new IMF borrowing of some US$30–40 billion as soon as this week. The IMF has failed to attract any borrower for a US$100-million loan offering last year. Potential borrowers may be concerned over conditionality requirements for loans and the negative message sent out when any economy requires IMF financing. The new Flexible Credit Line (FCL), launched recently by the IMF to attract developing nations, offers eligible countries easy access to large loans. Countries will be able to either immediately draw funds from the FCL, or keep it as an easily accessibly pool of finance. March 31. The Organization for Economic Cooperation and Development (OECD) in a new survey reports worsening economic prospects. It is now expected that the global recession will worsen by an average GDP contraction of 4.3% in the OECD area in 2009 before a policy-induced recovery gradually builds strength through 2010. International trade is forecast to fall by more than 13% in 2009 and world economic activity will shrink by 2.7%. Specific forecasts include: U.S.: -4% in 2009 and 0% in 2010; Japan: -6.6% in 2009 and -0.5% in 2010; Eurozone: -4.1% in 2009 and -0.3% in 2010. Brazil's GDP is expected to decline by 0.3% in 2009 while Russia's is projected to fall 5.6%. Growth in India will ease to 4.3% in 2009 and in China to 6.3%. By the end of 2010 unemployment rates across OECD nations may reach 10.1% from 7.5% in the first quarter of 2009. The unemployed in the 30 advanced OECD countries would increase by about 25 million, the largest and most rapid growth in OECD unemployment in the post-war period. March 31. U.S. housing prices continue to fall. The Standard & Poor's S&P/Case-Shiller 20-City Composite Index fell 19.0% annually in January 2009, the fastest on record. High inventories and foreclosures continued to drive down prices. All 20 cities covered in the survey showed a decrease in prices, with 9 of the 20 areas showing rates of annual decline of over 20%. As of January 2009, average home prices are at similar levels to what they were in the third quarter of 2003. From their peaks in mid-2006, the 10-City Composite is down 30.2% and the 20-City Composite is down 29.1%. March 31 . The World Trade Organization (WTO) predicted that the volume of global merchandise trade would shrink by 9% this year. This will be the first fall in trade flows since 1982. Between 1990 and 2006 trade volumes grew by more than 6% a year, easily outstripping the growth rate of world output, which was about 3%. Now the global economic machine has gone into reverse: output is declining and trade is shrinking faster. March 30. The central banks of China and Argentina reached an agreement for a 70 billion yuan/U.S. $10 billion currency swap for three years, the sixth such swap China has concluded with emerging economies including South Korea, Hong Kong, Indonesia, Belarus and Malaysia. The move may provide capital to these emerging markets and may in the long-term promote the Chinese yuan's international role. For Argentina, these moves may help to offset challenges in securing foreign exchange financing. March 24 . The Executive Board of the International Monetary Fund (IMF) approved a major overhaul of the IMF's lending framework, including the creation of a new Flexible Credit Line (FCL). The changes to the IMF's lending framework include: modernizing IMF conditionality for all borrowers, introducing a new Flexible Credit Line, enhancing the flexibility of the Fund's traditional stand-by arrangement, doubling normal access limits for nonconcessional resources, simplifying cost and maturity structures, and eliminating certain seldom-used facilities. "These reforms represent a significant change in the way the Fund can help its member countries—which is especially needed at this time of global crisis," said IMF Managing Director Dominique Strauss-Kahn. "More flexibility in our lending along with streamlined conditionality will help us respond effectively to the various needs of members. This, in turn, will help them to weather the crisis and return to sustainable growth." March 23 . The U.S. Treasury released the details of its Public Private Partnership Investment Program to address the challenge of legacy toxic assets (mortgages and securities backed by loans) being carried by the financial system. The Treasury and the Federal Deposit Insurance Corporation with funding from the TARP and private capital are to purchase eligible assets worth about $500 billion with the potential to expand the program to $1 trillion. March 20 . The European Union announced additional support for the IMF's lending capacity in the form of a loan to the IMF totaling €75 billion, about US$100 billion.. The EU's common strategy is released. It focuses on regulating hedge funds, private equity, credit derivatives and credit rating agencies, and vowed to crack down on tax havens. March 19 . The U.S. Federal Reserve announced a plan to purchase longer-term Treasury securities . The Fed is now trying not just to influence the spread between private interest rates and Treasuries (through its mortgage-backed securities purchases, for example), but also to pull down the entire spectrum of interest rates by driving down the rate on benchmark Treasuries. Key points of yesterday's Fed announcement include: The federal funds rate, with a current target range of 0.0%–0.25%, is likely to remain exceptionally low for "an extended period." Last month, the Fed said the low rate would apply "for some time." The Fed will purchase: up to an additional US$750 billion of agency mortgage-backed securities, for a total of US$1.25 trillion, and up to an additional US$100 billion of agency debt for a total of up to US$200 billion. It followed the central banks of the United Kingdom and Japan by announcing its intention to purchase longer-term Treasury securities (up to US$300 billion worth) over the next six months. It has launched its Term Asset-Backed Securities Loan Facility (TALF) program to support credit for households and small businesses, and may expand that program to other lending. The Fed anticipates that fiscal and monetary stimulus, plus policies aimed at stabilizing the financial sector, will contribute to a gradual resumption of growth—although it has not said when. This announcement caused the 10-year Treasury yield to fall from just over 2.9% to under 2.6%. Mortgage rates should follow Treasury yields down and spark another refinancing wave. Economists question whether lower rates will revive home purchases as well as refinancing. March 18. The Federal Reserve announced that it would buy approximately $1.2 trillion in government bonds and mortgage-related securities in order to lower borrowing costs for home mortgages and other types of loans. March 11 . Chinese total e xports experienced their biggest fall on record in February declining 25.7% on the year in February, to US$64.9 billion. Imports also declined 24.1% on the year, And China's trade surplus shrank to a three-year low of US$4.84 billion from US$39.1 billion in January. For the first two months of the year combined, exports fell 21.1% from the same period of 2008. Trade contracted despite investment being supported by the recent rapid expansion of credit and by the release of funds under the government's four trillion yuan/US$580 billion fiscal stimulus package. March 10 . Finance Minister Najib Razak announced a large Malaysian fiscal stimulus package. The 60 billion ringgit/US$16.3 billion package is the government's second supplementary budget, after the initial 7 billion ringgit stimulus already implemented. The package equals 9.0% of gross domestic product (GDP). March 10 . Philippines ' exports experienced a record contraction in January as global demand continued to decline. Official data showed that total exports fell 41% year-on-year to US$2.49 billion. In December, exports contracted by a revised 40.3% in annual terms. Shipments of electronics, which account for more than half of total exports, almost halved, shrinking 48.4% in annual terms to US$1.35 billion. March 10 . United Kingdom industrial production suffered the largest annual drop since January 1981 in January. Manufacturing output plunged by 2.9% month on month and 12.8% year on year in January 2009, according to the Office for National Statistics (ONS). This followed a drop of 1.9% monthly in December and marked the eleventh successive monthly decline in manufacturing output. March 10 . China 's official registered unemployment rate hit a three-year high of 4.2% in 2008. Although during the post-Asian Financial Crisis slowdown, between 1979 and 1982, unemployment was mostly concentrated in the state sector, this time the private sector has experienced worse unemployment, with migrant labor being fired first, with no social programs for relief. The number of business failures is estimated to be 7.5% of the country's Small and Medium sized Enterprises (SMEs), or nearly 500,000 firms. February 24 . U.S. President Barack Obama used his first address to a joint session of Congress to outline how the economic recovery can work. He outlined the rationale behind the economic stimulus and the financial sector rescue plans, conceding costs and risks, but warning of the greater danger of inaction. President Obama promised to reduce the federal budget deficit by half by the end of his first term. On the same day, U.S. Federal Reserve Chairman Ben Bernanke testified to Congress that if the financial system is stabilized soon, the recession will end in 2009 and the economy will grow in 2010. February 24 . The Latvian government fell over fiscal adjustment measures that are required for Latvia to comply with the IMF-led rescue program terms. This caused Standard & Poor's (S&P) to reduce its sovereign rating for Latvia from BBB- to BB+. S&P has thus cut the Baltic State to junk bond status. Latvia's ratings among various rating institutions currently vary significantly, from BB+ to BBB+. February 23 . The Dow Jones Industrial Average lost 3.4% to close at 7113.78, its lowest level in 12 years , and just under half the high it reached 16 months ago. Banking stocks led the index down, and losses were experienced in most sectors. The U.S. market declines have influenced international declines as well. Japan's Nikkei 225 ended down 1.5%, Australia's S&P/ASX 200 was off by 0.6%, Taiwan's Taiex lost 1.1%, and China's Shanghai Composite fell 4.6%. Equities are wiping huge amounts off the market value of companies and investments including pensions worldwide. February 23 . The Chilean Finance Ministry announced that the Central Bank of Chile will conduct U.S. dollar auctions in March 2009, to finance a US$3 billion stimulus plan announced by President Michelle Bachelet in January. US$1 billion will be directed into fiscal spending transactions. These resources will be drawn from the country's sovereign wealth fund, which currently holds around US$20.11 billion. February 20 . Several Netherlands local and provincial council s have announced that they are planning to launch local stimulus packages to combat the country's economic crisis. The Dutch government is planning to invest €94 million in the local economy and infrastructure projects, including new street lighting and an upgrade of the sewage network. Rotterdam is planning to launch further measures to augment the €200 million package announced in January for the construction industry. Amsterdam plans to invest €200 million in its construction industry, while Utrecht is still exploring options. February 18 . The German government agreed on a revised bank bailout plan. The first version, from October 2008, cost 480 billion euro/U.S. $603.7 billion, has not delivered appropriate results. The new text must be ratified by parliament before taking effect. To ensure the stability of the German financial sector the new plan considers three factors. Expropriation would be a last resort only. Acceleration of state holdings of bank shares, changes to current stock corporation regulations are proposed. The stabilization fund for the financial markets would increase its debt guarantee time period. February 17 . President Obama signed a US$787 billion economic stimulus bill , 111 th Congress bill H.R. 1 , following House and Senate final votes on the conference report on February 13. H.R. 1 , the American Recovery and Reinvestment Act of 2009 (ARRA), was signed into law as P.L. 111-5 . The ARRA was enacted as the fiscal centerpiece of a set of wide-ranging policy efforts designed to stabilize the financial sector and the macro-economy. These efforts also included stimulus from the Economic Stimulus Act of 2008 and Troubled Asset Relief Program, among other initiatives. Originally projected to provide $787 billion in stimulus, the Congressional Budget Office (CBO) in 2010 estimated the ten-year costs of the ARRA at $862 billion. As passed, the stimulus package included some $575 billion in government spending and $212 billion in tax cuts. February 17 . U.S. automakers General Motors Corp. and Chrysler LLC submitted recovery plans to the U.S. government requesting $21.6 billion more in loans to enable their recovery. February 17 . Eastern Europe 's deepening recession is putting pressure on those West European bank s with local subsidiaries , Moody's Investors Service reports. The countries with the deepest fiscal deficits—the Baltic states, Bulgaria, Croatia, Hungary and Romania—have the highest external vulnerability. Moody's says Kazakhstan, Russia and Ukraine are also under pressure despite low public external debt. The Austrian banking system is the most exposed; banks there and in Belgium, France, Germany, Italy and Sweden account for 84% of total West European claims. Exposure is heavily concentrated among certain banking groups: Raiffeisen, Erste, Societe Generale, UniCredit and KBC. Modern banking has just emerged in Eastern Europe. Eastern subsidiaries are more vulnerable in times of stress, with deteriorating asset quality and vulnerable liquidity positions. EU member countries have failed to coordinate national stimulus programs, and there appears to be no willingness to finance large cross-border rescue packages. February 16 . Russian President Dmitry Medvedev replaced the governors of Pskov, Orel and Voronezh, as well as the Nenets Autonomous Region. The terminations suggest that the Kremlin is using the economic crisis as an excuse for getting rid of governors with whom the federal leadership was already unhappy. As local development levels and production profiles vary greatly, the crisis is having diverse effects on Russia's regions. Russian economic activity as a whole may suffer substantially in the crisis, but inequality across Russian regions may be reduced. February 16 . The Japanese economy contracted by 3.3% quarterly in December, the Cabinet Office reported on preliminary figures. At an annual rate, GDP fell by 12.7%, and is now performing at its worst since 1974. February 16 . In preparation for the London Leaders' summit in April , world leaders are drafting responses to the global financial crisis. The extent to which they agree on the causes of the crisis will be critical to policies proposed. Broad consensus on key features of the financial crisis now includes: Maturity. It emerged from a market-led process of change that spanned around 30 years, not two or three, and culminated in the long boom that began in the early 1990s. Regulatory failure. For many reasons, neither regulation nor regulators policed these processes. Opacity. A major contributory factor was the complexity and opacity of the activities and the balance sheets of major financial institutions. Credit boom. The boom resulted from countries' competitive deregulation of financial markets over some 30 years. How these ingredients interacted to cause the crisis remains under debate. The G20 are likely to promote global measures that address both the underlying causes and more immediate responses. February 14 . Finance ministers and central bank governors of the Group of Seven ( G7 ) industrialized nations met in Rome to discuss the financial crisis and economic slowdown. In order to prevent a resurgence of protectionism, the G7 communique pledged members to do all they could to combat recession without distorting free trade. February 13 . The U.S. federal government 's monthly budget statement reported a deficit of US $83.8 billion in January 2009, compared with a US $17.8-billion surplus a year earlier. Both higher outlays and falling tax receipts led to the deficit. The deficit for the first four months of the 2009 fiscal year ballooned to a record US$569 billion. The Troubled Asset Relief Program (TARP) added about US$42 billion to the deficit in January, bringing TARP spending so far this fiscal year to US$284 billion. February 13 . Eurozone GDP declined by 1.5% quarterly and 1.2% annually in the fourth quarter of 2008, the sharpest contraction since the bloc came into being in January 1999. February 12 . Ukraine 's Finance Minister Viktor Pynzenuk resigned ; Fitch downgraded its long-term foreign and local currency issuer rating from "B+" to "B"; and an International Monetary Fund (IMF) mission left Ukraine last week. The IMF, which has not concluded its US $1.9 billion part of the Ukrainian aid package, called for immediate and serious crisis management. The IMF mission announced last week that a successful implementation of the financial rescue for the country is in jeopardy. February 12 . The Irish government reported a 7-billion-euro (US$9 billion) bank rescue plan for two of the country's largest banks, the Allied Irish Bank and the Bank of Ireland. Each bank will receive 3.5 billion euro in recapitalization funds. The government attached conditions including preference shares that the government will obtain, with a fixed annual dividend of 8%, partial control over the appointment of the banks' directors, and executive pay reductions with no bonuses. February 12 . China 's State Council approved a stimulus plan yesterday for the shipbuilding industry, urging banks to expand trade finance for the export of vessels, and extending fiscal and financial support for domestic buyers of long-range ships until 2012. The government will also encourage industry restructuring, and force the replacement of outdated ships. The funds will facilitate shipping research and technology. Mergers and acquisitions will be encouraged for industry consolidation. This is the latest Chinese industry stimulus plan, following support for textiles, automotive, steel, and machinery industries over the past few weeks. February 12 . Chinalco, the Aluminum Corporation of China, announced an investment of US$19.5 billion in Australian mining group Rio Tinto . This investment is China's largest-ever overseas purchase. Chinalco will buy $7.2-billion worth of convertible bonds as well as Rio Tinto assets worth $12.3 billion. Rio Tinto assumed substantial debt in its purchase of Canadian aluminum maker Alcan in 2007. February 12 . The Swiss government presented a second economic stimulus plan worth 700 million Swiss francs (US$603 million). The funds are directed at infrastructure (390 million francs), regions (100 million francs), environment and energy (80 million francs), research (50 million francs), renovation of state buildings (40 million francs), and the tourism sector (12 million francs). The first rescue package worth some 900 million francs launched in November did not have its desired effectiveness. February 12 . Kuwait 's Sovereign Wealth Fund lost 15% in 2008. The emirate's sovereign wealth fund lost nine billion dinars (US$30.9 billion) in 2008 as a result of the global economic downturn. One example of losses was the US$5-billion capital injection into Citibank and Merrill Lynch in 2008, which fell to US$2.2 billion before returning to its current value of US$2.8 billion. These figures come days after the government unveiled a US$5.14-billion stimulus package which will be funded by the country's foreign-exchange reserves, as well as the Kuwait Investment Authority. February 12 . Australian legislature rejected fiscal stimulus package as Australian unemployment climbed to two-year high. The US$28 billion package failed over environmentalists' objections. February 5 . The Bank of England 's Monetary Policy Committee reduce d its key interest rate by 50 basis points from 1.50% to 1.00%. Interest rates are now at their lowest level since the Bank of England was founded in 1694. February 3 . British Prime Minister [author name scrubbed] and Chinese Premier Wen Jiabao said that coordination was necessary in order to avert the global financial crisis, at the end of Premier Wen's five-day tour of Europe. Prime Minister Brown said that the United Kingdom is planning to double annual exports within the coming 18 months, from £5 billion to £10 billion. He stressed that the United Kingdom will benefit from China's recent stimulus packages, particularly the aerospace, hi-tech manufacturing, education, pharmaceuticals, and low-carbon technologies industries. China and the European Union (EU) have agreed to hold summit talks soon to increase economic cooperation. February 3 . Chinese President Hu Jintao will travel to Mali, Senegal, Tanzania, Mauritius, and Saudi Arabia from February 10 to February 17, 2009. Despite the global economic downturn the Chinese government is increasing investment in Africa and the Middle East. Chinese-African trade has been increasing by an average of 30% per year, almost reaching US$107 billion in 2008. February 3 . China will give Senegal several cooperation projects, including a museum, a theater, a children's hospital, and repair of sports stadiums worth some 80 million yuan or U.S. $11.5 million. This brings the total of pledged Chinese investments to Senegal in 2009 to US$117.3 million, including projects for power services, transport equipment and information technology infrastructure. February 2 . The government of Kazakhstan announced nationalization of two banks , BTA Bank, the nation's largest bank, and Alliance Bank, the nations third-largest bank. The government reported it is considering a possible sale of half of its stake in BTA Bank to Russia's Sberbank. The Kazakh government now owns 78.1% of BTA Bank. February 2 . A survey conducted jointly by the Afghan government and the United Nations forecast that opium production in Afghanistan will decline for the second consecutive year in 2009. The report estimates that the total area of poppy fields under cultivation declined to 378,950 acres, a 19% decline from the previous year. The survey also indicated that poppy cultivation in the main producing regions of the south and the southwest fell for the first time in five years. The decline was largely attributable to recent sharp falls in global prices for opiates following saturation of the market and the negative impact of drought. Farmers had also shifted production to staple grains after global prices surged in the first half of 2008. The survey indicates that prices for dry opium tumbled 25% in 2008 while wheat and rice prices rose 49% and 26% respectively. Afghanistan accounts for 90% of the world's supply of opium with proceeds from trafficking providing a main source of income for insurgents in the border regions with Pakistan. February 2 . Ireland average prices for housing declined by 9.1% in 2008 compared with a fall of 7.3% in 2007. Also, Moody's Ratings Services revised its sovereign outlook for Ireland to negative from stable on the basis of mounting fiscal pressures, economic deterioration, and the government's potentially damaging exposure to the banking sector. This follows a similar revision from Standard & Poor's in January. January 30 . The U.S. Bureau of Economic Analysis (BEA) announced that preliminary real gross domestic product ( GDP )—the output of goods and services produced by labor and property located in the United States – for 2008 rose 1.3%, down from 2.0% in 2007. Real GDP decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, the largest decline since the first quarter of 1982. January 30 . South Korea reported that industrial output fell 9.6% in December. Total output tumbled by 18.6% in annual terms compared with the 14.0% decline in November, which was the second-largest decrease in production since the series began in 1970. January 30 . Finland reported that industrial output declined by 15.6% year-on-year in December, after falling by a revised rate of more than 9.0% in November. Production decreased in all main industrial sectors. Also, the Finnish government announced an increase in government expenditure of 1.2 billion euro to support the flagging economy. Additional funds are to be allocated to construction, renovation and transport infrastructure projects. January 29-February 1 . The World Economic Forum (WEF) met in Davos, Switzerland. Chinese Premier Wen Jiabao and Russian Premier Vladimir Putin blamed the U.S.-led financial system for the global financial crisis. European Central Bank (ECB) President Jean-Claude Trichet noted the ECB is drafting guidelines for European governments' establishment of "bad banks" to consolidate toxic assets. January 29 . Thailand's parliament approved a $3.35 billion stimulus package aimed at boosting its economy battered by months of street protests. Final approval was expected in February. January 28. The International Monetary Fund (IMF) revised its forecast for world economic growth down to 0.5% for 2009. This would be the lowest level of growth since World War II and down by 1.7 percentage points since the IMF forecast in November 2008. The IMF indicated that despite wide-ranging policy actions by governments and central banks, financial markets are still under stress and the global economy is taking a turn for the worse. The IMF urged governments to take decisive action to restore financial sector health (by providing liquidity and capital and helping to dispose of problem assets) and to provide macroeconomic stimulus (both monetary and fiscal) to support sagging demand. January 28 . Canada announced a $32 billion stimulus package that included infrastructure spending and tax cuts. January 28 . The U.S. House of Representatives passed the American Recovery and Reinvestment Act of 2009 ( H.R. 1 , Obey). The cost of the bill was estimated at $819 billion. January 26 . Australia announced a $2.6 billion stimulus package. January 22 . Malaysia announced it is preparing a second economic stimulus package to fend off the threat of recession. Singapore unveiled a $13.7 billion stimulus package. January 21 . The Philippines announced a $633 million increase to bring its stimulus program to $6.9 billion. January 15 . The U.S. Senate voted to release the second half of the Treasury's Troubled Assets Recovery Package ( TARP ) to stabilize the U.S. financial system, granting President-elect Barack Obama authority to spend $350 billion to revive credit markets and help homeowners avoid foreclosure. The Treasury Department announced it would fund a rescue of Bank of America which guarantees $118 billion in troubled assets. January 6 . Chile announced a $4 billion stimulus package. January 1 . Belarus devalued its national currency , the Belarusian ruble, by over 20%. The National Bank announced that it will tie its currency immediately to a basket of three currencies—the U.S. dollar, the euro and the Russian ruble. 2008 December 31 . The International Monetary Fund ( IMF ) gave tentative approval to Belarus for a US$2.5 billion 15 month Stand By Arrangement. Final approval will be decided by the IMF executive board in January. December 30 . South Korea reported that the industrial output index declined by 14.1% annually and by 10.7% monthly. The monthly contraction was the largest in 21 years. The slump in production is closely tied with the sharp reverse in exports, which fell by 18.3%. December 30 . Monetary Union Pact approved by Gulf Cooperation Council (GCC) —Bahrain, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates. Representatives from five of the six members of the GCC approved a draft accord for a monetary union yesterday at a summit in Muscat. GCC finance ministers did not agree on the ultimate location of the future central bank. The draft accord prepares for the creation of a monetary council, and the framework for a future monetary union. December 26. The Japanese Ministry of Economy, Trade and Industry released preliminary figures showing that industrial production shrank at a record rate and unemployment rose. Total industrial output contracted 8.1% from October to November 2008. This marked the largest decline in industrial production in 55 years. December 23 . Poland 's Monetary Policy Council reduced its main policy rate by 75 basis points. The Polish main policy rate has been reduced by 1% in two months, and now stands at 5.00%. December 23 . Japanese Cabinet approves record fiscal plan for FY2009. The ¥88.5 trillion (US$980.6 billion) fiscal package for FY2009, which begins April 1, 2009, marks a 6.6% increase in spending from initial targets. December 23 . After the IMF submitted a positive review of Iraq's economic reconstruction, the Paris Club of sovereign lenders completed the third and final step of debt forgiveness for Iraq , reducing Iraq's public external debt with its members by 20% or US$7.8 billion. Most of Iraq's remaining debt consists of official loans from Gulf Arab states and former communist countries, which may be forgiven or discounted if Iraq's economy continues to improve. Under former President Saddam Hussein, Iraq's debt totaled $125 billion. December 23 . New Zealand Real GDP declined 0.4% in quarterly seasonally adjusted terms. This marks the third consecutive quarterly decline in Real GDP. The economy fell into its first recession in more than a decade in the March, 2008. The rate of contraction deepened from the first two quarters of the year during which growth shrank by 0.3% and 0.2% respectively. In annual terms, the economy grew 1.7% in the year through September 2008. December 23 . The central People's Bank of China lowered interest rates for the fifth time in four months. Benchmark one-year lending and deposit rates were both lowered by 27 basis points to 5.31% and 2.25% respectively. These rates were lowered by their biggest margin in 11 years a month ago, lowered by 108 basis points. December 22 . U.K. Real GDP contracted by 0.6% quarterly in the third quarter of 2008. The Office for National Statistics (ONS) revised the decline in real GDP from its previous estimate of 0.5% quarterly. This marks the first time that the British economy has contracted since the second quarter of 1992. It had stagnated in the second quarter of 2008 and is therefore on the brink of recession, defined as two successive quarters of contracting quarterly GDP. Prior to that, GDP growth had moderated to 0.4% in the first quarter of 2008 from 0.6% in the fourth quarter of 2007 and 0.8% in the third quarter. Annual GDP growth fell to a 16-year low of 0.3% in the third quarter of 2008 from 1.7% in the second quarter and a peak of 3.3% in the second quarter of 2007. Industrial production contracted by 1.4% quarterly, and 2.5% annually in the third quarter, with manufacturing output down by 1.6% quarterly and 2.3% annually. This marks the third successive quarterly decrease in industrial production, meaning that the sector is already in recession. December 22 . Russia reports that industrial output growth slowed to 0.6% annual growth in October, then contracted by 8.7% annually in November, the worst monthly report since the economic collapse which followed the ruble crisis of 1998. Critical to Russia's economic slowdown is the unwillingness of Russian banks, which are heavily exposed to foreign currency denominated external debt, to lend. December 21 . Eurostat reports that Eurozone industrial orders fell 5.4% monthly in September and 4.7% monthly and 15.1% annually in October. December 21 . Canada reports that its federal government and the province of Ontario will contribute some C$4 billion (US$3.3 billion) to the short-term automotive rescue announced by the U.S. administration. The United States will provide US$13.4 billion in emergency loans to General Motors and Chrysler. General Motors is to receive C$3 billion of the Canadian funds, while Chrysler is to receive C$1 billion. Ford declines injections. Limits on executive compensation are a requirement for funds. December 21 . Zimbabwe reports its domestic debt level increased from Z$1 trillion on August 8 to Z$179.6 trillion (US$194 million at the current official inter-bank exchange rate) on September 8. This represents a monthly increase of 17,800%. Interest payments now account for roughly 90% of total debt. December 19 . President Bush announced an automotive rescue plan for General Motors Corp. and Chrysler LLC that will make $13.4 billion in federal loans available almost immediately. The money will come from the $700 billion fund set aside to rescue banks and investment firms in October. The government attached several conditions to the three-year loans and set a deadline of March 31 for the automakers to prove they can restructure enough to ensure their survival or recall the loans. As part of the rescue, GM is required to reduce debt by two-thirds via debt-for-equity swaps, pay half of the contributions to a retiree health care trust using stock, make union workers' wages competitive with foreign automakers and eliminate the union jobs bank, which pays laid-off workers. December 19 . An international rescue package of 7.5 billion euro (US$10.6 billion) for Latvia was announced. The IMF reports a 27-month stand by arrangement between Latvia and the IMF, worth 1.7 billion euro (US$2.4 billion). The remainder of the rescue package includes 3.1 billion euro from the European Union (EU), 1.8 billion euro from Nordic countries, 400 million euro from the World Bank, 200 million euro from the Czech Republic, and 100 million euro each from the European Bank of Reconstruction and Development, Estonia and Poland. Latvia nationalized its second largest bank, Parex Bank. Latvia will implement measures to tighten fiscal policy and stabilize its economy. December 19 . The Bank of Japan lowered the benchmark rate by 20 basis points to 0.3%. This marks the second consecutive monthly cut. December 18. Turkey reduces rates for the second consecutive month. The Central Bank of the Republic of Turkey (CBRT) announced a 125-basis-point cut to their overnight borrowing rate from 16.25% to 15.00%, and their overnight lending rate by 125 basis points, from 18.75% to 17.50%. Turkish interest rates are the highest in Europe, even after the rate cuts. December 18 . Mexican industrial output decreased an annual 2.7% in October, the sixth consecutive monthly decline. More than 80% of Mexico's exports go to the United States. December 18 . Norwegian Central Bank cut its main policy interest rate by 175 basis points to 3.0%, the third decrease since October. December 17 . U.S. housing starts plummeted 18.9% in November, to a seasonally adjusted annual rate of 625,000 units. This was a record monthly low. December 16 . The U.S. Federal Open Market Committee (FOMC) voted unanimously to lower its target for the federal funds rate more than 75 basis points, to a range of 0.0% to 0.25%. Long term bond yields dropped from 2.50% to 2.35%. December 15 . The Bank of Japan 's tankan survey of business confidence fell from minus 3 in the third quarter to minus 24 points in the fourth quarter of the year. The 21 point contraction was the steepest in the index since the oil shocks of the 1970s, and marked the lowest level in the index since 2002. December 12 . Ecuador 's President Rafael Correa announced that Ecuador will stop honoring its external debt ; the country should expect lawsuits from bondholders in the short term. This is not the same as declaring the entire Ecuadorean economy in default. December 11 . 27 European Union ( EU ) governments' leaders approved a 200 billion euro (US$269 billion) economic stimulus package. The cost is approximately 1.5% of the EU's total GDP. Member states will pay major shares; supranational EU institutions, such as the European Investment Bank (EIB), will contribute the remaining 30 billion euro. December 11 . Taiwan 's central bank cut its leading discount rate by three quarters of a percentage point to 2.0%, marking the biggest reduction since 1982. It was also the fifth rate cut in two-and-a-half months. December 11 . The central Bank of Korea reduced the seven-day repurchase rate by one percentage point to a record low of 3.00%. Interest rates have been reduced by 225 basis points in two months, 100 basis points in October and 125 basis points in November. December 5 . November U.S. nonfarm employment loss of 533,000 jobs was the largest in 34 years, compared with the 602,000 decline in December 1974. The U.S. Bureau of Labor Statistics also reported the unemployment rate rose from 6.5 to 6.7 percent. November's drop in payroll employment followed declines of 403,000 in September and 320,000 in October, as revised. November 25 . U.S. real GDP fell 0.5% in the third quarter of 2008. The announcement by the U.S. Bureau of Economic Analysis also reported U.S. second quarter GDP increased 2.8%. BEA attributed the third quarter decline to a contraction in consumer spending and deceleration in exports. November 24 . The U.K. announced a fiscal stimulus package valued at £20 billion (US$30.2 billion) aimed at limiting the length and depth of the apparent U.K. recession. The package included a temporary reduction of value-added tax from 17.5% to 15.0%. November 24 . The IMF Executive Board approved a 23-month Stand-By Arrangement for Pakistan in the amount of $7.6 billion to support the country's economic stabilization program. November 24. The Central Bank of Iceland 's currency swap arrangement with Sweden, Norway, and Denmark is extended through December 2009. On the same date, Standard & Poor's Ratings Services, S&P, reduced its long-term Iceland sovereign credit rating from BBB to BBB-, while maintaining its short-term Iceland sovereign currency rating at A-3. November 24 . The U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corp. said that they will protect Citigroup against certain potential losses and invest an additional $20 billion (on top of the previous $25 billion) in the company. The government is to receive $7 billion in preferred shares in the company. November 19 . The IMF Executive Board agreed to a $2.1 billion loan for Iceland. Following the decision of IMF's Executive Board, Denmark, Finland, Norway, and Sweden agreed to provide an additional $2.5 billion in loans to Iceland. November 15 . At a G-20 (including the G-8, 10 major emerging economies, Australia and the European Union) summit in Washington, the G-20 leaders agreed to continue to take steps to stabilize the global financial system and improve the international regulatory framework. November 15 . Japan announced that it would make $100 billion from its foreign exchange reserves available to the IMF for loans to emerging market economies. This was in addition to $2 billion that Japan is to invest in the World Bank to help recapitalize banks in smaller, emerging market economies. Also, the IMF and Pakistan agreed in principle on a $7.6 billion loan package aimed at preventing the nation from defaulting on foreign debt and restoring investor confidence. November 14 . The President's Working Group on Financial Markets (Treasury, Securities and Exchange Commission, Federal Reserve, and the Commodity Futures Trading Commission) announced a series of initiatives to strengthen oversight and the infrastructure of the over-the-counter derivatives market. This included the development of credit default swap central counterparties—clearinghouses between parties that own debt instruments and others willing to insure against defaults. November 13 . The African Development bank conference on the financial crisis ended with a pessimistic outlook for Sub-Saharan Africa , due to declines in foreign capital, export markets and commodity-based exports. November 13 . Eurostat declared that Eurozone GDP declined by 0.2% in the third quarter of 2008, as well as the second quarter. Since recession is defined as two successive quarters of contracting GDP, this means that the Eurozone is technically in recession. November 12. United States Treasury Secretary Paulson announced a change in priorities for the US$700 billion Troubled Asset Relief Program (TARP) approved by Congress in early October. The first priority remains to provide direct equity infusions to the financial sector. Roughly US$250 billion has been allocated to this sector. This scope was broadened to include non-banks, particularly insurance companies such as AIG, which provide insurance for credit defaults. Paulson noted that TARP would be used to purchase bank stock, not toxic assets. Paulson's new plan also would provide support for the asset-backed commercial paper market, particularly securitized auto loans, credit card debt, and student loans. Between August and November 2007 asset-backed commercial paper outstanding contracted by nearly US$400 billion. Paulson rejected suggestions that TARP funds be made available to the U.S. auto industry. November 12. The Central Bank of Russia raised key interest rates by 1%. Swiss Economics Minister announced the Swiss government would inject 341 million Swiss Francs/US$286.6 million for economic stimulus . The State Bank of Pakistan raised interest rates by 2%, to reduce inflation. It also injected 320 billion rupees/US$4 billion into the Pakistan banking system. November 11 . IMF deferred their decision to approve US$2.1 billion loan for Iceland . This was the third time the IMF board scheduled then failed to discuss the Iceland proposal. The tentative Iceland package required Iceland to implement economic stabilization. That economic stabilization was the required trigger for implementation of EU loans to Iceland from Norway, Poland and Sweden. Iceland is reportedly involved in disputes over deposit guarantees with British and Dutch depositors in Icelandic banks. November 10. The United States government announced further aid to American International Group , AIG. AIG's September $85 billion loan was reduced to $60 billion; the government bought $40 billion of preferred AIG shares, and $52.5 billion of AIG mortgage securities. The U.S. support of AIG increased from September's $85 billion to $150 billion. November 9. G-20 meeting of finance ministers and central bank governors in Sao Paulo, Brazil , concluded with a communiqué calling for increased role of emerging economies in reform of Bretton Woods financial institutions, including the World Bank and the International Monetary Fund. November 9. China announced a 4 trillion Yuan/U.S. $587 billion domestic stimulus package . primarily aimed at infrastructure, housing, agriculture, health care, and social welfare spending. This program represents 16% of China's 2007 GDP, and roughly equals total Chinese central and local government outlays in 2006. November 8. Latvian government took over Parex Bank , the second-largest bank in Latvia. November 7. Iceland 's President Grimsson reportedly offered the use of the former U.S. Air Force base at Keflavik to Russia. The United States departed Keflavik in 2006. November 7. United States October employment report revealed a decline of 240,000 jobs in October, and September job losses revised from 159,000 to 284,000. The U.S. unemployment rate rose from 6.1% to 6.5%, a 14-year high. November 7 . Moody's sovereign rating for Hungary is reduced from A2 to A3. Despite IMF assistance, financial instability may require "severe macroeconomic and financial adjustment." Moody's reduced its ratings of Latvia from A3 to A2, before the Latvian statistical office announced Latvian GDP fell at a 4.2% annual rate in the third quarter of 2008. Moody's also announced an outlook reduction for Estonia and Lithuania . November 6. IMF approved SDR 10.5 billion/U.S. $15.7 billion Stand-By Arrangement for Hungary . U.S. $6.3 billion is to be immediately available. November 6. International Monetary Fund announced its updated World Economic Outlook . Main findings include that "global activity is slowing quickly", and "prospects for global growth have deteriorated over the past month." The IMF now projects global GDP growth for 2009 at 2.2% , 3/4 of a percentage point lower than projections announced in October, 2008. It projects U.S. GDP growth at 1.4% in 2008 and -0.7% in 2009. November 6. The European Central Bank , ECB, reduced its key interest rate from 3.75% to 3.25%. In two months the ECB has reduced this rate from 4.25% to 3.25%. The Danish Central Ban k lowered its key lending rate from 5.5% to 5%. The Czech National Bank reduced its interest rate from 3.5% to 2.75%. In South Korea , the Bank of Korea reduced its key interest rate from 4.25% to 4%. During October the Bank of Korea reduced its rate from 5.25% to 4.25%. November 4. United States Institute of Supply Management's manufacturing index fell 4.6 points in October to 38.9, after previously falling in September. The export orders component of the manufacturing index fell 11 points in October to 41, following a drop of 5 points in September. 41 is the lowest level in this export index in 20 years. Exports have been the strongest sector in U.S. manufacturing during the past year. November 4. Australia . Reserve Bank of Australia lowered its overnight cash rate by 75 basis points to 5.25%, the lowest Australian rate since March 2005. November 4 . Indian Prime Minister Manmohan Singh established a Cabinet-level committee to evaluate the effect of the financial crisis on India's economy and industries. This follows the November 2 Indian and Pakistani Central banks ' actions to boost liquidity. India cut its short-term lending rate by 50 basis points to 7.5% and reduced its cash reserve ratio by 100 basis points to 5.5%. November 4. Chilean President Michelle Bachelet announced a U.S. $1.15 billion stimulus package to boost the housing market and channel credit into small and medium businesses. November 3. IMF announced agreement with Kyrgyzstan on arrangement under the Exogenous Shocks Facility to provide at least U.S. $60 million. The agreement requires the approval of the IMF Executive Board to become final. November 3 . Russian Prime Minister Vladimir Putin reported measures to support the real economy. The measures will include temporary preferences for domestic producers for state procurement contracts, subsidizing interest rates for loans intended to modernize production; and tariff protection for a number of industries such as automobiles and agriculture. The new policy aims to support exporters. October 31. Three of the six Gulf Cooperation Council , GCC, countries, Bahrain , Kuwait and Saudi Arabian central banks reduced interest rates to follow the actions of the U.S. Federal Reserve and other central banks. October 31. Kazakhstan government will make capital injection s into its top four banks , Halyk Bank, Kazkommertsbank, Alliance Bank and BTA Bank. October 31 . The U.S. Commerce Department reported that consumer spending fell 0.3% in September after remaining flat in the previous month. On a year-to-year basis, spending was down 0.4%, the first such drop since the recession of 1991. Consumer spending has not grown since June. October 30 . The U.S. Bureau of Economic Analysis reported that U.S. real gross domestic product decreased 0.3 per cent in the third quarter of 2008 after increasing 2.8 per cent in the second quarter of 2008. October 29 . The U.S. Federal Reserve lowered its target for the federal funds rate 50 basis points to 1 per cent. It also approved a 50 basis point decrease in the discount rate to 1.25 per cent. The Federal Reserve also announced establishment of temporary reciprocal currency arrangements, or swap lines, with the Banco Central do Brasil, the Banco de Mexico, the Bank of Korea, the Monetary Authority of Singapore, and the Reserve Bank of New Zealand. Swap lines are designed to help improve liquidity conditions in global financial markets. October 29 . IMF approved the creation of a Short-Term Liquidity Facility , established to support countries with strong policies which face temporary liquidity problems. October 28 . The IMF, the European Union, and the World Bank announced a joint financing package for Hungary totaling $25.1 billion to bolster its economy. The IMF is to lend Hungary $15.7 billion, the EU $8.1 billion, and the World Bank $1.3 billion. October 28 . The U.S. Conference Board said that its consumer confidence index has dropped to an all-time low, from 61.4 in September to 38 in October. October 27 . Iceland 's Kaupthing Bank became the first European borrower to default on yen-denominated bonds issued in Japan (samurai bonds). October 2 6 . The IMF announced it is set to lend Ukraine $16.5 Billion. October 24 . IMF announced an outline agreement with Iceland to lend the country $2.1 billion to support an economic recovery program to help it restore confidence in its banking system and stabilize its currency. October 23 . President Bush called for the G-20 leaders to meet on November 15 in Washington, DC to deal with the global financial crisis. October 22 . Pakistan sought help from the IMF to meet balance of payments difficulties and to avoid a possible economic meltdown amid high fuel prices, dwindling foreign investment and soaring militant violence. G-20 . The Group of 20 Finance Ministers and Central Bank Governors from industrial and emerging-market countries is to meet in Sao Paulo, Brazil on November 8-9, 2008, to discuss key issues related to global economic stability. October 20 . The Netherlands agreed to inject €10 billion ($13.4 billion) into ING Groep NV, a global banking and insurance company. The investment is to take the form of nonvoting preferred shares with no maturity date (ING can repay the money on its own schedule and will have the right to buy the shares back at 150% of the issue price or convert them into ordinary shares in three years). The government is to take two seats on ING's supervisory board; ING's executive-board members are to forgo 2008 bonuses; and ING said it would not pay a dividend for the rest of 2008. October 20 . Sweden proposed a financial stability plan, which includes a 1.5 trillion Swedish kronor ($206 billion) bank guarantee, to combat the impact of the economic crisis. October 20 . The U.N. 's International Labor Organization projects that the global financial crisis could add at least 20 million people to the world's unemployed , bringing the total to 210 million by the end of 2009. October 19 . South Korea announced that it would guarantee up to $100 billion in foreign debt held by its banks and would pump $30 billion more into its banking sector. October 18 . President Bush, President Nicolas Sarkozy of France, and the president of the European Commission issued a joint statement saying they agreed to "reach out to other world leaders" to propose an international summit meeting to be held soon after the U.S. presidential election, with the possibility of more gatherings after that. The Europeans had been pressing for a meeting of the Group of 8 industrialized nations, but President Bush went one step further, calling for a broader global conference that would include "developed and developing nations"—among them China and India. October 17 . The Swiss government said it would take a 9% stake ($5.36 billion) in UBS , one of the country's leading banks, and set up a $60 billion fund to absorb the bank's troubled assets. UBS had already written off $40 billion of its $80 billion in "toxic American securities." The Swiss central bank was to take over $31 billion of the bank's American assets (much of it in the form of debt linked to subprime and Alt-A mortgages, and securities linked to commercial real estate and student loans). October 15 . The G8 leaders (Canada, France, Germany, Italy, Japan, Russia, the United Kingdom and the United States, and the European Commission) stated that they were united in their commitment to resolve the current crisis, strengthen financial institutions, restore confidence in the financial system, and provide a sound economic footing for citizens and businesses. They stated that changes to the regulatory and institutional regimes for the world's financial sectors are needed and that they look forward to a leaders' meeting with key countries at an appropriate time in the near future to adopt an agenda for reforms to meet the challenges of the 21 st century. October 14 . In coordination with European monetary authorities, the U.S. Treasury, Federal Reserve, and Federal Deposit Insurance Corporation announced a plan to invest up to $250 billion in preferred securities of nine major U.S. banks (including Citigroup, Bank of America , Wells Fargo , Goldman Sachs and JPMorgan Chase ). The FDIC also became able to temporarily guarantee the senior debt and deposits in non-interest bearing deposit transaction accounts (used mainly by businesses for daily operations). October 13 . U.K . Government provided $60 billion and took a 60% stake in Royal Bank of Scotland and 40% in Lloyds TSB and HBOS . October 12-13 . Several European countries ( Germany , France , Italy , Austria , Netherlands , Portugal , Spain , and Norway ) announced rescue plans for their countries worth as much as $2.7 trillion. The plans were largely consistent with a U.K. model that includes concerted action, recapitalization, state ownership, government debt guarantees (the largest component of the plans), and improved regulations. October 8 . In a coordinated effort, the U.S. Federal Reserve , the European Central Bank , the Bank of England and the central banks of Canada and Sweden all reduced primary lending rates by a half percentage point. Switzerland also cut its benchmark rate, while the Bank of Japan endorsed the moves without changing its rates. The Chinese central bank also reduced its key interest rate and lowered bank reserve requirements. The Federal Reserve's benchmark short-term rate stood at 1.5% and the European Central Bank's at 3.75%. October 5 . The German government moved to guarantee all private savings accounts and arranged a bailout for Hypo Real Estate , a German lender. A week earlier, Fortis , a large banking and insurance company based in Belgium but active across much of Europe, had received €11.2 billion ($8.2 billion) from the governments of the Netherlands, Belgium and Luxembourg. On October 3, the Dutch government seized its Dutch operations and on October 5, the Belgian government helped to arrange for BNP-Paribas , the French bank, to take over what was left of the company. October 3 . U.S. House of Representatives passes 110 th Congress bill H.R. 1424 , Financial Institutions Rescue bill, clearing it for Presidential signing or veto. President signs bill into law, P.L. 110-343 , the Emergency Economic Stabilization Act of 2008 , sometimes referred to as the Troubled Assets Relief Program, TARP. The new bill's title includes its purpose: "A bill to provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers ... " October 3 . Britain 's Financial Services Authority said it had raised the amount guaranteed in savings accounts to £50,000 ($88,390) from £35,000. Greece also stated that it would guarantee savings accounts regardless of the amount. October 3 . Wells Fargo Ban k announced a takeover of Wachovia Corp , the fourth-largest U.S. bank. (Previously, Citibank had agreed to take over Wachovia.) October 1 . U.S. Senate passed H.R. 1424 , amended, Financial Institutions Rescue bill. September/October . On September 30, Iceland 's government took a 75% share of Glitnir , Iceland's third-largest bank, by injecting €600 million ($850 million) into the bank. The following week, it took control of Landsbanki and soon after placed Iceland's largest bank, Kaupthing , into receivership as well. September 26 . Washington Mutual became the largest thrift failure with $307 billion in assets. JPMorgan Chase agreed to pay $1.9 billion for the banking operations but did not take ownership of the holding company. September 22 . Ireland increased the statutory limit for the deposit guarantee scheme for banks and building societies from €20,000 ($26,000) to €100,000 ($130,000) per depositor per institution. September 21 . The Federal Reserve approved the transformation of Goldman Sachs and Morgan Stanley into bank holding companies from investment banks in order to increase oversight and allow them to access the Federal Reserve's discount (loan) window. September 18 . Treasury Secretary Paulson announced a $700 billion economic stabilization proposal that would allow the government to buy toxic assets from the nation's biggest banks, a move aimed at shoring up balance sheets and restoring confidence within the financial system. An amended bill to accomplish this was passed by Congress on October 3. September 16 . The Federal Reserve came to the assistance of American International Group, AIG , an insurance giant on the verge of failure because of its exposure to exotic securities known as credit default swaps, in an $85 billion deal (later increased to $123 billion). September 15 . Lehman Brothers bankruptcy at $639 billion is the largest in the history of the United States. September 14 . Bank of America said it will buy Merrill Lynch for $50 billion. September 7 . U.S. Treasury announced that it was taking over Fannie Mae and Freddie Mac, two government-sponsored enterprises that bought securitized mortgage debt. August 12 . According to Bloomberg, losses at the top 100 banks in the world from the U.S. subprime crisis and the ensuing credit crunch exceeded $500 billion as write downs spread to more asset types. May 4 . Finance ministers of 13 Asian nations agreed to set up a foreign exchange pool of at least $80 billion to be used in the event of another regional financial crisis. China, Japan and South Korea are to provide 80% of the funds with the rest coming from the 10 members of ASEAN. March . The Federal Reserve staved off a Bear Stearns bankruptcy by assuming $30 billion in liabilities and engineering a sale of Bear Sterns to JPMorgan Chase for a price that was less than the worth of Bear's Manhattan office building. February 17 . The British government decided to "temporarily" nationalize the struggling housing lender, Northern Rock . A previous government loan of $47 billion had proven ineffective in helping the company to recover. January . Swiss banking giant UBS reported more than $18 billion in writedowns due to exposure to U.S. real estate market. Bank of America acquired Countrywide Financial , the largest mortgage lender in the United States. 2007 July/August . German banks with bad investments in U.S. real estate are caught up in the evolving crisis, These include IKB Deutsche Industriebank, Sachsen LB (Saxony State Bank) and BayernLB (Bavaria State Bank). July 18 . Two battered hedge funds worth an estimated $1.5 billion at the end of 2006 were almost entirely worthless. They had been managed by Bear Stearns and were invested heavily in subprime mortgages. July 12 . The Federal Deposit Insurance Corp . took control of the $32 billion IndyMac Bank ( Pasadena , CA ) in what regulators called the second-largest bank failure in U.S. history. March/April . New Century Financial corporation stopped making new loans as the practice of giving high risk mortgage loans to people with bad credit histories becomes a problem. The International Monetary Fund warned of risks to global financial markets from weakened US home mortgage market. Appendix B. Stimulus Packages Announced by Governments Appendix C. Comparison of Selected Financial Regulatory Reform Proposals This appendix provides a comparison, in graphic form, of selected proposals for regulatory reform that have been put forward in the wake of the global financial crisis. Seven such proposals are covered in the table below. They are, in chronological order: U.S. Department of the Treasury , Blueprint for a Modernized Financial Regulatory Structure , March 2008. (This study was completed under Secretary Henry Paulson, during the Bush Administration.) Counterparty Risk Management Policy Group (CRMPG) , Containing Systemic Risk: The Road to Reform , Aug. 6, 2008. (The CRMPG, a group of commercial and investment bankers, began this study at the suggestion of the President's Working Group on Financial Markets. Its focus is on market participants, rather than regulators.) Congressional Oversight Panel (COP) , Special Report on Regulatory Reform: Modernizing the American Financial Regulatory System: Recommendations for Improving Oversight, Protecting Consumers, and Ensuring Stability , January 2009. (The COP was created by the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) to oversee the Troubled Asset Relief Program.) Group of Thirty , Financial Reform: A Framework for Financial Stability , January 15, 2009. (The Group of Thirty is a private, nonprofit body composed of senior representatives of the private and public sectors and academia, which aims to deepen understanding of international economic and financial issues.) Group of 20 (G-20) , G-20 Working Group on Enhancing Sound Regulation and Strengthening Transparency: Final Report (Draft), February 2009. (The G-20 is made up of the finance ministers and central bank governors of 19 countries: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the U.K., and the United States, and also the European Union.) Financial Services Authority (FSA) , The Turner Review: A Regulatory Response to the Global Banking Crisis , March 2009. (The FSA is the UK regulatory agency with jurisdiction over banking, securities, insurance, and derivatives. Adair Turner has been FSA chairman since September 2008.) U.S. Department of the Treasury , Financial Regulatory Reform: A New Foundation , June 2009. (Treasury has released draft legislative language containing many of these recommendations.) The table below lists a number of specific recommendations contained in the above reports and studies, and indicates by an "X" which ones contain each recommendation. The absence of an "X" does not necessarily mean that the authors of the report oppose the recommendation—each study has its own scope and focus. In some cases, studies identify issues as needing further study; in others, an issue may be identified as a problem contributing to the financial crisis without a specific recommendation for reform being made. (In neither of these cases would an "X" appear in the table.) Appendix D. Summary of Policy Targets and Options This appendix lists the major problems raised by the crisis, the targets of policy, and the policies already being taken or possibly to take by various entities in response to the global financial crisis. The length and breadth of the list indicates the extent that the financial crisis has required diverse and draconian action. Policies or actions not yet taken or are being considered are marked by a "?" in the table. Many of these items are discussed in later sections of this report and are addressed in separate CRS reports. Appendix E. British, U.S., and European Central Bank Operations, April to Mid-October 2008 | The world appears to be recovering from the global recession that has caused widespread business contraction, increases in unemployment, and shrinking government revenues. Although the industrialized economies have stopped contracting, for many, unemployment is still rising. The United States likely hit bottom in June 2009, but numerous small banks and households still face huge problems in restoring their balance sheets, and unemployment has combined with sub-prime loans to keep home foreclosures at a high rate. Nearly all industrialized countries and many emerging and developing nations avoided dropping into another "Great Depression" by implementing sizable economic stimulus and/or financial sector rescue packages, such as the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). Several countries have resorted to borrowing from the International Monetary Fund as a last resort. The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in four basic phases. The first has been intervention to contain the contagion and restore confidence in the system. The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis. The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. In order to give these proposals political backing, world leaders have called for international meetings to address changes in policy, regulations, oversight, and enforcement. On September 24-25, 2009, heads of the G-20 nations met in Pittsburgh to address the global financial crisis. The fourth phase of the process is dealing with political, social, and security effects of the financial turmoil. One such effect is the strengthened role of China in financial markets. The role for Congress in this financial crisis is multifaceted. While the recent focus has been on combating the recession, the ultimate issue perhaps is how to ensure the smooth and efficient functioning of financial markets to promote the general well-being of the country while protecting taxpayer interests and facilitating business operations without creating a moral hazard. In addition to preventing future crises through legislative, oversight, and domestic regulatory functions, On June 17, 2009, the Obama Administration presented a proposal for financial regulatory reform that focuses on five areas and includes establishing the Federal Reserve as a systemic risk regulator, creating a Council of Regulators, regulating all financial derivatives, creating a Consumer Financial Protection Agency, improving coordination and oversight of international financial markets, and other provisions. The reform agenda now has moved to Congress with legislation that addresses many of the issues in the Obama plan but also includes other financial issues. Among the numerous bills in Congress addressing the financial crisis, H.R. 4173 (Wall Street Reform and Consumer Protection Act of 2009, passed the House on December 1, 2009) addresses many of the concerns raised. Congress also plays a role in measures to reform and recapitalize the International Monetary Fund, the World Bank, and regional development banks. This report provides a historical account and analysis of the crisis through January 2010. For information on current aspects of the crisis, see other CRS reports. This report will not be updated. |
September 25, 2009 — Exiled Uighur activist Rebiya Kadeer, living in the United States, was denied a visa to visit Taiwan. September 11, 2009—Former President Chen Shui-bian was given a life sentence on corruption charges. August 19, 2009 — Taiwan's Ministry of Foreign Affairs announced that Taiwan would not seek full membership in the U.N. this year, but instead would seek to participate in the activities of U.N. specialized institutions, like the World Meteorological Organization and the World Maritime Organization. August 7, 2009—Over a period of several days, Typhoon Morakot slammed into Taiwan, causing hundreds of millions of dollars in damage and leading to approximately 500 fatalities. U.S. policy on Taiwan, which is enshrined in the 1979 Taiwan Relations Act (the TRA, P.L. 96-8 ), remains rooted in a general notion of maintaining the "status quo" as it existed when the TRA was enacted. The United States has interpreted the "status quo" as the preservation of peace and stability in the Taiwan Strait until such time as the undecided issue of Taiwan's political status can be resolved peacefully by agreement between Taiwan and the PRC. Some in the United States also see the "status quo" as the maintenance of a relative military, economic, and diplomatic balance between the two sides. Everything that has followed in U.S. policy toward Taiwan since the TRA's enactment has been bound up within this delicate balance. But while U.S. policy has remained static, the circumstances it was designed to address have changed dramatically. Complex political changes have occurred in both Taiwan and the PRC. The military balance is shifting inexorably in the PRC's favor, there have been dramatic improvements in the PRC's economic fortunes, and the two sides have increasingly connected economic interests. These changes have resulted in periodic speculation about whether the current U.S. policy framework remains appropriate or should be revised. Issues involving Taiwan's unresolved political status remain key features in other U.S. interactions with both Taiwan and the PRC. They include complex policy trade-offs and questions such as: how far the United States should go in trying to accommodate PRC sensitivities about Taiwan without compromising U.S. principles supporting Taiwan's democratic development; how much the United States should try to pressure either China or Taiwan or both to avoid provocative actions; whether the United States should change its policy of not arbitrating or facilitating negotiations between Taiwan and the PRC in favor of a more direct, interventionist approach; and whether the United States should conduct a reassessment of its Taiwan policy in light of changing circumstances, and what the extent of such a possible reassessment should be. Once a U.S. World War II ally, China's situation changed dramatically after the civil war victory of Mao Tse-tung in 1949. The reigning Republic of China (ROC) government, led by Chiang Kai-shek and his Kuomintang (KMT) party, fled mainland China and moved to Taiwan, an island off the south China coast. For the next thirty years, the United States continued officially to recognize the ROC government on Taiwan while both regimes—the government on Taiwan and the People's Republic of China (PRC) government on the mainland—claimed legitimacy as the sole legal government of the Chinese people. With these competing claims of sovereignty, official U.S. relations with the government on Taiwan became a casualty of the 1979 decision to establish U.S. diplomatic relations with the PRC government as the sole government of all China. U.S. unofficial relations with Taiwan since then have been built on the framework of the 1979 Taiwan Relations Act ( P.L. 96-8 ) and further shaped by three U.S.-China communiqués. Under these agreements, the United States maintains its official relations with the PRC while selling Taiwan military weapons and having extensive economic, political, and security interests there. Absent formal diplomatic relations, the United States continues to maintain substantial economic and security relationships with Taiwan, including the sale of defensive military weapons and services. But continuing political and economic transformations in both the PRC and Taiwan since 1979 mean that U.S. policymakers are facing a different set of complex policy choices with each passing year. This report focuses on current developments in Taiwan, analyzing how those developments are affecting choices the United States makes about its policy toward Taiwan specifically and toward the PRC more broadly. Other CRS reports provide more details about the myriad historical complexities of Taiwan's current situation in U.S. policy, such as: historical background about how the ROC on Taiwan went from a U.S. ally to a government with no diplomatic U.S. relations, including the fundamentals governing U.S. policy toward Taiwan today (CRS Report RS22388, Taiwan's Political Status: Historical Background and Its Implications for U.S. Policy ); the increase in U.S.-Taiwan tensions under the former administration of President Chen Shui-bian (CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political Relations ); the 2008 elections in Taiwan (CRS Report RS22853, Taiwan's 2008 Presidential Election , all by [author name scrubbed]; as well as the subtle permutations of the "one-China" policy over three decades and its role in U.S. policy (CRS Report RL30341, China/Taiwan: Evolution of the "One China" Policy—Key Statements from Washington, Beijing, and Taipei ) and U.S. arms sales to Taiwan (CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990 ), both by [author name scrubbed]. The fundamental framework of U.S. policy toward Taiwan was laid down decades ago, beginning with the Nixon opening to the People's Republic of China (PRC) in 1971 that resulted in the severing of official relations with the government on Taiwan in 1979. U.S. policy toward Taiwan since then has been defined by four primary documents: the Taiwan Relations Act ( P.L. 96-8 , enacted in 1979); and three U.S. communiqués with the PRC: the Shanghai Communiqué (1972), in which the United States "acknowledge[d]" that both China and Taiwan maintain there is but one China, declared it did "not challenge that position," and reaffirmed its interest in a peaceful settlement of the Taiwan question. the Communiqué on Normalization of Relations with the PRC (1979), in which the United States recognized the PRC government as the sole legitimate government of all China and "acknowledge[d] the Chinese position that there is but one China and Taiwan is part of China", and the August 17 Communiqué on Arms Sales to Taiwan (1982), in which the United States stated it had no intention of pursuing a "two-China" policy; that it appreciated China's pledges to strive for a peaceful solution to the Taiwan question; and that it did not plan on a long-term policy of arms sales to Taiwan. In addition, U.S. policy has attained further nuance during these decades by a combination of other factors. Among these are a set of six policy assurances the United States gave Taiwan in the 1980s; the precedents set by a collection of sensitive "guidelines on Taiwan" that the executive branch has adopted to define and constrain its actions; a variety of statements by successive U.S. Administrations about the nature of U.S. policy toward Taiwan and the PRC; and periodic initiatives by Members of Congress intended to affect U.S. policy in some way. In 1979, the Carter Administration announced the United States would sever official relations with Taiwan and recognize the PRC as the legitimate government of China. While Members of the 96 th Congress clearly concurred with the strategic imperative of such a move, many Members were unhappy with what they saw as the Carter Administration's minimal proposals for continued dealings with the government on Taiwan. In particular, some were concerned that the package of legislation the White House submitted to Congress to govern future unofficial relations with Taiwan—the "Taiwan Enabling Act"—did not go far enough in protecting either Taiwan or U.S. interests. Congressional debate on the legislation in 1979 was extensive and complicated. The end result was passage of a much amended version of the Administration's proposal—the Taiwan Relations Act (TRA— P.L. 96-8 )—which remains the domestic legal authority for conducting unofficial U.S. relations with Taiwan today. Much of the TRA deals with the logistics of U.S.-Taiwan relations: the establishment of the American Institute in Taiwan (AIT) as the unofficial U.S. representative for interactions and consular activities with Taiwan, including details about AIT's staffing, functions, and funding; and the continued application of existing U.S. laws and treaties affecting Taiwan after the severing of diplomatic ties. Although it is a common misperception that the TRA mandates the United States to defend Taiwan in case of attack, nothing in the TRA specifically obligates the United States to do so or to resort to military conflict on Taiwan's behalf. In 1995-1996, precedent was set for potential U.S. involvement when the United States sent two carrier battle groups to the area after China conducted an unprecedented series of live-fire missile exercises in the Taiwan Strait. Given the lack of a mandate for military action in the TRA but the demonstrable U.S. willingness to deploy military forces in the Taiwan Strait missile crisis, there remain questions about how the United States may react in a comparable situation now. Of particular relevance for long-term U.S. policy are Section 2 (b) and Section 3 of the TRA, dealing with U.S. strategic interests in and arms sales commitments to Taiwan. Section 2 of the TRA speaks in broad terms about U.S. interests for peaceful resolution to the Taiwan question, saying that any forceful resolution would be of "grave concern to the United States." It further states that U.S. policy is to "maintain the capacity of the United States to resist ... coercion" in addressing the Taiwan issue. Section 3 provides for the sale of U.S. defense articles and services to Taiwan, but is non-specific about the nature of these. The language merely calls for "such defense articles and services ... as may be necessary to enable Taiwan to maintain a sufficient self-defense capability." Section 3 also gives Congress a role in determining what needs Taiwan may have. Much of the U.S. debate on Taiwan arms sales since the TRA was enacted has involved differing judgments—often between Congress and the White House—about what should be the capabilities and quantities of the "necessary" articles and services the United States provides to Taiwan under Section 3. Until the mid-1980s, Taiwan had a one-party system in which Chiang Kai-shek's authoritarian Nationalist Party (KMT) ruled under martial law. The KMT permitted no political opposition and held no democratic elections. In 1986, the party began to liberalize, allowing the formation of opposition parties, including the Democratic Progressive Party (DPP), a party whose platform advocated Taiwan independence from China. The KMT government also ended martial law (in 1987), and for the first time opened government positions to native "Taiwanese"—the 85% of the island's population who predated the influx of the two million "mainlanders" fleeing civil war in China in 1949. In the ensuing years, members of the ROC legislature on Taiwan, elected on mainland China over 40 years earlier, were asked to retire, and a new, streamlined legislature was elected in 1992. In 1996, Taiwan held its first direct presidential election, won by KMT leader Lee Teng-hui, himself a native Taiwanese. During his presidency, Lee increasingly distanced himself from his party's long-standing position that there was only "one China" and that Taiwan was part of it. Instead he began emphasizing Taiwan's distinct culture and identity apart from those of the PRC. This posed complications for one of the fundamental tenets on which U.S. relations with the PRC were based—the statement that "The United States acknowledges that all Chinese on either side of the Taiwan Strait maintain that there is but one China and that Taiwan is a part of China." The uninterrupted KMT dynasty on Taiwan finally was broken on March 18, 2000, when DPP candidate Chen Shui-bian won the presidency with only 39% of the popular vote in a three-way race. The victory was a stunning defeat for the KMT and its unbroken 50-year tenure in power on Taiwan. By the narrowest of margins, President Chen was elected to a second (and final) term in March 2004, winning by only 29,518 votes out of a reported 13.25 million votes cast. The KMT's fall from political dominance was compounded in two subsequent legislative elections in December 2001 and December 2004. By 2004, the KMT saw its majority of 115 seats in the 225-member Legislative Yuan (LY) cut to just 79. With neither the DPP nor the KMT having a working majority, each formed coalitions with smaller parties to gain strength. President Chen Shui-bian presided over a "Pan-Green" coalition composed of his DPP party and the Taiwan Solidarity Union (TSU); it was opposed by the "pan-Blue" coalition of the KMT and the People First Party (PFP), which together retained the barest control of Taiwan's legislature. Since the two opposing coalitions had very different political ideologies and roughly equal political strength, this split government created significant gridlock in Taiwan's political arena, and thus difficult political realities for U.S. policymakers throughout Chen's tenure. The political situation in Taiwan changed substantially in 2008 when momentum swung back behind the KMT. The DPP, struggling with growing political scandal and low voter confidence, lost power in both legislative (January) and presidential (March) elections that year. Taiwan's new President, Ma Ying-jeou, of the KMT, has pursued a more conciliatory approach toward the PRC and has made it a priority to improve relations with the United States. Since his landslide election, however, Ma's popularity has fallen, plagued among other things by his government's poor response to helping the victims of Typhoon Morakot in August 2009, a faltering economy, tumbling stock markets, and rising energy prices, as well as by concerns over his cross-strait policies and by residual domestic political tensions in Taiwan. Under Taiwan's new KMT government, then, the United States faces new challenges concerning the popularity of the elected government, the implications of closer and more cordial ties between Taiwan and the PRC for U.S. interests, and what role, if any, Washington should play in cross-strait relations. The return of the KMT to power in Taiwan has raised a number of questions. One concerns the political health of the DPP opposition, which was effectively crushed in 2008 elections. The DPP has been demoralized further by political scandals involving charges of corruption by former President Chen, and members of his family. There have been some reports that a key DPP figure and former presidential candidate, Frank Hsieh, may even be considering forming a separate political party, something that would deal a serious blow to DPP fortunes. In an effort to ensure its future, DPP leadership appears to be reducing the party's emphasis on Taiwan sovereignty and independence in favor of pursuing a broader strategy emphasizing social and political reform. A critical test for the party will be how well it can do in city and county elections scheduled for the end of 2009 and in 2010. In a second question arising from the KMT's return to power, some are concerned that the KMT's strong dominance of the executive and legislative in 2009 may revive the party's past tradition of authoritarianism, a development that would be out of step with Taiwan's continued democratization. The new government has been criticized not only for its cross-strait initiatives, for example, but for its handling of the 2008 indictment, detention, and subsequent sentencing of former President Chen on corruption and money-laundering charges. Critics of the government's handling of Chen's case charged that replacing the judge hearing the case part-way through the trial was highly irregular and politically charged. Critics also maintain that the former president should have been released on bail after his indictment instead of being held nine months in detention until his September 11, 2009 sentencing. President Ma also has been criticized for seeking and winning (on July 26, 2009) the KMT chairmanship. Ma, the sole candidate for the post, campaigned for president on assurances that he would not seek his party's chairmanship. Ma's position as party chair will assure him more control over the nomination of party candidates and will help him counter the lingering influence of old-time KMT leaders. His position as head of the party also should increase his stature in the cross-strait process, since as party chair (but not as Taiwan president) he can justify communicating directly with Beijing. On July 27, 2009, for instance, PRC Party Secretary Hu Jintao sent Ma written congratulations on his election as KMT chair—a communication not now possible in the two men's respective roles as presidents Many observers believe that the election of President Ma presented an opportunity to lay a new framework in Taiwan-PRC relations—one that moves toward cross-strait improvements and new understandings, and away from the more confrontational policies of the past. Ma has sought to ease tensions with China and improve cross-strait ties, and leaders in Beijing have been receptive. Cross-strait improvements to date have occurred on a number of levels. In a symbolic move, Taiwan in mid-May 2008 worked jointly with the PRC in providing disaster relief after the Sichuan earthquake. By late May, Taiwan had accepted a PRC invitation to resume a direct SEF-ARATS dialogue for the first time since October 1998. Three rounds of cross-strait talks have been held to date. They include: A first round in Beijing on June 12-13, 2008, resulting in agreements to allow weekend direct charter flights and boost PRC tourism to Taiwan. A second round in Taiwan on November 4-7, 2008, resulting in four agreements on direct sea transportation, air transportation, food safety, and direct postal links. A third round in Nanjing, China on April 26-28, 2009, resulting in agreements on cross-strait crime fighting, mutual judicial assistance, and others, plus a consensus, for the first time, on promoting mainland investment in Taiwan. In addition, both sides also have taken unilateral steps, with Taiwan among other things easing investment restrictions with China and the PRC dropping its long-standing objection to allowing Taiwan to participate (as a non-member) in the 2009 World Health Assembly, the annual meeting of the U.N.'s World Health Organization (WHO). PRC and Taiwan officials also have talked about creating a comprehensive agreement to expand economic cooperation between Taiwan and China—the Economic Cooperation Framework Agreement (ECFA)—discussed elsewhere in this memo. Some in Taiwan are critical of the cross-strait initiatives, saying they are too rapid and that easing cross-strait economic restrictions has jeopardized Taiwan's interests. Taiwan's economy, they say, will become more vulnerable to PRC pressure and manipulation under Ma's cross-strait initiatives. The opposition party also has criticized Ma's diplomatic overtures toward China as being "over-dependent on China's goodwill." In March 2009, the Chairman of the U.S. American Institute in Taiwan (AIT), Ray Burghardt, said that the United States was "comfortable with what's happening" in Taiwan-PRC engagement. With cross-strait rapprochement, Beijing in 2009 began to moderate its long-standing objection to Taiwan's meaningful participation in the U.N. health organizations. On January 13, 2009, WHO sent a letter to Taiwan stating that the island henceforth would be included in the International Health Regulations (IHR), a set of legally binding rules governing international commitment to disease surveillance, alert, and response. As an IHR participant, Taiwan will be included in the Global Outbreak and Alert Response Network, receiving the latest updates on global epidemics. On April 29, 2009, Taiwan authorities announced that the World Health Organization (WHO) had invited Taiwan to attend the 2009 WHA meeting from May 18-27 as an observer. The invitation marked the first time that Taiwan has been permitted to participate in an activity of U.N. specialized agency since it lost its U.N. seat to the PRC in 1971. Taiwan's Department of Health sent a 15-member delegation to the meeting using the name "Chinese Taipei." Taiwan President Ma Ying-jeou attributed the 2009 invitation to his moderate and flexible approach toward Beijing during the first year of his tenure. In its first WHO bid on August 14, 2008, the Ma Administration submitted a proposal to the U.N. Secretariat asking to be allowed to have "meaningful participation" in U.N. special organizations such as the WHO. Because of PRC objections, a U.N. subcommittee decided on September 18, 2008 not to include Taiwan's request for "meaningful participation" in U.N. activities on the agenda for the 63 rd General Assembly. Other Taiwan observers have bristled at the suggestion that PRC officials essentially had given "permission" for Taiwan to participate by negotiating directly with the WHO to include Taiwan. Taiwan's Foreign Minister, Francisco H.L. Ou, earlier had said that Taiwan would only accept an invitation extended directly by the WHO Secretariat, not one routed through Beijing. Taiwan had been unsuccessful in 15 previous attempts to gain either membership or non-member status in the U.N. and its affiliates such as the WHO. Taiwan's efforts under the DPP Administration of President Chen included an application both for full U.N. membership as well as for use of either the name "Republic of China" or "Taiwan." These applications had been of particular concern to both China and the United States. U.S. government officials, on record in the past as supporting Taiwan's membership in organizations "where statehood is not an issue," had been unusually blunt and outspoken in opposition to some of Taiwan's past U.N. application efforts under President Chen. In August 2007, for instance, a senior U.S. officials said: We are very supportive of Taiwan on many many fronts.... However, membership in the United Nations requires statehood. Taiwan, or the Republic of China, is not at this point a state in the international community. The position of the United States government is that the ROC ... is an issue undecided, and it has been left undecided ... for many, many years. In response to the 2009 announcement, however, the U.S. State Department issued a statement saying that the United States has "long supported Taiwan's meaningful participation in the WHO, including observers status at the WHA." Taipei also points out that it is a full member in other international organizations to which the PRC also belongs, such as the Asian Development Bank (ADB), the World Trade Organization (WTO), and the Asia Pacific Economic Cooperation (APEC). In 2004, the 108 th Congress enacted legislation ( P.L. 108-235 ) requiring the Secretary of State to seek Taiwan's observer status in WHO each year at its annual meeting, the World Health Assembly (WHA). Taiwan has maintained that its "observer status" in U.N. bodies such as WHO would be an apolitical solution since other non-sovereign entities, like the Holy See and the Palestine Liberation Organization, have been given such status. On September 11, 2009, former President Chen Shui-bian was sentenced to life imprisonment on charges of corruption and money laundering that was alleged to have been carried out while he served as Taiwan's president. In Taiwan, an appeal is automatic upon a life imprisonment sentence. Immune from prosecution while in office, Chen had been arrested on the corruption charges on November 12, 2008, and was indicted on December 12, 2008. His trial began on March 26, 2009. Several aspects of the judicial proceedings against Chen have led to criticism of the Taiwan government under Ma Ying-jeou. The first criticism involves the replacement of the original presiding case judge in Taipei District Court part-way through the judicial process. Judge Chou Chan-chun, who on December 18, 2009, ordered that Chen be released from detention pending the resolution of the case, shortly afterward was replaced as the case's presiding judge by Judge Tsai Shou-shun. Judge Tsai then reversed the original order for Chen's release and on December 30, 2009, ordered Chen back to detention, ostensibly (according to the court) out of fear that he would collude with witnesses, destroy evidence, or flee. The court also said Chen had "interfered" with the case by communicating with the public through friends and family. The court's decisions led to growing criticism, including by legal experts in Taiwan and the United States, that Chen's ongoing detention without bail violated his human rights and "seriously undermine[s] the credibility of the judiciary." Critics also said that the replacement of the presiding trial judge with a judge thought to be less favorably disposed to President Chen suggested political interference in the process. The corruption charges against Chen dated back to 2006, when the Taiwan government began to conduct broadening investigations into allegations of corruption made against then-President Chen, his family members, and officials in his administration. New allegations of money-laundering arose in August 2008 against Chen and his family, plunging the DPP further into crisis, according to current DPP chairwoman Tsai Ing-wen. The August 2008 allegations, which involved foreign government investigations and not just those of Taiwan's KMT-dominated government, also were the first in which Chen publicly admitted even partial culpability, saying that the funds were from campaign contributions, legally acquired, that he failed to report. On August 15, 2008, Chen apologized to the DPP for causing "humiliation" and "irreparable damage" to the party for his failure to declare the campaign funds. He announced his and his wife's immediate resignations from DPP party membership. Shortly after Chen stepped down as president on May 20, 2008 (thereby losing his presidential immunity), Taiwan prosecutors announced they were starting an official investigation on his potential role in the 2006 corruption and malfeasance charges. In pursuit of these allegations, President Ma on August 6, 2008 announced that he was declassifying documents, classified by Chen while he was president, that allegedly implicated Chen in the case of the special expenses fund. Chen has maintained that the funds wired to overseas accounts were undeclared campaign funds legally acquired, not government funds embezzled from the "special affairs" account while he was president or bribes associated with the 2004 financial reforms he initiated. He called the corruption investigations a "political vendetta" by the KMT against him and his family. One Taiwan press editorial criticized the recurring corruption allegations in recent years—which have involved a number of senior Taiwan politicians—suggesting they have been fueled more by political partisanship than by interest in real reform. Apart from the case involving former President Chen, investigations and indictments for corruption have been a recurring feature of political life in Taiwan, particularly over the issue of how senior officials use and account for expenditures from so-called "special expense accounts." Such accounts are to be used for official expenses only, but give the controlling officials broad discretion on how the funds are spent. They operate generally with poor government oversight and are subject to vague rules that many Taiwan officials have said are confusing. Among those investigated and cleared of such charges in the past are: current President Ma Ying-jeou, former foreign minister James Huang, former economics minister Steve Chen, and current DPP chairwoman Tsai Ing-wen (investigated when she was head of the Mainland Affairs Council). Other investigations for "special expense account" infractions include former Vice President Annette Lu, former justice minister Shi Mao-lin, former education minister Tu Cheng-sheng, former interior minister Lee Yi-yang, and former civil service minister Chu Wu-hsien, among others. Taiwan's economy grew rapidly (around 10% a year) in the 1970s and 1980s. Growth declined to around 5-6% a year in the 1990s as the economy matured. But Taiwan's economy has faltered in the global financial crisis, experiencing a serious slowdown beginning in the 4 th quarter of 2008. According to a March 2009 report by Taiwan's Council for Economic Planning and Development Taiwan's export-heavy economy suffered a 28.6% drop in exports from February 2008 to February 2009. Taiwan is the United States' ninth-largest overall trading partner, with two-way trade in 2008 valued at $61.6 billion, a slight decrease from 2007. Taiwan also is the sixth-largest destination for U.S. agricultural exports, about $2.5 billion annually. In addition to agricultural goods, Taiwan's U.S. imports include industrial raw materials and machinery and equipment; its exports to the United States are largely electronics and consumer goods. Once Taiwan's largest trading partner, the United States has been surpassed by China and Japan and is now Taiwan's third-largest trading partner, supplying 11% of Taiwan's imports and absorbing 14% of its exports. The U.S. trade deficit with Taiwan in 2008 was $11 billion. Taiwan was a long-time resident on the U.S. Special 301 Watch List because of strong U.S. concerns that it maintained insufficient protections for intellectual property rights (IPR). This changed in 2009, after Taiwan over a period of years had initiated a series of new laws and established institutional frameworks to assure IPR protections. On January 16, 2009, the USTR announced that Taiwan had made sufficient improvements to be removed from the list. To address U.S. concerns, the Taiwan government passed more robust copyright legislation, enacted new laws targeting illegal Internet file sharing, and improved prosecution of IPR offenses through the establishment (July 1, 2008) of a specialized Intellectual Property Court. The U.S. Trade Representative (USTR) had removed Taiwan from the more stringent "Priority Watch List" in 2004. But pursuant to provisions the Trade Act of 1974, Taiwan remained on the U.S. Special 301 "Watch List"—a designation of a less serious risk of IPR violations than indicated by the "Priority Watch List." The U.S. business community was divided on whether Taiwan had made sufficient IPR improvements to merit removal from the "Watch List." For instance, in separate letters to USTR dated September 8, 2008, the U.S.-Taiwan Business Council said it "strongly supports" Taiwan's removal from the Watch List, while the U.S.-based International Intellectual Property Alliance recommended that "Taiwan remain on the Watch List" pending further IPR improvements. Taiwan for years has been seeking the economic and political benefits of a U.S.-Taiwan Free Trade Agreement (FTA), so far without success. President Ma reportedly mentioned the subject again during his August 2008 transit visit through the United States on his way to Latin America. To date, U.S.-Taiwan trade discussions have been held under a 1994 Trade and Investment Framework Agreement (TIFA), a non-binding consultative mechanism the United States employs for resolving trade and investment difficulties with countries still opening their economies. But U.S.-Taiwan TIFA talks have been suspended in retaliation for Taiwan placing restrictions on imports of U.S. beef. In some instances, a TIFA may lead to economic liberalization that is significant enough to result in a U.S. FTA with the TIFA country. Taiwan has argued that its status as a major trading partner of the United States justifies an FTA on economic grounds. U.S. officials cite a number of obstacles to an FTA with Taiwan over the near term—not only trade matters, such as Taiwan's record on intellectual property rights (IPR), but more fundamentally, the complicated political issues involving both Taiwan's and U.S. relations with the PRC. The PRC strongly opposes a U.S.-Taiwan FTA. In the past, Taiwan's bid has had its supporters in the U.S. Congress, several of whom have introduced measures regarding an FTA for Taiwan. Since 1949, both Taiwan and the PRC have maintained restrictions on trade and economic investment relations across the Taiwan Strait. These have included requirements that goods and articles be transshipped via third parties and not directly; restrictions on the kinds of goods and articles that can be traded; and caps on investment levels, among others. Even with these restrictions on official trade and contacts, Taiwan businesses have invested increasingly across the strait into the mainland, although the exact figures remain unclear. Taiwan-China trade has also increased dramatically, so that China (along with Hong Kong) has surpassed the United States as Taiwan's most important trading partner. According to Taiwan's Central News Agency, Taiwan's total bilateral trade with the PRC for 2008 was $105.4 billion. Taiwan's growing economic interconnectedness with the PRC has created increasing pressures on a succession of Taiwan governments to ease its restrictions on direct travel and investment. Since 1987, Taiwan incrementally eased long-standing restrictions on contacts with the PRC. Initiatives under President Chen and the DPP, included the start in January 2005 of the first non-stop direct charter flights flown in 55 years between the two adversaries (limited to the Lunar New Year holiday that year). The resumption of cross-strait talks in June 2008 and the subsequent agreements signed (discussed elsewhere in this report) have already increased the potential for cross-strait trade and investment. Ma Administration officials also have talked about creating a comprehensive agreement to expand economic cooperation between Taiwan and China—with names suggested such as the Comprehensive Economic Partnership Agreement (CEPA) or the Economic Cooperation Framework Agreement (ECFA). The idea is controversial to some in Taiwan because of the economic inter-dependence they fear such an agreement could help create. President Ma's willingness to significantly expand such cross-strait exchanges has concerned many DPP members and pro-independence advocates in Taiwan, who see the Ma initiatives as having overly ambitious expectations and as moving far too rapidly. These DPP observers say that cross-strait overtures need to be calibrated carefully to avoid compromising Taiwan's economic security and political autonomy. Under the Taiwan Relations Act ( P.L. 96-8 ), the United States is obligated to provide Taiwan with defense articles and services for its self-defense—a commitment to which the PRC objects. In spite of the apparent warming ties with Taiwan after the March 2008 presidential election, many thought the Bush Administration delayed sending forward notifications to Congress concerning a number of long-pending U.S. arms sales to Taiwan. In June 2008, some Members of the U.S. Senate wrote to President Bush expressing concern about the reports and urging the White House to act swiftly on Taiwan's arms sales requests. Some speculated that the delay in arms sales notifications was related to Beijing's hosting of the 2008 Summer Olympic Games from August 8-24, 2008. One Pentagon official hinted in a public forum that the United States may have imposed a freeze on weapons sales to Taiwan. A State Department spokesman at the time maintained that the pending arms sales still were being discussed in "an internal interagency process." Since then, U.S. arms sales to Taiwan have resumed. On August 25, 2008, the Pentagon announced that it was awarding the McDonnell-Douglas Corp. (owned by Boeing) a contract to provide Taiwan with 60 Harpoon missiles and associated hardware, worth $89.8 million, that Taiwan requested in 2007. On October 3, 2008, the Defense Security Cooperation Agency (DSCA) notified Congress of the possible Foreign Military Sale of six different types of defense articles and equipment, consistent with the policies of P.L. 96-8 , which could total a maximum of approximately $6.4 billion. These included: upgrades of four E-2T Aircraft to the HAWKEYE 2000 configuration (est. maximum of $250 million) 30 AH-64D Block III APACHE Longbow Attack helicopters (est. maximum of $2.532 billion) 330 PATRIOT Advanced Capability (PAC-3) missiles (est. maximum of $3.1 billion) 32 UGM-84L Sub-Launched HARPOON Block II missiles and 2 UTM-84L HARPOON Block II Exercise missiles (est. maximum of $200 million) follow-on spare parts in support of F-5E/F, C-130H, F-16A/B, and Indigenous Defense Fighter IDF aircraft (est. maximum of $334 million) 182 JAVELIN guided missile rounds and 20 JAVELIN command launch units (est. maximum of $47 million) One sensitive issue for the Obama Administration is how it will respond to Taiwan's long-standing desire to purchase F-16 C/D fighters from the United States. In June 2009, the U.S. AIT Director in Taiwan, Stephen Young, said that the Administration would consider the F-16 sale after key Administration officials were settled into their posts, but no such announcement had been made by the end of October 2009. Observers consider any arms sale announcement to be highly unlikely before President Obama visits the PRC in mid-November 2009. The PRC has repeated its strong opposition to any U.S. arms sales. According to one noted U.S. China expert, the People's Liberation Army (PLA) has said it would suspend U.S. military exchanges when an arms sales announcement is made. Taiwan also has sought to qualify for coverage under the U.S. Visa Waiver Program (VWP), which eliminates some visa requirements for qualified countries, allowing their citizens to make temporary U.S. visits without first obtaining a valid visa. VWP countries must meet certain criteria—such as offering reciprocal privileges to U.S. citizens, having machine-readable passports, and having a low nonimmigrant refusal rate (defined as the formal denial of a nonimmigrant visa application by a U.S. consular official). The latter criteria appears to have been a particularly difficult one for Taiwan. In 2007, Congress enacted amendments to the VWP which may provide for a waiver of the non-immigrant refusal rate. With a waiver, Taiwan may meet the requirements of the program. Although Taiwan citizens would benefit from the facilitated travel that the U.S. Visa Waiver Program affords, another key Taiwan government motive is thought to be the international stature that Taiwan would gain from being among the VWP's group of participants. In addition, participation in the program is often seen as evidence of close ties with the United States. In addition to its current failure to meet all of the program's qualifications (absent a non-immigrant refusal rate waiver), Taiwan's chances of participation in the VWP also are subject to the anticipated kinds of political difficulties involving the PRC that are aspects of other U.S.-Taiwan relations. The PRC does not qualify for the VWP. It is unclear at this point what the ultimate Taiwan policy of the Obama Administration will be. Trends since 1979 strongly suggest that the White House will maintain policy continuity, with U.S. policy remaining rooted firmly in the fundamentals of the Taiwan Relations Act and the three communiqués. In a press conference in Taiwan on March 18, 2009, for example, AIT Chairman Ray Burghardt stressed that U.S. commitments under the Taiwan Relations Act will remain unchanged. He also emphasized that U.S. officials "truly are enthusiastic" about improvements in cross-strait ties. Recent history on U.S. Taiwan policy indicates, however, that even within the framework of policy continuity there can be nuance. Many observers concluded in 2001 that the newly elected George W. Bush then had abandoned the long-standing U.S. policy of "strategic ambiguity" in favor of "strategic clarity" that placed a clearer emphasis on Taiwan's interests and showed less concern for PRC views. In addition to approving a major arms sales package for Taiwan in 2001, the Bush Administration's subsequent statements and actions continued to appear more supportive of Taiwan than those of previous U.S. Administrations. This support was in keeping with growing concern in Congress in the late 1990s that the U.S. policy framework toward Taiwan had become outdated and that Taiwan's self-defense capabilities had eroded while those of the PRC had grown. A series of congressionally mandated annual reports issued by the Pentagon supported these conclusions, assessing that the military balance in the Taiwan Strait was increasingly tilting in the PRC's favor. During its tenure, however, the Bush Administration began reshaping its own policy articulations concerning both Taiwan and the PRC. Administration officials came to see that smooth U.S.-PRC relations may be an important tool in cooperating against terrorism, maintaining stability on the Korean peninsula, and advancing many other key U.S. strategic goals. As articulated by Vice President Cheney during his visit to Shanghai in April 2004, the White House judged that "the areas of agreement [between the United States and the PRC] are far greater than those areas where we disagree ... " Also, such problems of trust developed between Taiwan's President Chen and U.S. officials that the bilateral atmosphere eroded significantly during the Bush Administration. The Bush White House came to balance criticisms of China's military buildup opposite Taiwan with periodic warnings to the Taiwan government that U.S. support was not unconditional. Whether such nuance will continue in the Obama Administration remains to be seen. Given developments in U.S. relations with Taiwan since 2001, lawmakers who are concerned about current trends and the U.S. ability to meet future challenges may consider a number of various options for U.S. policy. The official U.S. policy view is that the one-China policy and the fundamental framework surrounding it is an important constant in an otherwise dangerously fluid and evolving U.S.-Taiwan-PRC relationship. In this view, any alteration or apparent flexibility in that policy would lead to a disintegrating policy damaging to U.S. interests. In addition, according to this view, the current policy framework helps protect the United States and U.S. policies from becoming greater factors in the domestic Taiwan and PRC political environments. The slightest deviation from U.S. policy formulations and actionsan off-the-cuff comment, the use of different wording beyond that already approved, a visit by a more senior U.S. officialcan be and has in the past been seized upon by actors from either side to further domestic political agendas, inevitably creating nettlesome diplomatic problems for U.S. policy. Moreover, these proponents say, those who advocate scrapping the one-China policy and other aspects of the U.S. policy framework are recklessly discounting PRC resolve on unifying Taiwan with the mainland and irresponsibly advocating actions that well could lead to the use of U.S. military forces in a U.S.-PRC conflict. The Taiwan Relations Act and the current policy approach, according to these proponents, should be maintained and regularly reaffirmed. As the PRC itself is firmly committed to the "one-China" policy, maintaining and reaffirming the current policy would be the last disruptive to U.S.-PRC relations. Any change in this policy, these proponents say, would be an about-face in the long-standing U.S. position and would involve the greatest risk to U.S.-PRC relations. Some suggest also that such a move would be damaging to Taiwan's ultimate economic and political security. Outside the U.S. government, a minority of some Taiwan proponents places greater emphasis on the political aspirations and rights to self-determination of the people on Taiwan. According to this view, the current U.S. policy framework on Taiwan is out of step with the American emphasis on global democratization. This view holds that as the PRC and Taiwan have evolved, the original U.S. policy framework on Taiwan has grown increasingly irrelevant. The one-China policy itself, they argue, originally was based on the U.S. acknowledgment that both Taiwan and the PRC held there was only one China and that Taiwan was part of it. They contend that this U.S. policy has become untenable; it no longer reflects the reality in Taiwan. Therefore, they say, the one-China policy needs to be abandoned and replaced with a one-China, one-Taiwan policy in which the United States would work toward gradual normalization of relations with Taiwan. Some who advocate this viewpoint believe that the costs of such a policy change for the United States would be minimal. They believe that PRC actions and statements on Taiwan are just saber-rattling, and they doubt that the PRC will attack Taiwan should Taipei declare independence. Even if the PRC should attack Taiwan, these proponents appear confident that for political and strategic reasons, the United States would come to Taiwans aid. To do nothing, they say, would seriously damage U.S. credibility and influence in Asia. Bracketed within the above two policy options is a steady but quiet flow of alternative policy suggestions. These tend to advocate various substantive changes in day-to-day U.S. relations with Taiwan that their proponents believe would remain within the boundaries of the current policy framework and within U.S. understandings with the PRC. At the very least, some say, the United States needs to consider doing another comprehensive review of its Taiwan policy in order to revisit once again the 1979-1980 Taiwan Guidelines that govern U.S. government interactions with Taiwan and with Taiwan officials. Reportedly, only one such review to update the guidelines has been conducted since 1979—the 1993-1994 Taiwan Policy Review undertaken in the Clinton Administration—and that review resulted in a new approval for exchanges of high-level official visits in the economic arena. But even the high-level economic visits resulting from the 1993-1994 policy review were not pursued with vigor by the Bush Administration, according to these proponents. Furthermore, since the 1993-1994 policy review, there have been dramatic developments in Taiwans political development. From an authoritarian, one-party government some saw as only marginally more democratic than that of the PRC, Taiwan has become a fully functioning democracy, with multiple political parties, competitive elections, and two complete, peaceful shifts in government—the DPP's victory under Chen in 2000 and the KMT's return to power under Ma in 2008. In addition, since 1995 the PRC has undertaken a substantial military buildup along the coast opposite Taiwan, and in 2005 Beijing adopted the anti-secession law suggesting hostile intent against Taiwan. These significant developments since 1993-1994, according to this view, justify another Taiwan Policy Review to make selected changes in U.S. policy. Proponents of a review believe that the importance of Taiwan for U.S. interests, and of peace and stability in the Taiwan strait, warrant such renewed policy attention. Limited changes, they argue, could result in a more rational policy process and could improve communications. Among the policy changes that have been discussed are: More transparent and open interactions with Taiwan at the working level, including visits between U.S. and Taiwan officials in official U.S. government buildings and invitations to Taiwan officials to attend special events such as swearing-in ceremonies; Higher level U.S. government visits and exchanges with Taiwan counterparts; Greater coordination within the U.S. government—including regular inter- departmental meetings involving the Departments of Commerce, Defense, State, and Treasury, among others—on policy and substantive issues involving Taiwan; and More open and active support for Taiwan's participation in international organizations for which statehood is not a requirement, and greater support for observer status for Taiwan in organizations for which statehood is a requirement (such as the United Nations and World Health Organization). The implications of a Taiwan policy review for U.S.-PRC relations likely would depend on the nature of the policy review itself. A substantial or comprehensive public review undoubtedly would raise concerns both in the PRC and likely in Taiwan. As stated before, however, such a review is not without precedent, and could be seen by both U.S. and PRC officials as a pragmatic adjustment to current circumstances. Among those suggesting alternative approaches, there appears to be greater sentiment that a more active U.S. role in cross-strait matters is both justifiable within the current policy framework and warranted by changing sentiments within the PRC and Taiwan. They suggest, for instance, that there is room for U.S. involvement in trying to moderate, re-shape, or otherwise influence those contending positions of the two sides that remain major obstacles to greater stability in the Taiwan Strait. Such greater involvement would require changes in long-standing U.S. assurances to Taiwan that the United States would not become involved in a mediating role between the two sides, and long-standing objections from the PRC that the United States not "interfere" in China's internal affairs. U.S. officials maintain, however, both governments in recent years have changed the way they talk to Washington about Taiwan. U.S. officials now are under subtle and perhaps increasing pressure from both governments to become directly involved in some aspects of cross-strait issues. According to U.S. officials, the PRC during Taiwan's Chen Administration suggested that Beijing and Washington cooperate to manage controversial Taiwan issues. This included suggestions and pressure from PRC officials that the United States pressure Chen into shelving plans for an island-wide referendum and that U.S. officials avoid sending the "wrong signals" to Taiwan, encouraging independence aspirations. For their part, members of the Taiwan government suggested that the Taiwan Relations Act needed to be strengthened or reevaluated. They sought U.S. support for Chen's constitutional reform plans and more visible and routine U.S.-Taiwan official interaction. As a result, some observers in both Taiwan and the United States suggest that the time may be ripe for the United States to step up its rhetoric and activities to promote cross-strait dialogue. Nevertheless, this receptivity to U.S. involvement has significant limitations—the chief of which is that each side wants U.S. involvement only on behalf of its own interests. Taiwan urges the United States to press the PRC to renounce the use of force and to agree to no pre-conditions for cross-strait talks. The PRC urges the United States to oppose Taiwan independence and to be more forceful in opposing unilateral changes in the status quo. According to many, U.S. involvement in such a one-sided way could help foster rather than ease cross-strait tensions. Former U.S. officials report that the United States is willing to help in a cross-strait dialogue if both sides can reach consensus on the kind of U.S. help they can accept. Another alternate view is that the United States has become too responsive to PRC sensitivities on Taiwan, and therefore unwilling to exert more pressure on the PRC government to reduce its hostile military posture toward Taiwan. According to this view, the U.S. stake in maintaining a democratic Taiwan, along with the potential cost of a non-peaceful resolution to Taiwans political status, is too high for the U.S. government to remain on the sidelines. The United States should use more of its considerable leverage with Beijing in an effort to bring about more conciliatory behavior and promote more cross-strait concessions. Proponents suggest that U.S. officials could pressure the PRC to reduce its missile and military buildup opposite Taiwan and to revisit China's 2005 Anti-Secession Law which specifically provides for use of force against Taiwan. Another set of policy suggestions supports greater U.S. support for and involvement in Taiwans democratic institutions. According to this view, Taiwan has already transformed itself by adopting a democratic system of governance; it is in the interests of all parties to have Taiwans government be as effective and stable as possible. In particular, Taiwan's democratic system serves as a principle barrier to a Taiwan leadership's "preemptive capitulation" to PRC initiatives. But proponents of this view say that the very immaturity of Taiwans democracy and the infrastructural weaknesses of its political institutions are hampering Taiwan governance, contributing to cross-strait tensions, and posing problems for U.S. policy. Proponents suggest that the U.S. might pursue initiatives to improve the effectiveness of Taiwans governance, such as: U.S. support for limited constitutional reforms in Taiwan (such as movement to a parliamentary system or reduction in the multiple levels of government) that could contribute directly to more effective government institutions and a more workable balance of power; Greater dialogue and more direct contact between the U.S. Congress and Taiwans Legislative Yuan (LY), particularly to assist the LYs current structural reform and committee structure and processes; and Encouragement for Taiwan to use its political strengths and resources in a non-isolating way—by de-emphasizing divisive sovereignty issues, for instance, and instead emphasizing the global role Taiwan can play in democratic capacity building—such as in vote-counting and monitoring. In addition, say these proponents, the United States can and should be more open in offering rhetorical support for the statements and actions of Taiwan leaders, defending them as natural components of Taiwans democratic processes. The United States might feel obliged publicly to disagree with those espousing Taiwan independence aspirations, according to this view, but U.S. officials should openly support the rights of Taiwan officials to say such things as an essential part of the open debate that characterizes a democratic government. Many consider the continued success in 2008 of the democratic process in Taiwan to be a validation of U.S. goals for the spread of democratic values. It also further emphasizes the unique and delicate challenge for U.S. policy that Taiwan continues to pose: Taiwan is our ninth largest trading partner with a vibrant and free democratic government on an island claimed by the PRC, with which the United States has no diplomatic relations but does have defense commitments, and whose independence from China U.S. officials say they do not support. With Taiwan under the KMT government, the United States will be faced with some challenges familiar from past years, including decisions on: new arms sales; how to accommodate requests for visits to the United States by President Ma and other senior Taiwan officials; the level of U.S. relations with the Ma government; and whether to pursue closer economic ties, such as through a Free Trade Agreement. In addition, Taiwan-U.S. relations under the KMT government face new challenges—notably the implications that President Ma's initiatives toward the PRC have for U.S. interests; and what role, if any, Washington should play in Taiwan-PRC relations. President Ma's emphasis on improving relations with the PRC presents a potentially new policy environment for the United States. U.S. policy had been stressed after President Chen abandoned his early, unsuccessful olive branches to Beijing in favor of a more pro-independence approach, with U.S. officials subjected to increasing pressure from both sides to become directly involved in some aspects of cross-strait ties. PRC officials began quietly urging the United States to pressure Chen into shelving plans for an island-wide referendum, and they pressed U.S. officials to avoid sending the "wrong signals" to Taiwan. Members of the Taiwan government urged U.S. officials to give more overt support for Taiwan's democracy and to put more pressure on Beijing to lessen its hostility—efforts that some see as setting a precedent for overriding the "six assurances" to Taiwan. U.S. officials were put in the position of continually seeking to re-balance the cross-strait relationship to achieve some sort of stasis in keeping with stated U.S. policy goals. The cross-strait policy of President Ma's government presents the United States with a different set of challenges. Ma's new approach toward the PRC would seem to be in keeping with U.S. wishes, as U.S. officials in the past have urged both sides to move toward greater conciliation and less confrontation. In 2008, a U.S. State Department spokesman spoke favorably (if somewhat tepidly, in keeping with most U.S. policy pronouncements on Taiwan issues) of the resumption of cross-strait talks under the Ma Administration, responding to a reporter's question with "... we believe it's important for the two to work towards a peaceful resolution of the ... Cross-Strait issues." While U.S. policy favors improvements in Taiwan-PRC relations, it has been silent on what should be the speed, depth, and degree of cross-strait conciliation. Some observers worry that the KMT government may be overly responsive to economic imperatives and to pressures from influential Taiwan business interests that have substantial economic investments in China. They worry that the Ma government could reach a swift accommodation with Beijing that may complicate U.S. regional interests. The implication for U.S. interests is only one factor President Ma will have to continue to consider in pursuing his PRC policy. Ma faces multiple balancing acts. These include efforts to improve cross-strait relations—and Taiwan's economic opportunities on the mainland—while not appearing overly eager to voters who worry that he will sell out Taiwan's political interests in pursuit of closer mainland economic ties. He also will have to strike a balance between those in the electorate who favor unification with China; those who argue for a strong defense for Taiwan and the continuation of U.S. weapons purchases; and those who urge significant improvements in Taiwan's relations with Beijing. Relatedly, the question of U.S. arms sales to Taiwan takes on new shades of delicacy in an environment of improving Taiwan-PRC ties. While U.S. law mandating arms sales to Taiwan states that these sales shall be "based solely upon ... the needs of Taiwan," such decisions can be and have been a useful U.S. policy lever in U.S.-Taiwan-PRC relations. Either the approval of a major weapons package to Taiwan or an apparent "freeze" in weapons sales can have symbolic significance for either side of the strait. U.S. policymakers will be faced with decisions on what kind of signal a specific U.S. arms sale will send under current circumstances. The PRC objects to U.S. arms sales to Taiwan and has reacted punitively in some cases, so that future U.S. arms sales to Taiwan may have significant implications for cross-strait ties. A recent news story from a Taiwan newspaper alleged that U.S. military officials are concerned that potential Taiwan-PRC military exchanges could provide Beijing with an opportunity to learn details about sensitive U.S. military technology sold to Taiwan and, therefore, could jeopardize future U.S. arms sales to Taiwan. Despite the challenges that Ma faces, many believe that his policy approach will be an important test of the PRC's stated intentions of approaching cross-strait problems by "putting aside differences and seeking a win-win result." Having railed against President Chen's independence-aspirations for eight years while wooing the KMT, the PRC now is faced with the question of whether it wishes to follow through with creative initiatives if it is to capitalize on the opportunity that a KMT government presents. Rebuffing a new and, at least initially, a more conciliatory Taiwan government could damage the PRC's credibility that it wishes to pursue a peaceful and constructive solution for cross-strait ties. Any perceived PRC reluctance also could serve to revitalize U.S. and congressional opposition to the PRC's Taiwan policy—opposition which remained relatively muted for years in part because of mutual U.S.-PRC problems with former President Chen. Observers suggest there are a number of options now for Beijing to make meaningful gestures toward Taiwan that would not impinge on PRC sovereignty claims. Beijing has appeared willing to take some guarded steps. These include willingness to restart cross-strait talks on a mutually acceptable basis; a new willingness to entertain Taiwan's aspirations to be a "meaningful participant" in the WHO; and, with the November 2008 meeting between Taiwan's Lien Chan and PRC President Hu Jintao during the APEC meeting, at least the suggestion of a halt to inflexible posturing against Taiwan in APEC and other multilateral organizations. Other such steps could include a suspension of Taiwan-focused military exercises and other military maneuvers in the strait and a meaningful drawing-down of missiles deployed opposite the Taiwan coast. Many Americans have welcomed the 2008 election results as a sign that Taiwan's democracy has continued to ripen and mature. They say Taiwan's democratic development has been validated by having passed the "Huntington test" for established democracies—having two successful, consecutive changes of government through a free and peaceful electoral process. Those harboring concern about how the DPP's supporters would take such a defeat were reassured greatly by the gracious concession speech of candidate Frank Hsieh and the widespread DPP acceptance of the results of the democratic process. To some watching the March 22, 2008 election, the Taiwan electorate also appeared to have attained a new level of maturity and sophistication, apparently motivated more in its election decisions by pragmatic calculations of governmental performance than by more emotional issues involving U.N. membership or sovereignty issues. Some, however, suggest that functional political pluralism in Taiwan may be in trouble over the short term. An effective democracy requires a viable opposition, and the overwhelming KMT electoral victories in 2008 left Taiwan's polity lopsided, the opposition effectively crushed. The DPP has been demoralized and decimated further by the political scandals involving former President Chen, who brought the party from a fledgling opposition party to the pinnacle of power. The scandals, wrote DPP Chairwoman Tsai Ing-wen, have brought the DPP "a kind of sadness so painful it cannot be soothed, and a kind of disappointment so grave it cannot be overcome." Despite the warming U.S.-Taiwan relationship under the KMT, then, many feel that U.S. interests in having Taiwan remain a full-fledged democracy may be compromised should the opposition remain too feeble effectively to monitor and hold accountable the majority party. S. 1390 (Levin) National Defense Authorization Act for FY2010. Section 1226 of the bill requires the Department of Defense to submit a report to Congress, in both classified and unclassified versions, a report on Taiwan's air force, including the number, type, age, and capabilities of its aircraft; an assessment of the weapons platforms Taiwan would need to provide for its self-defense in the face of a PRC missile attack; and a five-year plan for fulfilling U.S. obligations under the Taiwan Relations Act to aid Taiwan in controlling its own air space. The Committee on Armed Services introduced an original measure on July 2, 2009, with written report S.Rept. 111-35 . The Senate took up consideration on July 14, 2009, and passed an amended bill by unanimous consent on July 23, 2009. H.Con.Res. 18 (Linder) Expressing the sense of Congress that the United States should resume normal diplomatic relations with Taiwan. The measure calls on the President to abandon the "one-China" policy, adopt a "one-China, one-Taiwan" policy that recognizes Taiwan sovereignty, and begin establishing normal diplomatic relations with Taiwan. The measure also calls on the President to aggressively support Taiwan's membership in the U.N. and other international organizations for which statehood is a requirement. The measure was introduced on January 9, 2009, and referred to the House Foreign Affairs Committee. H.Con.Res. 55 ( Berkley ) Recognizing the 30 th anniversary of the Taiwan Relations Act. The resolution reaffirms the unwavering U.S. commitment to the Taiwan Relations Act, reaffirms strong U.S. support for Taiwan's democratic development, and supports deepening U.S.-Taiwan ties. The measure was introduced on February 23, 2009, and referred to the House Foreign Affairs Committee's Subcommittee on Asia and the Pacific, which held mark-up on March 19, 2009. The Subcommittee forwarded the bill to the full Committee, amended, by voice vote the same day. 09/25/09 — Exiled Uighur activist Rebiya Kadeer, living in the United States, was denied a visa to visit Taiwan. 09/11/09 —Former President Chen Shui-bian was given a life sentence on charges of corruption in public office. 08/19/09 —Taiwan's Ministry of Foreign Affairs announced that Taiwan would not seek full membership in the U.N. this year, but instead would seek to participate in the activities of U.N. specialized institutions, like the World Meteorological Organization and the World Maritime Organization. 08/07/09 — Over a period of several days, Typhoon Morakot slammed into the Philippines, Taiwan, and China, causing hundreds of millions of dollars in damage and numerous fatalities. 07/27/09 —PRC President and Communist Party Secretary Hu Jintao sent a congratulatory note to Taiwan's newly elected KMT chairman Ma Ying-jeou. 07/26/09 —Taiwan President Ma Ying-jeou was elected to the chairmanship of his political Party, the Nationalist Party (KMT). 07/21/09 —It was reported that Taiwan and China plan to open semi-official tourism offices in each other's territories by the end of 2009. 07/16/09 —The opening ceremony of the 2009 World Games began, being hosted by Taiwan. 07/01/09 —William Stanton, a career U.S. diplomat, was announced to be the next director of the American Institute in Taiwan in Taipei. 05/18/09 —For the first time since its ouster from the U.N. in 1971, Taiwan participated as an observer in the four-day 2009 World Health Assembly, the annual meeting of the World Health Organization (WHO). 04/26/09 —The third round of cross-strait talks between Taiwan and China began in Nanjing, China. 03/18/09— U.S. American Institute in Taiwan (AIT) chairman Ray Burghardt said that the United States was "comfortable with what's happening" in Taiwan-PRC engagement. The same day, former President Chen Shui-bian appeared at his final pre-trial hearing before going on trial for corruption, scheduled to begin March 26, 2009. 03/17/09 —The first luxury cruise ship (Ocean Mystery) to sail directly to Taiwan from the PRC (Shanghai) arrived at Keelung, reportedly carrying 1,600 PRC tourists. 03/16/09 —In its first quadrennial report (QDR), Taiwan's Ministry of Defense said that Taiwan would cut its military personnel from 275,000 to 215,000 over the next five years—part of a plan to create an all-volunteer force by December 2014. 03/14/09 —The Taiwan government urged the PRC to jettison its "anti-secession" law. The law, passed in March 2005, justifies the use of force to prevent Taiwan independence. 01/13/09 —World Health Organization officials sent a letter to the Taiwan government stating that the island henceforth would be included in the International Health Regulations (IHR), a set of legally binding rules governing international commitment to disease surveillance, alert, and response 01/07/09 —Taiwan's cross-strait negotiator, Chiang Pin-kung, began a visit to four PRC cities to discuss issues facing Taiwan investors in the mainland. 12/12/08 —Former Taiwan President Chen Shui-bian was indicted on charges of corruption, having been arrested on November 12, 2008. 11/21/08 — On November 21, 2008, Taiwan's Lien Chan, a former Vice-President and Premier, met with PRC President Hu Jintao during the Asian Pacific Economic Cooperation (APEC) meeting in Peru. It was said to be the highest-level meeting between the two sides in an international forum since 1949. 10/03/08 —The Defense Security Cooperation Agency notified Congress of the possible Foreign Military Sale of six different types of defense articles and equipment, totaling approximately $6.4 billion. 09/08/08 —Taiwan announced that it would cancel the live-fire exercise portion of its annual five-day military exercises, in deference to warming ties between Taiwan and the PRC. 09/08/08 —Taiwan's Foreign Ministry announced it would seek closer participation in the 16-member Pacific Islands Forum (PIF). Taiwan has taken part every year in the PIF since joining in 1993, but because of PRC objections has been restricted to dialoguing only with its 6 diplomatic South Pacific partners. 08/27/08 —The Pentagon announced the sale of 58 Harpoon missiles as well as related support, logistics, and training equipment to Taiwan worth about $101 million. 08/19/08 —Taiwan's Special Investigation Unit (SIU) announced it was inviting the Taipei-based Central Bank of China (CBC) and the cabinet-level Financial Supervisory Commission (FSC) to assist in investigating the source of $21 million in a Swiss bank account in the name of former President Chen Shui-bian's daughter-in-law, Huang Jui-ching. SIU investigators said they were looking into possible irregularities in the second-phase financial reform initiated by President Chen in 2004 as a potential source of the funds. 08/18/08 —Prosecutors in Taiwan named five suspects in an alleged high-level money laundering scheme involving former President Chen Shui-bian. They included Chen Shui-bian; his wife Wu Shu-jen; Chen's son Chen Chih-chung and his wife Huang Jui-ching; and Wu's brother Wu Ching-mao. 08/17/08 —Tsai Ing-wen, head of Taiwan's DPP party, said the current political crisis had come about because the DPP put too much faith and trust in Chen Shui-bian. 08/14/08 —Former Taiwan President Chen Shui-bian held a press conference to resign from DPP membership. He admitted failing fully to declare campaign funds and for wiring millions of dollars overseas, and apologized for causing "humiliation" and "irreparable damage" to the party. 08/14/08 —Taiwan's Ministry of Foreign Affairs (MOFA) confirmed that the Swiss Confederation's Department of Justice sought assistance from Taiwan about suspected money laundering by Chen's daughter-in-law, Huang Jui-ching. 08/14/08 —Taiwan submitted a proposal to the UN Secretariat via St. Vincent and the Solomon Islands (2 of Taiwan's diplomatic relationships), asking the UN to consider permitting Taiwan to have "meaningful participation" in the organization's specialized agencies. 08/13/08 —A spokesman for Taiwan's presidential office said that this year's UN bid would focus on "participation" in specialized UN agencies. 08/12/08 —AIT Chairman Ray Burghardt gave a dinner for President Ma in Los Angeles. Ma also met with Members of Congress. 08/12/08 —Taiwan President Ma YJ left for state visits to Paraguay and the Dominican Republic, returning on the 19 th . He flew a commercial flight to the United States—a first for a Taiwan president—and transited through LA (coming) and through San Francisco (returning home). 07/27/08 —Taiwan's Sports Affairs Council (SAC—a cabinet-level council) announced that several Taiwan Ministers would attend the 2008 Olympic Games at IOC invitation using National Olympic Committee ID cards. In the past, China's protests had led to the issuance of the less prestigious "Guest Card" for Taiwan officials. 07/22/08 —Taiwan's SEF chairman, Chiang Pin-kung, was reported as having said he wants to study and promote the creation of a cross-strait comprehensive economic cooperation agreement (CECA). 07/17/08 —Taiwan's cabinet announced it would revise regulations limiting investment by Taiwan companies in China, and that new measures would be put into place August 1. Preliminary reports said that the current investment cap would be abolished for some companies and raised to 60% of net worth for other companies. 06/12/08 —The first cross-strait meetings in a decade began between China and Taiwan in Beijing at the Diaoyutai State Guest House, conducted by SEF and ARATS. The two sides reportedly agreed to set up permanent offices in each other's territory and to begin regular weekend direct charter flights. 05/26/08— KMT Chairman Wu Poh-hsiung visited China and met with PRC Party Secretary Hu Jintao at the latter's invitation in the highest-level contact between the two sides of the Taiwan Strait. 05/20/08— Ma Ying-jeou was inaugurated President of Taiwan. 05/19/08 —Tsai Ing-wen, considered a moderate in the DPP Party and a former Vice-Premier, was elected chairwoman of the Party. 05/19/08 —The WHO rejected Taiwan's bid for observer status. 03/22/08 —KMT candidate Ma Ying-jeou was elected president of Taiwan, defeating the rival DPP ticket of Frank Hsieh. CRS Report RS22853, Taiwan's 2008 Presidential Election , by [author name scrubbed]. CRS Report RL33684, Underlying Strains in Taiwan-U.S. Political Relations , by [author name scrubbed]. CRS Report RS22388, Taiwan's Political Status: Historical Background and Its Implications for U.S. Policy , by [author name scrubbed]. CRS Report RL30957, Taiwan: Major U.S. Arms Sales Since 1990 , by [author name scrubbed]. CRS Report RL30341, China/Taiwan: Evolution of the "One China" Policy—Key Statements from Washington, Beijing, and Taipei , by [author name scrubbed]. | U.S. policy toward Taiwan is unique. Since both the Chinese governments on Taiwan and on mainland China held that they alone were China's legitimate ruling government, U.S. diplomatic relations with Taiwan had to be severed in 1979 when the United States recognized the People's Republic of China (PRC) government as China's sole legitimate government. While maintaining diplomatic relations with the PRC, the United States maintains extensive but unofficial relations with Taiwan based on the framework of the 1979 Taiwan Relations Act (TRA—P.L. 96-8) and shaped by three U.S.-PRC communiqués. U.S. interests in Taiwan include significant commercial ties, objections to PRC military threats against Taiwan, arms sales and security assurances, and support for Taiwan's democratic development. U.S. policy remains rooted in a general notion of maintaining the "status quo" between the two sides. But other factors have changed dramatically since 1979, including growing PRC power and influence, Taiwan's democratization, and the deepening of Taiwan-PRC economic and social linkages. These changes have led to periodic discussions about whether or not U.S. policy should be reviewed or changed. Taiwan's current president, Ma Ying-jeou, elected in March 2008, moved quickly to jump start Taiwan-PRC talks that had been stalled since 1998. The talks to date have yielded agreements to establish regular direct charter flights, direct sea transportation, postal links, and food safety mechanisms. Taiwan also has lifted long-standing caps on Taiwan investment in the PRC and lowered the profile of its bids for participation in U.N. agencies. Many welcome these and other initiatives as contributing to greater regional stability. More pessimistic observers believe growing PRC-Taiwan ties are eroding U.S. influence, strengthening PRC leverage and, particularly in the face of expanding economic links, jeopardizing Taiwan autonomy and economic security. The changing dynamic between Taiwan and the PRC poses difficult, competing policy challenges for the United States. Along with new challenges—such as what U.S. policy should be if Taiwan continues to move closer to the PRC; and how U.S. officials should respond to the life sentence on corruption charges given to former President Chen Shui-bian—the Obama Administration faces other challenges familiar from past years, including decisions on new arms sales to Taiwan, which are anathema to the PRC; how to accommodate requests for visits to the United States by President Ma and other senior Taiwan officials; the overall nature of U.S. relations with the Ma government; whether to pursue closer economic ties with Taiwan; what role, if any, Washington should play in cross-strait relations; and more broadly, what form of defense assurances to offer Taiwan. In addition, the Taiwan government also seeks to raise its international profile in other ways involving the United States. Taiwan successfully has sought to be removed from the U.S. Special 301 "Watch List" for intellectual property rights violations, and it is seeking to qualify for the U.S. Visa Waiver Program (VWP), which eliminates some visa requirements for qualified countries. The Taiwan government also continues to ask for a U.S.-Taiwan Free Trade Agreement (FTA), which would broaden the current and stalled avenue for U.S.-Taiwan trade discussions, the 1994 Trade and Investment Framework (TIFA). Legislation in the 111th Congress concerning Taiwan includes H.Con.Res. 18, urging that the United States resume diplomatic relations with Taiwan; H.Con.Res. 55, expressing U.S. support for and commitment to Taiwan; and S. 1390/H.R. 2647, including a mandatory report assessing the strength and capacity of Taiwan's air force. This report will be updated as events warrant. |
The Middle East, broadly defined as an area stretching from North Africa to Afghanistan, presents an array of challenges to U.S. foreign policy. Although the United States maintains strong relations with several key Arab and non-Arab states such as Israel, Egypt, Saudi Arabia, Jordan, and Turkey, other state and non-state actors, such as Iran, the Lebanese Shiite group Hezbollah in Lebanon, and the Palestinian Sunni group Hamas, are aligned against U.S. interests. Hezbollah and Hamas are both U.S. State Department-designated Foreign Terrorist Organizations (FTOs) and have refused to renounce the use of violence against Israel. It is widely believed that Iran continues to seek nuclear weapons capability, a goal that, if achieved, would have serious balance of power and proliferation consequences throughout the region and globally. Some observers fear that Israel could preemptively strike Iran and thereby trigger a wider war. Iran also continues its strong ties to Syria, complicating U.S. efforts to peel that Arab state away from its predominantly Persian ally and advance a more comprehensive Israeli-Arab peace process. Although most observers agree that the image of the United States in the Middle East has improved under the Obama Administration, widespread dissatisfaction with U.S. policy in the region remains. Muslim world outreach and the Administration's decision to try to close the U.S. detention facility at Guantanamo have done little to limit the influence of state and non-state actors aligned against U.S. interests (Iran, Syria, Hezbollah, Hamas). The ongoing war in Afghanistan and the perceived failure of the United States in bringing Israel and Palestinian leadership together to advance the peace process have curbed U.S. influence in the broader Middle East. Regional actors themselves, such as Saudi Arabia, Qatar, and Turkey, have taken more responsibility for resolving disputes rather than reflexively deferring to U.S. diplomacy. In addition to these broad geopolitical realities, the Middle East continues to struggle with the effects of the global financial crisis and a range of domestic socioeconomic challenges including widespread poverty, income inequality, population growth, high unemployment, and water resource scarcity. Lack of respect for human rights and the underdeveloped state of democracy in the region are often criticized by citizens, advocacy groups, and international observers alike. The United States has continued to advocate for economic and political reform to address these challenges. General questions for congressional consideration include: If the Obama Administration continues the push for Middle East peace, how will the 112th Congress respond to Palestinian divisions, Hamas' control of the Gaza Strip, continued Israeli settlements, and various obstacles to the peace process? Given the budget constraints facing the nation, how will the United States continue to support an array of regional initiatives, such as foreign aid to key strategic partners, democracy promotion, and development assistance? Despite U.S. and international sanctions, radical regimes, such as Iran and Syria, continue to persist in pursuing policies counter to U.S. interests. What new tools, if any, may Congress employ to change their behavior? Should some existing policy tools be reinforced or adapted? To what extent does the United States remain vulnerable, at home and abroad, to terrorist attacks from Al Qaeda-inspired groups? How will policymakers balance counterterrorism strategies with diplomatic strategies for improving U.S. bilateral relationships with Arab regimes? Members of the 112 th Congress may face any number of issues in or relating to the Middle East including the war in Afghanistan, terrorism, foreign assistance, democracy promotion, human rights concerns, and ongoing effects of the global financial crisis. Unexpected challenges are also likely. Discussed below are issues of interest to members of the 111 th Congress that may receive attention in the 112 th Congress, a summary of past congressional action, and options for members of the 112 th Congress. There appears to be a growing international consensus to adopt progressively stricter economic sanctions against Iran to try to compel it to compromise on its further nuclear development. Measures adopted since mid-2010 by the United Nations Security Council, the European Union, and several countries complement the numerous U.S. laws and regulations that have long sought to slow Iran's alleged weapons of mass destruction (WMD) programs and curb its support for militant groups. The U.S. view—increasingly shared by major allies—is that sanctions should target Iran's energy sector, which provides about 80% of government revenues, and try to isolate Iran from the international financial system. U.S. efforts to curb international investment in Iran's energy sector began in 1996 with the Iran Sanctions Act (ISA), a U.S. law that mandates penalties against foreign companies that conduct certain business with Iran's energy sector. ISA represents a U.S. effort, which is now broadening, to persuade foreign firms to choose between the Iranian market and the much larger U.S. market. In the 111 th Congress, the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA, P.L. 111-195 , signed July 1, 2010) expanded ISA significantly to try to restrict Iran's ability to make or import gasoline. Iran depends on gasoline imports for about 40% of its needs. CISADA also adds a broad range of other measures that restrict access to the U.S. market for banks that conduct transactions with sanctioned Iranian entities; the already limited amount of U.S. trade with Iran; and some high technology trade with countries that allow WMD-useful technology to reach Iran. CISADA's enactment followed the June 9, 2010, adoption of U.N. Security Council Resolution 1929, which imposes a ban on sales of heavy weapons to Iran and sanctions many Iranian entities affiliated with its Revolutionary Guard. The resolution does not mandate sanctions on Iran's energy or broad financial sector but it does authorize such measures. European Union sanctions, enacted July 27, 2010, use the authorities of United Nations Resolution 1929 to prohibit EU involvement in Iran's energy sector and restrict trade financing and banking relationships with Iran, among other measures. National measures announced by Japan and South Korea in early September 2010—both are large buyers of Iranian energy—impose restrictions similar to those of the EU. Because so many major economic powers have imposed sanctions on Iran, the sanctions are, by most accounts, having a growing effect on Iran's economy even though reliable empirical data is scarce. Among other indicators, there were a stream of announcements by major international firms during 2010 that they are exiting the Iranian market. However, there is not a consensus that sanctions are causing a demonstrable shift in Iran's commitment to its nuclear program—the key strategic objective of the sanctions. Many observers believe that the 112 th Congress might consider additional Iran sanctions legislation, and possibly also measures to support Iran's domestic opposition through democracy promotion funding or other efforts. For decades, the United States and Israel have maintained strong bilateral relations based on a number of factors, including strong domestic U.S. support for Israel; shared strategic goals in the Middle East (concern over Iran, Syria, Islamic extremism); shared democratic values; and historic ties dating from U.S. support for the creation of Israel in 1948. U.S. foreign aid has been a major component in cementing and reinforcing these ties. Although there have been differences over Israel's settlements in the West Bank and Gaza Strip and Israeli arms sales to China, successive Administrations and many lawmakers have long considered Israel to be a reliable partner in the region, and U.S. aid packages for Israel have reflected this sentiment. Critics of U.S. aid policy, particularly some in the Middle East, argue that U.S. foreign aid exacerbates tensions in the region. Many Arab commentators insist that U.S. assistance to Israel indirectly causes suffering to Palestinians by supporting Israeli arms purchases. Congress has taken measures to strengthen Israel's security and maintain its "qualitative military edge" (QME) over neighboring militaries, and successive administrations have routinely affirmed the U.S. commitment to strengthening Israel's QME. In July 2010, Assistant Secretary of State for Political-Military Affairs Andrew J. Shapiro publicly reaffirmed the Obama Administration's commitment to preserving Israel's QME. He said, "We are fully committed to Israel's security because it enhances our own national security and because it helps Israel to take the steps necessary for peace." The 112 th Congress may choose to focus on U.S. aid to Israel as a way to preserve its QME. For FY2011, the Obama Administration requested $3 billion in Foreign Military Financing (FMF) to Israel. Defense appropriations for co-research and development of missile defense systems also may be an issue for the 112 th Congress. U.S.-Israeli missile defense cooperation has been authorized and appropriated in the defense authorization and appropriations bills. In FY2010, Congress appropriated over $202 million for U.S.-Israeli missile defense. In March 2010, the Obama Administration announced that it would support an additional $205 million in defense assistance to Israel for the purchase of up to 10 Iron Dome short-range missile defense batteries. Congress may act to authorize and appropriate these funds for Iron Dome. Since the founding of the State of Israel in 1948, wars between Israel and its neighbors have repeatedly spurred active U.S. diplomacy, and their resolutions have required Congress to legislate assistance for Israel and its erstwhile adversaries. Congressional aid appropriations have reinforced Israel's peace treaties with Egypt and Jordan and have helped to enable the peace process between Israel and the Palestinians to proceed, albeit with interruptions. On taking office in 2009, President Obama declared Israeli-Palestinian peace to be a U.S. national security interest because the lack of peace has affected U.S. relations with countries in the Middle East and elsewhere and provided extremists with a cause. However, his early call for a halt to all Israeli settlement activity in the West Bank led Palestinian Liberation Organization (PLO) Chairman Mahmud Abbas to echo that demand and tie it to his participation in direct talks with Israel. A limited 10-month Israeli moratorium on settlement activity in the West Bank enabled the Administration to bring about only very short-lived proximity talks between the parties. As the settlement freeze expired in September 2010, settlements persisted as an obstacle to talks. Israel has proceeded with settlement activity in the West Bank as well as in East Jerusalem, which it views as part of its indivisible capital of Jerusalem and which the Palestinians regard as their future capital. The Administration reportedly offered a generous package of incentives to Israel in order to obtain an additional three-months settlement freeze, during which time it hoped to achieve a breakthrough on a few issues in order to create momentum for more comprehensive final status talks. However, reportedly it abandoned that effort in December and set about searching for new approaches. Final status issues in the negotiations center on borders, security, Jerusalem, refugees, and water. Congress may continue to be interested in the Arab-Israeli peace process because of its oversight role in the conduct of U.S. foreign policy, its support for Israel, and keen constituent interest. In the 111 th Congress, as in the past, several resolutions were introduced to require the Administration to recognize Jerusalem as the capital of Israel and to relocate the U.S. embassy there from Tel Aviv. Foreign operations appropriations legislation restricts U.S. official conduct with the Palestinian Authority (PA) in Jerusalem, thereby emphasizing Congress's commitment to an undivided Jerusalem as Israel's capital. The Obama Administration, as had its predecessors, maintains that Jerusalem is a final status issue for the parties to negotiate. As in the past, appropriations legislation also required a new Palestinian state that might be established as a result of peace talks to act peacefully and take action to counter terrorism. In addition, Congress passed resolutions supporting Israel's right to self-defense against rocket attacks from the Gaza Strip and against a flotilla attempting to break Israel's blockade of the Gaza Strip. In the 112 th Congress, legislation may revisit moving the U.S. embassy to Jerusalem and the conduct of all U.S. official business in the city, conditions for a new Palestinian state, and reactions to possible violent confrontations between Israeli forces and Palestinian groups and their supporters. Should an Israeli-Palestinian peace accord be achieved, the Administration may call on Congress to provide additional assistance to Israel for taking what have been described as the "risks" for peace and to the Palestinians to enable them to establish a viable state. U.S. aid to the Palestinians forwards at least three major U.S. policy priorities of interest to Congress: Combating, neutralizing, and preventing terrorism against Israel from Hamas and other militant organizations; Creating a virtuous cycle of stability and prosperity in the West Bank that inclines Palestinians toward peaceful coexistence with Israel and prepares them for self-governance; and Meeting humanitarian needs (particularly in the Gaza Strip) and preventing destabilization. U.S. aid policy toward the Palestinians during the 111 th Congress has largely been a continuation of the policy established in June 2007 following the factional and geographical split between 1. the Palestinian Authority (PA) in the West Bank (led by President Mahmoud Abbas and Prime Minister Salam Fayyad) that receives Western assistance; and 2. the regime in the Gaza Strip led by Hamas, a State Department-designated Foreign Terrorist Organization. Since the split, annual U.S. bilateral assistance to the West Bank and Gaza Strip has averaged over $600 million annually (and spiked to nearly $1 billion in 2009 following the Gaza conflict between Hamas and Israel), including annual averages of over $200 million in direct budgetary assistance and over $100 million in non-lethal train-and-equip security assistance for the PA in the West Bank. Additional humanitarian assistance for Palestinian refugees in Gaza and elsewhere, provided mostly through the U.N. Relief and Works Agency for Palestine Refugees in the Near East (UNRWA), has averaged over $200 million annually since 2007. Because of congressional concerns that, among other things, U.S. funds might be diverted to Palestinian terrorist groups, much of this aid is subject to a host of vetting and oversight requirements and legislative restrictions. U.S. assistance to the Palestinians is given alongside assistance from other, mostly Western donors, and U.S. policymakers routinely call for greater assistance from Arab states whose contributions are chronically late and/or less than what they initially pledge. On October 20, 2010, the Administration notified Congress of several proposed sales of military equipment and related services to Saudi Arabia, including the proposed sale of fighter aircraft, attack and utility helicopters, upgrades of existing Saudi fighter aircraft, and related weaponry and services. If all options are exercised, the proposed sales may be worth over $60 billion over a period of 10 to 15 years. The proposed sales include 84 new F-15SA fighter aircraft, the upgrade of 70 F-15S fighter aircraft, 70 new AH-64D Block III APACHE helicopters, and dozens of UH-60M BLACKHAWK and other helicopters. The Obama Administration hopes the proposed sales will help "sustain long-term relationships to ensure continued U.S. influence for decades." The proposed sales raise a series of policy questions for Congress among which are questions about the rationale for the sales, their likely effect on the regional security balance, and their likely effects on Israel's security. The Obama Administration hopes the proposed sales would strengthen Saudi Arabia vis-à-vis Iran and help "sustain long-term relationships to ensure continued U.S. influence for decades," a potentially important consideration given the advanced age and failing health of some key Saudi leaders. The Obama Administration has praised improvements in U.S.-Saudi counterterrorism cooperation with regard to Al Qaeda, while U.S. officials have indicated in public comments that some challenges remain, including on terrorist financing. U.S. concerns about human rights in Saudi Arabia and the export of religious extremism persist, without clear solutions in sight. Saudi leaders share U.S. concerns about Iranian policies and regional ambitions, but remain wary of embracing Iraq's elected government and engaging Israel beyond a standing Saudi peace proposal (known as the Arab Peace Initiative). In the 111th Congress, several committees of jurisdiction reviewed the proposed arms sales in both classified and unclassified settings. A series of congressional briefings from Administration officials preceded the formal notification of the proposed sales in October 2010. On November 12, 2010, 198 members of Congress wrote to the Obama Administration "to raise concerns and pose a number of strategic questions" about the proposed sales. The Obama Administration's response letter of November 16, 2010, reflects its belief—which has been shared by successive previous Administrations—that it is possible to strengthen the long-standing U.S. military partnership with Saudi Arabia while maintaining Israel's qualitative military edge (see " Preserving Israel's Qualitative Military Edge " above) over its neighbors. The U.S. government is pursuing an initiative to supply Israel with fifth-generation F-35 Joint Strike Fighter aircraft, which, when delivered, would maintain Israel's status as having the most advanced fighter aircraft in the region. H.J.Res. 104 , introduced December 15, 2010, would have prohibited the proposed sales to Saudi Arabia. Members of the 112 th Congress may seek to exercise additional oversight of U.S. military training, arms sales, and counterterrorism cooperation with Saudi Arabia through hearings or briefings with Administration officials. The United States has played a central role in the development, training, and arming of the Saudi Arabian military since the 1940s, and long-standing U.S. military training and equipment support programs in the kingdom remain important pillars of U.S.-Saudi relations. New U.S. programs for Saudi interior security forces and critical infrastructure security also are being implemented. With regard to the proposed arms sales, Congress retains the option of passing legislation to block or modify an arms sale at any time up to the point of delivery of the items involved. Such an action, if taken, would, as with a joint resolution of disapproval, be subject to presidential veto. However, since any such action in the 112 th Congress would be taken after the close of the 30-day review period outlined in the Arms Export Control Act (AECA, 22 U.S.C. 2751 et seq.), new legislation seeking to block or modify the specific arms sales would not enjoy the expedited procedural privileges specified in the act. Congress may also seek to alter or provide enhanced oversight of U.S. security assistance to Saudi Arabia in light of policy concerns outlined above. Due to the ever-increasing threat of Yemen-based terrorists carrying out an attack against the U.S. homeland, it is likely that the 112 th Congress may focus on U.S. counterterrorism policy in Yemen. Al Qaeda in the Arabian Peninsula (AQAP) unsuccessfully attempted to bomb Northwest Airlines Flight 253 on Christmas Day 2009 and, more recently, destroy two air cargo flights using explosives hidden inside printer cartridges destined for Chicago in October 2010. American citizen Anwar al Awlaki, AQAP's radical ideologue, also has attempted to indoctrinate U.S. citizens and motivate them to carry out terrorist bombings on U.S. soil. Awlaki has been either directly or indirectly linked to radicalizing, among others, Major Nidal M. Hasan (committed the November 2009 mass shooting at Fort Hood Army Base in Texas), Umar Farouk Abdulmutallab (the Nigerian accused of trying to ignite explosive chemicals to destroy Northwest/Delta Airlines Flight 253 on Christmas Day 2009), and Faisal Shahzad (alleged Times Square failed car bomber). For the past several months, numerous reports have indicated the Obama Administration is contemplating how to increase assistance and intelligence cooperation with Yemen without overly militarizing the U.S. presence there. In the short term, some reports suggest that the CIA may increase its use of drones inside Yemen or place U.S. military units overseen by the Defense Department Joint Special Operations Command (JSOC) under its control. The U.S. military historically has had only a limited presence in Yemen, and as such, U.S. intelligence agencies may have limited knowledge of the local terrain and may need time before they are able to employ all assets to their maximum capacity. As Yemen becomes a more prominent battlefield against Al Qaeda-affiliated terrorist groups, Congress may assess whether the Administration is able to balance the short-term need to counter terrorism against the long-term goal of stabilizing Yemen. Other lawmakers may demand more U.S. military involvement in Yemen, particularly if AQAP is able to carry out an attack inside the United States. Some members may demand more forcefully that Yemen cooperate with the United States by apprehending wanted AQAP operatives such as Awlaki. The 112 th Congress may choose to consider new appropriations for Yemen. In FY2010, the United States provided an estimated $290 million in total aid (including economic and development aid) and that figure is expected to increase in FY2011. The Defense Department also has proposed increasing Section 1206 security assistance to Yemen to $1.2 billion over a five- or six-year period. In the past, the Yemeni government has cautioned the United States against overreacting to the terrorist threat there, though in recent months, Yemeni forces have launched several large-scale campaigns against suspected AQAP strongholds in the Abyan and Shabwah governorates. Whether U.S.-Yemeni security cooperation can be sustained over the long term is the key question for U.S. lawmakers and policymakers. Inevitably, at some point, disagreements arise over Yemen's policy of releasing alleged terrorists from prison in order to placate tribal leaders and domestic Islamist politicians who oppose U.S. "interference" in Yemen and U.S. policy in the region in general. Iraq's political system and U.S.-supported elections have been increasingly characterized by peaceful competition, as well as by attempts to form cross-sectarian alliances. However, ethnic and factional infighting continues, sometimes involving the questionable use of key levers of power and legal institutions. This infighting—and the belief that holding key political offices may mean the difference between life and death for Iraq's political communities— significantly delayed agreement on leadership of a new government following the March 7, 2010, national elections for the Council of Representatives (COR, parliament). With U.S. intervention, on November 10, 2010, major ethnic and sectarian factions agreed on the most senior positions of a new government, breaking the long deadlock. Since then, the major political blocs have begun to implement the agreement and form a broad-based government, although one that might lack clear direction and ability to reach consensus on major issues. Some observers worry that U.S. influence is waning and that the new government remains dominated by parties aligned with Iran, including Prime Minister Nuri al Maliki and supporters of the Shiite cleric Moqtada al Sadr. Others warn of the potential for conflict between Iraq's Kurdistan Regional Government and nationalist Arabs. Many Iraqis view the long political vacuum and ongoing high profile attacks as contributing to a sense of uncertainty and disillusionment, in spite of the drawdown of U.S. forces to below 50,000 personnel and a formal end of the U.S. combat mission. The violence has caused some experts to question whether stability will continue after all U.S. forces depart at the end of 2011. Some believe that a reduction in U.S. leverage and influence in Iraq will cause the rifts among major ethnic and sectarian communities to widen to the point where Iraq could become a "failed state" after 2011, unless some U.S. troops remain. In several areas, U.S. officials do not expect Iraqi Security Forces to meet Minimum Essential Capability benchmarks before the end of 2011. The formation of the government will allow U.S. officials to directly address their goals of securing a long-term strategic partnership with Iraq and defining the terms of continued security cooperation and potential arms sales. The opposition of some Iraqi parties to a partnership and their inclusion in key ministries and positions may complicate U.S. attempts to secure lasting cooperation. The U.S. government will be pursuing these initiatives while undertaking a complex transition from military to civilian leadership of its efforts in Iraq, with the State Department overseeing a large expansion in civilian personnel, associated security needs, and costs. U.S. economic assistance to Iraq has declined significantly since the 2003-2007 period, when large amounts of funding were obligated to reconstruct war-damaged infrastructure, win hearts and minds of the Iraqi people, build security forces, and help demonstrate the value of a stable Iraqi government. As efforts funded through the main stabilization accounts have been completed, U.S. Economic Support Fund (ESF) assistance reached $382.5 million in FY2010. The Administration's FY2011 request sought to keep economic aid at that level and continue support for Iraq's security forces, although Senate appropriators recommended significant cuts in both areas. FY2011 funding for Iraq is provided under the terms of the Continuing Appropriations Act, 2011 ( P.L. 111-242 , as amended by P.L. 111-290 ), which provides foreign aid spending at the level in the FY2010 Consolidated Appropriations Act ( P.L. 111-117 ). It remains to be seen whether future economic and security assistance for Iraq will face resistance in the 112 th Congress, in light of some members' persistent concerns about Iraq's ability and willingness to invest in its own reconstruction and security forces. Iraq's oil revenues appear poised to grow, although its domestic investment needs, foreign debts, and financial management challenges remain considerable. The transition from U.S. military operations to a U.S. civilian-led presence in Iraq opens several new avenues for the exercise of oversight by Congress. Congress also may be asked to consider appropriations and authorization requests and review proposed arms sales intended to support U.S.-Iraqi security cooperation. Turkey is a long-term U.S. NATO ally with which bilateral relations have become increasingly complex. Thus far, however, only certain aspects of the relationship have drawn congressional attention. They are issues of interest to diaspora communities, notably Greek-Americans and Armenian Americans, who demand that Turkey change its policies regarding the Greek Orthodox Church and religious freedom, Cyprus, and the Armenian national "genocide" of 1915-1917. Turkey has not been a major recipient of U.S. foreign aid since the 1990s. Other issues such as a possible reorientation of Turkey's foreign policy have been the subject of hearings. Congressional concern became more pronounced after Turkey voted against enhanced U.N. Security Council sanctions on Iran and Turkish activists and Israeli commandos had a violent confrontation when Israel attempted to divert a Turkish ship that was part of a flotilla attempting to break the blockade of Gaza. In the 111 th Congress, in line with constituent interests, legislation called on the Administration to urge Turkey to respect the property and religious rights of the Greek Orthodox Ecumenical Patriarch whose seat is in Istanbul, to recognize his international status, and to allow him to train clergy. The House Foreign Affairs Committee approved H.Res. 252 for consideration by the full House, calling on the Administration to affirm the U.S. historical record that documented the Armenian genocide. A parallel resolution in the Senate did not receive a committee hearing. The House passed H.Res. 1631 , which called for the protection of Greek Orthodox religious sites and artifacts in Turkish-occupied areas of northern Cyprus. In the 112 th Congress, issues of concern to select constituencies with regard to Turkey may arise again, notably the rights of the Greek Orthodox Church and the genocide resolution, which did not obtain a floor vote in the House. Since the NATO summit in Lisbon in November 2010 adopted a new missile defense architecture in which Turkey is expected to play a critical role, Ankara may press the Administration to help fund missiles and supporting radar in Turkey that are part of the system. Should the Administration agree, it would require new defense appropriations. In addition, congressional interest in possible political and policy changes resulting from the June 2011 Turkish national election may prompt oversight hearings unless Ambassador-designate to Turkey Francis J. Ricciardone receives a recess appointment or the Senate revisits his or a replacement nomination in the 112 th Congress. The 111 th Congress did not vote on the nomination due to a member's hold. U.S. policy toward Syria may be of interest to some lawmakers in the 112 th Congress as they consider how best to peel Syria away from Iran. Upon taking office in 2009, the Obama Administration slightly altered the previous Bush Administration approach toward Syria by appearing more willing to engage the Syrian government in a diplomatic dialogue in the hope of securing its cooperation on Iraq, Iran, Lebanon, and the peace process. The Obama Administration made some gestures toward the Asad government, such as sending several high level delegations to Damascus for discussions and allowing sanctions-exempted materials to be exported to Syria. Overall, U.S. sanctions against Syria have remained in force since President Obama took office in January 2009, leading critics to assert that the change in U.S. tone toward Syria two years ago was superficial. Now, after two years of attempting to engage Syria diplomatically, the Obama Administration appears to be shifting its tactics to applying more pressure on the Syrian government to play a more constructive role in stabilizing Lebanon and advancing the Arab-Israeli peace process. This shift has coincided with renewed international concern about Lebanon. Hezbollah has threatened to destabilize the country should, as anticipated, the Special Tribunal for Lebanon issue indictments against Hezbollah members for the murder of former Lebanese Prime Minister Rafiq Hariri. The Administration's shift also comes after nearly two years of unsuccessfully attempting to restart Israeli-Syrian peace talks due to resistance by both Israel and Syria. With U.S.-Syrian relations possibly becoming more tense, Congress may choose to impose new sanctions against the Asad regime. Other lawmakers may seek to continue U.S. engagement, as several congressional delegations visited Syria during the 111 th Congress. Also during the 111 th Congress, lawmakers introduced H.R. 1206 , the Syria Accountability and Liberation Act, which would have placed new sanctions on countries and individuals who help Syria gain access to weapons of mass destruction. It also called for sanctions against those who invest $5 million or more in Syria's energy sector. Appropriators may also choose to fund democracy and governance programs for opposition members and human rights activists repressed by the Asad government. Congress also may choose to act on the nomination of Robert S. Ford as Ambassador-Designate to Syria. The appointment remains on hold, and there is no vote planned on confirmation scheduled in the Senate. Supporters of sending an ambassador to Syria (there has been no U.S. Ambassador in Damascus since 2005) assert that the lack of a high-level U.S. presence there only hurts U.S. interests. Opponents charge that it is a concession to a rogue Syrian regime. Current U.S. policy toward Lebanon is to support the current unity government under the leadership of Prime Minister Saad Hariri, to limit Iranian and Syrian influence, and to contain the U.S. State Department-designated terrorist organization Hezbollah. In support of these goals, the United States has provided economic and military assistance to strengthen state institutions, particularly in the security sector, since Syria's withdrawal from Lebanon in 2005. The United States also supports the Special Tribunal for Lebanon (STL) with an annual contribution of $10 million. Prime Minister Hariri's government faces a number of challenges. Pending STL indictments have led to increased sectarian tension as Hezbollah appears to be mounting a public relations campaign aimed at discrediting the STL. Hezbollah Secretary General Sayyid Hassan Nasrallah has publicly rejected any potential indictment, characterizing it as a U.S. and Israeli attack on the "resistance." Escalating rhetoric on the part of Hezbollah and recent statements by Hariri in which he retreated from his earlier claims that Syria was responsible for the assassination have led observers to question whether U.S. support for Hariri and U.S. support for the STL are at odds. The Hariri government's legitimacy depends in part on the STL's success, but Hezbollah and the opposition might make it impossible for Hariri to stay in power if the STL proceeds with indictments. Any changes in the Lebanese government could affect the course of U.S. policy and U.S. assistance to Lebanon, particularly if it includes an expanded role for Hezbollah. Members of the 112 th Congress may be asked to consider the Obama Administration's request for $246 million in FY2011 foreign assistance to continue a multi-year program specifically designed to increase the central authority of the Lebanese state and deter the use of force by non-state actors. On August 3, 2010, the LAF opened fire on an Israeli Defense Force (IDF) unit engaged in routine brush-clearing maintenance along the Blue Line, alleging that it had crossed over into Lebanese territory. Two Lebanese soldiers, a journalist, and an Israeli officer were killed in the confrontation. In response, some members of Congress placed a hold on the FY2010 $100 million FMF appropriation for Lebanon citing the need to "determine whether equipment that the United States provided to the Lebanese Armed Forces was used against our ally, Israel." The hold was lifted in December 2010 after congressional consultations with State Department officials, but the incident raised questions about the future of U.S. assistance to Lebanon. As Egypt faces a possible leadership transition in the near future, the 112 th Congress may decide to express and support a U.S. desire for a more democratic government that preserves human rights and religious freedom for all citizens. Although other countries, such as Iran, Saudi Arabia, and Turkey, play a more formidable role in regional affairs, Egypt is still the Arab world's largest country by far, and a key partner of the United States both militarily and diplomatically in its support for the Arab-Israeli peace process. Its domestic politics are therefore of keen interest to U.S. policymakers and lawmakers. Some believe that political liberalization in Egypt would spread across the Middle East and possibly beyond. On the other hand, others assert that a stable, though autocratic Egypt at peace with Israel is in the U.S. interest, believing that gradual, long-term change is more desired, lest a sudden takeover by Egypt's largest opposition movement, the Muslim Brotherhood, usher in a government inimical to U.S. interests in the region. In November and December 2010 parliamentary elections in Egypt, just one Muslim Brotherhood independent won a seat, and the ruling National Democratic Party won over 90% of all seats (as opposed to slightly less than 80% in the last parliament). In the State Department press release on the parliamentary elections, the Administration stated that Reports from domestic civil society monitors, candidate representatives, and government officials on the conduct of yesterday's elections give us cause for concern. We are disappointed by reports in the pre-election period of disruption of campaign activities of opposition candidates and arrests of their supporters, as well as denial of access to the media for some opposition voices. We are also dismayed by reports of election-day interference and intimidation by security forces. These irregularities call into question the fairness and transparency of the process. For each of the last few fiscal years, Congress has provided Egypt an estimated $1.5 billion in total military and economic aid, and appropriations are one possible tool members may use in promoting democracy in Egypt. Although funding for democracy promotion is not the only way to promote reform abroad, its use in Egypt has been controversial over the last six years. The Egyptian government has staunchly opposed foreign support to independent non-governmental organizations (NGOs) that are working on political reform, transparency, and government accountability, including civic groups that have not received government approval. During the Bush Administration, policymakers and members of Congress directed some Economic Support Funds (ESF) toward USAID programming in the democracy and governance (D&G) sector and toward direct support to Egyptian NGOs. Most importantly, in FY2005, Congress for the first time directed that "democracy and governance activities shall not be subject to the prior approval of the GoE [government of Egypt]." As overall economic aid to Egypt has decreased, so too has U.S. democracy assistance. P.L. 111-117 , the Consolidated Appropriations Act, FY2010, provided $25 million in economic aid for democracy promotion (or 10% of total economic aid). Some analysts believe the Obama Administration would like to ease tensions with the Egyptian government by de-emphasizing democracy assistance. Others assert that U.S. funding has been largely ineffective anyway and that assistance should be channeled into areas that make a more immediate impact on the daily lives of average Egyptians. Some critics of U.S. policy believe that portions of U.S. aid should be conditioned on improvements in Egypt's human rights and religious freedom record. The 10 years since the September 11, 2001, Al Qaeda terrorist attacks on the United States have seen the U.S. government embark on a global war against Al Qaeda and its affiliates that U.S. officials believe has considerably weakened the organization's ability to attack the United States. Nevertheless, Al Qaeda's continued survival, the strength of its regional affiliates, and the apparent persistence of its appeal among some Muslims overseas and in the United States remain vexing problems. By all accounts, Al Qaeda operatives remain determined to attack the United States and its citizens and appear poised to exploit U.S. vulnerabilities, reactions, and policy mistakes. Recent events suggest that Al Qaeda supporters are conducting more sophisticated ideological outreach via the Internet and promoting independent, low-cost operations by individuals with limited linkages to established terrorist networks. These trends may complicate U.S. and allied counterterrorism efforts by amplifying the spread of Al Qaeda's ideology and making terrorism threats more diffuse, less predictable, and less vulnerable to disruption. In the Middle East, a series of overlapping dilemmas now confront U.S. policy makers as they pursue counterterrorism goals along with other strategic priorities, such as securing global access to energy supplies, preventing nuclear proliferation, pursuing Israeli-Palestinian peace, and protecting regional allies. Ten years of war in Afghanistan and Iraq have demonstrated the costs, benefits, and limits of sustained U.S. military operations to target Al Qaeda operatives abroad and to stabilize countries where Al Qaeda seeks to establish safe havens. The continued presence of U.S. military forces in the Middle East, Africa, and South Asia remains the subject of Al Qaeda rhetoric about U.S. occupation and imperialism, in spite of the ongoing withdrawal of U.S. forces from Iraq. More limited operations against Al Qaeda figures and counterterrorism assistance programs for allied governments at times have been criticized as violations of sovereignty or as examples of counterproductive U.S. support for undemocratic regimes. At the same time, U.S. support for democratic reform in places such as Egypt, Jordan, and the West Bank and Gaza has risked alienating allied governments and empowering Islamist parties who may oppose U.S. policies. The U.S. government's outreach to Muslims has expanded and changed in tone over time, but public opinion polls suggest that Muslims in many countries remain skeptical of U.S. intentions and critical of U.S. policies despite more U.S. outreach. Some observers suggest that more direct, robust U.S. and allied efforts to destroy Al Qaeda operatives and to confront religious extremism are necessary, while acknowledging the costs such an approach may create. Others suggest that the United States should adopt a containment strategy based on the assumption that Al Qaeda's agenda is self-defeating, that the negative consequences of direct U.S. intervention may outweigh its benefits, and that a lasting victory over Al Qaeda and other violent extremists can only be won by Muslims rejecting extremism in their own mosques, communities, and societies. Still others argue that without a positive U.S. agenda for the Middle East that extends beyond security and counterterrorism concerns, the challenges facing the United States and its allies in the region are likely to persist. The 111 th Congress held a number of hearings on aspects of U.S. counterterrorism policy, including specific terrorist threats, U.S. foreign assistance, and terrorist financing. Legislative input on U.S. counterterrorism policy was largely directed through annual appropriations and authorization legislation, alongside legislation such as the Enhanced Partnership with Pakistan Act of 2009 ( P.L. 111-73 ). The 112 th Congress may seek to further evaluate U.S. counterterrorism strategy and examine U.S. engagement efforts with governments and citizens in predominantly Muslim countries. Issues of potential congressional interest in the Middle East include maintaining U.S.-Iraqi counterterrorism partnership, defeating Al Qaeda affiliates in Yemen and the Sahel, securing greater counterterrorism cooperation from allied governments in the Gulf, and securing peace between Israel and its neighbors. Appendix A. Relevant Congressional Research Service Reports Iran Sanctions CRS Report RS20871, Iran Sanctions , by [author name scrubbed] CRS Report RL32048, Iran: U.S. Concerns and Policy Responses , by [author name scrubbed] CRS Report R40849, Iran: Regional Perspectives and U.S. Policy , coordinated by [author name scrubbed] CRS Report RL34525, Iran's Economic Conditions: U.S. Policy Issues , by Shayerah Ilias CRS Report R40094, Iran's Nuclear Program: Tehran's Compliance with International Obligations , by [author name scrubbed] Preserving Israel's Qualitative Military Edge CRS Report RL33476, Israel: Background and Relations with the United States , by [author name scrubbed] CRS Report RL33222, U.S. Foreign Aid to Israel , by [author name scrubbed] Israeli-Palestinian Peace Process CRS Report R40092, Israel and the Palestinians: Prospects for a Two-State Solution , by [author name scrubbed] CRS Report RL34074, The Palestinians: Background and U.S. Relations , by [author name scrubbed], CRS Report R41514, Hamas: Background and Issues for Congress , by [author name scrubbed] U.S. Aid to the Palestinians CRS Report RS22967, U.S. Foreign Aid to the Palestinians , by [author name scrubbed] Saudi Arabia: Arms Sales and Security Cooperation CRS Report RL33533, Saudi Arabia: Background and U.S. Relations , by [author name scrubbed]. Yemen CRS Report RL34170, Yemen: Background and U.S. Relations , by [author name scrubbed] Iraq: Defining Post-2011 Relations CRS Report RL33793, Iraq: Regional Perspectives and U.S. Policy , coordinated by [author name scrubbed] CRS Report RL31339, Iraq: Post-Saddam Governance and Security , by [author name scrubbed] CRS Report RL34064, Iraq: Oil and Gas Sector, Revenue Sharing, and U.S. Policy , by [author name scrubbed] CRS Report RS21968, Iraq: Politics, Elections, and Benchmarks , by [author name scrubbed] CRS Report RS22323, Iran-Iraq Relations , by [author name scrubbed] CRS Report RL33110, The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11 , by [author name scrubbed] Turkey CRS Report RL34642, Turkey: Selected Foreign Policy Issues and U.S. Views , by [author name scrubbed] CRS Report R41368, Turkey: Politics of Identity and Power , by [author name scrubbed] U.S. Policy Toward Syria CRS Report RL33487, Syria: Issues for the 112th Congress and Background on U.S. Sanctions , by [author name scrubbed] Lebanon CRS Report R40054, Lebanon: Background and U.S. Relations , by [author name scrubbed] CRS Report R40485, U.S. Security Assistance to Lebanon , by [author name scrubbed] CRS Report R41446, Hezbollah: Background and Issues for Congress , by [author name scrubbed] and [author name scrubbed] U.S. Democracy Promotion in Egypt CRS Report RL33003, Egypt: Background and U.S. Relations , by [author name scrubbed] Islam, Al Qaeda, and U.S. Counterterrorism Strategy CRS Report R41070, Al Qaeda and Affiliates: Historical Perspective, Global Presence, and Implications for U.S. Policy , coordinated by John Rollins Other Selected CRS Reports on the Middle East CRS Report RL33546, Jordan: Background and U.S. Relations , by [author name scrubbed] CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by [author name scrubbed] CRS Report R41484, Afghanistan: U.S. Rule of Law and Justice Sector Assistance , by Liana Sun Wyler and [author name scrubbed] CRS Report RL32686, Afghanistan: Narcotics and U.S. Policy , by [author name scrubbed] CRS Report RS21579, Morocco: Current Issues , by [author name scrubbed] CRS Report RS20962, Western Sahara: Status of Settlement Efforts , by [author name scrubbed] CRS Report RS21532, Algeria: Current Issues , by [author name scrubbed] CRS Report R40344, The United Arab Emirates Nuclear Program and Proposed U.S. Nuclear Cooperation , by [author name scrubbed] and [author name scrubbed] CRS Report RL33142, Libya: Background and U.S. Relations , by [author name scrubbed] CRS Report RL32260, U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request , by [author name scrubbed] | The Middle East, broadly defined as an area stretching from North Africa to Afghanistan, presents an array of challenges to U.S. foreign policy. Although the United States maintains strong relations with several key Arab and non-Arab states such as Israel, Egypt, Saudi Arabia, Jordan, and Turkey, other state and non-state actors, such as Iran, the Lebanese Shiite group Hezbollah in Lebanon, and the Palestinian Sunni group Hamas, are aligned against U.S. interests. The United States and its regional and international allies continue to work to limit the influence of these actors while advocating for economic and political reform to address ongoing socioeconomic challenges and to promote democracy and a greater respect for human rights in the region. Members of the 112th Congress may face any number of issues in or relating to the Middle East including the war in Afghanistan, terrorism, foreign assistance, democracy promotion, and ongoing effects of the global financial crisis. This report provides an overview of key issues, a summary of past congressional action on these issues, and options for congressional consideration during the 112th Congress. Key issues include: Iran Sanctions Preserving Israel's Qualitative Military Edge Israeli-Palestinian Peace Process U.S. Aid to the Palestinians Saudi Arabia: Arms Sales and Security Cooperation Yemen Iraq: Defining Post-2011 Relations Turkey U.S. Policy Toward Syria U.S. Support for Lebanon U.S. Democracy Promotion in Egypt Islam, Al Qaeda, and U.S. Counterterrorism Strategy This report also contains a section, Appendix A, with links to relevant Congressional Research Service reports, along with analyst contact information. |
Each year, the House and Senate armed services committees take up national defense authorization bills. The House of Representatives passed the John S. McCain National Defense Authorization Act for Fiscal Year 2019 (NDAA; H.R. 5515 ) on May 24, 2018. The Senate passed its version of the NDAA ( H.R. 5515 ) on June 18, 2018. These bills contain numerous provisions that affect military personnel, retirees, and their family members. Provisions in one version are sometimes not included in the other, are treated differently, or are identical in both versions. Following passage of each chamber's bill, a conference committee typically convenes to resolve the differences between the respective chambers' versions of the bill. The FY2019 NDAA conference report was passed by the House on July 26, 2018, and the Senate on August 1, 2018. On August 13, 2018, President Donald J. Trump signed the bill into law ( P.L. 115-232 ). This report highlights selected personnel-related issues that may generate high levels of congressional and constituent interest. CRS will update this report to reflect enacted legislation. Related CRS products are identified in each section to provide more detailed background information and analysis of the issues. For each issue, a CRS analyst is identified. Some issues discussed in this report were previously addressed in the FY18 NDAA ( P.L. 115-91 ) and discussed in CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon, or other reports. Those issues that were considered previously are designated with an asterisk in the relevant section titles of this report. Background: The authorized active duty end-strengths for FY2001, enacted in the year prior to the September 11 terrorist attacks, were as follows: Army (480,000), Navy (372,642), Marine Corps (172,600), and Air Force (357,000). Over the next decade, in response to the demands of wars in Afghanistan and Iraq, Congress substantially increased the authorized personnel strength of the Army and Marine Corps. Congress began reversing those increases in light of the withdrawal of U.S. forces from Iraq in 2011, the drawdown of U.S. forces in Afghanistan beginning in 2012, and budgetary constraints. Congress halted further reductions in Army and Marine Corps end-strength in FY2017, providing slight end-strength increases that year and more substantial increases in FY2018. End-strength for the Air Force generally declined from 2004-2015, but increased from 2016-2018. End-strength for the Navy declined from 2002-2012, increased in 2013, and remained essentially stable through 2017 with a modest increase in 2018. Authorized end-strengths for FY2018 and FY2019 are in Figure 1 . Discussion: In comparison to FY2018 authorized end-strengths, the Administration's FY2019 budget proposed increases for the Army (+4,000), Navy (+7,500), Marine Corps (+100) and Air Force (+4,000). Section 401 of the enacted bill approved end-strengths identical to the Administration request. The enacted bill also adopted Section 402 of the House bill which adjusts the minimum end-strengths required by 10 U.S.C. §619 to a level equal to the authorized end-strengths set in Section 401. References: Previously discussed in CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon, and similar reports from earlier years. CRS Point of Contact: Lawrence Kapp. Background: The overall authorized end-strength of the Selected Reserves has declined by about 6% over the past 16 years (874,664 in FY2001 versus 823,900 in FY2018). Much of this can be attributed to the reductions in Navy Reserve strength during this period. There were also modest shifts in strength for some other components of the Selected Reserve. Authorized end-strengths for FY2018 and FY2019 are in Figure 2 . Discussion: Relative to FY2018 authorized end-strengths, the Administration's FY2019 budget proposed increases for the Navy Reserve (+100), Air Force Reserve (+200), and Air National Guard (+500); and no change for the Army National Guard, Army Reserve, Marine Corps Reserve, and Coast Guard Reserve. Section 411 of the enacted bill specified end-strengths identical to the Administration request. References: Previously discussed in CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon, and similar reports from earlier years. CRS Point of Contact: Lawrence Kapp. Background: DOD operates a health care delivery system that serves approximately 9.4 million beneficiaries. The military health system (MHS) provides care through DOD-operated and staffed medical and dental facilities (collectively referred to as military treatment facilities ) or through care from civilian providers purchased through an insurance-like program known as TRICARE. Currently, military treatment facilities (MTFs) are administered by each respective service surgeon general and provide a wide range of clinical services depending on its size, mission, and level of capabilities. TRICARE is administered by the Defense Health Agency (DHA), a combat support agency that enables the Army, Navy, and Air Force medical services to provide a medically ready force and ready medical force to combatant commands in both peacetime and wartime. The DHA also operates six MTFs in the Washington DC metropolitan area. In 2016, Congress found that the organizational structure of the MHS could be streamlined to sustain the "medical readiness of the Armed Forces, improve beneficiaries' access to care and the experience of care, improve health outcomes, and lower the total management cost." Section 702 of the FY2017 NDAA ( P.L. 114-328 ) directed significant reform to the MHS and administration of MTFs by October 1, 2018. This reform includes transfer of administration and management of MTFs from each respective service surgeon to the Director, DHA; reorganization of DHA's internal structure; and redesignation of the Service Surgeons General as principal advisors for their respective military service, and as service chief medical advisor to the DHA. In June 2018, DOD submitted its final implementation plan to Congress. The implementation plan details how DOD will reform the MHS to a "streamlined organizational model that standardizes the delivery of care across the MHS with less overhead, more timely policy-making, and a transparent process for oversight and measurement of performance." DOD also included recommendations on legislative actions to assist with executing its implementation plan, which includes ability to implement 10 U.S.C. §1073c using a three-year phased-in approach; and authority for the Secretary of Defense to waive specific requirements in 10 U.S.C. §1073c if necessary for implementation feasibility or military health readiness. Discussion: Section 711 of the enacted bill incorporates DOD's recommendation for a three-year, phased-in approach to implementing 10 U.S.C. §1073c. The provision requires the DHA Director to assume responsibility for administration and management of each MTF no later than September 30, 2021. However, there are no authorities included in Section 711 to allow the Secretary of Defense to waive requirements in 10 U.S.C. §1073c. Section 711 also requires limitation on MTF closures and downsizing in connection with implementation of 10 U.S.C. §§1073c-1073d; establishment of a DHA subordinate organization for research and development; establishment of a DHA subordinate organization for public health; feasibility study on establishing a DHA subordinate organization for education and training; and feasibility study on establishing a Defense Health Command as a superseding organization to DHA. Section 712 of the enacted bill directs the Director of the DHA, by October 1, 2018, to implement an "organizational framework" that effectively delivers DOD health benefits, maximizes interoperability of military medical capabilities, and integrates those capabilities to support combatant commander requirements. As part of the organizational framework, Section 712 also requires DOD to establish four "defense health regions," two in the continental United States and two outside of the continental United States. Additionally, the service surgeons general are assigned new responsibilities focusing on manning, training, and equipping medical forces to meet MTF or combatant commander requirements. References: CRS In Focus IF10530, Defense Primer: Military Health System , by Bryce H. P. Mendez. CRS Point of Contact: Bryce H. P. Mendez. Background : According to Arlington National Cemetery (ANC) news, in about 25 years, the cemetery will run out of space as an active cemetery that would allow for future burials. Section 2 of Public Law 114-158 called for the Secretary of the Army in consultation with the Secretary of Defense (SECDEF), to submit a report to Congress on the capacity of ANC. The Secretary of the Army's report, The Future of Arlington National Cemetery: Report on the Cemetery's Internment and Inurnment Capacity , February 14, 2017, identified the current status of ANC and provided future options, including restricting eligibility; expanding the geographical footprint of the cemetery; and other hybrid solutions. In July 2017, the cemetery conducted a survey in partnership with several military and veteran service organizations. Among the findings from this preliminary survey: 94% of the respondents want Arlington Cemetery to stay active well into the future; and nearly 50% who favor expansion also recognize the need to modify eligibility. The survey had more than 28,000 respondents who indicated that—if eligibility at ANC is limited—those killed in action, Medal of Honor (MoH) and other high award recipients, former POWs, and those active duty servicemembers who die on operational missions should have a place at Arlington. ANC launched a second survey in April 2018 and encouraged the public and its various stakeholders to continue to share their thoughts on the future of Arlington. ANC shared the results of the second survey that was similar to the first with 96% of the 230,000 respondents wanting Arlington to remain an active cemetery. The Advisory Committee on Arlington National Cemetery (ACANC) is expected to make recommendations on future eligibility criteria, capacity issues, and expansion plans in the committee's annual report to the Secretary of the Army. Discussion : Section 582 of the enacted bill adopts House Section 582 requiring the Secretary of the Army in consultation with the Secretary of Defense (SECDEF), to prescribe revised criteria for interment at ANC that would preserve Arlington Cemetery as an active burial ground ''well into the future.'' The SECDEF is required to establish the revised criteria no later than September 30, 2019. Section 1070 of the enacted bill adopts House Section 1062, with an amendment requiring the Secretary of Defense and the Administrator of the FAA to jointly submit a report on unmanned aircraft in Arlington National Cemetery to preserve the sanctity of the cemetery as a national shrine. This report for Congress will discuss how to prevent the flight of unmanned aircraft over Arlington to preserve the sacred atmosphere of the national cemetery; and restrict all flights of unmanned aircraft during the execution of funeral services, except in emergency situations or if requested by the family as part of the service. The report is due not later than 90 days after the date of the enactment of this Act. Section 2852 of the enacted bill adopts a Senate provision that would commemorate the southern expansion of Arlington Cemetery and grant permanent easement of approximately 0.1 acres of land in Arlington County for the purpose of commemorating Freedman's Village and Gate. In the event ANC subsequently acquires the property used for the commemoration for burial purposes, the Army shall relocate any commemoration of Freedman's Village to an appropriate location. Section 2830B of the House bill had a similar provision. Section 2105 of the Senate bill would have extended an authorization of $30 million for certain FY2016 military construction projects including Arlington National Cemetery Southern Expansion. Section 2105 of the enacted bill increased the authorization to $60 million for Arlington extension projects. Section 4601 of the enacted bill adopts Senate Section 4601, which authorizes $30 million for ANC military construction in FY2019. CRS Point of Contact : Barbara Salazar Torreon. Background: Over the past few years, Congress has been concerned with improving the Defense Commissary Agency (DeCA) system, mandating several studies and reports on the topic. Recent reform proposals have sought to reduce DeCA's reliance on appropriated funds without compromising patrons' commissary benefits or by reducing the revenue generated by DOD's nonappropriated fund (NAF) entities (military exchanges) that fund morale, welfare, and recreation (MWR) facilities on military installations. An option to consolidate commissaries and military exchanges has been the subject of numerous studies in the last several years. In 2015, the Military Compensation and Retirement Modernization Commission (MCRMC) recommended consolidating the commissary and three exchange systems into one entity to be called the Defense Resale Activity (DeRA). Other options discussed include expanding commissary and exchange access to all eligible veterans to increase patronage and sales revenue. However, Congress has stopped short of major changes that would significantly reduce or eliminate the commissary subsidy. In the FY2018 NDAA, Congress authorized $1.4 billion for commissary operations and an additional $40 million for the construction of a new commissary in Stuttgart, Germany. Approximately $800 million of DeCA's annual operating budget is spent on pay and benefits for the commissary workforce. The President's FY2019 budget request for $1.3 billion included funding for DeCA to operate 237 commissaries on military installations worldwide and employ a workforce of over 14,000 civilian full-time equivalent (FTE) employees. Discussion : Section 579 of the enacted bill adopts Senate Section 576, which requires the Secretary of Defense (SECDEF) to submit a report to Congress assessing the feasibility and advisability of permitting small business activities of military spouses on military installations in the United States including partnership with commissaries, exchanges, and other morale, welfare, and recreation (MWR) facilities of the U.S. Armed Forces. Elements of this report would include (1) taking into account the usage by military spouses of installation facilities, utilities, and other resources in the conduct of small business activities on military installations in the United States, and other matters in connection with the business activities by military spouses as the SECDEF considers appropriate; and (2) seeking to identify mechanisms to ensure that costs and fees associated with the usage by military spouses of such facilities, utilities, and other resources in connection with such business activities does not curtail or eliminate the opportunity for military spouses to profit reasonably from such business activities. The report is due to the House and Senate Armed Services Committees no later than March 1, 2019. Section 621 of the enacted bill adopts House Section 629, which extends eligibility of certain MWR and commissary privileges to certain veterans and their caregivers. Eligible veterans include recipients of the Purple Heart and Medal of Honor; veterans with service-connected disabilities; former Prisoners of War (POWs); and the caregivers for eligible veterans. A fee, to be determined by the SECDEF, for purchases by these newly eligible individuals will offset any increase in expenses arising from this provision associated with the use of credit or debit cards for customer purchases, including expenses related to card network use and related transaction processing fees. This provision will take effect on January 1, 2020, after a briefing by the SECDEF to the House and Senate Armed Services Committees not later October 1, 2019. Section 627 of the enacted bill adopts House Section 625, which requires the SECDEF to conduct a study to determine the feasibility of consolidating military commissaries under DeCA and NAF exchange entities (i.e., Army and Air Force Exchange Service, Navy Exchange, and Marine Corps Exchange) into a single defense resale system. The report is to be submitted to the defense congressional committees no later than January 1, 2019. It shall contain the following: (1) details of the internal and external organizational structures of a consolidated defense resale system; (2) recommendations of the Secretaries of each of the military departments regarding the plan to consolidate the military resale entities; (3) the costs and associated plan for the merger of technologies or implementation of new technology from a third-party provider to standardize financial management and accounting processes of a consolidated defense resale system; (4) best practices to maximize reductions in costs associated with back-office retail payment processing for a consolidated defense resale system; (5) a timeline for converting DeCA into a NAF under Section 2484(j) of Title 10, United States Code; (6) a determination whether the business case analysis supports consolidation of the military resale entities; (7) recommendations of the SECDEF for legislation related to consolidation of the military resale entities; and (8) any other elements the SECDEF determines are necessary for a successful evaluation of a consolidation of the military resale entities. Section 4501 of the enacted bill authorizes $1,266,200,000 for commissary operations in FY2019. References: CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon; and similar reports from earlier years. CRS Point of Contact : Barbara Salazar Torreon. Background : The Family Advocacy Program (FAP) is the congressionally-mandated program within DOD devoted to "clinical assessment, supportive services, and treatment in response to domestic abuse and child abuse and neglect in military families." As required by law, the FAP provides an annual report to Congress on child abuse and neglect and domestic abuse in military families. Approximately half of military servicemembers are married and there are approximately 1.6 million dependent children across the active and reserve components. According to DOD statistics, in FY2017, the rate of child abuse or neglect in military homes was 13.7 per 1,000 children. This is a decrease from the previous year's rate of 14.4 per 1,000 children. There were 17 child abuse-related fatalities in the same year, 65% of which were 1 year old or younger. The rate of reported spousal abuse in FY2017 was 24.5 per 1,000 military couples, an increase to the FY2016 rate of 23.4 per 1,000 couples. Since FY2006, DOD has been collecting data on intimate partner abuse. In FY2017, there were 916 incidents of intimate partner abuse involving 756 victims and five fatalities. Discussion: The FY2019 NDAA (Sec. 532) adds a punitive article to the Uniform Code of Military Justice (UCMJ) for domestic violence. Previously, domestic violence could be prosecuted under UCMJ punitive articles for assault (Article 28), cruelty and maltreatment (Article 93), and rape and sexual assault (Article 20) among other articles. While these crimes may be perpetrated against any individual, the new punitive article criminalizes certain acts committed against a spouse, intimate partner, or immediate family member. Two provisions in the Senate bill would have authorized victims of domestic violence to receive the same services that are currently available to victims of sexual assault. These include Special Victims' Counsel (SVC) services (Sec. 545), and expedited transfer eligibility for servicemember victims (Sec. 547). Section 536 of the enacted bill requires the SECDEF to standardize expedited transfer procedures for servicemembers who are victims of sexual assault or physical domestic violence. The Administration objected to Section 545 of the Senate bill which would expand SVC services to victims of other violent crimes, arguing that SVC representation is focused on legal issues specifically related to sexual assault. The enacted bill does not authorize victims of domestic violence to have access to SVC services; however, Section 534 requires DOD to study and report on the feasibility and advisability of expanding services. Section 577 requires service secretaries to establish and maintain multidisciplinary teams to enhance collaboration and cooperation among specialists in the response to domestic violence and child abuse on military installations. Section 578 requires a maximum two-year pilot program on no less than five installations for information on the risk factors for child abuse and training on safe childcare practices for military families. In 2018, an investigative report on juvenile sex offense cases on military installations drew congressional concern about gaps in the response, investigation, tracking, and prosecution of such cases. Section 1089 seeks to improve the response to juvenile-on-juvenile problematic sexual behavior on military installations by requiring DOD to establish a formal policy for such incidents, and to create a confidential database for tracking substantiated and unsubstantiated incidents. Section 1035 of the Senate bill would have removed the military's exclusive jurisdiction over criminal offenses committed by juveniles on military installations. This provision was not adopted in the enacted bill; however, the conferees noted concern "about the lack of State or local criminal jurisdiction over offenses committed on those portions of military installations with exclusive Federal jurisdiction by individuals not subject to the Uniform Code of Military Justice," and directed the service secretaries to seek to relinquish jurisdiction (pursuant to 10 U.S.C. §2683). A report to the armed services committees is required by the service secretaries on the relinquishment of jurisdiction no later than 15 months after the enactment date of this act. References: For information on expedited transfers and Special Victims' Counsel, see CRS Report R44944, Military Sexual Assault: A Framework for Congressional Oversight , by Kristy N. Kamarck and Barbara Salazar Torreon. CRS Point of Contact : Kristy N. Kamarck. Background: In accordance with 10 U.S.C. §502(b), U.S. citizens, noncitizen nationals (individuals born in American Samoa and Swains Island), legal permanent residents, and persons from Micronesia, Marshall Islands, and Palau are eligible to enlist in the U.S. Armed Forces. Subparagraph (b)(2) of this law also allows individuals who do not meet those requirements to enlist if the Service Secretary "determines that such enlistment is vital to the national interest." This is the statutory basis for the Military Accessions Vital to the National Interest (MAVNI) program. As implemented by DOD, the MAVNI program allowed the military services to recruit certain legally present aliens whose skills were deemed vital to the national interest. Those skills included medical specialties and expertise in certain languages. Applicants at the time of enlistment had to be either asylees, refugees, holders of Temporary Protected Status (TPS), beneficiaries of the Deferred Action for Childhood Arrivals (DACA) policy, or in any one of a range of nonimmigrant categories. DOD established new security screening requirements for MAVNI personnel in a memorandum published on September 30, 2016. Among other things, it prohibited certain personnel enlisted under MAVNI from commencing with basic training until the military service certified in writing that the individuals could meet the administrative, security, and suitability protocols mandated in the memo. Subsequently, the military services stopped accepting new applicants to the MAVNI program. It is not known if or when DOD will reactivate the program. Discussion: The provision in the enacted bill tightens requirements on the skills required for an enlistee's admission under the MAVNI program and mandates that those skills be used in the individual's primary daily duties as a member of the Armed Forces. It codifies DOD's prohibition on MAVNI enlistees attending initial military training until they complete required background checks and security and screening requirements. It also places a cap on MAVNI accessions for each military department that may be exceeded if the Secretary of Defense notifies Congress and a period of 30 days elapses ( notify and wait ). The Joint Explanatory Statement noted "The conferees believe the Military Accessions Vital to National Interest, or MAVNI, program continues to be an important option for the acquisition of certain critical skills for military service." References: CRS In Focus IF10884, Expedited Citizenship through Military Service , by William A. Kandel and Lawrence Kapp. CRS Point of Contact: Lawrence Kapp. Background: Over the past decade, the issues of sexual assault and sexual harassment in the military have generated sustained congressional and media attention. In 2005, DOD issued its first department-wide sexual assault policies and procedures. These policy documents were built on recommendations from the Joint Task Force for Sexual Assault Prevention and Response (SAPR) and on congressional requirements specified in the FY2005 NDAA ( P.L. 108-375 ). In the same year, DOD established the Sexual Assault Prevention and Response Office (SAPRO), its primary oversight body for all service-level programs. Sexual harassment policy and oversight is separately handled by DOD's Office of Diversity and Military Equal Opportunity. Between 2012 and 2018, DOD took a number of steps to implement its own strategic initiatives as well as dozens of congressionally mandated actions related to sexual assault prevention and response, victim services, reporting and accountability, and military justice. In FY2016, estimated sexual assault prevalence rates across the DOD's active duty population were 4.3% for women and 0.6% for men. These estimated prevalence rates were slightly lower than the reported prevalence rates in 2014 (4.9% and 0.9%, respectively). Discussion: Section 546 of the FY2015 NDAA ( P.L. 113-291 ) called for the establishment of a 20-member Defense Advisory Committee on Investigation, Prosecution, and Defense of Sexual Assault in the Armed Forces (DAC-IPAD) to "review, on an ongoing basis, cases involving allegations of rape, forcible sodomy, sexual assault, and other sexual misconduct involving members of the Armed Forces." Section 533 in the enacted bill gives the committee additional authority to require DOD and other Federal agencies to provide information relevant to the committee's scope as requested. One of the DAC-IPAD's findings in its March 2018 annual report was that DOD policies and standards for expedited transfer apply "only to active duty victims whose sexual assault reports are handled by the SAPR program and expressly excludes victims covered under FAP from the expedited transfer policy." Expedited transfer policies have been in place since 2011 and allow victims to request transfer to a new unit or installation in order to separate themselves from an alleged perpetrator. Section 536 of the enacted bill requires DOD to modify policies related to expedited transfers in order to standardize processes for all sexual assault victims and extend the transfer policy to a servicemember's dependent when the dependent is a victim. Section 542 of the House bill would have allowed cadets and midshipmen from the military service academies who are victims of sexual assault to apply for a transfer to one of the other service academies. This was not adopted; however, the conference report noted, "The Conferees believe that providing an option for a cadet or midshipman, who was sexually assaulted, to request a transfer to another academy should be explored," and directs DOD to study the feasibility of establishing such a process. The Administration objected to Section 544 of the Senate bill which would have authorized military judges to issue and enforce domestic protective orders, stating that this would, "strain the military judiciary's limited resources and greatly expand the authority of military judges into an area that has been reserved to civil courts." This provision was not adopted. Military protective orders (MPOs) may currently be issued by commanding officers having full force and effect on military installations, but are not enforceable by civilian law authorities. DOD is required to produce an annual report for Congress on sex-related offenses. Section 547 of the enacted bill requires DOD to also report information on collateral misconduct of victims of sexual assault. Collateral misconduct by the victim is considered to be one barrier to reporting assault due to the victim's fear of punishment for offenses such as underage drinking or fraternization. Psychological trauma following a sexual assault incident has been associated with negative behavioral changes in the victim such as increased drug or alcohol use, poor work performance, or other disciplinary issues. The Department of Veterans Affairs defines psychological trauma related to sexual assault or harassment as military sexual trauma (MST). DOD's policies recognize psychological trauma related to sexual assault and defines it as trauma-informed care. Section 547 of the House bill would have required DOD and VA to develop a joint definition of military sexual trauma. This section was not adopted. Section 702 of the enacted bill requires DOD to carry out a pilot program to treat servicemembers suffering from post-traumatic stress disorder (PTSD) resulting from military sexual trauma. Behaviors associated with sexual trauma may affect the nature of a victim's discharge from the Armed Forces. Discharges that are not under "honorable" conditions affect servicemember eligibility for certain veterans' benefits. Under certain circumstances, servicemembers may appeal these decisions through Discharge Review Boards or Boards of Correction for Military Records. Senate Section 536 was not adopted, but would have amended 10 U.S.C. §1552 and §1553 with respect to the correction of military records to ensure that the claimants receive "liberal consideration" that the sexual trauma contributed to the circumstances surrounding discharge or dismissal. Following a sexual assault investigation in the military, the investigator will provide recommendations for legal or other actions to a disposition authority – typically a military commander in the accused's chain of command. Section 535 of the enacted bill adopts Senate Section 548, requiring the SECDEF to establish a uniform command action form for reporting the final disposition of certain sexual assault cases. Section 544 of the enacted bill seeks to improve compliance with sex offender reporting requirements by establishing a single entity within DOD for the oversight of the registered sex offender management program. Finally, Section 542 of the enacted bill requires security clearance reinvestigations under expedited procedures for flag officers and DOD Senior Executive Service personnel who are convicted of certain offenses, including sexual assault and sexual harassment. Not adopted was House Section 531, which would have imposed mandatory penalties for those convicted of sex-related offenses. References: See also CRS Report R44944, Military Sexual Assault: A Framework for Congressional Oversight , by Kristy N. Kamarck and Barbara Salazar Torreon, CRS Report R43168, Military Sexual Assault: Chronology of Activity in Congress and Related Resources , by Barbara Salazar Torreon, CRS Report R43928, Veterans' Benefits: The Impact of Military Discharges on Basic Eligibility , by Umar Moulta-Ali and Sidath Viranga Panangala. Previously discussed in CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon, and similar reports from earlier years. CRS Point of Contact : Kristy N. Kamarck. Background: There is long-standing congressional interest on the military pay raise in relation to the overall cost of military personnel and recruitment and retention of high-quality personnel to serve in the all-volunteer military. Section 1009 of Title 37 of the U.S. Code provides a permanent formula for an automatic annual increase in basic pay that is indexed to the annual increase in the Employment Cost Index (ECI). The statutory formula stipulates that the increase in basic pay for 2019 will be 2.6% unless either (1) Congress passes a law to provide otherwise; or (2) the President specifies an alternative pay adjustment under subsection (e) of 37 U.S.C. §1009. Increases in basic pay are typically effective at the start of the calendar year, rather than the fiscal year. The FY2019 President's Budget requested a 2.6% military pay raise, equal to the statutory formula. Discussion: The enacted bill contained no provision relating to a general increase in basic pay, thereby leaving the automatic adjustment of 37 U.S.C. §1009 in place. According to the Joint Explanatory Statement, "The conferees note that current law authorizes automatic military pay raises consistent with the Economic Cost Index, which for calendar year 2019 amounts to a 2.6 percent raise in basic pay for all members of the uniformed services." Reference(s): For an explanation of the pay raise process and historical increases, see CRS In Focus IF10260, Defense Primer: Military Pay Raise , by Lawrence Kapp. Previously discussed in CRS Report R44577, FY2017 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck et al., and similar reports from earlier years. CRS Point of Contact: Lawrence Kapp. Background: Since 1998, DOD and the Department of Veterans Affairs (VA) have pursued numerous efforts to increase interoperability between each department's electronic health records (EHR). The lack of EHR interoperability, or bi-directional communication, has been a historical barrier to access and continuity of care for both DOD and VA beneficiaries. Congress has expressed significant interest in DOD and VA efforts to develop an interoperable or joint EHR. Section 1635 of the FY2008 National Defense Authorization Act directed DOD and VA to develop an interoperable EHR, accelerate the exchange of health care information between the two departments by September 30, 2009, and create an interagency program office to facilitate these efforts. As directed by law, the DOD/VA Interagency Program Office was established in 2011 to jointly develop an integrated EHR that would replace each department's legacy systems. As an interim solution, the Joint Legacy Viewer (JLV) was developed to facilitate health care data sharing between each department's legacy systems. While the JLV provides read-only access, it continues to be the primary platform for DOD and VA clinicians to review a patient's medical history and care delivered in both health systems. In 2012, DOD and VA committed to developing a new integrated EHR that would be fully operational by 2017. In 2013, DOD and VA announced that they would no longer pursue the development of an integrated EHR; rather, they would invest in separate systems that could meet interoperability requirements. DOD opted to pursue a commercial alternative, while VA decided to modernize VistA. On August 25, 2014, DOD issued a request for proposals for a new EHR to replace its legacy systems. In July 2015, DOD awarded a $4.3 billion EHR contract, also known as MHS Genesis , to the Leidos Partnership for Defense Health (LPDH), comprised of the following vendors: Leidos (prime vendor), Cerner, Accenture Federal Services, and Henry Schein, Inc. On June 5, 2017, VA announced its decision to adopt the same EHR platform as MHS Genesis as its replacement to VistA and awarded a $10 billion contract to Cerner. On April 9, 2018, the Coast Guard announced its intent to partner with DOD and adopt MHS Genesis. Adding the Coast Guard to DOD's contract with LPDH increased the award ceiling to $5.5 billion. DOD intends to deploy MHS Genesis at all military treatment facilities (MTFs) by 2022. The VA intends to start with three operational sites by 2020. Discussion: While there are no provisions in the enacted bill relating to DOD's new electronic health record, House Section 718 was incorporated into the conference report. DOD is directed to "submit a letter report to the Committees on Armed Services of the Senate and the House of Representatives describing the corrective actions taken, as a result of the findings in the initial operational and test evaluation report, prior to fielding MHS Genesis to additional military medical treatment facilities." Currently, there are six congressional committees that may exercise jurisdiction in oversight of this program. As DOD, VA, and the Coast Guard implement a new, common EHR over the next four years, Congress may consider additional or streamlined oversight activities to ensure successful deployment of MHS Genesis. CRS Point of Contact: Bryce H. P. Mendez. Background: In 2017, four incidents involving Navy ships in the Western Pacific resulted in serious damage and the deaths of 17 sailors. These incidents prompted Congressional inquiry into possible root causes of such accidents. Experts and investigators have pointed to various issues in the Surface Warfare community, including fleet and unit readiness, the seamanship training and qualification processes, ship-board workloads, and operational/personnel tempo. In response to these concerns, the FY2019 NDAA includes several provisions related to Navy training and personnel management issues. Discussion: In 2018, a 3-year internal Navy review of junior surface warfare officer (SWO) competency uncovered gaps in basic seamanship and navigation skills. The enacted bill includes provisions that seek to improve training, as well as qualification standards and processes for Navy watchstanders. Section 334 encourages the Secretary of the Navy to establish a comprehensive proficiency assessment process for SWOs and to more closely align watchstander qualification standards with the International Convention on Standards of Training, Certification and Watchkeeping (STCW). This section would also require a report to Congress on the training curriculum and assessment process for surface warfare watchstanders by March 1, 2019. Section 527 requires reporting on Navy training and qualification standards. The Senate Armed Services Committee (SASC) report also includes language with respect to surface warfare officer initial training, stating, The committee believes SWO candidates lack sufficient at-sea training before reporting to their first ships. The committee is concerned that the lack of practical at-sea experience before reporting to their first ships may result in SWOs having gaps in their foundational safety, seamanship, and navigation knowledge, skills, and experience. The SASC report further directs the Secretary of the Navy to conduct a review of the adequacy and appropriate balance of training methods, to include the feasibility of expanding use of yard patrol craft as training vessels, and to report to Congress by October 1, 2018. The Comptroller General is directed to provide a review of the Secretary's report within 120 days of the Navy report. Finally, Section 526 of the enacted bill requires the Navy to maintain a career record of watchstanding hours. It is current practice for military pilots to log flight hours; however, this has not been a common practice for surface warfare watchstanders. Section 502 of the House bill sought to increase specialization for SWOs by establishing two career paths: (1) ship engineering systems; and (2) ship operations and combat systems. While some foreign navies use this approach for SWO career management (e.g., the British Royal Navy), there is ongoing debate within the U.S. surface warfare community about whether specialization would improve performance and resolve existing problems. The Administration objected to this section, stating that "Separating SWOs into two career paths would limit mastery of core skillsets that are fundamental in developing a warfighter to lead, fight, and operate complex U.S. Navy warships." The enacted bill does not require the Navy to establish separate career paths, but instead requires GAO to conduct a review of SWO career paths and to brief congressional committees by March 1, 2019. Another area of concern is that high shipboard workload and personnel tempo could lead to higher risk of human error due to fatigue. A 2017 GAO report found that, The Navy's process to determine manpower requirements—the number and skill mix of sailors needed for its ships—does not fully account for all ship workload. The Navy continues to use an outdated standard workweek that may overstate the amount of sailor time available for productive work. Although the Navy has updated some of its manpower factors, its instruction does not require reassessing factors to ensure they remain valid or require measuring workload while ships are in port. Current and analytically based manpower requirements are essential to ensuring that crews can maintain readiness and prevent overwork that can affect safety, morale, and retention. Section 525 of the enacted bill requires the Navy to ensure that manning levels on forward deployed ships are consistent with requirements for the ship class and to notify Congress in writing when manning fill for a covered ship falls below 90% and manning fit falls below 87%. CRS Point of Contact : Kristy N. Kamarck. Background: Congress has taken an interest in understanding federal efforts and identifying options to address overall substance abuse issues, particularly in the context of the opioid crisis . According to DOD's 2011 Health Related Behaviors Survey of Active Duty Military Personnel, servicemembers reported using or misusing the following substances within the 12 months prior to the study at the following rates: illicit drugs (1.4%), prescription drugs (0.8%), and heavy alcohol amounts (8.4%). Other than heavy alcohol use, the prevalence of substance abuse is lower than in the general U.S. population. Since 2009, the number of new alcohol or substance abuse diagnoses per year has been on a declining trend for active duty servicemembers. However, opioid medications are prescribed at a higher rate for servicemembers than the general U.S. population. This higher prescription rate may be attributable to deployment-related effects such as combat exposure and injuries. However, the incidence rate for dependence or abuse among servicemembers declined by 38% between 2012 and 2016. When adjusted for demographics, the opioid death rate among servicemembers is significantly lower than the U.S. population at 2.7 per 100,000 and 10.4 per 100,000, respectively. DOD attributes these trends to its extensive education, prevention, and treatment programs developed over the past decade. Discussion: DOD currently operates a prescription drug monitoring program that identifies at-risk beneficiaries and restricts patients from receiving multiple prescriptions for opioids outside of their primary care manager. However, the data exchange that occurs between various TRICARE contractors and military treatment facilities is not shared with state prescription drug monitoring programs. Section 715 of the enacted bill directs DOD to establish a Military Health System Prescription Drug Monitoring Program. The program would allow for bi-directional sharing of patient-specific information regarding prescriptions for controlled substances with state prescription drug monitoring programs. Section 715 also clarifies that the patient-specific information is an authorized disclosure under the Health Insurance Portability and Accountability Act of 1996 ( P.L. 104-191 ). Section 716 of the enacted bill adopts House Section 736 and Senate Section 704, directing DOD to implement an opioid safety pilot program for a period of no more than three years. The pilot program must address: opioid safety for patients, physicians, dentists, and pharmacists; identify potential misuse or abuse of opioid medications within military, retail, or home delivery pharmacies; beneficiary education on opioid misuse or abuse; and use of predictive analytics to identify at-risk beneficiaries. Not adopted were provisions to require DOD to distribute in-home prescription drug disposal kits to beneficiaries and a report on historical prescribing practices that were inconsistent with the DOD-VA clinical practice guidelines for post-traumatic stress disorder. Congress is also considering at least 20 separate legislative proposals to address the opioid crisis , primarily through authorities, programs, and services directed by the Department of Health and Human Services, Department of Homeland Security, and the Drug Enforcement Agency. These proposals do not explicitly address opioid abuse, prevention, treatment, or research within DOD. References: CRS In Focus IF10951, Substance Abuse Prevention, Treatment, and Research Efforts in the Military , by Bryce H. P. Mendez, CRS In Focus IF10219, Opioid Treatment Programs and Related Federal Regulations , by Johnathan H. Duff, and CRS Report R42593, Prescription Drug Monitoring Programs , by Lisa N. Sacco, Johnathan H. Duff, and Amanda K. Sarata. CRS Point of Contact: Bryce H. P. Mendez. Background: Approximately 200,000 servicemembers are discharged from the Armed Forces every year. This is a diverse group including, for example, enlistees completing their first-term (typically 4-6 years), mid-career members, retirees (>20 years), and those with medical disabilities. A majority of these members pursue a post-service career; veterans account for about 6% of the civilian labor force. In the past few decades, Congress has enacted legislation and appropriated funds in support of programs that help servicemembers prepare for transition to civilian life by providing them with counseling, resources, and tools for accessing veteran benefits and leveraging their skills, education, and training gained in the service for post-service education and employment opportunities. Some DOD programs are the Transition Assistance Program (TAP); Credentialing Opportunities Online (COOL); and the DOD Skillbridge program, which is also known as the Job Training, Employment Skills Training, Apprenticeships, and Internships (JTEST-AI) program. There are also DOD programs to help servicemembers in pursuit of post-secondary degrees, for example, tuition assistance (TA) for off-duty education and the Defense Activity for Non-Traditional Education Support (DANTES). Discussion: Congressional concerns about the transition of servicemembers to civilian employment are evident in the number of provisions seeking to enhance or expand transition services, education support, and other transition-related programs. Section 558 of the enacted bill extends the availability of Military OneSource services to members and their families for a minimum period of one year following separation from the military. A broad range of information resources and training programs are available online in an open source format on Military OneSource; however, previously, some counseling and support services were only available to veterans for a period of 180 days following separation. Other House provisions seeking to improve outreach to recently separated veterans through the addition of email addresses to discharge paperwork (Section 525), allowing for discharge information to be transmitted to country veteran service officers (Section 560B), and follow-up phone calls to check on status (Section 560D) were not adopted. A Government Accountability Office (GAO) report released in November 2017 found that fewer than half of all eligible servicemembers completed TAP before the statutory deadline of 90 days prior to separation. In addition, the report found that relatively few members were participating in DOD's optional two-day classes on (1) Accessing Higher Education, (2) Career Technical Training, and (3) Entrepreneurship. The SASC raised concerns in its committee report that, "requiring transitioning servicemembers to opt into a two-day workshop signals to both servicemembers and their commanders that the workshops may be superfluous, thereby discouraging participation," and encourages DOD to mandate member participation in one of the workshops. Section 552 of the enacted bill requires that TAP counseling begin no later than 365 days before transition. This provision requires the development of tailored transition pathways depending on the characteristics or needs of different member groups (e.g., rank, term of service, or gender), and would mandate certain elements of the TAP curriculum. Another requirement in this section is that transitioning members and the Secretary of Veterans Affairs are provided with a copy of their Joint Service Transcript upon separation. Congress also requires GAO and DOD reports on the implementation of this law. Section 556 of the enacted bill removes the requirement that credentials earned under the authority in 10 U.S.C. §2015 be "related to military training." This will potentially expand a member's ability to use COOL funds to pursue nonmilitary-related credentials. Section 560A of the House bill would have required DOD to report on TAP participants who met with academic or technical training advisors and would also request specific information on equivalent college credit and technical certifications for members of the armed forces. This provision was not adopted. The American Council on Education (ACE), as funded by DOD, provides a military guide with credit recommendations for formal military courses and occupations. This information may be provided to servicemembers and veterans as part of a Joint Service Transcript (JST) or Verification of Military Experience and Training (VMET). The COOL program provides an online resource that translates military service occupations and experience to civilian credentials. Currently servicemembers' spouses are authorized to participate in certain elements of TAP under 10 U.S.C. §§1142 and 1144. Section 575 of the Senate bill would have required a pilot program for spouse participation in TAP regardless of whether the member is also participating in TAP at the same time. This provision was not adopted. Finally, Section 559 of the House bill would have required that DOD provide members with information about apprenticeship programs as part of pre-separation counseling. While this provision was not adopted, the conferees noted that, "apprenticeships provide a valuable career option for separating servicemembers and encourage the Department of Defense to ensure information on apprenticeship programs, and appropriate funding options, is easily accessible to those servicemembers who may be interested in pursuing an apprenticeship upon separating from the military." References: CRS In Focus IF10347, Military Transition Assistance Program (TAP): An Overview , by Kristy N. Kamarck, CRS In Focus IF10850, DOD's Troops to Teachers Program (TTT) , by Kristy N. Kamarck and Eva G. McKinsey, CRS In Focus IF10490, Veterans' Employment , coordinated by Benjamin Collins, and CRS Report R42790, Employment for Veterans: Trends and Programs , coordinated by Benjamin Collins. CRS Video WVB00223, Service Member-to-Veteran Transitions: Education and Employment , by Kristy N. Kamarck, Benjamin Collins, and Cassandria Dortch. CRS Point of Contact : Kristy N. Kamarck. Background : Under the Survivor Benefit Plan (SBP), a military retiree may have a portion of his or her monthly retired pay withheld in order to provide, after his or her death, a monthly benefit to a surviving spouse or other eligible recipients. When an active duty servicemember dies, his or her survivor's payment through the SBP is usually 55% of the retired base pay that the member would otherwise have been eligible to receive. By law, surviving spouses who receive both an annuity from DOD as a beneficiary of the SBP and from the Department of Veterans Affairs' Dependency and Indemnity Compensation (DIC) must have their SBP payments reduced by the amount of DIC they receive. This offset has sometimes been referred to as a widows' tax . Congress first authorized a payment to such surviving spouses to offset that reduction in the FY2008 NDAA. This benefit is called the Special Survivor Indemnity Allowance (SSIA). Monthly SSIA payments are currently capped at $310 and are taxable. Section 621 of the FY2018 NDAA ( P.L. 115-91 ) amended 10 U.S.C. §1450 to permanently extend the authority to pay the SSIA and requires inflation adjustments to that allowance by the amount of the military retired pay COLA for each calendar year beginning in 2019. Section 622 of the FY2018 NDAA modified 10 U.S.C. §§1447 and 1452 to ensure equitable treatment under the SBP of members of the uniformed services covered by the modernized retirement system who elect to receive a lump sum of retired pay, as authorized under 10 U.S.C. §1415. Discussion: Section 621 of the Senate bill would make technical corrections in calculation and publication of special survivor indemnity allowance (SSIA) cost of living adjustments. This provision was adopted in Section 622 of the enacted bill. A provision not included in the enacted bill was House Section 607, which expressed a sense of Congress that the widows' tax be eliminated. While the SSIA alleviates the gap in benefits, Section 607 states "the whole Congress must work together to find a way to eliminate the widows' tax entirely. There was no similar provision in the Senate bill. Another House provision that was not adopted was Section 626, which would amend 10 U.S.C. §1448(b)(1), by allowing designation of a new beneficiary by a terminally ill participant. Any such beneficiary must be a natural person with an insurable interest in the participant. Such an election would be effective the first day of the first month following the month in which the election is received by the Secretary concerned. There was no similar provision in the Senate bill. References: Previously discussed in CRS Report R44923, FY2018 National Defense Authorization Act: Selected Military Personnel Issues , by Kristy N. Kamarck, Lawrence Kapp, and Barbara Salazar Torreon; CRS Report R40757, Veterans' Benefits: Dependency and Indemnity Compensation (DIC) for Survivors , by Scott D. Szymendera; CRS Report RL34751, Military Retirement: Background and Recent Developments , by Kristy N. Kamarck; and CRS Report R40589, Concurrent Receipt: Background and Issues for Congress , by Kristy N. Kamarck. CRS Point of Contact : Barbara Salazar Torreon. Background: TRICARE is a DOD-administered health insurance-like program for uniformed servicemembers, uniformed service retirees, their family members, and survivors. With the exception of active duty servicemembers (who are assigned to the TRICARE Prime option and pay no out-of-pocket costs for TRICARE coverage), DOD beneficiaries may have a choice of TRICARE plan options depending on their status (e.g., active duty family members, retiree, reservist, child under age 26 ineligible for family coverage, Medicare-eligible, etc.) and geographic location. Each of the three major plan options has different beneficiary cost-sharing features: TRICARE Prime, TRICARE Select, and TRICARE for Life. Since 1966, Congress has enacted legislation to deliver a robust health care benefit to eligible beneficiaries. TRICARE now accounts for approximately 52% (or $15.3 billion) of the total cost of care delivered through the military health system. In FY2017 and FY2018, Congress directed numerous TRICARE reforms including replacing TRICARE options with new plans featuring an annual enrollment period and a new benefit structure with enrollment fees, annual deductibles, co-payments, and annual catastrophic caps; changes to the delivery of the TRICARE dental benefit for uniformed services retirees and their family members; and increased pharmacy co-pays for retirees and military family members. The Administration's FY2019 Budget request did not include any cost-share reforms or programmatic changes to TRICARE. Discussion: The enacted bill does not include any changes to TRICARE's cost-sharing requirements. It focuses on administration and delivery of certain health benefits. Section 737 of the enacted bill directs the Comptroller General to assess, report, and brief Congress on the Defense Health Agency's guidance and oversight provided to outgoing and incoming managed care support contractors during the recent TRICARE contract transition. This reporting requirement will also be in effect for future TRICARE contract transitions. Section 713 adopts Senate Section 702 directing DOD to administer the TRICARE dental benefit for uniformed services dependents and reserve component members through the Office of Personnel Management's Federal Employee Dental and Vision Insurance Program (FEDVIP) no earlier than January 1, 2022. Section 734 adopts House Section 739 directing a study on how beneficiaries desiring to remain in the workforce are affected by the current requirement to participate in Medicare Part B, as a condition to participate in TRICARE for Life. References: CRS In Focus IF10530, Defense Primer: Military Health System , by Bryce H. P. Mendez; CRS Insight IN10922, TRICARE Modernization: Eligibility for the Federal Employee Dental and Vision Insurance Program , by Bryce H. P. Mendez. CRS Point of Contact: Bryce H. P. Mendez. | Each year, the National Defense Authorization Act (NDAA) provides authorization of appropriations for a range of Department of Defense (DOD) and national security programs and related activities. New or clarified defense policies, organizational reform, and directed reports to Congress are often included. For FY2019, the John S. McCain NDAA (H.R. 5515) contains several high-profile military personnel issues. Some are required annual authorizations, such as end-strengths; some are updates or modifications to existing programs; and some changes in response to problems identified in certain military personnel programs. In this year's NDAA, Congress authorized end-strengths identical to the Administration's FY2019 budget proposal, which are slightly higher than in FY2018. The authorized active duty end-strength increased by 1% to 1,338,100. The authorized Selected Reserves end-strength increased by <1% to 824,700. With regards to military pay, a 2.6% increase will take effect in calendar year 2019. Congress considered the increase as requested by the Administration; however, an authorization was not required since 37 U.S.C. §1009 provides for automatic annual increases in basic pay that is indexed to increases in the Employment Cost Index. Congress also directed modifications to several existing programs, including development of criteria for internment at Arlington National Cemetery, as well as a $30 million authorization to expand the cemetery; clarified military health system reform requirements outlined in 10 U.S.C. §1073c and revised the implementation date from October 1, 2018 to September 30, 2021; expanded eligibility for TRICARE beneficiaries to access the Federal Dental and Vision Insurance Program (FEDVIP); extended eligibility for commissary and morale, welfare, and recreation (MWR) privileges to certain veterans and veterans' caregivers, as well as a $1.26 billion authorization for commissary operations; expanded availability of Military OneSource services, enhanced Transition Assistance Program (TAP) counseling requirements, and broadened educational opportunities for servicemembers desiring professional credentials; and corrected technical calculations for automatic annual adjustments to the Special Survivor Indemnity Allowance. As part of the oversight process, additional provisions were incorporated to address selected congressional items of interest, such as added punitive articles on domestic violence in the Uniform Code of Military Justice and directed clarifying policy, support programs, and further study on services for victims of domestic violence and child abuse; stricter eligibility requirements for enlistees of the Military Accessions Vital to the National Interest (MAVNI) program; standardized processes for reporting and accountability, military justice and investigations, and victim services relating to military sexual assault and sexual harassment; increased transparency in Navy watchstander training programs and standards; and enhanced data-sharing between DOD and states to prevent opioid abuse or misuse. |
All of the Navy's aircraft carriers, but none of its other surface ships, are nuclear-powered. Some Members of Congress, particularly on the House Armed Services Committee, have expressed interest in expanding the use of nuclear power to a wider array of Navy surface ships, starting with the CG(X), a planned new cruiser that the Navy had wanted to start procuring around FY2017. Section 1012 of the FY2008 Defense Authorization Act ( H.R. 4986 / P.L. 110-181 of January 28, 2008) made it U.S. policy to construct the major combatant ships of the Navy, including ships like the CG(X), with integrated nuclear power systems, unless the Secretary of Defense submits a notification to Congress that the inclusion of an integrated nuclear power system in a given class of ship is not in the national interest. The Navy studied nuclear power as a design option for the CG(X), but did not announce whether it would prefer to build the CG(X) as a nuclear-powered ship. The Navy's FY2011 budget proposed canceling the CG(X) program and instead building an improved version of the conventionally powered Arleigh Burke (DDG-51) class Aegis destroyer. The cancellation of the CG(X) program would appear to leave no near-term shipbuilding program opportunities for expanding the application of nuclear power to Navy surface ships other than aircraft carriers. Most military ships and large commercial ships are conventionally powered, meaning that they burn a petroleum-based fuel, such as marine diesel, to generate power for propulsion and for operating shipboard equipment. Conventionally powered ships are sometimes called fossil fuel ships. Some military ships are nuclear-powered, meaning that they use an on-board nuclear reactor to generate power for propulsion and shipboard equipment. Nuclear-powered military ships are operated today by the United States, the United Kingdom, France, Russia, China, and India. Some other countries have expressed interest in, or conducted research and development work on, nuclear-powered military ships. A military ship's use of nuclear power is not an indication of whether it carries nuclear weapons—a nuclear-powered military ship can lack nuclear weapons, and a conventionally powered military ship can be armed with nuclear weapons. For a surface combatant like a cruiser, using nuclear power rather than conventional power eliminates the need for the ship to periodically refuel during extended operations at sea. Refueling a ship during a long-distance transit can reduce its average transit speed. Refueling a ship that is located in a theater of operations can temporarily reduce its ability to perform its missions. A nuclear-powered surface combatant can steam at sustained high speeds to a distant theater of operations, commence operations in the theater immediately upon arrival, and continue operating in the theater over time, all without a need for refueling. In contrast, a conventionally powered surface combatant might need to slow down for at-sea refueling at least once during a high-speed, long-distance transit; might need to refuel again upon arriving at the theater of operations; and might need to refuel periodically while in the theater of operations, particularly if the ship's operations in theater require frequent or continuous movement. Table 1 shows the unrefueled cruising ranges of the Navy's existing conventionally powered cruisers and destroyers at a speed of 20 knots, along with transit distances from major U.S. Navy home ports to potential U.S. Navy operating areas. Navy surface combatants have maximum sustained speeds of more than 30 knots. A speed of 20 knots is a moderately fast long-distance transit speed for a Navy surface combatant. For a higher transit speed, such as 25 knots, the unrefueled cruising ranges would be less than those shown in the table, because the amount of fuel needed to travel a certain distance rises with ship speed, particularly as speeds increase above about 15 knots. During extended operations at sea, a nuclear-powered surface combatant, like a conventionally powered one, might need to be resupplied with food, weapons (if sufficient numbers are expended in combat), and other supplies. These resupply operations can temporarily reduce the ship's ability to perform its missions. The Navy's nuclear propulsion program began in 1948. The Navy's first nuclear-powered ship, the submarine Nautilus (SSN-571), was commissioned into service on September 30, 1954, and went to sea for the first time on January 17, 1955. The Navy's first nuclear-powered surface ships, the cruiser Long Beach (CGN-9) and the aircraft carrier Enterprise (CVN-65), were commissioned into service on September 9, 1961, and November 25, 1961, respectively. The Navy's nuclear propulsion program is overseen and directed by an office called Naval Reactors (NR), which exists simultaneously as a part of both the Navy (where it forms a part of the Naval Sea Systems Command) and the Department of Energy (where it forms a part of the National Nuclear Security Administration). NR has broad, cradle-to-grave responsibility for the Navy's nuclear-propulsion program. This responsibility is set forth in Executive Order 12344 of February 1, 1982, the text of which was effectively incorporated into the U.S. Code (at 50 USC 2511) by Section 1634 of the FY1985 defense authorization act ( H.R. 5167 / P.L. 98-525 of October 19, 1984) and again by section 3216 of the FY2000 defense authorization act ( S. 1059 / P.L. 106-65 of October 5, 1999). NR has established a reputation for maintaining very high safety standards for engineering and operating Navy nuclear power plants. The first director of NR was Admiral Hyman Rickover, who served in the position from 1948 until 1982. Rickover is sometimes referred to as the father of the nuclear Navy. The current director is Admiral Kirkland Donald, who became director in November 2004. He is the fifth person to hold the position. All of the Navy's submarines and all of its aircraft carriers are nuclear-powered. No other Navy ships are currently nuclear-powered. The Navy's combat submarine force has been entirely nuclear-powered since 1990. The Navy's aircraft carrier force became entirely nuclear-powered on May 12, 2009, with the retirement of the Kitty Hawk (CV-63), the Navy's last remaining conventionally powered carrier. Although no Navy surface ships other than aircraft carriers are currently nuclear-powered, the Navy in the past built and operated nine nuclear-powered cruisers (CGNs). The nine ships, which are shown in Table 2 , include three one-of-a-kind designs (CGNs 9, 25, and 35) followed by the two-ship California (CGN-36) class and the four-ship Virginia (CGN-38) class. All nine ships were decommissioned in the 1990s. The nuclear-powered cruisers shown in Table 2 were procured to provide nuclear-powered escorts for the Navy's nuclear-powered carriers. Procurement of nuclear-powered cruisers was halted after FY1975 largely due to a desire to constrain the procurement costs of future cruisers. In deciding in the late 1970s on the design for the new cruiser that would carry the Aegis defense system, two nuclear-powered Aegis-equipped options—a 17,200-ton nuclear-powered strike cruiser (CSGN) and a 12,100-ton derivative of the CGN-38 class design—were rejected in favor of a third option of placing the Aegis system onto the smaller, conventionally powered hull originally developed for the Spruance (DD-963) class destroyer. The CSGN was estimated to have a procurement cost twice that of the DD-963-based option, while the CGN-42 was estimated to have a procurement cost 30%-50% greater than that of the DD-963-based option. The DD-963-based option became the 9,500-ton Ticonderoga (CG-47) class Aegis cruiser. The first Aegis cruiser was procured in FY1978. The initial fuel core for a Navy nuclear-powered ship is installed during the construction of the ship. The procurement cost of the fuel core is included in the total procurement cost of the ship, which is funded in the Navy's shipbuilding budget, known formally as the Shipbuilding and Conversion, Navy (SCN) appropriation account. In constant FY2007 dollars, the initial fuel core for a Virginia (SSN-774) class submarine cost about $170 million, and the initial fuel cores for an aircraft carrier (which uses two reactors and therefore has two fuel cores) had a combined cost of about $660 million. The procurement cost of a conventionally powered Navy ship, in contrast, does not include the cost of petroleum-based fuel needed to operate the ship, and this fuel is procured largely through the Operation and Maintenance, Navy (OMN) appropriation account. Section 1012 of the FY2008 Defense Authorization Act ( H.R. 4986 / P.L. 110-181 of January 28, 2008) made it U.S. policy to construct the major combatant ships of the Navy, including ships like the CG(X), with integrated nuclear power systems, unless the Secretary of Defense submits a notification to Congress that the inclusion of an integrated nuclear power system in a given class of ship is not in the national interest. The FY2010 defense authorization bill ( S. 1390 ) as reported by the Senate Armed Services Committee ( S.Rept. 111-35 of July 2, 2009) contained a provision (Section 1012) that would repeal Section 1012 of the FY2008 defense authorization act. The House Armed Services Committee, in its report ( H.Rept. 111-166 of June 18, 2009) on the FY2010 defense authorization bill ( H.R. 2647 ), stated that it "remains committed to the direction" of Section 1012 of the FY2008 defense authorization act. The conference report ( H.Rept. 111-288 of October 7, 2009) on the FY2010 defense authorization act ( H.R. 2647 / P.L. 111-84 of October 28, 2009) did not contain a provision repealing or amending Section 1012 of the FY2008 defense authorization act. The CG(X) cruiser was a planned replacement for the Navy's 22 Aegis cruisers, which are projected to reach retirement age between 2021 and 2029. The Navy originally wanted to build as many as 19 CG(X)s, with the first to be procured around FY2017. The Navy assessed CG(X) design options in a large study called the CG(X) Analysis of Alternatives (AOA), known more formally as the Maritime Air and Missile Defense of Joint Forces (MAMDJF) AOA. The Navy did not announce whether it would prefer to build the CG(X) as a nuclear-powered ship. The Navy stated that it wanted to equip the CG(X) with a combat system featuring a powerful radar capable of supporting ballistic missile defense (BMD) operations. The Navy testified that this combat system was to have a power output of 30 or 31 megawatts, which is several times the power output of the combat system on the Navy's existing cruisers and destroyers. This suggested that in terms of power used for combat system operations, the CG(X) might have used substantially more energy over the course of its life than the Navy's existing cruisers and destroyers. As discussed later in this report, a ship's life-cycle energy use is a factor in evaluating the economic competitiveness of nuclear power compared to conventional power. The Navy testified in 2007 that in the Navy's 2006 study on alternative ship propulsion systems (see " 2006 Navy Alternative Propulsion Study " below), the notional medium-sized surface combatant in the study (which the study defined as a ship with a displacement between 21,000 metric tons and 26,000 metric tons) used a modified version of one-half of the reactor plant that the Navy has developed for its new Gerald R. Ford (CVN-78) class aircraft carriers, also called the CVN-21 class. The Ford-class reactor plant, like the reactor plant on the Navy's existing Nimitz (CVN-68) class aircraft carriers, is a twin reactor plant that includes two nuclear reactors. The medium-sized surface combatant employed a modified version of one-half of this plant, with a single reactor. This suggested that if the CG(X) were a ship with a displacement of 21,000 or more metric tons, its reactor plant could have been a modified version of one-half of the Ford-class reactor plant. This approach would minimize the time and cost of developing a reactor plant for a nuclear-powered CG(X). In the Ford class, the initial nuclear fuel cores in the two reactors are to be sufficient to power the ship for one-half of its expected life of 40 to 50 years. In a nuclear-powered CG(X), the Navy said, the initial fuel core in the single reactor would be sufficient to power the ship for its entire expected life of 30 to 35 years. Since the two fuel cores for an aircraft carrier cost about $660 million in constant FY2007 dollars (see previous section on initial fuel cores), the cost of a single fuel core for a CG(X) might be about $330 million in constant FY2007 dollars. The Navy's FY2011 budget proposed canceling the CG(X) program and instead building an improved version of the conventionally powered Arleigh Burke (DDG-51) class Aegis destroyer. The cancellation of the CG(X) program would appear to leave no near-term shipbuilding program opportunities for expanding the application of nuclear power to Navy surface ships other than aircraft carriers. Two U.S. shipyards are currently certified to build nuclear-powered ships—Newport news Shipbuilding of Newport News, VA, which forms part of Northrop Grumman Shipbuilding (NGSB); and General Dynamics' Electric Boat Division (GD/EB) of Groton, CT, and Quonset Point, RI. Newport News can build nuclear-powered surface ships and nuclear-powered submarines. GD/EB can build nuclear-powered submarines. Newport News built all the Navy's nuclear-powered aircraft carriers. Newport News also built the final six nuclear-powered cruisers shown in Table 2 . Newport News and GD/EB together have built every Navy nuclear-powered submarine procured since FY1969. Although Newport News and GD/EB are the only U.S. shipyards that currently build nuclear-powered ships for the Navy, five other U.S. shipyards once did so as well. These five yards built 44 of the 107 nuclear-powered submarines that were procured for the Navy through FY1968. Two of these five yards built the first three nuclear-powered cruisers shown in Table 2 . All cruisers and destroyers procured for the Navy since FY1978 have been built at two shipyards—General Dynamics' Bath Iron Works (GD/BIW) of Bath, ME, and the Ingalls shipyard at Pascagoula, MS, that forms part of NGSB. GD/BIW has never built nuclear-powered ships. Ingalls is one of the five U.S. yards other than Newport News and GD/EB that once built nuclear-powered ships. Ingalls built 12 nuclear-powered submarines, the last being the Parche (SSN-683), which was procured in FY1968, entered service in 1974, and retired in 2005. Ingalls also overhauled or refueled 11 nuclear-powered submarines. Ingalls' nuclear facility was decommissioned in 1980, and Ingalls is not certified to build nuclear-powered ships. The Navy in recent years has conducted two studies for Congress on the potential cost-effectiveness of expanding the use of nuclear power to a wider array of surface ships. These studies are the 2005 Naval Reactors quick look analysis, and the more comprehensive and detailed 2006 Navy alternative propulsion study. Each of these is discussed below. The 2005 NR quick look analysis was conducted at the request of Representative Roscoe Bartlett, who was then chairman of the Projection Forces Subcommittee of the House Armed Services Committee (since renamed the Seapower and Expeditionary Forces Subcommittee). The analysis concluded that the total life-cycle cost (meaning the sum of procurement cost, life-cycle operating and support cost, and post-retirement disposal cost) of a nuclear-powered version of a large-deck (LHA-type) amphibious assault ship would equal that of a conventionally powered version of such a ship if the cost of crude oil over the life of the ship averaged about $70 per barrel. The study concluded that the total life-cycle cost of a nuclear-powered surface combatant would equal that of a conventionally powered version if the cost of crude oil over the life of the ship averaged about $178 per barrel. This kind of calculation is called a life-cycle cost break-even analysis. The study noted but did not attempt to quantify the mobility-related operational advantages of nuclear propulsion for a surface ship. The more comprehensive and detailed 2006 Navy alternative propulsion study was conducted in response to Section 130 of the FY2006 defense authorization act ( H.R. 1815 , P.L. 109-163 of January 6, 2006), which called for such a study (see " Prior-Year Legislative Activity "). The study reached a number of conclusions, including the following: In constant FY2007 dollars, building a Navy surface combatant or amphibious ship with nuclear power rather than conventional power would add roughly $600 million to $800 million to its procurement cost. —For a small surface combatant, the procurement-cost increase was about $600 million. —For a medium-size combatant (defined as a ship with a displacement between 21,000 metric tons and 26,000 metric tons), the increase was about $600 million to about $700 million. —For an amphibious ship, the increase was about $800 million. Although nuclear-powered ships have higher procurement costs than conventionally powered ships, they have lower operating and support costs when fuel costs are taken into account. A ship's operational tempo and resulting level of energy use significantly influences the life-cycle cost break-even analysis. The higher the operational tempo and resulting level of energy use assumed for the ship, lower the cost of crude oil needed to break even on a life-cycle cost basis, and the more competitive nuclear power becomes in terms of total life-cycle cost. The newly calculated life-cycle cost break-even cost-ranges, which supercede the break-even cost figures from the 2005 NR quick look analysis, are as follows: —$210 per barrel to $670 per barrel for a small surface combatant; —$70 per barrel to $225 per barrel for a medium-size surface combatant; and —$210 per barrel to $290 per barrel for an amphibious ship. In each case, the lower dollar figure is for a high ship operating tempo, and the higher dollar figure is for a low ship operating tempo. At a crude oil cost of $74.15 per barrel (which was a market price at certain points in 2006), the life-cycle cost premium of nuclear power is: —17% to 37% for a small surface combatant; —0% to 10% for a medium sized surface combatant; and —7% to 8% for an amphibious ship. The life-cycle cost break-even analysis indicates that nuclear-power should be considered for near-term applications for medium-size surface combatants, and that life-cycle cost will not drive the selection of nuclear power for small surface combatants or amphibious ships. A nuclear-powered medium-size surface combatant is the most likely of the three ship types studied to prove economical, depending on the operating tempo that the ship actually experiences over its lifetime. Compared to conventionally powered ships, nuclear-powered ships have advantages in terms of both time needed to surge to a distant theater of operation for a contingency, and operational presence (time on station) in the theater of operation. The cancellation of the CG(X) program would appear to leave no near-term shipbuilding program opportunities for expanding the application of nuclear power to Navy surface ships other than aircraft carriers. In assessing whether any future classes of Navy surface ships (in addition to aircraft carriers) should be nuclear-powered, Congress may consider a number of issues, including cost, operational effectiveness, ship construction, ship maintenance and repair, crew training, ports calls and forward homeporting, and environmental impact. Each of these is discussed below. The cost calculations presented in the 2006 Navy alternative propulsion study do not include the additional up-front design and development costs, if any, for a nuclear-powered surface ship. As discussed in the " Background " section, if the CG(X) were to displace 21,000 or more metric tons, the Navy could have the option of fitting the CG(X) with a modified version of one-half of the Ford (CVN-78) class aircraft carrier nuclear power plant. This could minimize the up-front development cost of the CG(X) nuclear power plant. If the CG(X) were not large enough to accommodate a modified version of one-half of the Ford-class plant, then a new nuclear plant would need to be designed for the CG(X). Although this new plant could use components common to the Ford-class plant or other existing Navy nuclear plants, the cost of developing this new plant would likely be greater than the cost of modifying the Ford-class plant design. For the CG(X) . The Navy originally stated a preference for basing the design of the CG(X) on the design of its new Zumwalt (DDG-1000) class destroyer, which is a conventionally powered ship. This approach could result in a conventionally powered CG(X) design with a procurement cost similar to that of the DDG-1000. If a conventionally powered CG(X) were to have a procurement cost equal to that of the DDG-1000 design, then a nuclear-powered CG(X) might cost roughly 32% to 37% more than a conventionally powered CG(X). If a conventionally powered CG(X) were to have a procurement cost greater than that of the DDG-1000, then the percentage procurement cost premium for nuclear power for the CG(X) would be less than 32% to 37%. The 2006 Navy study states that for a medium-size surface combatant that is larger than the DDG-1000, an additional cost of about $600 million to $700 million would equate to a procurement cost increase of about 22%. In more recent years, however, the Navy appeared to back away from the idea of basing the design of the CG(X) on the design of the DDG-1000. If building a Navy surface combatant or amphibious ship with nuclear power rather than conventional power would add roughly $600 million to $700 million to its procurement cost, then procuring one or two nuclear-powered CG(X)s per year, as called for in the Navy's 30-year shipbuilding plan, would cost roughly $600 million to $1,400 million more per year than procuring one or two conventionally powered CG(X)s per year, and procuring a force of 19 nuclear-powered CG(X)s would cost roughly $11.4 billion to $13.3 billion more than procuring a force of 19 conventionally powered CG(X)s. A figure of $13.3 is comparable to the total amount of funding in the Navy's shipbuilding budget in certain recent years. For Submarines and Aircraft Carriers . The Navy in 2007 estimated that building the CG(X) or other future Navy surface ships with nuclear power could reduce the production cost of nuclear-propulsion components for submarines and aircraft carriers by 5% to 9%, depending on the number of nuclear-powered surface ships that are built. Building one nuclear-powered cruiser every two years, the Navy has testified, might reduce nuclear-propulsion component costs by about 7%. In a steady-state production environment, the Navy testified in 2007, the savings might equate to about $115 million for each aircraft carrier, and about $35 million for each submarine. The Navy stated that this "is probably the most optimistic estimate." The Navy states that these savings were not included in the cost calculations presented in the 2006 Navy study. BWXT, a principal maker of nuclear-propulsion components for Navy ships, estimated in 2007 that increasing Virginia-class submarine procurement from one boat per year to two boats per year would reduce the cost of nuclear propulsion components 9% for submarines and 8% for aircraft carriers, and that "Adding a nuclear[-powered] cruiser or [nuclear-powered] large-deck amphibious ship would significantly drive down nuclear power plant costs across the fleet, even beyond the savings associated with the second Virginia-class [submarine per year]." As suggested by the 2006 Navy study, the total-life-cycle cost break-even analysis can be affected by projections of future oil prices and ship operating tempo. Future Oil Prices . Views on potential future oil prices vary. Some supporters of using nuclear power for the CG(X) and other future Navy surface ships, such as Representative Roscoe Bartlett, a member of the House Armed Services Committee, believe that oil in coming decades may become increasingly expensive, or that guaranteed access to oil may become more problematic, and that this is a central reason for making the CG(X) or other future Navy surface ships nuclear-powered. Ship Operating Tempo . A ship's average lifetime operating tempo can be affected by the number of wars, crises, and other contingency operations that it participates in over its lifetime, because such events can involve operating tempos that are higher than those of "normal" day-to-day operations. Ship operating tempo can also be affected by the size of the Navy. The lower the number of ships in the Navy, for example, the higher the operating tempo each a ship might be required to sustain for the fleet to accomplish a given set of missions. CG(X) vs. Medium-Size Surface Combatant . If the CG(X) were based on the hull design of the 14,500-ton DDG-1000 destroyer, the CG(X) may be smaller the 21,000- to 26,000-ton medium-size surface combatant in the 2006 Navy study. What difference that might create between the CG(X) and the medium-size surface combatant in terms of life-cycle energy use, and thus life-cycle cost break-even range, is not clear. The Navy has testified that the medium sized surface combatant in the 2006 study was modeled with a radar requiring 30 or 31 megawatts of power, like the radar the Navy wants to install on the CG(X). What is the operational value of increased ship mobility? How much better can a ship perform its missions as a result of this increased mobility? And is there some way to translate the mobility advantages of nuclear power into dollar terms? One potential way to translate the value of increased ship mobility into dollar terms would be to determine how much aggregate capability a force of 19 conventionally powered CG(X)s would have for surging to distant theaters and for maintaining on-station presence in theater, then determine how many nuclear-powered CG(X)s would be required to provide the same aggregate capability, and then compare the total cost of the 19 conventionally powered CG(X)s to the total cost of the nuclear-powered CG(X) force. Are there operational advantages of nuclear power for a surface ship other than increased ship mobility? One possibility concerns ship detectability. A nuclear-powered ship does not require an exhaust stack as part of its deckhouse, and does not emit hot exhaust gases. Other things held equal, this might make a nuclear-powered surface ship less detectible than a conventionally powered ship, particularly to infrared sensors. This possible advantage for the nuclear-powered ship might be either offset or reinforced by possible differences between the nuclear-powered ship and the conventionally powered ship in other areas, such as the temperature of the engine compartment (which again might affect infrared detectability) or the level of machinery noise (which might affect acoustic detectability). Some supporters of building future Navy surface ships with nuclear power have argued that an additional operational advantage of nuclear power for surface ships would be to reduce the Navy's dependence on its relatively small force of refueling oilers, and thus the potential impact on fleet operations of an enemy attack on those oilers. The Navy acknowledges that potential attacks on oilers are a concern, but argues that the fleet's vulnerability to such attacks is recognized and that oilers consequently are treated as high-value ships in terms of measures taken to protect them from attack. Another potential advantage of nuclear power postulated by some observers is that a nuclear-powered ship can use its reactor to provide electrical power for use ashore for extended periods of time, particularly to help localities that are experiencing brownouts during peak use periods or whose access to electrical power from the grid has been disrupted by a significant natural disaster or terrorist attack. The Navy stated that the CG(X) was to have a total power-generating capacity of about 80 megawatts (MW). Some portion of that would be needed to operate the reactor plant itself and other essential equipment aboard the ship. Much of the rest might be available for transfer off the ship. For purposes of comparison, a typical U.S. commercial power plant might have a capacity of 300 MW to 1000 MW. A single megawatt can be enough to meet the needs of several hundred U.S. homes, depending on the region of the country and other factors. Skeptics of the idea of using nuclear-powered ships to generate electrical power for use ashore could argue that if the local transmission system has been disrupted, the ship's generation capacity may be of limited use in restoring electric power. If the local transmission system is intact, they could argue, onshore infrastructure would be required to transmit the ship's power into the local system. The military or a local utility, they could argue, would likely bear the cost for this infrastructure, which would be used only on a sporadic basis. Skeptics could argue that a Navy ship would be helpful only if the power emergency lasts longer than the time it would take for the ship to reach the connection point. If the nearest available Navy ship is several steaming days away from the connection point when the power emergency occurs, they could argue, the ship might not be able arrive before local power is partially or fully restored. Skeptics could argue that critical facilities in the area of the power emergency, such as hospitals, would likely be equipped with emergency back-up diesel generators to respond to short-term loss of power. Another potential issue for Congress to consider in weighing whether future Navy surface ships (in addition to aircraft carriers) should be nuclear-powered concerns the shipyards that would be used to build the ships. There are at least three potential approaches for building a nuclear-powered version of a major surface combatant like the CG(X): Build them at Newport News, with GD/EB possibly contributing to the construction of the ships' nuclear portions. Certify Ingalls and/or GD/BIW to build nuclear-powered ships, and then build the CG(X)s at those yards. Build the nuclear portions of the CG(X)s at Newport News and/or GD/EB, the non-nuclear portions at Ingalls and/or GD/BIW, and perform final assembly, integration, and test work for the ships at either —Newport News and/or GD/EB, or —Ingalls and/or GD/BIW. These options have significant potential implications for workloads and employment levels at each of these shipyards. On the question of what would be needed to certify Ingalls and/or GD/BIW to build nuclear-powered ships, the director of NR testified that: Just the basics of what it takes to have a nuclear-certified yard, to build one from scratch, or even if one existed once upon a time as it did at Pasacagoula, and we shut it down, first and foremost you have to have the facilities to do that. What that includes, and I have just some notes here, but such things as you have to have the docks and the dry-docks and the pier capability to support nuclear ships, whatever that would entail. You would have to have lifting and handling equipment, cranes, that type of thing; construction facilities to build the special nuclear components, and to store those components and protect them in the way that would be required. The construction facilities would be necessary for handling fuel and doing the fueling operations that would be necessary on the ship—those types of things. And then the second piece is, and probably the harder piece other than just kind of the brick-and-mortar type, is building the structures, the organizations in place to do that work, for instance, nuclear testing, specialized nuclear engineering, nuclear production work. If you look, for instance, at Northrop Grumman Newport News, right now, just to give you a perspective of the people you are talking about in those departments, it is on the order of 769 people in nuclear engineering; 308 people in the major lines of control department; 225 in nuclear quality assurance; and then almost 2,500 people who do nuclear production work. So all of those would have to be, you would have to find that workforce, certify and qualify them, to be able to do that. The director of NR testified that Newport News and GD/BIW "have sufficient capacity to accommodate nuclear-powered surface ship construction, and therefore there is no need to make the substantial investment in time and dollars necessary to generate additional excess capacity." In light of this, the Navy testified, only the first and third options above are "viable." The director of NR testified that: my view of this is we have some additional capacity at both Electric Boat and at Northrop Grumman Newport News. My primary concern is if we are serious about building another nuclear-powered warship, a new class of warship, cost is obviously going to be some degree of concern, and certainly this additional costs, which would be—and I don't have a number to give you right now, but I think you can see it would be substantial to do it even if you could. It probably doesn't help our case to move down the path toward building another nuclear-powered case, when we have the capability existing already in those existing yards. With regard to the third option of building the nuclear portions of the ships at Newport News and/or GD/EB, and the non-nuclear portions at Ingalls and/or GD/BIW, the Navy testified that the "Location of final ship erection would require additional analysis." One Navy official, however, expressed a potential preference for performing final assembly, integration, and test work at Newport News or GD/EB, stating that: we are building warships in modular sections now. So if we were going to [ask], "Could you assemble this [ship], could you build modules of this ship in different yards and put it together in a nuclear-certified yard?", the answer is yes, definitely, and we do that today with the Virginia Class [submarine program]. As you know, we are barging modules of [that type of] submarine up and down the coast. What I would want is, and sort of following along with what [NR director] Admiral [Kirkland] Donald said, you would want the delivering yard to be the yard where the reactor plant was built, tooled, and tested, because they have the expertise to run through all of that nuclear work and test and certify the ship and take it out on sea trials. But the modules of the non-reactor plant, which is the rest of the ship, could be built theoretically at other yards and barged or transported in other fashion to the delivering shipyard. If I had to do it ideally, that is where I would probably start talking to my industry partners, because although we have six [large] shipyards [for building large navy ships], it is really two corporations [that own them], and those two corporations each own what is now a surface combatant shipyard and they each own a nuclear-capable shipyard. I would say if we were going to go do this, we would sit down with them and say, you know, from a corporation standpoint, what would be the best work flow? What would be the best place to construct modules? And how would you do the final assembly and testing of a nuclear-powered warship? A related issue that Congress may consider in weighing whether future Navy surface ships (in addition to aircraft carriers) should be nuclear-powered is whether there is sufficient capacity at the firms that make nuclear-propulsion components to accommodate the increase in production volume that would result from building such ships with nuclear power. On this question, the Navy has testified: Right now, as I look across the industrial base that provides [for nuclear-powered ships], let's just talk about the components, for instance, and I just look across that base, because we have been asserting earlier that we were going to go to [a procurement rate of two Virginia-class submarines per year] earlier [than the currently planned year of FY2012], we had facilitized and have sustained an over-capacity in those facilities to support construction of those additional components. So right now, it depends on the vendor and which one is doing what, the capacity is running right now at probably about 65 percent of what it could be doing, on the order of that. Again, it varies depending on the vendor specifically. So there is additional capacity in there, and even with the addition of a second Virginia-class submarine, there is still a margin in there, if you are talking about a single cruiser in the early phases of design, we still have margin in there that I believe we can sustain that work in addition to the submarine work within the industrial base. We would have to look at that in more detail once we determine what the design looks like and the degree to which we can use existing components. If you had to design new components, that would add a little bit more complexity to it, but that is a rough estimate of what I would provide for you now. Building future Navy surface ships (in addition to aircraft carriers) with nuclear power could affect the future distribution of Navy ship maintenance and repair work, because only certain U.S. shipyards are qualified for performing certain kinds of work on nuclear-powered ships. Much of the maintenance and repair work done on nuclear-powered ships is done at the country's four government-operated naval shipyards (NSYs)—Portsmouth NSY at Kittery, ME, Norfolk NSY at Norfolk, VA; Puget Sound NSY at Bremerton, WA; and Pearl Harbor NSY at Pearl Harbor, HI. Newport News and GD/EB also perform some maintenance and repair work on nuclear-powered ships. Would the Navy have the capacity to train the additional nuclear-qualified sailors that would be needed to crew additional nuclear-powered ships? On this question, the director of NR testified that "My training pipeline does have the capacity without further infrastructure investment to produce the additional personnel required by future classes of [nuclear-powered] ships." He also stated: We, in looking at the training pipeline, there are a couple of dynamics that are in work right now. First off, the [nuclear-powered aircraft carrier] Enterprise is going to be going away [in 2013], and that is a pretty significant training load just to keep that crew operating. And also, there as the CVN-21 [carrier class] comes on, [that is, as] the Ford-class carriers come on, and the [Nimitz-class nuclear-powered carriers] start to go away, [the number of people required to crew carriers will decrease, because with the] Ford class, we are targeting a 50 percent reduction in the reactor department sizing over there [compared to the Nimitz class]. So for the foreseeable future, the training infrastructure that we have right now will meet the needs to sustain this [additional] class [of nuclear-powered ship], if you choose to do it. A nuclear-powered ship might be less welcome than a conventionally powered ship in the ports of countries with strong anti-nuclear sentiments. The Navy works to minimize this issue in connection with its nuclear-powered submarines and aircraft carriers, and states that "U.S. nuclear-powered warships are welcome today in over 150 ports in more than 50 countries worldwide, thus allowing our warships to carry out their mission without constraint." Some Navy ships are forward-homeported, meaning that they are homeported in foreign countries that are close to potential U.S. Navy operating areas overseas. Forward-homeported Navy ships have occasional need for access to maintenance facilities near their home ports, and foreign shipyards are not qualified to perform certain kinds of maintenance work on nuclear-powered Navy ships. Building Navy surface ships (in addition to aircraft carriers) with nuclear power might thus affect the number of potentially suitable locations for forward-homeporting the ships, should the Navy decide that forward homeporting them would be desirable for purposes of shortening transit times to and from potential operating areas. Conventionally powered ships exhaust greenhouse gases and other pollutants that are created through combustion of petroleum-based fuel. They can also leak fuel into the water, particularly if they are damaged in an accident (such as a collision) or by enemy attack. Other environmental impacts of conventionally powered ships include those associated with extracting oil from the ground, transporting it to a refinery, refining it into fuel, and transporting that fuel to the ship. Most of these activities produce additional greenhouse gases and other pollutants. Nuclear-powered ships do not exhaust greenhouse gases and other pollutants created through conventional combustion. The environmental impacts of nuclear-powered ships include those associated with mining and processing uranium to fuel reactors, and with storing and disposing of spent nuclear fuel cores, radioactive waste water from reactors, and the reactors and other radioactive components of retired nuclear-powered ships. As mentioned in the " Background " section, NR has established a reputation for maintaining very high safety standards for engineering and operating Navy nuclear power plants. In addition, Navy combat ships are built to withstand significant shock and battle damage. It is possible, however, that a very serious accident involving a nuclear-powered Navy ship (such as a major collision) or a major enemy attack on a nuclear-powered Navy ship might damage the ship's hull and reactor compartment enough to cause a release of radioactivity, which may have adverse effects on the environment. The House Armed Services Committee, in its report ( H.Rept. 111-491 of May 21, 2010) on the FY2011 defense authorization bill ( H.R. 5136 ), stated the following in its discussion of the Navy's request for FY2011 funding for its research and development account: Future integrated nuclear power systems The budget request contained $366.5 million in PE 63570N for advanced nuclear power systems, but contained no funds for development of small scale pressurized water reactors suitable for destroyer-sized vessels or for alternative nuclear power systems using thorium liquid salt technology. The committee remains committed to an all nuclear powered naval battle force. The committee notes that significant challenges in size and weight of nuclear technology make inclusion of integrated nuclear power systems on destroyer sized vessels currently impossible. Therefore, the committee believes that additional funding in engineering research and development is needed to design a smaller scale version of a naval pressurized water reactor, or to design a new reactor type potentially using a thorium liquid salt reactor developed for maritime use. The committee recommends an increase of $2.5 million in PE 63570N for research and design efforts to develop an integrated nuclear power system capable of use on destroyer-sized vessels either using a pressurized water reactor or a thorium liquid salt reactor. (Page 158) The Senate Armed Services Committee, in its report ( S.Rept. 111-201 of June 4, 2010) on the FY2011 defense authorization bill ( S. 3454 ), did not discuss the issue of nuclear power for surface ships other than aircraft carriers. The joint explanatory statement for the FY2011 defense authorization act ( H.R. 6523 / P.L. 111-383 of January 7, 2011) did not discuss the issue of nuclear power for surface ships other than aircraft carriers. The Senate Appropriations Committee, in its report ( S.Rept. 111-295 of September 16, 2010) on S. 3800 , did not discuss the issue of nuclear power for surface ships other than aircraft carriers. The House Armed Services Committee, in its report ( H.Rept. 111-166 of June 18, 2009) on H.R. 2647 , stated: The committee believes that the next generation [CG(X)] cruiser must meet the challenge of emerging ballistic missile technology and that an integrated nuclear power system is required to achieve maximum capability of the vessel. (Page 72) The report also stated: The committee remains committed to the direction of section 1012 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110–181), which requires the use of an integrated nuclear propulsion system for the CGN(X) [cruiser]. (Page 75) Section 246 of H.R. 2647 would require the Department of Defense (DOD) to submit to the congressional defense committees a study on the use of thorium-liquid fueled nuclear reactors for Navy surface ships. The text of Section 246 is as follows: SEC. 246. STUDY ON THORIUM-LIQUID FUELED REACTORS FOR NAVAL FORCES. (a) Study Required- The Secretary of Defense and the Chairman of the Joint Chiefs of Staff shall jointly carry out a study on the use of thorium-liquid fueled nuclear reactors for naval power needs pursuant to section 1012, of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ; 122 Stat. 303). (b) Contents of Study- In carrying out the study required under subsection (a), the Secretary of Defense and the Chairman of the Joint Chiefs of Staff shall, with respect to naval power requirements for the Navy strike and amphibious force— (1) compare and contrast thorium-liquid fueled reactor concept to the 2005 Quick Look, 2006 Navy Alternative Propulsion Study, and the navy CG(X) Analysis of Alternatives study; (2) identify the benefits to naval operations which thorium-liquid fueled nuclear reactors or uranium reactors would provide to major surface combatants compared to conventionally fueled ships, including such benefits with respect to— (A) fuel cycle, from mining to waste disposal; (B) security of fuel supply; (C) power needs for advanced weapons and sensors; (D) safety of operation, waste handling and disposal, and proliferation issues compared to uranium reactors; (E) no requirement to refuel and reduced logistics; (F) ship upgrades and retrofitting; (G) reduced manning; (H) global range at flank speed, greater forward presence, and extended combat operations; (I) power for advanced sensors and weapons, including electromagnetic guns and lasers; (J) survivability due to increased performance and reduced signatures; (K) high power density propulsion; (L) operational tempo; (M) operational effectiveness; and (N) estimated cost-effectiveness; and (3) conduct a ROM cost-effectiveness comparison of nuclear reactors in use by the Navy as of the date of the enactment of this Act, thorium-liquid fueled reactors, and conventional fueled major surface combatants, which shall include a comparison of— (A) security, safety, and infrastructure costs of fuel supplies; (B) nuclear proliferation issues; (C) reactor safety; (D) nuclear fuel safety, waste handling, and storage; (E) power requirements and distribution for sensors, weapons, and propulsion; and (F) capabilities to fully execute the Navy Maritime Strategic Concept. (c) Report- Not later than February 1, 2011, the Secretary of Defense and the Chairman of the Joint Chiefs of Staff shall jointly submit to the congressional defense committees a report on the results of the study required under subsection (a). Section 1012 of the FY2010 defense authorization bill ( S. 1390 ) as reported by the Senate Armed Services Committee ( S.Rept. 111-35 of July 2, 2009) would repeal Section 1012 of the FY2008 defense authorization act ( H.R. 4986 / P.L. 110-181 of January 28, 2008). The committee's report stated: The committee recommends a provision [Section 1012] that would repeal section 1012 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ). Section 1012 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ), as amended by section 1015 of the Duncan Hunter National Defense Authorization Act for Fiscal Year 2009 ( P.L. 110-417 ), would require that all new classes of surface combatants and all new amphibious assault ships larger than 15,000 deadweight ton light ship displacement have integrated nuclear power systems, unless the Secretary of Defense determines that the inclusion of an integrated nuclear power system in such vessel is not in the national interest. The committee believes that the Navy is already having too much difficulty in achieving the goal of a 313-ship fleet without adding a substantial increment to the acquisition price of a significant portion of the fleet. Moreover, current acquisition law and the Weapon System Acquisition Reform Act of 2009 ( P.L. 111-23 ) emphasize the need to start acquisition programs on a sure footing as a central mechanism by which the Department of Defense (DOD) can get control of cost growth and schedule slippage on major defense acquisition programs. Therefore, Congress should be loathe to dictate a particular outcome of a requirements process before the Department has conducted the normal requirements review. The committee expects that the Navy will continue to evaluate the integrated nuclear power alternative for any new class of major surface combatants, but would prefer that any Navy requirements analysis not be skewed toward a particular outcome. (Page 170) The conference report ( H.Rept. 111-288 of October 7, 2009) on H.R. 2647 / P.L. 111-84 of October 28, 2009, stated: Repeal of policy relating to the major combatant vessels of the Unites States Navy The Senate amendment contained a provision (sec. 1012) that would repeal section 1012 of the National Defense Authorization Act for Fiscal Year 2008 (Public Law 110–181). Section 1012, as amended, would require that all new classes of surface combatants and all new amphibious assault ships larger than 15,000 deadweight ton light ship displacement have integrated nuclear power systems, unless the Secretary of Defense determines that the inclusion of an integrated nuclear power system in such vessel is not in the national interest. The House bill contained no similar provision. The Senate recedes. (Page 822) The report also stated: Study on thorium-liquid fueled reactors for Naval forces The House bill contained a provision (sec. 246) that would have directed the Secretary of Defense and the Chairman of the Joint Chiefs of Staff to carry out jointly a study on the use of thorium-liquid fueled nuclear reactors for naval propulsion. The Senate amendment contained no similar provision. The House recedes. The conferees note that while there may be credible research initiatives to explore the use of molten salt reactors for commercial power generation, the use of molten salt reactors on naval vessels is not currently technically feasible and a requirement to perform a study on the use of molten salt reactors is premature. This is due to technology challenges with material construction (molten salt reactors are inherently corrosive to metals), storage of the liquid fuel, and radiation shielding for the crew from a non-solid fuel reactor. The conferees recommend that the Navy continue to monitor the progress of technology development in commercial application of molten salt reactors, including licensing, for potential future application. (Page 708) The House-reported version of H.R. 5658 contained a provision (Section 1013) that would amend Section 1012 of the FY2008 defense authorization act (see discussion below) to include amphibious ships and amphibious command ships of a certain minimum size as among the types of ships to be built in the future with nuclear power unless the Secretary of Defense notifies Congress that nuclear power for a given class of ship would not be in the national interest. Section 1013 stated: SEC. 1013. POLICY RELATING TO MAJOR COMBATANT VESSELS OF THE STRIKE FORCES OF THE UNITED STATES NAVY. Section 1012(c)(1) of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) is amended by adding at the end the following: '(D) Amphibious assault ships, including dock landing ships (LSD), amphibious transport-dock ships (LPD), helicopter assault ships (LHA/LHD), and amphibious command ships (LCC), if such vessels exceed 15,000 dead weight ton light ship displacement.' In its report ( H.Rept. 110-652 of May 16, 2008) on H.R. 5658 , the House Armed Services Committee stated: This section would amend section 1012 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) by requiring that in addition to future ship classes of aircraft carriers, major surface combatants, and submarines, that assault echelon amphibious ships also must be constructed with integrated nuclear power systems if the ship's light weight displacement is greater than 15 thousand tons. The committee believes the future naval force should not be reliant on the availability of fossil fuel for fleet operations. Removing the need for access to fossil fuel sources significantly multiplies the effectiveness of the entire battle force and eliminates the dependence on foreign nation support of deployed naval forces. (Pages 428-429) The report of the Senate Armed Services Committee ( S.Rept. 110-335 of May 12, 2008) on the FY2009 defense authorization bill ( S. 3001 ) stated, with regard to the CG(X) cruiser, that: The John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ) required that the Navy include nuclear power in its Analysis of Alternatives (AoA) for the CG(X) propulsion system. Section 1012 of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) further requires that CG(X) be nuclear powered, unless the Secretary of Defense submits a notification that inclusion of an integrated nuclear power system is not in the national interest. The statement of managers accompanying that act directed the Secretary of the Navy to submit a report with the budget request for fiscal year 2009 providing information regarding CG(X) design, cost, schedule, industrial base considerations, and risk assessment; that would reflect the results of the CG(X) AoA and provide evidence that the Navy is on schedule for procuring the first ship of the class in 2011. The Secretary of the Navy has delayed submission of the CG(X) report because the CG(X) AoA, which was scheduled to be complete by third quarter fiscal year 2007, remains under review by the Navy. Fundamental considerations regarding the cruiser's requirements, characteristics, technology readiness levels, and affordability continue to be studied, making it likely that milestone A, which was targeted for September 2007, will slip into 2009. By all measures, there is no reasonable path for the next-generation cruiser to meet the current schedule for milestone B and award of a ship construction contract in 2011. Pending completion of the AoA, determination of radar requirements, ship characteristics, propulsion system, and an executable program schedule, and in view of the delay to program major milestones, the activities planned for fiscal years 2008 and 2009 cannot be executed per the schedule reflected in the fiscal year 2009 budget request. Therefore, the committee recommends a decrease [in the Navy's request for FY2009 research and development funding] of $87.2 million in PE 64300N and a decrease of $33.6 million in PE 64501N. These recommended decreases would maintain the cruiser development activities at the same level as was funded in fiscal year 2008. (Page 195) In lieu of a conference report, there was a compromise version of S. 3001 that was accompanied by a joint explanatory statement. Section 4 of S. 3001 states that the joint explanatory statement "shall have the same effect with respect to the implementation of this Act as if it were a joint explanatory statement of a committee of conference." S. 3001 was signed into law as P.L. 110-417 on October 14, 2008. Section 1015 of S. 3001 / P.L. 110-417 amended Section 1012 of the FY2008 defense authorization act (see discussion below) to include amphibious ships and amphibious command ships of a certain minimum size as among the types of ships to be built in the future with nuclear power unless the Secretary of Defense notifies Congress that nuclear power for a given class of ship would not be in the national interest. Section 1015 states: SEC. 1015. POLICY RELATING TO MAJOR COMBATANT VESSELS OF THE STRIKE FORCES OF THE UNITED STATES NAVY. Section 1012(c)(1) of the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ) is amended by adding at the end the following: "(D) Amphibious assault ships, including dock landing ships (LSD), amphibious trans port—dock ships (LPD), helicopter assault ships (LHA/LHD), and amphibious command ships (LCC), if such vessels exceed 15,000 dead weight ton light ship displacement." The House-reported version of the FY2008 defense authorization bill (originally H.R. 1585 , a bill that was succeeded by H.R. 4986 following a presidential veto of H.R. 1585 ) contained a provision (Section 1012) that would make it U.S. policy to build submarines, aircraft carriers, cruisers, and other large surface combatants with nuclear power unless the Secretary of Defense notifies Congress that nuclear power for a given class of ship would not be in the national interest. The provision stated: SEC. 1012. POLICY RELATING TO MAJOR COMBATANT VESSELS OF THE STRIKE FORCES OF THE UNITED STATES NAVY. (a) Integrated Nuclear Power Systems- It is the policy of the United States to construct the major combatant vessels of the strike forces of the United States Navy, including all new classes of such vessels, with integrated nuclear power systems. (b) Requirement to Request Nuclear Vessels- If a request is submitted to Congress in the budget for a fiscal year for construction of a new class of major combatant vessel for the strike forces of the United States, the request shall be for such a vessel with an integrated nuclear power system, unless the Secretary of Defense submits with the request a notification to Congress that the inclusion of an integrated nuclear power system in such vessel is not in the national interest. (c) Definitions- In this section: (1) MAJOR COMBATANT VESSELS OF THE STRIKE FORCES OF THE UNITED STATES NAVY- The term `major combatant vessels of the strike forces of the United States Navy' means the following: (A) Submarines. (B) Aircraft carriers. (C) Cruisers, battleships, or other large surface combatants whose primary mission includes protection of carrier strike groups, expeditionary strike groups, and vessels comprising a sea base. (2) INTEGRATED NUCLEAR POWER SYSTEM- The term `integrated nuclear power system' means a ship engineering system that uses a naval nuclear reactor as its energy source and generates sufficient electric energy to provide power to the ship's electrical loads, including its combat systems and propulsion motors. (3) BUDGET- The term `budget' means the budget that is submitted to Congress by the President under section 1105(a) of title 31, United States Code. The House Armed Services Committee, in its report ( H.Rept. 110-146 of May 11, 2007) on H.R. 1585 , stated the following in regard to Section 1012: This section would require that all new ship classes of submarines, cruisers, and aircraft carriers be built with nuclear power systems unless the Secretary of Defense notifies the committee that it is not in the national interest to do so. The committee believes that the mobility, endurance, and electric power generation capability of nuclear powered warships is essential to the next generation of Navy cruisers. The Navy's report to Congress on alternative propulsion methods for surface combatants and amphibious warfare ships, required by section 130 of the National Defense Authorization Act for Fiscal Year 2006 ( P.L. 109-163 ), indicated that the total lifecycle cost for medium-sized nuclear surface combatants is equivalent to conventionally powered ships. The committee notes that this study only compared acquisition and maintenance costs and did not analyze the increased speed and endurance capability of nuclear powered vessels. The committee believes that the primary escort vessels for the Navy's fleet of aircraft carriers should have the same speed and endurance capability as the aircraft carrier. The committee also notes that surface combatants with nuclear propulsion systems would be more capable during independent operations because there would be no need for underway fuel replenishment. (Page 387) The Senate-reported version of the FY2008 defense authorization bill ( S. 1547 ) did not contain a provision analogous to Section 1012 of the House-reported version of H.R. 1585 . The report of the Senate Armed Services Committee on S. 1547 ( S.Rept. 110-77 of June 5, 2007) did not comment directly on the issue of nuclear power for Navy ships other than submarines and aircraft carriers. Section 1012 of the conference report ( H.Rept. 110-477 of December 6, 2007) on H.R. 1585 is the same as Section 1012 of the House-reported version of H.R. 1585 (see discussion above). In discussing Section 1012, the conference report stated: The Navy's next opportunity to apply this guidance will be the next generation cruiser, or "CG(X)". Under the current future-years defense program (FYDP), the Navy plans to award the construction contract for CG(X) in fiscal year 2011. Under this provision, the next cruiser would be identified as "CGN(X)" to designate the ship as nuclear powered. Under the Navy's normal shipbuilding schedule for the two programs that already have nuclear power systems (aircraft carriers and submarines), the Navy seeks authorization and appropriations for long lead time nuclear components for ships 2 years prior to full authorization and appropriation for construction. The conferees recognize that the milestone decision for the Navy's CG(X) is only months away. After that milestone decision, the Navy and its contractors will begin a significant design effort, and, in that process, will be making significant tradeoff decisions and discarding major options (such as propulsion alternatives). This is the normal process for the Navy and the Department of Defense (DOD) to make choices that will lead to producing a contract design that will be the basis for awarding the construction contract for the lead ship in 2011. In order for the Navy to live by the spirit of this guidance, the conferees agree that: (1) the Navy would be required to proceed through the contract design phase of the program with a comprehensive effort to design a CGN(X) independent of the outcome of decisions that the Navy or the DOD will make at the next milestone decision point regarding any preferred propulsion system for the next generation cruiser; (2) if the Navy intends to maintain the schedule in the current FYDP and award a vessel in fiscal year 2011, the Navy would need to request advance procurement for nuclear components in the fiscal year 2009 budget request; and (3) the Navy must consider options for: (a) maintaining the segment of the industrial base that currently produces the conventionally powered destroyer and amphibious forces of the Navy; (b) certifying yards which comprise that segment of the industrial base to build nuclear-powered vessels; or (c) seeking other alternatives for building non-nuclear ships in the future if the Navy is only building nuclear-powered surface combatant ships for some period of time as it builds CGN(X) vessels; and (d) identifying sources of funds to pay for the additional near-term costs of the integrated nuclear power system, either from offsets within the Navy's budget, from elsewhere within the Department's resources, or from gaining additional funds for DOD overall. The conferees recognize that these considerations will require significant additional near-term investment by the Navy. Some in the Navy have asserted that, despite such added investment, the Navy would not be ready to award a shipbuilding contract for a CGN(X) in fiscal year 2011 as in the current FYDP. Section 128 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364) required that the Navy include nuclear power in its Analysis of Alternatives (AOA) for the CG(X) propulsion system. The conferees are aware that the CG(X) AOA is nearing completion, in which case the Navy should have some indications of what it will require to design and construct a CGN(X) class. Accordingly, the conferees direct the Secretary of the Navy to submit a report to the congressional defense committees with the budget request for fiscal year 2009 providing the following information: (1) the set of next generation cruiser characteristics, such as displacement and manning, which would be affected by the requirement for including an integrated nuclear power system; (2) the Navy's estimate for additional costs to develop, design, and construct a CGN(X) to fill the requirement for the next generation cruiser, and the optimal phasing of those costs in order to deliver CGN(X) most affordably; (3) the Navy's assessment of any effects on the delivery schedule for the first ship of the next generation cruiser class that would be associated with shifting the design to incorporate an integrated nuclear propulsion system, options for reducing or eliminating those schedule effects, and alternatives for meeting next generation cruiser requirements during any intervening period if the cruiser's full operational capability were delayed; (4) the Navy's estimate for the cost associated with certifying those shipyards that currently produce conventionally powered surface combatants, to be capable of constructing and integrating a nuclear-powered combatant; (5) any other potential effects on the Navy's 30-year shipbuilding plan as a result of implementing these factors; (6) such other considerations that would need to be addressed in parallel with design and construction of a CGN(X) class, including any unique test and training facilities, facilities and infrastructure requirements for potential CGN(X) homeports, and environmental assessments that may require long-term coordination and planning; and (7) an assessment of the highest risk areas associated with meeting this requirement, and the Navy's alternatives for mitigating such risk. (Pages 984-986) H.R. 1585 was vetoed by the President on December 28, 2007. In response, Congress passed a modified bill, H.R. 4986 , that took into account the President's objections to H.R. 1585 . The modifications incorporated into H.R. 4986 did not affect the provisions discussed here, and for these and other unmodified parts of the bill, H.Rept. 110-477 in effect serves as the conference report for H.R. 4986 . H.R. 4986 was signed into law as P.L. 110-181 on January 28, 2008. Section 1012 of the conference report is similar in some respects to the so-called Title VIII legislation of the 1970s that required future Navy ships of certain kinds to be nuclear-powered. Section 130 of the conference report ( H.Rept. 109-360 of December 18, 2005) on the FY2006 defense authorization act ( H.R. 1815 / P.L. 109-163 of January 6, 2006) required the Navy to submit a report by November 1, 2006, on alternative propulsion methods for surface combatants and amphibious warfare ships. The Navy submitted the report to Congress in January 2007. Section 130 states: SEC. 130. REPORT ON ALTERNATIVE PROPULSION METHODS FOR SURFACE COMBATANTS AND AMPHIBIOUS WARFARE SHIPS. (a) ANALYSIS OF ALTERNATIVES.—The Secretary of the Navy shall conduct an analysis of alternative propulsion methods for surface combatant vessels and amphibious warfare ships of the Navy. (b) REPORT.—The Secretary shall submit to the congressional defense committees a report on the analysis of alternative propulsion systems carried out under subsection (a). The report shall be submitted not later than November 1, 2006. (c) MATTERS TO BE INCLUDED.—The report under subsection (b) shall include the following: (1) The key assumptions used in carrying out the analysis under subsection (a). (2) The methodology and techniques used in conducting the analysis. (3) A description of current and future technology relating to propulsion that has been incorporated in recently-designed surface combatant vessels and amphibious warfare ships or that is expected to be available for those types of vessels within the next 10-to-20 years. (4) A description of each propulsion alternative for surface combatant vessels and amphibious warfare ships that was considered under the study and an analysis and evaluation of each such alternative from an operational and cost-effectiveness standpoint. (5) A comparison of the life-cycle costs of each propulsion alternative. (6) For each nuclear propulsion alternative, an analysis of when that nuclear propulsion alternative becomes cost effective as the price of a barrel of crude oil increases for each type of ship. (7) The conclusions and recommendations of the study, including those conclusions and recommendations that could impact the design of future ships or lead to modifications of existing ships. (8) The Secretary's intended actions, if any, for implementation of the conclusions and recommendations of the study. (d) LIFE-CYCLE COSTS.—For purposes of this section, the term "life-cycle costs" includes those elements of cost that would be considered for a life-cycle cost analysis for a major defense acquisition program. | All of the Navy's aircraft carriers, but none of its other surface ships, are nuclear-powered. Some Members of Congress, particularly on the House Armed Services Committee, have expressed interest in expanding the use of nuclear power to a wider array of Navy surface ships, starting with the CG(X), a planned new cruiser that the Navy had wanted to start procuring around FY2017. Section 1012 of the FY2008 Defense Authorization Act (H.R. 4986/P.L. 110-181 of January 28, 2008) made it U.S. policy to construct the major combatant ships of the Navy, including ships like the CG(X), with integrated nuclear power systems, unless the Secretary of Defense submits a notification to Congress that the inclusion of an integrated nuclear power system in a given class of ship is not in the national interest. The Navy studied nuclear power as a design option for the CG(X), but did not announce whether it would prefer to build the CG(X) as a nuclear-powered ship. The Navy's FY2011 budget proposed canceling the CG(X) program and instead building an improved version of the conventionally powered Arleigh Burke (DDG-51) class Aegis destroyer. The cancellation of the CG(X) program would appear to leave no near-term shipbuilding program opportunities for expanding the application of nuclear power to Navy surface ships other than aircraft carriers. A 2006 Navy study on the potential for applying nuclear-power to Navy surface ships other than aircraft carriers concluded the following, among other things: In constant FY2007 dollars, building a Navy surface combatant or amphibious ship with nuclear power rather than conventional power would add roughly $600 million to $800 million to its procurement cost. The total life-cycle cost of a nuclear-powered medium-size surface combatant would equal that of a conventionally powered medium-size surface combatant if the cost of crude oil averages $70 per barrel to $225 per barrel over the life of the ship. Nuclear-power should be considered for near-term applications for medium-size surface combatants. Compared to conventionally powered ships, nuclear-powered ships have advantages in terms of both time needed to surge to a distant theater of operation for a contingency, and in terms of operational presence (time on station) in the theater of operation. |
At the outset of the 113 th Congress, there has been renewed congressional interest in gun control legislation. Senator Dianne Feinstein introduced S. 150 , the Assault Weapons Ban of 2013, which would prohibit, subject to certain exceptions, the sale, transfer, possession, manufacturing, and importation of specifically named firearms and other firearms that have certain features, as well as the transfer and possession of large capacity ammunition feeding devices. Representative Carolyn McCarthy introduced a companion measure, H.R. 437 , in the House of Representatives. S. 150 is similar to the Assault Weapons Ban of 1994 that was in effect through September 13, 2004. As Congress considers S. 150 and other gun control measures, it may be useful to review the 1994 law and its relation to federal firearms law, as well as the disposition of the legal challenges to the ban. Congress enacted the Gun Control Act of 1968 (GCA or Act) to "keep firearms out of the hands of those not legally entitled to possess them because of age, criminal background, or incompetency, and to assist law enforcement authorities in the states and their subdivisions in combating the increasing prevalence of crime in the United States." The GCA establishes a comprehensive statutory scheme that regulates the manufacture, sale, transfer, and possession of firearms and ammunition. In particular, the GCA establishes nine classes of individuals who are prohibited from shipping, transporting, possessing, or receiving firearms and ammunition. The individuals targeted by this provision include (1) persons convicted of a crime punishable by a term of imprisonment exceeding one year; (2) fugitives from justice; (3) individuals who are unlawful users or addicts of any controlled substance; (4) persons legally determined to be mentally defective, or who have been committed to a mental institution; (5) aliens illegally or unlawfully in the United States, as well as those who have been admitted pursuant to a nonimmigrant visa; (6) individuals who have been discharged dishonorably from the Armed Forces; (7) persons who have renounced United States citizenship; (8) individuals subject to a pertinent court order; and, finally, (9) persons who have been convicted of a misdemeanor domestic violence offense. When the GCA was enacted, the transfer and sale of ammunition appear to have been regulated in the same manner as firearms. In 1986, Congress passed the Firearm Owners' Protection Act (FOPA), which repealed many of the regulations regarding ammunition. Consequently, the transfer and sale of ammunition is not as strictly regulated as the transfer and sale of firearms. In order to effectuate the general prohibitions outlined above, the GCA imposes significant requirements on the transfer of firearms. Pursuant to the Act, any person who is "engaged in the business" of importing, manufacturing, or dealing in firearms must apply and be approved as a Federal Firearms Licensee (FFL). FFLs are subject to several requirements designed to ensure that a firearm is not transferred to an individual disqualified from possession under the Act. For example, FFLs must verify the identity of a transferee by examining a government-issued identification document bearing a photograph of the transferee, such as a driver's license; conduct a background check on the transferee using the National Instant Criminal Background Check System (NICS); maintain records of the acquisition and disposition of firearms; report multiple sales of handguns to the Attorney General; respond to an official request for information contained in the licensee's records within 24 hours of receipt; and comply with all other relevant state and local regulations. Not all sellers of firearms are required to be approved FFLs, however. The GCA contains a specific exemption for any person who makes "occasional sales, exchanges, or purchases of firearms for the enhancement of a personal collection or for a hobby, or who sells all or part of his personal collection of firearms." Although private sellers are not required to conduct a background check or maintain official records of transactions under federal law, they are prohibited from transferring a firearm if they know or have reasonable cause to believe that the transferee is a disqualified person. In addition to the requirements imposed upon the sale of firearms by FFLs and non-FFLs (or private individuals) generally, federal law also places significant limitations on the actual interstate transfer of weapons. Although FFLs have the ability to sell and ship firearms in interstate or foreign commerce, the GCA places several restrictions on the manner in which a transfer may occur. Specifically, while FFLs may make an in-person, over-the-counter sale of a long gun (i.e., shotgun or rifle) to any qualified individual regardless of her state of residence, they may only sell a handgun to a person who is a resident of the state in which the dealer's premises are located. Relatedly, FFLs are prohibited from shipping firearms, both handguns and long guns, directly to consumers in other states. Instead, FFLs making a firearm sale to a non-resident must transfer the weapon to another FFL that is licensed in the transferee's state of residence and from whom the transferee may obtain the firearm after passing the required NICS background check. Firearm transfers between non-FFL sellers are also strictly regulated. Specifically, whereas FFLs may transfer a long gun to any individual regardless of her state of residence in an over-the-counter sale, the GCA specifically bars a non-FFL from directly selling or transferring any firearm to any person who is not a resident of the state in which the non-FFL resides. Instead, interstate transactions between non-FFLs result in the transferring party shipping the firearm to an FFL located in the transferee's state of residence. Congress enacted, as part of the Violent Crime Control and Law Enforcement Act of 1994, the Public Safety and Recreational Firearms Act (referred to as the "Assault Weapons Ban"), which established a 10-year prohibition on the manufacture, transfer, or possession of "semiautomatic assault weapons," as defined by the act, as well as large capacity ammunition feeding devices. The act contained several exceptions, including a "grandfather clause" allowing for the possession of such items that were otherwise lawfully possessed on the date of enactment. The Assault Weapons Ban expired on September 13, 2004. Generally speaking, an "assault weapon" is considered to be a military style weapon capable of providing by a selector switch either semiautomatic—that is, the firearm discharges one round, then loads a new round, each time the trigger is pulled until the magazine is exhausted—or a fully automatic firearm—that is, continuous discharge of rounds while the trigger is depressed until all rounds are discharged. Under federal law, a fully automatic firearm falls under the definition "machinegun," which is defined as "any weapon that shoots ... automatically more than one shot, without manual reloading, by a single function of the trigger." Semiautomatic firearms, including semiautomatic assault weapons, are "produced with semiautomatic fire capability only." The 1994 act made it "unlawful for a person to manufacture, transfer, or possess a semiautomatic assault weapon." Weapons banned were identified either by specific make or model (including copies or duplicates thereof, in any caliber), or by specific characteristics that slightly varied according to whether the weapon was a pistol, rifle, or shotgun. The act also made it unlawful to transfer and possess large capacity ammunition feeding devices (LCAFD). An LCAFD was defined as "any magazine, belt, drum, feed strip, or similar device manufactured after the date [of the act] that has the capacity of, or that can be readily restored or converted to accept, more than 10 rounds of ammunition." LCAFDs manufactured after the date of enactment were required to have a serial number that "clearly shows" that they were manufactured after such date, as well as other markings prescribed by regulation. The 1994 act included a grandfather clause and therefore allowed for the transfer of any "semiautomatic assault weapon" or LCAFD that was otherwise lawfully possessed on the date of enactment. Additionally, Congress exempted roughly 650 types or models of firearms, such as various models of Browning, Remington, and Berettas, deemed mainly suitable for target practice, match competition, hunting, and similar sporting purposes. This list was not exhaustive and the act provided that the absence of a firearm from the exempted list did not mean it was banned unless it met the definition of "semiautomatic assault weapon." The act also exempted any firearm that (1) is manually operated by bolt, pump, lever, or slide action; (2) has been rendered permanently inoperable; or (3) is an antique firearm. The act also did not apply to any semiautomatic rifle that cannot accept a detachable magazine that holds more than five rounds of ammunition nor any semiautomatic shotgun that cannot hold more than five rounds of ammunition in a fixed or detachable magazine. Furthermore, there were exemptions that permitted semiautomatic assault weapons and LCAFDs to be manufactured for, transferred to, and possessed by law enforcement and for authorized testing or experimentation purposes. The other exemptions included a transfer for purposes of federal security pursuant to the Atomic Energy Act, as well as possession by retired law enforcement officers who are not otherwise a prohibited possessor under law. The 1994 Assault Weapons Ban did not address the importation of semiautomatic assault weapons, rather Section 925(d)(3) of the GCA provides that the Attorney General shall authorize a firearm or ammunition to be imported or brought into the United States if it does not meet the definition of a firearm under the National Firearms Act, and is "generally recognized as particularly suitable for or readily adaptable to sporting purposes, excluding surplus military rifles." Notably, the statute does not specifically describe or list any criteria that the Attorney General is required to take into consideration when determining what constitutes "suitable for or readily adaptable to sporting purposes." This provision permitting the importation of firearms is generally known as "the sporting purposes test," and its implementation appears to be left to the Attorney General's discretion. Prior to the implementation of the 1994 Assault Weapons Ban, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) identified several semiautomatic assault rifles that it determined did not meet the sporting suitability standard of Section 925(d)(3). On July 6, 1989, ATF prohibited importation of these rifles. This decision was, in part, based on ATF's finding that "these rifles have certain characteristics that are common to modern military assault rifles and that distinguish them from traditional sporting rifles." Subsequent to this decision, domestic manufacturing of semiautomatic assault weapons reportedly increased, and foreign manufacturers reportedly "circumvented the strictures of the [1989] ban [under President Bush] by reconfiguring their weapons and shipping them out under different models," as well as attempting to give the weapons a sporting appearance. The enactment of the 1994 Assault Weapons Ban addressed these developments to a certain degree; however, ATF subsequently determined in 1997 that certain semiautomatic assault rifles could no longer be imported even though they were permitted to be imported under the 1989 "sporting purposes test" because they had been modified to remove all of their military features other than the ability to accept a detachable magazine. Accordingly, on April 6, 1998, ATF prohibited the importation of 56 such rifles, determining that they did not meet the "sporting purposes test." S. 150 , the Assault Weapons Ban of 2013, was introduced by Senator Dianne Feinstein in the 113 th Congress. A companion measure, H.R. 437 , was introduced by Representative Carolyn McCarthy in the House of Representatives. S. 150 would establish a regulatory scheme for "semiautomatic assault weapons" similar to the 1994 law with a few differences. First, it would ban approximately 157 specifically named firearms and any copies, duplicates, or variants thereof. It differs from the 1994 law because a semiautomatic firearm would be considered a "semiautomatic assault weapon" if it accepts a detachable magazine and has any one of five features (compared to two of five features in the 1994 law). The features listed in S. 150 are slightly different than those listed in the 1994 law. The bill also further provides definitions for each of the features listed. Second, the bill would prohibit the importation of—in addition to the sale, manufacture, transfer, and possession of—such weapons and LCAFDs. The bill's exemptions are similar to the 1994 law; however, it would exempt more hunting and sporting rifles and shotguns by make and model (approximately 2,258), and prohibit the transfer of grandfathered semiautomatic assault weapons to other private individuals unless a background check is conducted through an FFL. Other differences from the 1994 law include an absence of a sunset provision; requirements for safe storage of semiautomatic assault weapons by any private persons; and a requirement for the Attorney General to establish, maintain, and annually report to Congress the make, model, and if available, the date of manufacture of any semiautomatic assault weapon which the Attorney General is made aware has been used in relation to a crime under federal or state law. The Assault Weapons Ban of 1994 was unsuccessfully challenged as violating several constitutional provisions. While arguments that the act constituted an impermissible Bill of Attainder, is unconstitutionally vague, and is contrary to the Ninth Amendment were readily dismissed by the courts, challenges to the ban based on the Commerce Clause and the Equal Protection Clause received more measured consideration. The 1994 Assault Weapons Ban was challenged on the basis that it violated the Commerce Clause. The ban was evaluated under the factors delineated by the Supreme Court in United States v. Lopez , which held that Congress had exceeded its constitutional authority under the Commerce Clause by passing the Gun Free School Zone Act of 1990 (School Zone Act). The Court in Lopez clarified the judiciary's traditional approach to Commerce Clause analysis and identified three broad categories of activity that Congress may regulate under its commerce power. These are (1) the channels of commerce; (2) the instrumentalities of commerce in interstate commerce, or persons or things in interstate commerce; and (3) activities which "substantially affect" interstate commerce. In examining the School Zone Act, the Court concluded that possession of a gun in a school zone was neither a regulation of the channels nor the instrumentalities of interstate commerce. Because the conduct regulated was considered to be a wholly intrastate activity, the Court concluded that Congress could only regulate if it fell within the third category and "substantially affect[ed]" interstate commerce. The Court indicated that intrastate activities have been, and could be, regulated by Congress where the activities "arise out of or are connected with a commercial transaction" and are "part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated." With respect to the School Zone Act, the Court declared that the intrastate activity was not a part of the larger firearms regulatory scheme. Moreover, the Court found it significant that the act did not require that interstate commerce be affected, such as by requiring the gun to be transported in interstate commerce. Commerce Clause challenges to the 1994 Assault Weapons Ban were evaluated under the framework provided by the Lopez decision, and lower courts readily determined that the act met minimum constitutional requirements under the Commerce Clause. For example, in Navegar, Inc. v. United States , the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) addressed the question of whether the act fell within one of the three categories of activity identified in Lopez . Like the Court in Lopez , the D.C. Circuit determined that it was not required to analyze the act under the first or second categories because the "[it] readily falls within category 3 as a regulation of activities having a substantial [e]ffect on interstate commerce." The court analyzed individually the act's prohibitions on manufacture, transfer, and possession. Regarding the manufacturing prohibition, the D.C. Circuit declared that "[t]he Supreme Court has repeatedly held that the manufacture of goods which may ultimately never leave the state can still be activity which substantially affects interstate commerce." Regarding the prohibition on transfers, the court similarly remarked that "the Supreme Court precedent makes clear that the transfer of goods, even as part of an intrastate transaction, can be an activity which substantially affects interstate commerce." Based on these maxims, the court held that "it is not even arguable that the manufacture and transfer of 'semiautomatic assault weapons' for a national market cannot be regulated as activity substantially affecting interstate commerce." However, with respect to the possession of a semiautomatic assault weapon, the court in Navegar noted that the Lopez decision raised a question of whether "mere possession" can substantially affect interstate commerce. The court proceeded to analyze the purposes behind the act to determine whether "it was aimed at regulating activities which substantially affect interstate commerce." Analyzing the congressional hearings, the court determined that the ban on possession was "conceived to control and restrict the interstate commerce in 'semiautomatic assault weapons,'" and that the "ban on possession is a measure intended to reduce the demand for such weapons." The D.C. Circuit stated that the ban on possession was "necessary to allow law enforcement to effectively regulate the manufacture and transfers where the product comes to rest, in the possession of the receiver." Based on these factors, the court held that the "purpose of the ban on possession has an 'evident commercial nexus.'" Although the Supreme Court further clarified its Commerce Clause jurisprudence in later decisions, such as Gonzales v. Raich , it appears that the Commerce Clause analysis applicable to the ability of Congress to regulate or ban certain semiautomatic assault weapons would not be fundamentally altered by these later developments. The Assault Weapons Ban of 1994 was also challenged on Equal Protection Clause grounds, with opponents arguing that it prohibited weapons that were the functional equivalents of weapons exempted under the Act, and because the prohibition of other semiautomatic assault weapons based upon their characteristics served no legitimate governmental interest. A court must employ one of the three levels of judicial scrutiny in an Equal Protection Clause analysis to determine whether a law negatively impacts a suspect class or a fundamental right. If there is such an impact, the law is subjected to strict scrutiny, requiring the government to prove that the law is necessary to satisfy a compelling governmental interest. If a law does not affect a suspect class or a fundamental right, the court engages in a "rational basis" review, requiring only that the law be rationally related to a legitimate governmental interest. Applying these standards, the U.S. Court of Appeals for the Sixth Circuit (Sixth Circuit) held that the provisions of the 1994 law did not violate the Equal Protection Clause. In Olympic Arms v. Buckles , the Sixth Circuit first noted that the lower court had held that the plaintiffs' claim was non-cognizable, given that the "Equal Protection Clause protects against inappropriate classifications of people, rather than things." However, the court stated that other rulings have held that since persons may have an interest in things, their classification may be challenged on equal protection grounds. Rather than resolve this disparity on the scope of the Equal Protection Clause, the Sixth Circuit went on to declare that "even if we were to assume that equal protection analysis is appropriate here, we would have to conclude that the semi-automatic assault weapons ban meets all equal protection requirements." The court first addressed the argument "that variations in the specificity of weapon descriptions and lack of common characteristics in the list of weapons outlawed destroy the constitutional legitimacy of the 1994 Act." The Sixth Circuit found this argument to be without merit for several reasons. First, the court found it significant that the list of prohibited firearms was developed to target weapons commonly used in the commission of violent crimes. Additionally, the court found that the prohibition on copies or duplicates of listed firearms was incorporated to prevent manufacturers from circumventing the act's terms "by simply changing the name of the specified weapons." Finally, the court noted that the list of exempted weapons was based on the determination that they were particularly suited to sporting purposes. Taking these factors together, the Sixth Circuit held that it was "entirely rational for Congress ... to choose to ban those weapons commonly used for criminal purposes and to exempt those weapons commonly used for recreational purposes." The fact that many of the protected weapons were somewhat similar in function to those that were banned does not destroy the rationality of the congressional choice. The Sixth Circuit next addressed whether prohibiting weapons based upon having two or more qualifying features was irrational, given that the act allowed a weapon to possess one such feature and that the individual features did not operate in tandem with one another. The court also rejected this argument, explaining that each characteristic served to make the weapon "potentially more dangerous," and were not "commonly used on weapons designed solely for hunting." The court also explained that "Congress could have easily determined that the greater the number of dangerous add-ons on a semi-automatic weapon, the greater the likelihood that the weapon may be used for dangerous purposes." Accordingly, the Sixth Circuit concluded that the plaintiffs had "failed to meet the heavy burden required to show that the 1994 Act violates equal protection." Notably, the Sixth Circuit reviewed the equal protection claim under the rational basis test finding that "precedent does not recognize a fundamental right to individual weapon ownership or manufacture, and the plaintiffs, gun retailers and owners, are not a suspect class." While the latter is still accurate, precedent regarding a fundamental right to individual weapon ownership has changed with the Supreme Court's decision in District of Columbia v. Heller . As discussed below, the full nature of the right guaranteed by the Second Amendment has yet to be determined by the courts. Therefore, a court considering an equal protection claim in the context of a semiautomatic assault weapons ban could conceivably determine that it is necessary to first address the fundamental issue of whether assault weapons are protected by the Second Amendment. If enacted, an assault weapons ban could also be challenged on Second Amendment grounds in light of the Supreme Court's decision in District of Columbia v. Heller . In Heller , the Court recognized that the Second Amendment protects an individual right to bear arms for lawful purposes such as self-defense within the home. The decision was not an exhaustive analysis of the full scope of the right guaranteed by the Second Amendment, but the Court stated that "[l]ike most rights, the right secured by the Second Amendment is not unlimited." One limitation upon the Second Amendment the Court addressed is that it "does not protect those weapons not typically possessed by law-abiding citizens for lawful purposes, such as short-barreled shotguns." The Court found that its prior 1939 decision in United States v. Miller supported this conclusion. Relying on Miller , the Court acknowledged that this limitation is supported by the "historical tradition of prohibiting the carrying of 'dangerous and unusual weapons'" and that the "sorts of weapons protected were those 'in common use at the time'" because those capable of service in the militia at the time of ratification would have brought "the sorts of lawful weapons that they possessed at home to militia duty." Since Heller , cases that have evaluated the constitutionality of state assault weapons bans have generally found them to be valid under the Second Amendment. In 2009, the California Court of Appeals decided People v. James , which held that possession of an assault weapon in California remains unlawful and is not protected by the Second Amendment. California's Roberti-Roos Assault Weapons Control Act of 1989, like the 1994 federal assault weapons ban, defines "assault weapons" by providing a list of proscribed weapons and through characteristics "which render these weapons more dangerous than ordinary weapons typically possessed by law-abiding citizens for lawful purposes." Relying on Heller 's brief discussion that the Second Amendment does not protect a military weapon, such as an M16 rifle, the court in James 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. The District of Columbia amended its firearms regulations after the Heller decision and enacted new firearms regulations including an assault weapons ban that is similar to California's. In 2011, the D.C. Circuit issued its decision in Heller v. District of Columbia ( Heller II ) which upheld the District's ban on certain semiautomatic rifles and LCAFDs. Under the "common use" factor delineated in Heller , the D.C. Circuit acknowledged that "it was clear enough in the record that certain semi-automatic rifles and magazines holding more than 10 rounds are indeed in 'common use.'" However, the court could not conclude definitely whether the weapons are "commonly used or are useful specifically for self-defense or hunting" such that they "meaningfully affect the right to keep and bear arms." Therefore, the court went on to analyze the bans under a two-stepped approach to determine their validity under the Second Amendment. Under this approach, the court first asks whether a particular provision impinges upon a right protected by the Second Amendment as historically understood. If it does, then it goes on to determine whether the provision passes muster under the appropriate level of constitutional scrutiny. Assuming that the ban impinged on the right protected under Heller (i.e., to possess certain arms for lawful purposes such as individual self-defense or hunting), the court found that such regulations should be reviewed under intermediate scrutiny because the prohibition "does not effectively disarm individuals or substantially affect their ability to defend themselves." Under intermediate scrutiny, the government has the burden of showing that there is a substantial relationship or reasonable "fit" between the regulation and the important governmental interest "in protecting police officers and controlling crime." The D.C. Circuit held that the District carried this burden and that the evidence demonstrated that a ban on both semiautomatic assault rifles and LCAFDs "is likely to promote the Government's interest in crime control in the densely populated urban area that is the District of Columbia." In 2012, the Supreme Court of Illinois decided Wilson v. Cook County , a case that evaluated the constitutionality of the Blair Holt Assault Weapons Ban of Cook County, a long-standing ordinance that was amended to similarly reflect provisions of the 1994 Assault Weapons Ban. The plaintiffs argued that the ordinance violates the Due Process and Equal Protection Clauses of the U.S. Constitution as well as the Second Amendment. Regarding the due process claim, the court concluded that the ordinance is not unconstitutionally vague such that it "fails to provide people of ordinary intelligence a reasonable opportunity to understand what conduct it prohibits." The court also dismissed the plaintiff's equal protection claim, finding that the "[o]rdinance does not arbitrarily differentiate between two owners with similar firearms because the banned firearms are either listed, a copy or duplicate, or fall under the characteristics-based test." With respect to the Second Amendment claim, the court indicated that it would follow the two-step approach similar to the Heller II court. While the court acknowledged that the ordinance banned only a subset of weapons with particular characteristics similar to other jurisdictions, it found that it could not "conclusively say ... that assault weapons as defined in the [o]rdinance categorically fall outside the scope of the rights protected by the [S]econd [A]mendment." The court ultimately remanded the Second Amendment claim to the trial court for further proceedings, because unlike the James and Heller II decisions, the county did not have an opportunity to present evidence to justify the nexus between the ordinance and the governmental interest it seeks to protect. These cases demonstrate that courts evaluating various assault weapons bans, and to a limited extent LCAFD bans, have looked to the Heller decision and the general framework that has developed in the lower courts for analyzing claims under the Second Amendment. Based on the Heller decision where the Supreme Court indicated that certain weapons fall outside the protection of the Second Amendment, lower courts have examined whether the prohibited weapons are considered in "common use" or "commonly used" for lawful purposes or "dangerous and unusual." It is uncertain whether, to be protected under the Second Amendment, the weapon must be in "common use" by the people and if so, must it be in "common use" for self-defense or hunting, or what constitutes "dangerous and unusual." Heller could arguably be taken to indicate that if the prohibited weapons do not meet these criteria then they are not protected by the Second Amendment, in which case no heighted judicial scrutiny would be applied. Courts also could evaluate such measures under the two-step approach laid out by the lower courts. This asks whether a ban on certain weapons and firearm accessories imposes a burden on conduct falling within the scope of the Second Amendment. If so, then a heightened level of judicial scrutiny will be applied to determine the ban's constitutionality. How the "common use" and "dangerous and unusual" criteria should be read, if at all, in connection with the two-step approach remains unclear. Neither the James , Heller II , nor Wilson courts appear to have fully explained the connection between the two approaches. Lastly, while it appeared that constitutional claims under the Due Process and Equal Protection Clauses were largely dismissed when the 1994 Assault Weapons Ban was in effect, the Wilson case demonstrates that they are claims challengers may still consider raising. | In the 113th Congress, there has been renewed congressional interest in gun control legislation. On January 16, 2013, President Obama announced his support for legislation on gun control, including a ban on certain semiautomatic assault firearms and large capacity ammunition feeding devices. Senator Dianne Feinstein introduced S. 150, the Assault Weapons Ban of 2013, which would prohibit, subject to certain exceptions, the sale, transfer, possession, manufacturing, and importation of specifically named firearms and other firearms that have certain features, as well as the transfer and possession of large capacity ammunition feeding devices. Representative Carolyn McCarthy introduced a companion measure, H.R. 437, in the House of Representatives. S. 150 is similar to the Assault Weapons Ban of 1994 (P.L. 103-322) that was in effect through September 13, 2004. The Assault Weapons Ban of 1994 was challenged in the courts for violating, among other things, the Equal Protection Clause and the Commerce Clause. This report reviews the disposition of these challenges. It also discusses Second Amendment jurisprudence in light of the Supreme Court's decision in District of Columbia v. Heller and how lower courts have evaluated state and local assault weapons bans post-Heller. |
Unanimous consent agreements are special orders of the Senate that are agreed to without objection by the chamber's membership. Fundamental to the management of the contemporary Senate, these devices are typically employed to structure floor proceedings and to expedite the chamber's business. Two general types of unanimous consent permeate Senate operations: "simple" and "complex." Both types set aside the rules, precedents, or orders of the Senate via the unanimous concurrence of all Senators. A simple unanimous consent request addresses routine matters, such as dispensing with quorum calls or requesting that certain staff aides have floor privileges. To be sure, there are occasions when a simple unanimous consent request can have policy consequences, such as an objection to setting aside an amendment or dispensing with the reading of an amendment. Simple unanimous consent requests have been used since the First Congress. For example, a Senate rule adopted on April 16, 1789, stated: Every bill shall receive three readings [prior] to its being passed; and the President [of the Senate] shall give notice at each, whether it be first, second, or third; which readings shall be on three different days, unless the Senate unanimously directs otherwise. The focus of this report is on the complex variety: their historical origin, some benchmarks in their evolution, and how they came to be reflected in the Senate's rulebook. Complex agreements establish a tailor-made procedure for virtually anything taken up by the Senate, such as bills, joint resolutions, concurrent resolutions, simple resolutions, amendments, nominations, treaties, or conference reports. As two Senate parliamentarians wrote: There is a fundamental difference between the Senate operating under a unanimous consent agreement and the Senate operating under the Standing Rules. Whereas the Senate Rules permit virtually unlimited debate, and very few restrictions on the right to offer amendments, these agreements usually limit time for debate and the right of Senators to offer amendments. Senators generally accept the debate and amendment restrictions common to most unanimous consent agreements largely for two overlapping reasons: they facilitate the processing of the Senate's workload, and they serve the interests of individual lawmakers. Based on trust, and reached after often protracted negotiations, unanimous consent agreements are the equivalent of "binding contracts" that can only be changed or modified by unanimous consent. It is not clear when the Senate actually began to employ unanimous consent agreements to limit debate or to fix a time for a vote on a measure. Perhaps the first instance occurred in the mid-1840s. On March 24, 1846, Senator William Allen, D-OH, stated that the Senate had been debating a joint resolution concerning the Oregon Territory for more than two months, and it was now time to proceed to a final vote on the matter. Noting that the Senate neither allowed for the previous question (a motion employed in the House to end debate) nor adopted resolutions directing that a vote should occur at a specific time, Senator Allen pointed out that it was the Senate's habit to have "a conversational understanding that an end would be put to a protracted debate at a particular time." A Senate colleague suggested that Allen delay several days before making such a request. Two days later Senator Allen again asked that the Senate informally agree to fix "a definite day on which the vote might be taken." The Senate, he said, should simply refuse to adjourn until there is a final vote. No action occurred on Allen's recommendation. On April 13, 1846, however, a consensus developed among Senators that a final vote on the joint resolution should occur three days later. Finally, after spending around 65 days debating the matter, the Senate on April 16 enacted the joint resolution. Indeed, if this was the first time that the Senate employed something like a unanimous consent agreement to end debate and precipitate a vote on a measure, there is little question that these accords became both more commonly used and more sophisticated in their procedural features. By 1870, noted two scholars, unanimous consent agreements "were being used with some frequency." These early unanimous consent agreements were, "as they are today, time-limitation agreements that provided for the disposal of a measure by a specified time." An April 24, 1879, exchange illustrates the practical use of these accords for limiting debate and setting the time for a vote. The exchange is reminiscent of what occurs in today's Senate. The President pro tempore . The Chair will once more state the proposition and again ask the Senate whether there be any objection to it. The proposition is, that at three o'clock to-morrow, all debate on this bill shall cease, and the Senate shall then proceed to vote upon the pending amendment or amendments that may be offered, and finally on the bill itself without debate. Mr. Conkling . That is right. The President pro tempore . Is there objection to that understanding. The Chair hears none, and it is agreed to. Bill managers apparently took the initiative in propounding unanimous consent agreements. Their increasing use in subsequent decades led one Senator, Roger Mills, D-TX, to complain that the Senate "reaches its vote on all questions like the historic Diet of Poland, by the unanimous agreement of the whole, and not by the act of the majority." Other issues associated with these early accords also sowed confusion among the membership. Many of the complaints stemmed from the fact that the early unanimous consent agreements were often viewed "as an arrangement simply between gentlemen" and could, as a president pro tempore once said, be "violated with impunity by any member of the Senate." To reduce the confusion, the Senate adopted a new rule. The fundamental objective of Rule XII was to clarify several uncertainties associated with these senatorial contracts. In the early 1900s, the Senate took modest steps to reduce some of the confusion associated with unanimous consent agreements, such as requiring these accords to be submitted in writing to the desk, read to the chamber, and "printed on the title page of the daily calendar of business as long as they were operative." More changes were in the offing, however. Two overlapping factors explain why the Senate agreed to a formal rules change to govern these accords. First, there were a couple of ambiguities associated with these accords that continued to arouse contention and confusion. Past precedents simply did not adequately address these recurring problems. Second, a riveting event—a Senator was caught by "surprise" when a unanimous consent agreement was entered into—underscored the need for a formal rule (Rule XII) to clear up issues associated with these "gentlemen's agreements." On the matter of ambiguity, there were two principal issues. First, could these agreements be changed or modified by another unanimous consent agreement? Second, could the presiding officer enforce these accords? Today, both principles are accepted as procedural "givens." Not so several decades ago. For example, on March 3, 1897, Senator George Hoar, R-MA, stated: "I think it is very serious, indeed, under any circumstances, to set the precedent of revoking a unanimous-consent agreement by other unanimous-consent agreements." As another example, one of the Senate's institutional leaders, Henry Cabot Lodge, R-MA., argued: "If it is to be supposed that unanimous-consent agreements are to be modified, we shall soon find it impossible to get a unanimous-consent agreement. I think nothing is more important than the rigidity with which the Senate preserves unanimous-consent agreements." Or as Senator Joseph O'Gorman, D-NY, stated: "Has it not been established by the precedents of this body that a unanimous-consent agreement could not be impaired or modified either by another unanimous-consent agreement or by an order of the Senate?" To be sure, other Senators contended that these compacts could be modified by another unanimous consent agreement. As to the enforcement of these accords, presiding officers took different positions. As one presiding officer observed, "it has been the universal ruling of the Chair that the Chair can not enforce a unanimous-consent agreement, but that it must rest with the honor of Senators themselves." On another occasion, the president of the Senate asked: "[W]hat is the pleasure of the Senate, whether he shall enforce the agreements entered into by unanimous consent or not?" Senator John Sherman, R-OH, replied that the chair should "enforce the agreement with respect to the bill under consideration." The chair then asked, "In similar cases, what is the pleasure of the Senate?" Senator Eugene Hale, R-ME, provided this answer: "We'll cross that bridge when we reach it." Contrarily, "Vice Presidents Charles Fairbanks and James Sherman were not timid about enforcing [unanimous consent agreements] at times." Sundry other issues were also associated with these compacts. For example, Senators argued about whether a motion to recommit a bill violated a unanimous consent agreement to vote on the bill. Some Senators said that if they were not present when a unanimous consent agreement was proposed, colleagues could object for them. In response, Senator Thomas Martin, VA, the ostensible Democratic floor leader, stated: "When unanimous consent is asked, unless objection is made from the floor of the Senate by a Senator who is present, he can not leave his vote here to be recorded against it. The Senate can not do business by proxy that way." Senator Reed Smoot, R-UT, was caught off-guard when a unanimous consent agreement he opposed was agreed to. The issue involved a 1913 bill (S. 4043) to prohibit interstate commerce in intoxicating liquors. A unanimous consent agreement was properly made and announced by the presiding officer. Senator Smoot, who was present in the chamber, had planned to object but was momentarily distracted and failed to lodge a timely dissent. For the next two days the Senate debated the legitimacy of the unanimous consent agreement and whether it could be modified by another unanimous consent agreement. In the end, the presiding officer submitted the question of legitimacy to the Senate, which voted 40 to 17 (with 37 Members not voting) to instruct the chair to resubmit the unanimous consent agreement to the Senate. When this was done, Senator Smoot objected to the accord. Quickly, another unanimous consent agreement on the liquor bill was propounded by Senator Jacob Gallinger, R-NH, and it was accepted by the Senate. In short, uncertainties and controversies influenced the Senate on January 16, 1914, to adopt a formal rule to govern unanimous consent agreements. There was relatively little debate on Rule XII. The major controversy involved whether these compacts could be modified by another unanimous consent agreement. Unsurprisingly, Senator Lodge argued against the new rule on the ground that to permit any subsequent changes to unanimous consent agreements would only lead to delays in expediting the Senate's business. Senator Charles Thomas, D-CO, responded: "It seems to me the most illogical thing in the world to say that the Senate of the United States can unanimously agree to something and by that act deprive itself of the power to agree unanimously to undo it." By a vote of 51 to 8, the Senate adopted Rule XII. Two critical portions of the rule stipulate that (1) unanimous consent agreements are orders of the Senate, which means that the presiding officer is charged with enforcing their terms; and (2) the Senate, by unanimous consent, could change a unanimous consent agreement. As orders of the Senate, unanimous consent agreements are now printed in the Senate Journal . (They are also printed in the Senate's daily Calendar of Business , as noted earlier, and the Congressional Record .) In subsequent decades, the Senate witnessed increasing use of unanimous consent agreements. The contemporary Senate regularly operates via the terms of unanimous consent agreements. They are used on every type of measure or matter that comes before the Senate, and at least since the post-World War II period, all party leaders and floor managers have extensively relied on them to process the chamber's business. During the majority leadership of Senator Lyndon Johnson, D-TX (1955-1960), unanimous consent agreements were often comprehensive in scope (e.g., identifying when a measure is to be taken up, when it is to be voted upon for final passage, and what procedures apply in-between these two stages). Today, in a period of heightened individualism and partisanship, unanimous consent agreements tend to be piecemeal, such as establishing debate limits on a number of discrete amendments without limiting the number of amendments or specifying a time or date for final passage of the legislation. Still, compared with the compacts promulgated during the early 1900s, today's accords are often broader in scope, more complex, and involve more procedural detail. A large body of precedents has even evolved to govern "how [unanimous consent agreements] are to be interpreted and applied in various situations." In short, unanimous consent agreements are essential to the processing of the Senate's workload and protecting the procedural prerogatives of individual senators. | Unanimous consent agreements are fundamental to the operation of the Senate. The institution frequently dispenses with its formal rules and instead follows negotiated agreements submitted on the floor for lawmakers' unanimous approval. Once entered into, unanimous consent agreements can only be changed by unanimous consent. Their objectives are to waive Senate rules and to expedite floor action on measures or matters. Typically, these accords (sometimes called time-limitation agreements) restrict debate and structure chamber consideration of amendments. Given their importance to chamber operations, it is worthwhile to understand the background, or origin, of unanimous consent agreements. The purpose of this report is to examine how and why these informal agreements became special orders of the Senate enforceable by the presiding officer. This report will be updated as circumstances warrant. Further information on unanimous consent agreements can be found in CRS Report 98-225, Unanimous Consent Agreements in the Senate, by [author name scrubbed]; CRS Report RS20594, How Unanimous Consent Agreements Regulate Senate Floor Action, by [author name scrubbed]; and CRS Report 98-310, Senate Unanimous Consent Agreements: Potential Effects on the Amendment Process, by [author name scrubbed]. |
The 112 th Congress is considering legislative proposals to limit the government's present and future risk from Fannie Mae and Freddie Mac. The two entities are government-sponsored enterprises (GSEs)—congressionally chartered, stockholder-owned companies with special legal privileges and special obligations to facilitate the flow of mortgage funds. Their basic business includes purchasing mortgages that have been issued by others, pooling and guaranteeing the mortgages into mortgage-backed securities (MBS), and either selling the MBS to investors or holding the MBS "in portfolio" as an investment. In recent years, Fannie Mae and Freddie Mac together were responsible for nearly half of the nation's outstanding residential mortgage debt. In 2008, the enterprises' capital proved to be inadequate as mortgage defaults and foreclosures increased more than anticipated, and the cost of borrowing to finance their investment portfolios increased. To support the mortgage markets during the financial crisis of 2008-2009 and to keep these enterprises in business, the U.S. Department of the Treasury has purchased more than $175 billion of special preferred stock. In addition, Treasury and the Federal Reserve (the Fed) have provided mortgage market support by purchasing nearly $1.4 trillion in MBS from investors in the open market. Treasury's purchase of more than $175 billion in preferred stock is one element in contracts that require the enterprises to pay an annual 10% cash dividend on the Treasury funds. Based on their past histories, it is not clear that the enterprises could survive without Treasury's continued support. Some of the bills that have been introduced are likely to reduce the enterprises' future size by reducing or eliminating certain advantages conferred by their charters. More specifically, one category of proposed legislation would increase their cost of doing business (e.g., H.R. 1222 ). It is likely that the increased costs would be passed onto the enterprises' business partners in the form of lower prices for mortgages and higher interest rates to borrowers. This would potentially allow other securitizers to compete more effectively with the enterprises. A second group of bills would impose new limitations on the types of mortgages that the enterprises can purchase, leaving more of the mortgage market to their competition (e.g., H.R. 1227 ). A third category of changes contained in some of the bills would increase regulatory oversight and disclosure (e.g., H.R. 31 and H.R. 1225 ). The proposed increased capital requirements would be another source of increased costs, but would also reduce risks. New requirements to file with the Securities and Exchange Commission (SEC) would eliminate a competitive advantage enjoyed by the enterprises and require them to adhere to some of the same rules as their competitors. A fourth category of legislative proposals would set a deadline for the enterprises to return to stockholder control or to be dissolved; in the event they were to return to stockholder control, the bills would phase out their charters (e.g., two pairs of companion bills H.R. 408 / S. 178 and H.R. 1182 / S. 693 ). A fifth category of legislative proposals would make provisions for replacing the enterprises in the secondary mortgage markets (e.g. H.R. 1859 and H.R. 2413 ). Table 1 summarizes and illustrates differences in provisions of the various bills introduced in the 112 th Congress. The enterprises came to their current financial difficulties following a period of increasing losses due to mortgage delinquencies, coupled with inadequate capital. In September 2008, Fannie Mae and Freddie Mac separately agreed to enter voluntary conservatorship, which entailed giving their regulator, the Federal Housing Finance Agency (FHFA), management and control of the enterprises. At the same time, the Treasury signed separate contracts with Fannie Mae and Freddie Mac to provide whatever financial support might be needed to keep them solvent. Homeowners and potential homeowners indirectly depend on Fannie Mae and Freddie Mac as a source of mortgage money. The enterprises are prohibited from making loans directly to borrowers; instead, they purchase mortgages that lenders have already made. They package the mortgages into MBS and either keep them "in portfolio" or sell them to institutional investors. Sometimes the originator "swaps" the mortgages for an MBS backed by the same loans. The advantage of a swap is the addition of the enterprise's guarantee that the loans will be repaid. Fannie Mae and Freddie Mac back almost half of the home mortgages in the nation. The Obama Administration's report on the future of the enterprises and the housing finance system presents three broad alternatives: a privatized system with existing government mortgage programs (Federal Housing Authority, Veterans Affairs, and U.S. Department of Agriculture) more narrowly targeted toward groups based on income or first-time homebuyer status; a privatized system with a government guarantee only during a crisis; and a privatized system with backup government reinsurance of private mortgage insurance. As of this writing, no legislation has been introduced to implement any of the Administration's proposals; therefore, they are not discussed further in this report. If and when legislation is introduced, it will be incorporated into this report. More detail on the proposals is contained in CRS Report R41719, The Obama Administration's Report on "Reforming America's Housing Finance Market": Implications for Fannie Mae and Freddie Mac , by [author name scrubbed]. This report continues with summaries of legislation that has been introduced in the 112 th Congress. Most of the bills address individual areas of concern, such as executive compensation, but two pairs of companion bills would reform a number of areas. This section analyzes legislation that has been introduced and that would make changes to a single area of the enterprises' operations. H.R. 31 , Fannie Mae and Freddie Mac Accountability and Transparency for Taxpayers Act of 2011, would require the director of FHFA to make quarterly reports on Fannie Mae and Freddie Mac in 12 specific areas: 1. total liabilities and the risk to the federal government; 2. executive compensation and bonuses; 3. the impact of reducing the conforming loan limits at the end of FY2011; 4. foreclosure mitigation efforts; 5. mortgage fraud prevention efforts; 6. communications with the Federal Reserve and Treasury regarding the purchase or sale of enterprise securities; 7. enterprise investments outside of their mission; 8. reasons for equity (preferred stock) investments by Treasury; 9. capital levels, portfolio size and their impacts on the safety and soundness of the enterprises; 10. underwriting standards; 11. mortgage buyback policies; and 12. the enterprises' actions that affected enterprise securities, in particular, preferred stock issued before September 6, 2008. The director could include additional information that he "considers relevant or important with respect to the enterprise, and the activities and condition of the enterprise." The FHFA inspector general (IG) would be required to review the reports and inform Congress of his findings. The bill would require both the reports and the IG's comments to be posted on the FHFA website. The bill would also require the IG to examine FHFA's loss mitigation policies, including the impact of principal reduction on the enterprises' financial condition and the nationwide foreclosure rate. There is some overlap between these reporting requirements and current reports. For example, the FHFA's quarterly Report on the Enterprises' Financial Performance covers capital, investments, and loss mitigation activities. The FHFA's monthly Foreclosure Prevention and Refinance Report also covers loss mitigation efforts. FHFA has issued a report on the effect of reducing the conforming loan limit. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 31 and forwarded it to the full committee. Even without this legislation, FHFA could send such quarterly reports to Congress, and the IG could review the reports. The bill indicates to FHFA and the FHFA IG that Congress attaches particular importance to these areas of oversight. H.R. 463 , Fannie Mae and Freddie Mac Transparency Act of 2011, would make the enterprises subject to Freedom of Information Act (FOIA) requests by making them federal agencies for the purpose of FOIA compliance. No action has been taken on H.R. 463 . H.R. 1221 , Equity in Government Compensation Act of 2011, would limit the pay of the enterprises' employees. Current executive compensation packages, previously approved by FHFA, would be suspended and declared to be the sense of Congress that any pay in 2010 exceeding Level I of the Executive Schedule ($199,700) or the Senior Executive Service ($179,700) should be turned over to the Treasury. Other employees of the enterprises would be paid according to the federal government's general schedule (GS), with a maximum pay in the Washington, DC, area in 2011 of $155,500. Executive compensation would be based in part on the enterprise's profitability. The enterprises would be covered by Troubled Asset Relief Program (TARP) provisions on executive compensation and corporate governance. The bill states that enterprise employees shall not be considered federal employees. On November 15, 2011, the House Financial Services Committee ordered the bill to be reported as amended. As conservator, FHFA currently has the authority to reject enterprise salaries without this legislation, but this bill would remove FHFA's discretion. As regulator, 12 U.S.C. 4518 authorizes FHFA to prohibit and order an enterprise to withhold executive compensation that is "not reasonable and comparable" to that provided by similar companies. The same section prohibits FHFA from actually setting salaries or salary ranges. H.R. 1222 , GSE Subsidy Elimination Act of 2011, would require the enterprises to charge a guarantee fee that reflects the risk of the mortgages purchased and the cost of capital that a totally private company would charge. FHFA would have the option to either phase in the higher fee over two years or to impose it at the higher level two years after enactment. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1222 and forwarded it to the full committee. As conservator or receiver, FHFA has the authority to implement these provisions. As regulator, it appears that FHFA could not require guarantee fees consistent with the provisions of H.R. 1222 unless necessary for the safety and soundness of the enterprises. H.R. 1223 , GSE Credit Risk Equitable Treatment Act of 2011, would prohibit treating mortgage-backed securities issued by the enterprises differently from similar MBS issued by an otherwise identical company. The bill would require that regulatory determinations as to what is a mortgage with a low risk of default, called a "qualified residential mortgage" (QRM) in the Dodd-Frank Wall Street Reform and Consumer Protection Act, "Dodd-Frank," ( P.L. 111-203 , 124 Stat. 1376 et seq.), not be based solely on the enterprises' role in the securitization. Dodd-Frank requires the federal banking regulators, the SEC, the Department of Housing and Urban Development (HUD), and FHFA to issue joint regulations to implement the act's risk retention requirements for mortgages included in MBS. Under Dodd-Frank, QRMs would be exempt from this risk retention requirement. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1223 and forwarded it to the full committee. Scott G. Alvarez, the Federal Reserve's general counsel, has testified that Dodd-Frank does not exempt the enterprises from the risk retention requirement, and that their 100% guarantee of timely payment of principal and interest on their MBS is "generally in the form of an unfunded guarantee, which would not satisfy the risk retention requirements of the proposed rules." Nevertheless, he said that the proposed rules would allow the enterprises' guarantees to satisfy the risk retention requirements as long as the enterprises were in conservatorship or receivership. H.R. 1224 , GSE Portfolio Risk Reduction Act of 2011, would require the enterprises to accelerate the reduction of their portfolios over five years to $250 billion each. At the end of 2010, Fannie Mae's portfolio was $789 billion and Freddie Mac's was $697 billion. The financial support agreements between Treasury and the GSEs require the GSEs to reduce their mortgage portfolios to stay within a cap that started at $900 billion at the end of 2009 and decreases 10% annually reaching $250 billion in 2022. The companion bills H.R. 1182 and S. 693 would reduce the enterprises' portfolios on the same five-year schedule as H.R. 1224 . The companion bills H.R. 408 and S. 178 would reduce the portfolios over four years. Table 2 compares the portfolio caps under the current agreement, H.R. 1224 , and the pairs of companion bills. H.R. 1224 would not count delinquent mortgages that were repurchased to fulfill an enterprise's guarantee against the portfolio limits. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1224 and forwarded it to the full committee. As regulator, FHFA could order the enterprises to reduce their risk by reducing their portfolios more rapidly than the current contract provides. H.R. 1225 , GSE Debt Issuance Approval Act of 2011, would require the enterprises to request in writing permission from the Secretary of the Treasury to issue new debt. The Secretary would announce his decision and reasons in writing to the enterprise, FHFA, and Congress. There would be a seven-day waiting period following Treasury's approval before the enterprise could issue the debt. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1225 and forwarded it to the full committee. Fannie Mae's and Freddie Mac's charters currently provide the Secretary of the Treasury this authority. According to FHFA staff, it was used in the past to prevent the enterprises from issuing large amounts of debt too close to Treasury debt sales, but this practice fell into disuse. Former Assistant Secretary of the Treasury Emil Henry has written that there was a more formal process until the mid-1990s. Arguably, the Secretary of the Treasury could assert the existing review authority contained in the enterprises' charters. The requirements that the enterprises make the requests for approval in writing, that the secretary publish his decision, and that there be a seven-day waiting period would formalize the process. H.R. 1226 , GSE Mission Improvement Act, would repeal the affordable housing goals first established by the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 ( P.L. 102-550 , 106 Stat. 3672 et seq.) and amended by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 , 122 Stat. 2654 et seq.). It would repeal, also, the duty to serve underserved markets, and funding for both the housing trust fund and the capital magnet fund. FHFA would have six months to submit a report to Congress on this bill's effect on multifamily properties, loans to low-income borrowers, and loans to borrowers in rural areas. The report would contain recommendations on increasing mortgage credit in these areas. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1226 and forwarded it to the full committee. Unless the housing goals are repealed, the enterprises will continue to be required to meet them. H.R. 1227 , GSE Risk and Activities Limitation Act of 2011, would prohibit FHFA from approving any new products while an enterprise is in conservatorship or receivership unless FHFA determined the new products were necessary to preserve the enterprises' assets or reduce losses. When the enterprises are not in conservatorship or receivership, the FHFA would retain its existing new product approval authority. On April 5 and 6, 2011, the House Subcommittee on Capital Markets and Government-Sponsored Enterprises of the Committee on Financial Services marked up H.R. 1227 and forwarded it to the full committee. Arguably, FHFA could announce a new policy that would restrict new product approvals while the GSEs are in conservatorship. H.R. 2425 , Transparency and Security in Mortgage Registration Act of 2011, would prohibit Fannie Mae, Freddie Mac, and Ginnie Mae from purchasing or securitizing a mortgage that is registered with the Mortgage Electronic Registration System (MERS). MERS is a centralized mortgage registration system that bypasses state laws requiring local registration of mortgages and other liens on real estate. MERS is involved in legal challenges questioning its authority to participate in foreclosures and its ability to maintain a clear history of ownership of real estate. Some of the employment contracts between the enterprises and employees and former employees provide that the appropriate enterprise shall pay legal expenses incurred as a result of the employment. H.R. 2428 , GSE Legal Fee Reduction Act of 2011, would require the enterprises to propose to FHFA a methodology to determine "reasonable" legal expenses of an employee or former employee. Under HERA the conservator, FHFA, can repudiate any contracts (including employment contracts) entered into prior to the conservatorship. H.R. 2436 , Fannie Mae and Freddie Mac Taxpayer Payback Act of 2011, would prevent a reduction in the annual dividend rates of 10% in cash or 12% in preferred stock paid by the enterprises to Treasury. H.R. 2439 , Removing GSEs Charters During Receivership Act of 2011, would empower FHFA to revoke an enterprise's charter and requires the charter to be revoked at the termination of a limited-life entity created as part of the receivership process. Presently only Congress can terminate an enterprise's charter. H.R. 2441 , Housing Trust Fund Elimination Act of 2011, would terminate the Housing Trust Fund, the Capital Magnet Fund, and the Hope Reserve Fund, which were established by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ) and were to be funded by the enterprises. The enterprises financial conditions precluded any contributions, but $80 million was appropriated in the FY2010 budget for the Capital Magnet Fund. H.R. 2440 , Market Transparency and Taxpayer Protection Act of 2011, would direct FHFA to identify non-mission critical assets held by the enterprises. Patents and mortgage data are specifically identified as possibly non-mission critical assets. FHFA would submit to Congress a plan to sell these assets. It would, also, require Fannie Mae and Freddie Mac to release loan and appraisal data in a manner that would not disclose personally identifiable information. H.R. 2462 , Cap the GSE Bailout Act of 2011, would set in statute the maximum amount of support that Treasury has contracted to provide each enterprise in the Preferred Stock Purchase Agreements (PSPA), although an amendment to this bill would allow the director of FHFA to supply additional financial support if the private secondary mortgage market were not viable. To keep each of the enterprises solvent, Treasury has contracted to purchase preferred stock subject to certain limits. Initially, the limit was $100 billion for each GSE, but this amount was raised to $200 billion each. In late 2009, the PSPA were amended to provide for unlimited support in calendar years 2010 through 2012. Outside of 2010-2012, the $200 billion limits apply. For more information of the enterprises' financial condition, see CRS Report RL34661, Fannie Mae's and Freddie Mac's Financial Problems , by [author name scrubbed]. Two pairs of broader companion bills have been introduced in the 112 th Congress. The first pair is Title VI of H.R. 408 and Title VI of S. 178 ; the second pair is H.R. 1182 and S. 693 . The two sets of companion legislation have some different provisions pertaining to the enterprises and include some, but not all, of the provisions of H.R. 1221 through H.R. 1227 . In addition, H.R. 1859 and H.R. 2413 would replace the enterprises. H.R. 408 and S. 178 , both titled the Spending Reduction Act of 2011, are identical and address many other issues besides reforming Fannie Mae and Freddie Mac. These unrelated concerns are not addressed in this report. Title VI, the GSE Bailout Elimination and Taxpayer Protection Act, of these two bills would terminate the enterprises' conservatorships in 24 months (or six months later if FHFA determines that financial markets would be adversely affected by the termination and so notifies Congress). At the end of the conservatorship, the enterprises would either go into receivership and be dissolved or would continue under revised charters. These revisions would impose the following changes: Starting one year after leaving conservatorship, the enterprises would have to reduce their portfolios to $250 billion each over four years; H.R. 1224 provides for five years, starting one year after enactment. (Section 604(2)) The enterprises would no longer have housing goals (including the housing trust fund and the magnet fund contributions). This is similar to H.R. 1226 . (Section 604(1)) Certain provisions in H.R. 408 and S. 178 are not included in the more narrowly focused bills: The enterprises would leave conservatorship 24-30 months after enactment. They would either be returned to stockholder control or be dissolved under receivership. (Section 603) Three years after the enterprises return to stockholder control, their charters would be repealed as applied to new business. There would be a 10-year wind-down period followed by their dissolution, which would make provisions for continued payment of each enterprise's financial obligations such as debts and MBS. (Section 606) FHFA would have strengthened authority to set and to enforce minimum capital levels. (Section 604(3)) The conforming loan limit would be set at $417,000 nationwide with no high-cost exceptions and the enterprises could not purchase homes selling for more than the area median home price. The conforming loan limit would only increase in future years to reflect increasing house prices. The conforming loan limit is currently $417,000, except in high-cost areas where the limit is higher with a maximum of $625,500. (Section 604(4)) The enterprises would be prohibited from purchasing mortgages greater than the area median home price. (Section 604(4)(F)) The minimum downpayment for mortgages purchased by the enterprises would be 5% during the 12 months after leaving conservatorship, 7.5% during the second 12 months and 10% afterward. Currently, the required downpayment is flexible as part of the mortgage underwriting process and may affect the interest rate paid by the borrower. (Section 604(5)) The enterprises would be required to pay all state and local taxes. Currently, they pay only state and local property taxes. (Section 604(6)) The enterprises would be required to register all stocks and public offerings with the Securities and Exchange Commission (SEC). (Section 604(7)) FHFA would charge each enterprise for the value of the benefits provided by the government. (Section 604(8)) The other pair of companion bills ( H.R. 1182 and S. 693 ) contains all the provisions of H.R. 408 and S. 178 (except for the recovery of the value of the federal guarantee), and has two additional provisions. More specifically, compared with H.R. 408 and S. 178 , H.R. 1182 and S. 693 would add the guarantee fee increase also contained in H.R. 1222 (Section 4(a)(4)); require the enterprises to reduce their portfolios to $250 billion each over five years like H.R. 1224 , but unlike the four years in H.R. 408 and S. 178 (Section 4(a)(2)); and repeal the affordable housing goals like H.R. 1226 and the other pair of companion bills (Section 4(a)(1)). Provisions in H.R. 1182 and S. 693 not contained in any of the narrowly focused bills but contained in H.R. 408 and S. 178 would end the enterprises' conservatorship in 24 months (without the option for FHFA to grant a six month extension) (Section 3); start the phase-out the enterprises' charters as pertains to new business three years after they leave conservatorship (Section 5); repeal the enterprises' exemption from SEC registration as pertains to MBS and subordinated debt (Section 4(b)(4)); lower the conforming loan limit to $417,000, eliminate the high-cost areas limit, and increase in future years to reflect increasing house prices (Section 4(a)(3)); direct FHFA to increase the minimum capital required of the enterprises (Section 4(b)(1)); increase borrower downpayment requirements (Section 4(b)(2)); and require the enterprises to pay all state and local taxes (Section 4(b)(3)). In addition, H.R. 1182 and S. 693 would prohibit a reduction in the 10% annual cash dividend paid to Treasury under terms of the support contracts with the enterprises (Section 4(a)(5)). H.R. 1859 , Housing Finance Reform Act of 2011 , would authorize FHFA to charter housing finance guaranty associations to pool and to securitize single-family and multifamily mortgages (Section 3). The associations would guarantee the timely payment of principal and interest to investors, and the federal government would provide (and charge for) a backup guarantee. The associations would be restricted to purchasing and securitizing existing mortgages, and they could specialize in particular markets such as community banks and multifamily mortgages. The maximum mortgage size would be the greater of 150% of the national average home price or 150% of the area median price. Using the National Association of Realtor's median single-family house sales data, the nationwide mortgage limit would be $256,000 compared to $417,000 presently. The highest area limits would be Honolulu at $897,300 (currently $721,050) and San Jose at $886,500 (currently, $625,500). Mortgages on one-to-four family dwelling units (usually called single family), could be purchased only if the loan-to-value ratio is 80% or less, unless the seller retains a 10% participation, the seller agrees to repurchase the mortgages in default according to terms approved by FHFA, or the unpaid principal balance in excess of 80% is guaranteed. FHFA would regulate the associations and could place them into conservatorship or receivership. FHFA would create a plan to wind down the enterprises as the associations were chartered (Section 4). During the transition, the enterprises would not have affordable housing goals and would be required to pay state and local taxes. Currently, the only state and local taxes that they pay are property taxes. H.R. 2413 , Secondary Market Facility for Residential Mortgages Act of 2011, would create a federal corporation to purchase and securitize mortgages that meet certain underwriting standards. The facility would be prohibited from originating mortgages and would charge a guarantee fee and a reinsurance fee for purchasing mortgages. The fees would be adjusted to keep the facility's market share under 50%, except in unusual circumstances. The goal of the guarantee fee would be to cover the payment of mortgages during normal times. The reinsurance fee would compensate Treasury for the backup federal guarantee. The fees would be based on the quality of the mortgages, regardless of the location of the home, the volume of mortgages provided by the seller, or any reduction in homeownership costs proved to the owner. Mortgages eligible for purchase would be for 30 years or less, be for no more that 80% of the sales price of the house (or 90% of the sales price if the seller retains a 10% participation, or the homeowner purchases private mortgage insurance). The maximum mortgage size would be based on the formula most recently used in FY2011 that provides for a $729,750 maximum in high-cost areas. A reorganized FHFA would oversee the facility. | As households and taxpayers, Americans have a large stake in the future of Fannie Mae and Freddie Mac. Homeowners and potential homeowners indirectly depend on Fannie Mae and Freddie Mac, which in recent years backed and guaranteed home loans accounting for nearly half of the outstanding home mortgages in the nation. Taxpayers have a large investment in Fannie Mae and Freddie Mac. The Department of the Treasury kept the two insolvent companies in business by providing more than $175 billion in support. Based on past performance, it is not clear how the enterprises will be able to repay Treasury out of future earnings. In addition to the $175 billion in direct support, Treasury and the Federal Reserve (the Fed) purchased nearly $1.4 trillion in GSE-issued and guaranteed mortgage-backed securities (MBS). These two entities are stockholder-owned, congressionally chartered companies that purchase home mortgages, commonly called government-sponsored enterprises (GSEs). In 2008, increasing mortgage delinquencies and the general financial crisis weakened the two enterprises to the point that they agreed to a voluntary takeover by the federal government known as conservatorship. This report summarizes and analyzes bills introduced in the 112th Congress that seek to enhance the public accountability of the two enterprises. The bills covered are H.R. 31, H.R. 408, H.R. 463, H.R. 1182, H.R. 1221, H.R. 1222, H.R. 1223, H.R. 1224, H.R. 1225, H.R. 1226, H.R. 1227, H.R. 1859, H.R. 2413, H.R. 2425, H.R. 2428, H.R. 2436, H.R. 2439, H.R. 2440, H.R. 2441, H.R. 2462, S. 178, and S. 693. Some seek to reduce the cost to the government, while others seek to change the enterprises' charters if or when they leave conservatorship. None of the above bills introduced proposes government actions to replace the two enterprises. To date, two bills, H.R. 1859 and H.R. 2413, propose creating a replacement for the two enterprises. H.R. 1859 would authorize the Federal Housing Finance Agency (FHFA) to charter special purpose associations to support the secondary mortgage market by issuing MBS with an explicit federal catastrophic guarantee. The associations would be charged for this guarantee. H.R. 1859 would require FHFA to develop a plan to transition from enterprise support for the secondary mortgage market to support by these new associations. The second bill, H.R. 2413, would create a government corporation (the Secondary Market Facility for Residential Mortgages) to purchase and to securitize mortgages. Those selling mortgages to the facility would be required to pay guarantee and reinsurance fees for an explicit federal guarantee on the securities. Because Fannie Mae and Freddie Mac are under conservatorship, Congress has unusual leverage to direct FHFA, which is both their regulator and conservator, to implement policy changes. Currently, FHFA has unusual control in that it both regulates and manages Fannie Mae and Freddie Mac. This report will be updated as warranted. |
In accordance with the doctrine of federalism, the American constitutional system divides privilege and power between the central national government and the individual states. Significant constitutional conflicts often arise, however, where the legitimate exercise of power at one level is incompatible with the legitimate exercise of power at the other. The convergence of state sovereign immunity and federal intellectual property law provides one example of the complicated interaction between the powers of the federal government, the state, and the individual, and the inevitable conflicts that arise as all three attempt to exercise their established powers and rights. The Eleventh Amendment to the U.S. Constitution, with limited exceptions, bars an individual from suing a state under federal law without the state's consent. While states may consent to suit by waiving the privilege of sovereign immunity, in limited circumstances Congress may also abrogate, or overrule, that immunity by passing a statute pursuant to the enforcement power under § 5 of the Fourteenth Amendment. There are times, however, when a state may decide against waiving its sovereign immunity and Congress is unable to abrogate sovereign immunity pursuant to the Fourteenth Amendment. In these situations, an individual is barred from suing a state for monetary damages for a violation of federal law. Intellectual property has emerged as one area where Congress has been unsuccessful in abrogating sovereign immunity, and states have not expressly chosen to waive their constitutionally protected privilege of immunity. Therefore, individuals may not recover damages under federal patent, copyright, or trademark law for infringements perpetrated by a state entity. Intellectual property (IP) law has several major branches, applicable to different types of subject matter, including the following: copyright (original artistic and literary works of authorship), patent (inventions of processes, machines, manufactures, and compositions of matter that are useful, new, and nonobvious), and trademark (commercial symbols and commercial names). The source of federal copyright and patent law originates with the copyright and patent clause of the U.S. Constitution, which authorizes Congress to "promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." By contrast, the constitutional basis for federal trademark law is the power to regulate interstate commerce under the commerce clause. The Copyright Act, Patent Act, and the Trademark Act of 1946 (conventionally known as the Lanham Act) provide legal protection for intellectual property against unauthorized use, theft, and other violations of the rights granted by those statutes to the IP owner. The Copyright Act provides copyright owners with the exclusive right to control reproduction, distribution, public performance, and display of their copyrighted works. The Patent Act grants patent holders the right to exclude others from making, using, offering for sale, or selling their patented invention throughout the United States, or importing the invention into the United States. The Lanham Act allows sellers and producers of goods and services to prevent a competitor from (1) using any counterfeit, copy, or imitation of their trademarks (that have been registered with the U.S. Patent and Trademark Office) in connection with the sale of any goods or services in a way that is likely to cause confusion, mistake, or deception, or (2) using in commercial advertising any word, term, name, symbol, or device, or any false or misleading designation of origin or false or misleading description or representation of fact, which (a) is likely to cause confusion, mistake, or deception as to affiliation, connection, or association, or as to origin, sponsorship, or approval, of his or her goods, services, or commercial activities by another person, or (b) misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities. In addition, the Lanham Act grants to owners of "famous" trademarks the right to seek injunctive relief against another person's use in commerce of a mark or trade name if such use causes dilution by blurring or tarnishing the distinctive quality of the famous trademark. Private individuals and organizations may own various forms of IP, either because they are the creators of such IP and have not relinquished their rights by assignment, or they have acquired legal title to the IP. Federal, state, and local government entities also may own or claim a property interest in certain patents, copyrights, and trademarks, with the notable exception that the Copyright Act categorically excludes copyright protection for any work of the U. S. government, although the federal government may receive and hold copyrights transferred to it by assignment, bequest, or otherwise. Generally speaking, the use of a patented invention, copyrighted work, or trademark without the authorization of the IP owner constitutes infringement. The IP owner may initiate a civil action against an alleged infringer for a violation of any of the exclusive rights conferred by a patent, copyright, or trademark. If a defendant is found guilty of patent infringement in a lawsuit brought by the patent holder, the remedies available to the plaintiff include an injunction to cease and prohibit the offending activity by the defendant, damages to compensate for the infringement, and even attorney fees. Federal law only provides civil remedies in the event of patent infringement; there are no criminal sanctions. The Copyright Act provides several civil remedies for infringement, including the possibility of obtaining injunctive relief, actual damages suffered by the copyright owner due to the infringement, statutory damages, and costs and attorney fees. The U.S. Department of Justice may also criminally prosecute particularly egregious violators of the copyright law in the case of willful infringement for purposes of commercial advantage or private financial gain. The usual remedy for trademark infringement is injunctive relief, although monetary relief is also available. In addition, the court may order that any infringing articles bearing the reproduction, copy, or colorable imitation of a registered trademark be destroyed. As noted above, IP owners may enforce their rights under the federal IP laws by bringing lawsuits against alleged infringers. The defendants who may be sued for infringement include private individuals, companies, and also the federal government. However, while both monetary and injunctive relief are available in the case of private entity defendants, the remedies differ when the defendant is the federal government in copyright and patent infringement cases. Federal government infringement of a copyright or patent may give rise to a cause of action that is governed by statute, 28 U.S.C. § 1498. This law provides that if the federal government uses a patented invention without the authorization of the patent holder, or if the federal government infringes a copyright, the only remedy available to the IP owner is the right to bring suit in the U.S. Court of Federal Claims to recover "reasonable and entire compensation" from the federal government. However, note that the federal government remains fully liable for all forms of relief (both monetary and injunctive) that are provided under the Lanham Act in the case of trademark infringement. Yet when state governments and state institutions (such as state-owned universities) infringe copyrights, patents, or trademarks, the IP owner currently has very limited legal recourse because of the U.S. Supreme Court's jurisprudence concerning the Eleventh Amendment. This case law has produced what some consider an anomalous outcome: a state may own a copyright, patent, or trademark and sue to enforce its rights in federal court, but that state may not be held accountable for monetary damages for its own violations of others' IP rights unless the state waives its sovereign immunity and consents to be sued. Shortly after the Revolutionary War, two citizens of South Carolina sued the state of Georgia to recover a Revolutionary War debt owed by the State. The case eventually made its way to the U.S. Supreme Court, where in Chisholm v. Georgia the Court noted that Article III of the Constitution specifically granted the federal courts jurisdiction over suits "between a state and citizens of another state." The authorization came as a considerable surprise to the states, which had each relied on the immunity from suit that had commonly accompanied state sovereignty. In a direct rebuke of Chisholm , Congress and the states immediately acted to protect state sovereign immunity through the ratification of the Eleventh Amendment, the first amendment to the Constitution subsequent to the Bill of Rights. The Eleventh Amendment states, "The Judicial power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State." Though the language of the amendment appears to bar only suits against a state by non-residents, the Supreme Court has interpreted the doctrine of sovereign immunity to also bar suits by citizens against their own state. The Eleventh Amendment therefore protects states from being sued in federal court without their consent in both federal question and diversity cases. The Court expanded the purview of the amendment in Alden v. Maine to include immunity from suit under federal law within a state's own court system. In Hans v. Louisiana , the Court considered whether the grant of federal jurisdiction found in Article III of the Constitution negated state sovereign immunity. In holding that it did not, the Court characterized the Eleventh Amendment as a specific attempt to overturn the Court's misinterpretation in Chisholm , rather than an affirmative amendment to the original structure of the Constitution. The Eleventh Amendment had not constituted a change in the Constitution, the Court determined, but a restoration of the original and intended constitutional design. This interpretation allowed the Court to expand sovereign immunity beyond the confines of the language of the Eleventh Amendment. It was not until 1996 that the Court attempted to define the extent to which Congress had the authority to abrogate sovereign immunity where a state refused to waive its protection. In Seminole Tribe of Florida v. Florida, the Supreme Court reasoned that because the Eleventh Amendment was ratified after Article I of the Constitution, Congress could not abrogate state sovereign immunity pursuant to any legislative power granted under the enumerated powers of Article I, § 8. The Court did, however, suggest that Congress could abrogate sovereign immunity through a statute passed pursuant to the § 5 enforcement power of the Fourteenth Amendment because that legislative authority was granted subsequent to the ratification of the Eleventh Amendment. It became clear following Seminole Tribe that any attempt by Congress to abrogate state sovereign immunity would have to be justified under the Fourteenth Amendment. From 1790 to 1962, no court had dismissed a suit for alleged intellectual property infringement by a state on Eleventh Amendment sovereign immunity grounds. An individual was free to recover damages from a state that was guilty of copyright, patent, or trademark infringement. Then in 1962, a copyright infringement action against an Iowa school district was dismissed by the Eighth Circuit Court of Appeals for lack of jurisdiction under the Eleventh Amendment. The issue simmered until 1985 when the Supreme Court dismissed an employment discrimination case on sovereign immunity grounds because Congress had not provided the requisite "unequivocal language" in the Rehabilitation Act of 1973 necessary to abrogate state sovereign immunity. The Court in Atascadero State Hospital v. Scanlon held that federal statutes purporting to abrogate state sovereign immunity must clearly express Congress's intent to provide a remedy for individuals filing suit against a state. The Federal Circuit Court of Appeals then applied Atascadero in Chew v. California , in holding that the Patent Act did not contain the "requisite unmistakable language of Congressional intent necessary to abrogate Eleventh Amendment immunity." Congress, concerned about the integrity of its intellectual property laws and unwilling to accept the proposition that states could enjoy the protections of federal intellectual property law without recognizing others' interests in intellectual property protections, soon responded to the uncertainty created by the Atascadero and Chew decisions by passing the Copyright Remedy Clarification Act (CRCA), the Trademark Remedy Clarification Act (TRCA), and the Patent and Plant Variety Protection Remedy Clarification Act (PRCA). Language within these acts specifically and unequivocally abrogated state sovereign immunity and subjected the states to suits for monetary damages brought by individuals for violation of federal copyright, trademark, or patent law. In 1999, sensing a growing tension between state and federal power, the Supreme Court granted certiorari to review two companion cases out of the Third Circuit and Federal Circuit Court of Appeals dealing directly with the abrogation of state sovereign immunity under the PRCA and the TRCA. College Savings Bank had been awarded a patent for its financing methodology, based on certificates of deposit and annuity contracts, designed to guarantee investors funds for future college expenses. The state of Florida soon adopted College Savings Bank's methodology and created the Florida Prepaid Postsecondary Education Expense Board (the Board) to issue similar financing options to its own residents. Consequently, College Savings Bank filed two separate actions seeking damages from the Board. In the first action, Florida Prepaid v. College Savings Bank , College Savings Bank filed a claim for patent infringement against the Board under the PRCA. In the second action, College Savings Bank v. Florida Prepaid , College Savings Bank filed a claim alleging false and misleading advertising by the Board under the TRCA. In defense, the Board argued that both the PRCA and the TRCA were an improper attempt by Congress to abrogate state sovereign immunity. The United States intervened in both cases in support of College Savings Bank. The principal issue in Florida Prepaid was whether the PRCA had legitimately abrogated state sovereign immunity from suit for patent infringement. College Savings Bank argued that Congress had lawfully done so pursuant to the due process clause by ensuring an individual an adequate remedy in the case of a deprivation of property perpetrated by the state in the form of patent infringement. The Board responded that the PRCA was passed pursuant to Congress's enumerated Article I powers, rather than its powers under the Fourteenth Amendment, and therefore constituted invalid abrogation under Seminole Tribe . The district court agreed with College Savings Bank and denied the Board's motion to dismiss. The Federal Circuit Court affirmed, holding that "Congress had clearly expressed its intent to abrogate the States' immunity ... and that Congress had the power under § 5 of the Fourteenth Amendment to do so." The PRCA had specifically made "States, instrumentalities of States, and officers and employees of States acting in their official capacity, [] subject to suit in Federal court by any person for infringements of patents." However, the Supreme Court overturned the Federal Circuit decision, holding that the PRCA was not a valid use of the § 5 enforcement power of the Fourteenth Amendment and therefore not a legitimate abrogation of state sovereign immunity. In reaffirming that Congress may not abrogate state sovereign immunity pursuant to Article I powers, the Court applied its holding in City of Boerne v. Flores to determine whether the PRCA was aimed at securing property protections guaranteed under the Fourteenth Amendment rather than passed pursuant to Article I, § 8, clause 8. While admitting that patents were "property" protected by the due process clause, the Court held that because Congress had not shown sufficient evidence of a "widespread and persisting deprivation of constitutional rights" nor adequately considered the availability of alternative remedies under state law, the PRCA was "so out of proportion to a supposed remedial or preventive object that [it] cannot be understood as responsive to, or designed to prevent, unconstitutional behavior." The principal issue in College Savings Bank was whether the state of Florida had indirectly waived sovereign immunity by electing to engage in a federally regulated activity knowing that such conduct would subject it to suit under federal law. College Savings Bank argued that Congress had lawfully abrogated state sovereign immunity in trademark infringement actions through the TRCA. Alternatively, College Savings Bank argued that Florida had waived sovereign immunity by voluntarily engaging in the "activity of selling and advertising a for-profit educational investment vehicle in interstate commerce after being put on notice by the clear language of the TRCA that it would be subject to ... liability for doing so." The district court was not swayed by College Savings Bank's arguments and dismissed the case. The Court of Appeals for the Third Circuit affirmed. The Supreme Court affirmed the dismissal, holding that Florida's actions did not constitute waiver. The Court first brushed aside the petitioner's abrogation argument, reasoning that neither of the TRCA's false or misleading advertising provisions related to interests that would qualify as property interests protected by the due process clause, and were therefore not passed pursuant to the Fourteenth Amendment. The Court devoted a large part of its opinion to rejecting College Savings Bank's argument that Florida had waived sovereign immunity through its knowing participation in an activity that would subject it to suit under the TRCA. The majority refused to recognize any form of constructive waiver in sovereign immunity; instead, waiver could only be found where the state voluntarily invoked federal jurisdiction, or where the "state makes a clear declaration that it intends to submit itself" to federal jurisdiction. Florida had done neither. As a result of Florida Prepaid and College Savings Bank , the Eleventh Amendment currently bars an individual from successfully seeking damages from a state for federal patentâand likely copyright and trademarkâinfringement, unless the state has clearly consented to the suit through waiver, or Congress has successfully abrogated state sovereign immunity pursuant to a valid use of its legislative power under the Fourteenth Amendment. The specifics of these two avenues that would permit a state to be suedâwaiver and abrogationâare discussed in detail below. Although state sovereign immunity is a "personal privilege which it may waive at [its] pleasure," the Court will only recognize waiver in instances where the state has explicitly shown its intent to waive immunity. The College Savings Bank Court held that waiver would only be legitimate where "the State voluntarily invoke[d] our jurisdiction," or where "the State makes a 'clear declaration' that it intends to submit itself to our [the federal court's] jurisdiction." For example, consent to suit in a state's own courts does not translate into a waiver of immunity in federal court because it does not constitute a clear declaration of waiver of immunity in the federal system. Illustrating the importance of state sovereign immunity, the Court equated the requirements for waiver of sovereign immunity by a state to the requirements for waiver of a protected constitutional right by an individual. In order to convey the seriousness with which the Court would approach the standard for waiver of a state's right to immunity in federal court, the majority opinion in College Savings Bank specifically overturned existing precedent relating to waiver implied by the state's actions rather than through express consent. At issue in Parden v. Terminal R. of Ala. Docks Dept. was a statute Congress had passed that authorized employment discrimination suits by employees of any employer operating a railroad in interstate commerce. The Parden Court held, against a strong dissent, that by "operating a railroad in interstate commerce, Alabama must be taken to have accepted that condition and thus to have consented to suit." By participating as a common carrier in interstate commerce the State had impliedly, or constructively, waived sovereign immunity. The petitioner in College Savings Bank used the Parden precedent to argue that Florida, "by engaging in the ... activity of selling and advertising a for-profit educational investment vehicle in interstate commerce" with the knowledge that doing so would subject it to suit under the TRCA, had impliedly waived its immunity. The Court refused to accept the argument. After outlining the many cases that had narrowed the legitimacy of constructive waiver under Parden , the Court expressly overruled the Parden "anomaly": "There is little reason to assume actual consent based upon the State's mere presence in a field subject to congressional regulation." Even where a state is on notice that participation in a given field could subject it to suit under federal law, merely entering the regulated field does not amount to a voluntary decision to waive immunity. In overruling Parden , College Savings Bank made clear that a federal court would require explicit evidence of an intent to waive sovereign immunity before allowing a case against a state to proceed. While this case barred the recognition of an implied waiver based on general state participation in a regulated field, other cases have wrestled with the extent to which states may invoke federal court jurisdiction and waive immunity by voluntarily participating in legal proceedings. The Supreme Court has held that a state voluntarily invokes a federal court's jurisdiction, and waives sovereign immunity, where the state voluntarily removes a case from state court to federal court. In Lapides v. Board of Regents, the Court clearly distinguished between the repudiated Parden -style constructive waiver, and waivers effected by affirmative litigation conduct, such as removal. Paul Lapides, a professor at the University of Georgia had brought suit against the Board of Regents of the University System of Georgia for violation of state and federal civil rights law. The state of Georgia joined with their co-defendants to remove the case to federal district court and asked for a dismissal of the claims under state sovereign immunity. The Court, limiting its holding to those situations in which a state has expressly waived immunity in the underlying state court proceedings, held that where a state voluntarily removes a case to federal court it engages in affirmative litigation conduct sufficient to waive sovereign immunity. In reaching its holding, the Court expressed concern over the "unfair tactical advantages" and "selective use of immunity" that a state would enjoy by removing a case to federal court. Lapides , however, left unclear exactly what "affirmative litigation conduct" would qualify as waiver. The Federal Circuit Court of Appeals entered the fray in a 2002 case, holding that a state participates in affirmative litigation conduct sufficient to waive sovereign immunity when the state initiates the legal proceedings. In Vas-Cath Inc. v. Univ. of Missouri , the University of Missouri had initiated an administrative proceeding known as an interference action within the U.S. Patent and Trademark Office (PTO) to clarify a dispute with Vas-Cath over ownership of a patent. Following six years of proceedings, the PTO issued an order granting ownership of the patent to the university. As authorized by law, Vas-Cath appealed the PTO decision to the United States District Court for the District of Columbia. The university had the case transferred to Missouri where the federal district court granted its motion to dismiss on the grounds of Eleventh Amendment sovereign immunity. On appeal, the Federal Circuit reversed the district court decision, holding that where a state initiates an administrative proceeding with ensuing judicial review, the state "cannot both retain the fruits of that action and bar the losing party from its statutory right of review." By voluntarily commencing and participating in the PTO interference action, the state had waived its privilege of sovereign immunity with respect to judicial review of that decision in federal court. The appellate court grounded its decision on the Supreme Court's previously expressed concern over the "selective use of immunity to achieve litigation advantages." The court held it would be unfair and inconsistent to allow the state, in one continuous action, to invoke sovereign immunity "to shield the agency decision from review." Where a state becomes a party in a legal proceeding that it voluntarily initiated, the state has "submitted its rights for judicial determination" and may not escape the proceedings under the auspices of the Eleventh Amendment until the statutorily guaranteed judicial review is exhausted. Later that year, the Federal Circuit limited its decision in Vas-Cath and refused to extend the doctrine of waiver by affirmative litigation conduct to separate lawsuits. The Court affirmed the rule that a state's waiver of immunity through litigation conduct in one case does not extend to a separate, future action. In Biomedical Patent Management Corp. v. California Dept. of Health Services, a private contractor employed by California's Department of Health Services (DHS) had sued Biomedical in 1997 in the U.S. District Court for the Northern District of California for a declaratory judgment stating that the contractor's pregnancy screening program did not infringe a Biomedical patent. DHS intervened in that action, also seeking a declaration of non-infringement, and Biomedical responded with a counterclaim in favor of patent infringement. The 1997 case was eventually dismissed for lack of venue. Biomedical re-filed its infringement claim in 1998, but the U.S. District Court for the Southern District of California dismissed the case pending the Supreme Court's determination of Florida Prepaid and College Savings Bank . Finally, in 2007, Biomedical again re-filed its claim against DHS, at which time DHS filed a motion to dismiss the case on state sovereign immunity grounds that was subsequently granted by the district court. The Federal Circuit affirmed the district court's decision to grant the state's motion for dismissal under the Eleventh Amendment. The appellate court held that California had clearly waived sovereign immunity in the 1997 case and voluntarily submitted itself to the federal court's jurisdiction by intervening in the non-infringement action. The question the court had to answer, however, was whether the waiver in the 1997 case would carry over and extend to the 2006 case involving the same parties and litigating the same subject matter. The Federal Circuit, after a thorough survey of state sovereignty waiver jurisprudence, determined that waiver could not carry over to a separate lawsuit, and that "any waiver, including one effected by litigation conduct, must be 'clear.'" As it had in Vas-Cath , the court recognized Biomedical's concerns of unfairness, inconsistency, and selective use of immunity, but the court would not extend waiver through litigation conduct to separate legal proceedings. The Federal Circuit clearly differentiated between waiver scenarios consisting of one continuous action and those consisting of separate actions. Biomedical looked to Lapides , Vas-Cath , and New Hampshire v. Ramsey as precedent for finding waiver through litigation conduct where a state voluntarily submits itself to the jurisdiction of a federal court. The court rejected the argument, pointing out that none of the cases Biomedical cited supported the extension of state waiver to a separate action. Instead, all had "involve[d] the application of a state's waiver of immunity in the same continuous proceeding." The court did acknowledge the existence of situations in which concerns of unfairness, inconsistency, and selective use of immunity would be so significant as to outweigh the court's policy not to extend waiver to a separate legal action. No similar concerns existed in the Biomedical case, however, that were sufficient to "preclude" DHS from asserting immunity. In addition to some forms of litigation conduct, state sovereign immunity may also be waived where the state specifically submits itself to the jurisdiction of a federal court through a provision of an enforceable contract. In Baum Research and Developmental Co., Inc., v. Univ. of Mass. at Lowell , a dispute arose over a contract the University of Massachusetts had entered into with Baum Research relating to the firm's patented device for testing baseball bats. The two parties formed a "Confidential License Agreement" for the use of the patented device, which included a governing law provision stating that all parties "agree to proper venue and hereby submit to jurisdiction in the appropriate State or Federal courts." The court held this contract provision to be "a clear and unambiguous consent to the jurisdiction of a Michigan federal court for disagreements arising from this licensing agreement." Although general consent provisions are not sufficient to waive sovereign immunity, this provision was clear and unequivocal as to the obligation of the state to submit to the jurisdiction of the federal court in the case of a future dispute. However, a state that participates in the federal trademark system or that files a civil action in a federal court seeking review of a decision of the Trademark Trial and Appeal Board of the PTO does not waive its sovereign immunity, according to the federal district court in Board of Regents of the Univ. of Wisconsin System v. Phoenix Software Int ' l, Inc. This opinion involved the Trademark Trial and Appeal Board's (TTAB's) decision to cancel a federal trademark that had been registered by the Board of Regents of the University of Wisconsin System. A software manufacturer had filed a petition with the TTAB seeking the cancellation, asserting that the Board of Regents' mark was similar to the one that it used for its software for computers. The TTAB granted the petition, prompting the Board of Regents to appeal the decision to the federal district court. After the software manufacturer filed a counterclaim against the Board of Regents for trademark infringement related to the university's use of the mark, the university moved to dismiss the counterclaim on the grounds that the university is a branch of the State of Wisconsin and thus entitled to sovereign immunity. The federal court granted the motion and dismissed the software manufacturer's counterclaim. In reaching these decisions, the court first examined the validity of Congress's attempt to abrogate state immunity from trademark infringement suits pursuant to the Trademark Remedy Clarification Act. Noting that the Supreme Court's decision in College Savings Bank considered only the liability of states for claims brought under the false and misleading advertisement provisions of the federal Lanham Act, and not the statute's trademark infringement provisions, the district court concluded that "[i]t is unlikely the [Supreme] Court would reach a different conclusion in trademark litigation." Citing that the TRCA's legislative history had not found a pattern of trademark infringement by the states and that it had not seriously discussed Fourteenth Amendment concerns to justify abrogation, the federal court ruled that the TRCA is not "congruent and proportional" to any Fourteenth Amendment injury and thus the TRCA was unconstitutional and fails to abrogate state immunity from trademark infringement suits. With respect to the waiver issue, the district court explained that the State of Wisconsin has not "constructively waive[d]" its immunity by participating in the federal trademark system. While acknowledging that College Savings Bank had held that Congress may condition a "gift" on the waiver (such as a grant of funds to the state upon waiver of immunity), the Trademark Remedy Clarification Act does not condition a state's receipt of a federal trademark registration on a waiver of sovereign immunity; rather, the court explained, the TRCA "seeks to expose all states to liability, regardless of their participation in the federal trademark system." The court also determined that Wisconsin had not waived its immunity by appealing the TTAB's cancellation decision to a federal court, because its invocation of federal jurisdiction was not voluntary. Here, the software manufacturer had initiated the administrative proceedings by petitioning the TTAB to cancel the state's trademark, and the state was "simply ... contesting unfavorable decisions in suits brought against it." The Supreme Court set the standard for waiver of state sovereign immunity in College Savings Bank : "Generally, we will find a waiver either if the State voluntarily invokes [a federal court's] jurisdiction, or else if the State makes a 'clear declaration' that it intends to submit itself to our jurisdiction." A state must clearly submit itself to federal jurisdiction and cannot constructively or impliedly waive its sovereign immunity. The Federal Circuit and other federal district courts have interpreted this rule to validate waiver where a state voluntarily removes a case to federal court; where a state voluntarily initiates and participates in the litigation; where the case is part of one continuous action in which the state previously waived its immunity; where a state enacts legislation waiving its sovereign immunity; or where a state enters a contract containing a provision in which the state specifically submits to federal court jurisdiction in the case of a dispute. Absent these forms of clear waiver, a state does not relinquish its privilege of sovereign immunity under the Eleventh Amendment. Although state sovereign immunity is a common law privilege preserved by the Eleventh Amendment, under limited situations Congress may abrogate, or override, state immunity in a given subject matter. In Seminole Tribe , the Supreme Court held that Congress could not abrogate state sovereign immunity through a statute passed pursuant to any of its Article I powers. However, the Court left the door open for abrogation by statutes passed pursuant to the § 5 legislative enforcement power of the Fourteenth Amendment. This signifies that any attempt by Congress to abrogate state sovereign immunity must find a basis in the Fourteenth Amendment. In order for a statute to be passed pursuant to Congress's § 5 power, the means adopted must be congruent and proportional to the remedy of a due process, equal protection, or privileges and immunities injury. The Court in Florida Prepaid held that the PRCA was passed pursuant to Congress's Article I powers, rather than its § 5 power, and was therefore an invalid abrogation of state sovereign immunity. Although the Court acknowledged that patents were "property" under the due process clause, Congress had failed to satisfy the "congruence and proportionality" test used in City of Boerne v. Flores to define the scope of the § 5 enforcement power. In considering what measures can be taken to prevent constitutional violations, the City of Boerne Court held that "there must be a congruence and proportionality between the injury to be prevented or remedied and the means adopted to that end." In order to show the required proportionality, Congress must identify conduct transgressing the Fourteenth Amendment's substantive provisions, and must tailor its legislative scheme to remedying or preventing such conduct. The Florida Prepaid Court applied the City of Boerne test to the PRCA and found the evidence of patent infringements by the states to be lacking: "Congress identified no pattern of patent infringement by the states, let alone a pattern of constitutional violations." The record reflected the existence of only eight patent infringement actions against the states "in the 110 years between 1880 and 1990." Without evidence of widespread or pervasive infringements by the states, the Court was unwilling to justify the abrogation of state sovereign immunity under the PRCA. Additionally, Congress had failed to adequately consider the availability of state law remedies. The Court explained that mere patent infringement by the state does not violate the due process clause; rather, "only where the state provides no remedy, or only inadequate remedies, to injured patent owners for its infringement of their patent could a deprivation of property without due process result." Where the state provides an adequate remedy, or the necessary process prior to infringing a patent, there is no violation of due process. Any statute that abrogated state sovereign immunity in a situation where the patent infringement did not amount to a constitutional violation of due process would thus be overboard. The record showed Congress had "barely considered" the availability of state remedies to patent infringements by the state. Because Congress had not presented sufficient evidence of widespread and persisting deprivations of constitutional rights, had not adequately considered the availability of state remedies, and had not adequately tailored its legislation to cover only those patent infringements by the state that constituted constitutional violations, the PRCA was "so out of proportion to a supposed remedial or preventive object" as to be considered an invalid use of the § 5 enforcement power. Thus, the abrogation provision of the PRCA was held to be invalid. In 2000, the Fifth Circuit elaborated on the Florida Prepaid abrogation standard and applied the precedent to copyright law. In Chavez v. Arte Publico Press, the plaintiff sued the University of Houston for copyright infringement under the CRCA for publishing the plaintiff's book without her consent. Relying on Florida Prepaid , the university invoked sovereign immunity as a defense. The court quickly recognized that a copyright, similar in nature to a patent, was a form of property protected by the Fourteenth Amendment and with no waiver argument made, the only question for the court was whether the abrogation provision of the CRCA was within the scope of Congress's § 5 enforcement power and therefore a valid abrogation of state sovereign immunity under Florida Prepaid. In holding that the CRCA, "doomed in the wake of Florida Prepaid ," was not a valid use of Congress's § 5 power, the court gleaned a functional three-part test from the Supreme Court's Florida Prepaid decision. First, the court must consider the nature of the injury and whether "the state's conduct evinced a pattern of constitutional violations." Congress, as it had for the PRCA in Florida Prepaid , had failed to provide sufficient evidence of widespread and unremedied copyright infringement by the states. The record only contained seven instances in which a state utilized the Eleventh Amendment as a defense to copyright infringement. The legislative record demonstrated that Congress's principal concern was over the "potential for future abuse," a worry not sufficient to establish the required "pattern" of infringement by the states. Second, the court must consider whether "Congress studied the existence and adequacy of state remedies for injured copyright owners when a state infringes their copyright." In the case of the CRCA, the Fifth Circuit held that Congress had "barely considered the availability of state remedies for infringement." The court noted there was little documentation by Congress of state contract or takings remedies, and Congress had refused to consider the possibility of granting states concurrent jurisdiction over copyright claims. Finally, the court must consider the breadth of coverage of the legislation. Florida Prepaid made clear that not all patent infringements violate the Constitution. A negligent patent infringement for instance, as opposed to an intentional violation, would not constitute a violation of due process. In Chavez , the court reasoned that because copyright infringement required no finding of an intent to infringe, any valid abrogation statute would have to limit its scope to include only intentional property infringements by the states that amounted to a violation of due process. Florida Prepaid , Chavez , and other cases have not completely closed the door on federal abrogation of state sovereign immunity in the intellectual property realm. If Congress could show a substantial increase in intentional intellectual property infringements by the states, perhaps the courts would reconsider the existence of a widespread pattern of infringement and uphold an abrogation attempt. Ten years after Florida Prepaid , however, the United States District Court for the Southern District of California ruled that, as of 2008, the frequency of state infringements still did not warrant federal abrogation of state sovereign immunity. In Marketing Information Masters v. The Board of Trustees of the California State University , plaintiffs brought suit against the California State University for copyright infringement relating to the school's use of a community impact study for the 2004 Holiday Bowl in San Diego. The district court upheld the state's claim to sovereign immunity and granted the state's motion to dismiss. The court applied the standards of the Supreme Court's rulings in City of Boerne and Florida Prepaid, and cited the Fifth Circuit's holding in Chavez, in ruling that the CRCA was not passed pursuant to a legitimate exercise of the Fourteenth Amendment and therefore did not constitute a valid abrogation of state sovereign immunity. Although the updated record showed eight recent cases of state infringement of copyrights, the evidence "demonstrated at most sporadic violations, not widespread violations by states." The district court was unable to find the "pattern of unremedied conduct" required under City of Boerne for a valid exercise of Congress's Fourteenth Amendment enforcement powers. The district court also found that Congress had failed to adequately consider state remedies and had not sufficiently tailored the CRCA to address only conduct that violates the due process clause. Once again, the courts had made clear that constitutional violations relating to intellectual property infringements by the states were not so pervasive as to warrant abrogation of state sovereign immunity by Congress. With Congress unable to successfully abrogate state sovereign immunity, an individual may only recover damages where a state has "unequivocally" expressed its consent to suit through a clear waiver. There are, however, limited alternative remedies available for individuals in those situations where the state has not waived its immunity. While an aggrieved party may be able to recover monetary damages under state contract, conversion, or takings law, the most likely relief for a plaintiff in these situations would be to sue an individual state officer in his or her official capacity for prospective injunctive relief. The Eleventh Amendment does not bar suits for prospective injunctive relief against state officials acting in violation of federal law. Although this provides no avenue to recover monetary damages, an individual may obtain a court order forcing state officials to cease their unlawful conduct. In Ex Parte Young , the Supreme Court established this prospective remedy in order to mitigate wrongs resulting from the state sovereign immunity defense, and to prevent continued violations of federal law by state officials. To satisfy the Ex Parte Young standard, the injured party must allege an ongoing violation of federal law, seek only prospective relief, and establish that the officer has "some connection with the enforcement of the [illegal] act." Where the plaintiff satisfies this standard, a federal court may enter an injunction stopping the state official from acting in contravention of federal law. However, the Court has not made the Ex Parte Young exception available to plaintiffs in all instances of the violation of federal law by a state official. In 2006, the Federal Circuit considered the application of the Ex Parte Young approach to remedy state violations of federal patent law. In Pennington Seed v. Univ. of Arkansas , the plaintiff initially brought suit against the University of Arkansas for patent infringements related to Pennington's non-toxic feed grass. The district court dismissed the case on the basis of the university's Eleventh Amendment immunity. Pennington subsequently amended its complaint, dropped the university as a defendant, and filed its claim for patent infringement against four individual university officials; the chairman of the university board, the president of the university, the chancellor of the university, and a professor. The district court again dismissed the amended complaint on Eleventh Amendment grounds. In affirming the district court's decision, the Federal Circuit held that the plaintiff had failed to establish a sufficient nexus between the named officials and the enforcement of the illegal act. This connection must be more than a general obligation to prevent the violation, the court explained; otherwise the individual is simply being sued as a representative of the state. Although the officials named in the complaint may have had a general obligation to oversee the university's patent policy, they themselves did not violate any federal law. Plaintiffs could not show a sufficient causal connection between the named officials and the violation of federal patent law. Additionally, even if the officials had neglected their duty to the university to supervise the school's use of patents, a court can only enjoin activity that violates federal law; it cannot mandate that a state official "perform his or her duty under state law." Although the court may stop an illegal action, it cannot mandate action unless an affirmative duty to act is created by federal law. No such duty existed in Pennington Seed . In the years following Florida Prepaid and College Savings Bank , Congress repeatedly attempted to provide individuals with ways to recover from the states for intellectual property infringement. In 1999, 2001, 2002, and 2003, Representative Lamar Smith, Senator Patrick Leahy, and Representative Howard Coble each introduced the "Intellectual Property Protection Restoration Act" (the Act) in their respective chambers. The proposed law presented a three-pronged approach to providing a remedy for intellectual property rights holders against states that engage in infringement. The first prong would have amended federal copyright, patent, and trademark laws to bar a state from recovering for the infringement of a state-owned patent, trademark, or copyright unless the state had previously waived its Eleventh Amendment sovereign immunity and consented to suit under federal intellectual property law. The Act would have used affirmative waiver as a condition to the state's receipt of damages under federal intellectual property law. By requiring states to first waive their Eleventh Amendment immunity in the intellectual property area before enjoying the protections of federal intellectual property law, this provision created "reasonable incentives" for states to waive immunity without "oblig[ing] them to do so." This provision raised some constitutional concerns as to the apparent voluntariness of the states' decision to waive their sovereign immunity. Critics argued that the waiver provision was simply a veiled attempt at the same congressional abrogation of state sovereign immunity struck down by the Court in Florida Prepaid and College Savings Bank . The state's strong financial interest in protecting its intellectual property may make the option of either waiving immunity or relinquishing recovery for property infringements a forced waiver. Critics also argued that the Act violated the doctrine of unconstitutional conditions, which at its core means "the government may not require a person to give up a constitutional right ... in exchange for a discretionary benefit conferred by the government." The Act asked states to give up their constitutional right to state sovereign immunity in exchange for the benefits of federal intellectual property protections. Proponents of the Act responded by drawing a parallel to the use of Congress's spending power. Senator Leahy, who introduced the Senate companion bill, argued before the Senate Committee on the Judiciary that much like attaching a condition to the receipt of federal funds, Congress could attach a condition to the receipt of federal intellectual property benefits. The second prong of the Act would have guaranteed an individual's right to sue a state official in his individual capacity for violation of federal intellectual property law. The provision would have statutorily reinforced the rights provided in Ex Parte Young : mainly, the ability of an individual, notwithstanding the Eleventh Amendment, to obtain prospective injunctive relief, and monetary damages where applicable, against a state official. The Act would have clarified any confusion by reviewing courts as to the applicability of Ex Parte Young to suits against a state for intellectual property infringement. The final prong of the bill would have abrogated state sovereign immunity in limited circumstances. The abrogation provision of the Act was tailored directly to the concerns presented by the Justices in Florida Prepaid and College Savings Bank . The Act specifically limited abrogation to those instances where the property infringement constitutes a violation of the due process clause of the Fourteenth Amendment or the takings clause of the Fifth Amendment. The abrogation provision was narrowly tailored to only include infringements amounting to constitutional violations in an attempt to ameliorate the Supreme Court's concern over the "scope" of the previous abrogation provisions found in the CRCA, TRCA, and PRCA. Critics argued, however, that this provision of the Act still would not amount to a valid abrogation of state sovereign immunity, contending that regardless of the narrowly tailored statute, the instances of unremedied intellectual property infringements by the states simply do not occur with the frequency required to classify abrogation as a use of the Fourteenth Amendment enforcement power. The Act never made it out of committee. The 1999 Senate bill was referred to the Committee on the Judiciary and never acted upon. In 2002, the Senate Committee held hearings on the issue, but the bill never came to a vote. In 2003, the House Subcommittee on Courts, the Internet, and Intellectual Property again held hearings with no further action. Similar legislation has not been re-introduced in subsequent Congresses. In early 2006, the new Roberts Court issued a ruling concerning bankruptcy law that triggered renewed questions relating to the application of state sovereign immunity. In Central Virginia Community College v. Katz , the Court held that in ratifying the Constitution, the states waived sovereign immunity as a defense to bankruptcy suits. Relying on original intent and the legislative history of the bankruptcy clause, the Court reasoned that the Framers' concerns over a uniform bankruptcy system, which gave rise to the bankruptcy clause in Article I, § 8, superseded state sovereign immunity in that area. The Katz Court did not validate the abrogation of state sovereign immunity under the Article I bankruptcy clauseârelying instead on a historical waiver pertaining only to bankruptcy. Therefore, the case's effect on intellectual property law is unclear. The case did mark, however, a limitation on the dominance of state sovereign immunity over Congress's Article I powers. The Court did not consider the legislative history behind any of the other Article I, § 8 powers, and was careful not to venture into the realm of intellectual property. In April 2008, the Supreme Court indicated a possible desire to reconsider the relationship between state sovereign immunity and intellectual property by asking for the Solicitor General's opinion in relation to an appeal in Biomedical Patent Management Corp. v. California Department of Health Services . As discussed above, Biomedical involved the potential waiver of sovereign immunity under federal patent law by a state through affirmative litigation conduct. On December 2, 2008, the Solicitor General filed a brief expressing the views of the United States as amicus curiae. According to the Solicitor General's brief, certiorari was not warranted because The [Federal Circuit's] decision is consistent with decisions of this Court and it does not conflict with any decision of any other court of appeals. Moreover, this case presents a poor vehicle for addressing whether a State's waiver in one action extends to a subsequent action involving the same parties and the same underlying transaction or occurrence. The facts are not only unusual, but in light of the applicable limitations period, this case appears to involve alleged acts of infringe ment that occurred after the dismissal of the earlier suit. On January 12, 2009, the Supreme Court denied the petition for writ of certiorari in the Biomedical case. It thus remains to be seen whether there will be further changes by the Supreme Court in the area of state sovereign immunity and intellectual property law. | The Eleventh Amendment to the U.S. Constitution provides that "[t]he Judicial Power of the United States shall not be construed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or Subjects of any Foreign State." Although the amendment appears to be focused on preventing suits against a state by non-residents in federal courts, the U.S. Supreme Court has expanded the concept of state sovereign immunity to reach much further than the literal text of the amendment, to include immunity from suits by the states' own citizens and immunity from suits under federal law within a state's own court system. As a result of two landmark Supreme Court decisions in 1999, Florida Prepaid and College Savings Bank, the Eleventh Amendment currently bars an individual from successfully seeking damages from a state for violations of federal intellectual property laws unless the state clearly consents to being sued through waiver, or Congress legitimately abrogates state sovereign immunity. Valid waiver exists only where a state has clearly submitted itself to federal jurisdiction. Courts have interpreted this rule to validate waiver in several scenarios: where a state voluntarily removes a case to federal court; where a state voluntarily initiates and participates in the litigation; where the case is part of one continuous action in which the state previously waived its immunity; where a state enacts legislation waiving its sovereign immunity; or where a state enters a contract containing a provision in which the state specifically submits to federal court jurisdiction in the case of a dispute. Absent these forms of clear waiver, a state does not relinquish its privilege of sovereign immunity under the Eleventh Amendment. Congress may limit state sovereign immunity to suit under federal intellectual property laws only by passing a law pursuant to its enforcement power under § 5 of the Fourteenth Amendment. A valid statute passed pursuant to § 5 will be limited in scope and remedy a pervasive and unredressed constitutional violation. The Supreme Court has previously invalidated congressional attempts to abrogate state sovereign immunity in intellectual property lawsuits against state governments. Where there has been no clear waiver by the state, nor abrogation of state sovereignty by Congress, a party cannot obtain damages from a state under federal law. The injured party may, however, sue the individual official responsible for the violation for prospective injunctive relief under the Ex Parte Young doctrine . In order to obtain this kind of non-monetary relief, the party must show a continued violation of federal law and an adequate connection between the named official and the actual violation. In response to Florida Prepaid and College Savings Bank, various bills have been introduced in previous sessions of Congress in an attempt to hold states accountable for violations of intellectual property rights. These proposals, however, never made it out of committee. |
While 69% children in the United States live in homes with two parents, an estimated 27% of children are maintained in one-parent homes. Most children in the latter group are in homes maintained by the mother only. In 2017, 23% of children lived in mother-only households, a statistic that has roughly doubled since 1970 (when it was 11%). Long-standing research indicates that children raised in one-parent homes are more likely than children raised in homes with both biological parents to do poorly in school, have emotional and behavioral problems, become teenage parents, and have poverty-level incomes as adults. Nonetheless, it is widely acknowledged that although children with absent fathers are at greater risk of having the aforementioned problems, most do not experience them. In an effort to improve the long-term outlook for children in one-parent homes—particularly those with low-income noncustodial parents—federal, state, and local governments (along with public and private organizations) have supported programs and activities that promote the financial and personal responsibility of noncustodial parents to their children and reduce the incidence of parental absence in the lives of children. These "fatherhood initiatives" include campaigns that seek to encourage noncustodial parents to connect with their children; counseling and training on "soft skills," including relationship skills, to help noncustodial parents connect with them; and employment and training services so that they can help financially support them. (Although most people refer to programs that seek to help parents initiate or maintain contact with their children and become emotionally involved in their lives as "fatherhood" programs, the programs generally are gender-neutral with regard to who may participate. Their underlying goal is participation of the noncustodial parent in the lives of his or her children.) This report provides an overview of the federal government's financial support of fatherhood initiatives, including through the Responsible Fatherhood (RF) grant program. It begins by providing a legislative history of this financial support and a summary of allowable activities under the RF grant program. This is followed by an explanation of some of the research and evaluations that have occurred via demonstration programs. The report concludes by briefly examining the role of governmental child support enforcement (CSE) agencies in fatherhood programs, initiatives to promote and support father-child interaction outside the parents' relationship, and recent developments with regard to work-oriented programs for noncustodial parents. Low-income noncustodial parents historically have had little opportunity to participate in public assistance programs. Most of the policy discussion about low-income children that had occurred as part of the "welfare reform" debates between the 1960s to 1990s was focused on single custodial mothers and their children, not on the fathers of those children. This changed to some degree with the enactment of the 1996 welfare reform law ( P.L. 104-193 ), which established the Temporary Assistance for Needy Families (TANF) program. The third finding of that law states: "Promotion of responsible fatherhood and motherhood is integral to successful child rearing and the well-being of children." In addition, three of the four goals of the TANF program included in the law were consistent with the components of most fatherhood programs: ending welfare dependence by employment and marriage, reducing out-of-wedlock pregnancies, and encouraging the formation and maintenance of two-parent families. This meant that states could spend TANF funds on fatherhood programs, and the law further allowed any services aimed at reduced nonmarital births or encouraging two-parent families to be free of income eligibility rules. During and soon after welfare reform, fatherhood-related changes were made to certain programs. For example, with regard to the CSE program, visitation and child support had historically been treated as legally separate issues, with only enforcement activities being under the purview of the federal government. However, the 1996 welfare reform law appropriated an additional $10 million per fiscal year in CSE funds for states to establish and operate access and visitation programs. In addition, the Balanced Budget Act of 1997 ( P.L. 105-33 ; enacted the year following welfare reform) included a $3 billion "Welfare to Work" grant program, which expired in 2000, to fund employment services for mothers leaving cash assistance who were long-term recipients. This grant was also available to fund employment services for unemployed or underemployed fathers of those mothers' children. The next significant legislative development for fatherhood programs occurred during the 109 th Congress with the enactment of the Deficit Reduction Act of 2005 ( P.L. 109-171 ; DRA). The DRA included a provision (in Title IV-A of the Social Security Act) that provided funding for competitive Responsible Fatherhood (RF) grants to public and private entities, and also a Healthy Marriage Promotion (HMP) grants program. The law provided up to $50 million per year (FY2006-FY2010) for RF grants, and up to $100 million per year for HMP grants. Subsequently, the RF grants were awarded to 90 organizations to operate fatherhood programs. In addition, 13 other organizations received reentry program grant funding specifically for incarcerated fathers and formerly incarcerated fathers. During the 111 th Congress, the Claims Resolution Act of 2010 ( P.L. 111-291 ) extended funding for the HMP and RF grants through FY2011, but altered the split between the programs to $75 million each. Subsequently, RF program grants were for three-year grants to 55 organizations, and an additional 5 organizations received reentry program grants. Beyond FY2011, when the funding in the Claims Resolution Act was set to expire, the HMP and RF grants received a series of short-term funding extensions, usually through provisions in appropriations acts. (See Appendix A for a list of these extension laws.) A third round of RF grant funding was announced during this period on September 30, 2015, which awarded five-year grants to 39 organizations. (Subsequently, two organizations dropped out of this most recent round of RF grant funding, reducing the total number of participating organizations to 37. ) Five other organizations received reentry program grant funding. Most recently, on May 5, 2017, funding was extended through the end of FY2018 by the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). (See Appendix B for a chronological legislative history of the RF program.) In addition to federal funds explicitly provided for RF grants, there are several other potential sources of federal funding for fatherhood programs. These include federal TANF funds and TANF state maintenance of effort (MOE) funding, which are potentially the largest sources of federal funding for fatherhood initiatives. (Other sources are CSE funds and Social Services Block Grant funds.) The TANF block grant to states is currently funded through FY2018, at an annual level of $16.5 billion. In addition, the state funding or MOE requirement (at the 75% level) is about $10.4 billion annually. Due to a 71% reduction in the cash welfare caseload since FY1994, together with the fixed block grant funding, funds that otherwise would have been spent for cash assistance are now available for other purposes. According to the U.S. Department of Health and Human Services (HHS), about half of all states use some TANF funds for responsible fatherhood programs. The realization that one parent, especially a low-income parent, often cannot meet the financial needs of her or his children is not new. In 1975, the CSE program was viewed as a way to make noncustodial parents responsible for the financial support of their children and recover the costs of public assistance to children and custodial parents. With the advent of welfare reform in 1996, Congress agreed that many fathers were in the same financial straits as the mothers of their children who were receiving cash welfare. Thus, the 1996 welfare reform law mandated that each state enact laws authorizing that state to issue an order, or request that a court or administrative process issue an order, that requires noncustodial parents who were unable to pay their child support obligation for a child receiving TANF benefits to participate in TANF work activities. Today, while the CSE, TANF, and RF programs remain separate entities, all three interact in a variety of ways with regard to the role of noncustodial parents in the lives of their children. Since their inception, fatherhood programs have sought to strengthen positive father-child engagement, improve healthy relationships (including couple and coparenting) and marriage, and improve employment and economic mobility opportunities for noncustodial fathers. For the purposes of the RF grant program, federal law specifies the following four activities. (1) Activities to promote marriage or sustain marriage through activities, such as providing information about the benefits of marriage and two-parent involvement for children; enhancing relationship skills; education regarding how to control aggressive behavior; disseminating information on the causes of domestic violence and child abuse; marriage preparation programs and premarital counseling; skills-based marriage education; financial planning seminars; and divorce education and reduction programs, including mediation and counseling. (2) Activities to promote responsible parenting, such as counseling, mentoring, and mediation; disseminating information about good parenting practices; teaching parenting skills; and encouraging child support payments. (3) Activities to foster economic stability, such as helping fathers improve their economic status by providing activities such as job training, employment services, and career-advancing education; and coordination with existing employment services such as welfare-to-work programs, and referrals to local employment training initiatives. (4) Activities to promote responsible fatherhood that are conducted through a national clearinghouse that provides access to curricula, webinars, research products, and other resources to improve the implementation and success of responsible fatherhood programs. In addition to the federal funding through the RF grant program, many states and localities, private organizations, and nonprofit agencies also operate fatherhood programs with their own funds. These programs might differ from those funded by RF grants in terms of their focus and activities, although the general overarching purpose remains the same. Most fatherhood programs include media campaigns that emphasize the importance of emotional, physical, psychological, and financial connections of fathers to their children. In addition, to counterbalance some of the procedural, psychological, emotional, and physical barriers to paternal involvement, fatherhood programs often involve courses or other program elements that include many of the following components: parenting education—the responsibilities of parents to their children; children's need for affection, gentle guidance, and financial support; the importance of being a proud example and respectful of the other parent; and the need to recognize developmentally appropriate behavior for children of different ages and respond appropriately to children's developmental needs; responsible decisionmaking (with regard to sexuality, establishment of paternity, and financial support); mentoring relationships with successful fathers and successful couples; mediation services (communicating with the other parent, supervised visitation, discipline of children, etc.); understanding the CSE program; conflict resolution, coping with stress, problem-solving skills; developing values in children, appropriate discipline, participation in child-rearing; understanding male-female relationships; peer support; practical tasks to stimulate involvement through parent-child interactions, such as fixing dinner for children, taking children to the park, playing a game, helping children with schoolwork, listening to children's concerns, and setting firm limits on behavior; and job training opportunities (skills development, interviewing skills, job search, job-retention skills, job-advancement skills, etc.). On September 30, 2015, the Office of Family Assistance (OFA) in the Administration for Children and Families (ACF, an HHS agency) announced that it had awarded over $55 million in RF grants, which included 39 New Pathways for Fathers and Families grants and 5 Responsible Fatherhood Opportunities for Reentry and Mobility (ReFORM) grants. (Subsequently, two New Pathways for Fathers and Families grantees dropped out of the program, reducing the total number of participating organizations to 37.) These grants are for the five-year period FY2016-FY2020 (with funding contingent upon the subsequent availability of appropriations). The most recent grant awards represent the third round of such funding since the program's inception in 2006. Fatherhood programs have offered varied approaches to serving families, resulting in deeper insight into which organizational structures, implementation strategies, and service delivery models might offer promise as effective and replicable strategies. Organizational structures included state and local government agencies, community-based organizations of varying sizes, universities, and faith-based groups. To help fathers and mothers meet their parental responsibilities, many policy analysts and observers support broad-based collaborative strategies that go beyond welfare and child support agencies and include schools, work programs, prison systems, churches, community organizations, and the health care system. Research findings indicate that father absence affects outcomes for children in terms of schooling, emotional and behavioral maturity, labor force participation, and nonmarital childbearing. These findings hold when income is taken into account, so the negative effects of father absence are not limited to those created by reduced family income. Much of the research into the efficacy of fatherhood programs examines, at least in part, child support-related issues and outcomes. Both advocates and critics of the CSE program largely agree that parents should be responsible for the economic and emotional well-being of their children. They generally agree that many low-income noncustodial parents are unable to meet their financial responsibility to their children and are barely able, or unable, to support themselves. They also generally agree that some noncustodial parents do not know how to be responsible parents because they were not taught that knowledge or were not exposed to enough positive role models that they could emulate. Below are several examples of research that has been or currently is being conducted related to fatherhood issues and programs. Many of these are demonstration programs with the purpose of helping low-income men become responsible fathers by gaining employment or job mobility and by teaching them life skills so that they might reconnect with their children in a positive sustained manner. Others are long-term studies that, for example, monitor the population that is served by these programs, but do not evaluate the efficacy of possible interventions. The Parents' Fair Share (PFS) Demonstration was a large-scale, scientifically designed (with experimental and control groups) national demonstration project conducted from 1994 to 1996 that combined job training and placement, peer support groups, and other services with the goal of increasing the earnings and child support payments of unemployed noncustodial parents (generally fathers) of children on welfare, improving their parenting and communication skills, and providing an opportunity for them to participate more fully and effectively in the lives of their children. The final report on the PFS demonstration concluded that the program did not significantly increase employment or earnings among the full sample of PFS participants during the two years after they entered the program. However, the program did increase earnings among a subgroup of men who were characterized as "less employable" (i.e., those without a high school diploma and with little recent work experience). One of the reports noted the following as lessons learned from the PFS demonstration: Low-income noncustodial fathers are a disadvantaged group. Many live on the edge of poverty and face severe barriers to finding jobs, while those who can find work typically hold low-wage or temporary jobs. Despite their low, irregular income, many of these fathers are quite involved in their children's lives and, when they can, provide financial and other kinds of support.... Some services, such as peer support proved to be very important and valuable to the men and became the focal point of the program. Other services, such as skill-building, were hard to implement because the providers had little experience working with such a disadvantaged group; it was difficult to find employers willing to hire the men, and the providers were not equipped to deal with the circumstances of men who often were simply trying to make it from one day to the next. Finally, we learned about the challenges of implementing a program like PFS, which involves the partnership of various agencies with different goals, and about the difficulty of recruiting low-income fathers into such a program. Some of the recommendations for future programs included structuring the program to encourage longer-term participation and to include job retention services; providing fathers who cannot find private sector employment with community service jobs; earmarking adequate funding for employment services; involving custodial mothers in the program; providing fathers with legal services to help them gain visitation rights; and encouraging partnerships between CSE agencies and fatherhood programs. HHS has an ongoing partnership with the private-sector initiative called Partners for Fragile Families (PFF). This project is an initiative of the National Partnership for Community Leadership (NPCL), a nonprofit organization based in Washington, DC. A "fragile" family consists of low-income children born outside of marriage whose two natural parents are working together to raise them—either by living together or through frequent visitation. The development of the initial PFF demonstrations began when planning grants were awarded to 16 sites in 1996. In March 2000, HHS approved state waivers of certain federal CSE requirements (under Section 1115 of the Social Security Act) for 13 PFF demonstration projects spread across nine states. The duration of these projects was three years. The purpose of the demonstration projects was to develop new ways for CSE agencies and community-based nonprofit and faith-based organizations to work together to help young noncustodial fathers (ages 16 to 25—who had not yet established paternity and who had little or no involvement with the CSE program) obtain employment, health, and social services; make child support payments to their children; learn parenting skills; and work with the mothers of their children to build stronger parenting partnerships. The demonstration project sites were located in California, Colorado, Indiana, Maryland, Massachusetts, Minnesota, New York, Pennsylvania, and Wisconsin. According to HHS, of the $9.7 million in federal funding budgeted for the projects, $7.1 million was spent. An additional $1.4 million was spent for an evaluation of the projects. An evaluation of the PFF project implementation included the following statement: Although the concept of PFF was unique when it was developed in 1996, by the time the demonstration was fully implemented, other responsible fatherhood programs had started in many communities nationwide. Independent of PFF, the child support enforcement system was already incorporating more "father-friendly" approaches to service delivery at about the same time PFF was in its developmental stages. The child support system had begun to absorb the lessons learned from earlier fatherhood initiatives (such as the Parents' Fair Share project and the Responsible Fatherhood Demonstration). By the time PFF was operational, some may have viewed it as less pioneering than when it was conceived several years earlier. In addition, the number of young fathers who had not established paternity for their children decreased in the mid- to late-1990s as a result of the success of in-hospital paternity establishment initiatives across the country that established paternity at the time of a child's birth. The pool of young fathers without paternity established for their children had diminished in the PFF sites by the time the projects were implemented. HHS also sponsored two other evaluations of the PFF demonstration projects. Both of the evaluations were conducted by the Urban Institute. One of the Urban Institute reports includes case studies of selected fathers and their families, and the other report provides an analysis of economic and child support outcomes. A process and outcome evaluation was conducted by interviewing all service providers (including child support enforcement, community-based organizations, and partner agencies) and analyzing client data matched with administrative wage data before and after the PFF program. This evaluation did not have a control group and, thus, did not seek to measure program impacts. According to the Urban Institute report, employment rates for participants before and after the program generally were low and unchanged. (About 58% of PFF participants were employed 6 months before the demonstration and 59% of PFF participants were employed 6-12 months after enrollment in the demonstration.) Although quarterly earnings of PFF participants increased after enrollment in the demonstration, at the end of 12 months, participants generally had poverty-level incomes. In contrast, the report indicated that there was a substantial increase in child support orders. At enrollment, about 14% of PFF participants had child support orders, whereas two years after enrollment, 35% of PFF participants had child support orders. For those PFF participants who paid child support, the average child support payment was $1,569 for the first year after enrollment and $2,296 for the second year after enrollment. The report also noted that, on average, about five monthly child support payments were made in the first year after enrollment and about seven monthly payments were made in the second year after enrollment. The Fragile Families and Child Wellbeing Study followed a group of 4,700 children who were born in 20 large U.S. cities between 1998 and 2000. The parents in the 4,700 families in this sample were 3,600 unmarried couples and 1,100 married couples. The data were intended to be representative of nonmarital births in each of the 20 cities and also representative of all nonmarital births in U.S. cities with populations over 200,000. Both parents were interviewed at the child's birth and again when the child was age one, two, and five. In addition, in-home assessments of the children and their home environments were performed when the children were ages three and five. The parent interviews provided information on attitudes, relationships, parenting behavior, demographic characteristics, health (mental and physical), economic and employment status, neighborhood characteristics, and public welfare program participation. The in-home interview collected information on children's cognitive and emotional development, health, and home environment. The study was expected to provide previously unavailable information on questions such as the following: What are the conditions and capabilities of new unwed parents, especially fathers? How many of these men hold steady jobs? How many want to be involved in raising their children? What is the nature of the relationship between unwed parents? How many couples are involved in stable, long-term relationships? How many expect to marry? How many experience high levels of conflict or domestic violence? What factors push new unwed parents together? What factors pull them apart? How do public policies affect parents' behaviors and living arrangements? What are the long-term consequences for parents, children, and society of new welfare regulations, stronger paternity establishment, and stricter child support enforcement? What roles do child care and health care policies play? How do these policies play out in different labor market environments? A 2007 report that examined data pertaining to the surveyed children at age five found that 16% of participant mothers were married to the father at the time of the five-year interview. Despite not marrying, about 40% of the parents were still romantically involved at the five-year interview. In cases where the couples were no longer romantically involved, 43% of the fathers had seen their children in the month previous to the interview. According to the report: Fatherhood programs, such as education, training, support services, and content addressing issues of shared parenting, may also be appropriate for many new unmarried fathers. Engaging parents in responsible fatherhood programs (and weaving these programs into marriage promotion curriculums) early in their child's life may also help new fathers develop important parenting skills crucial to their child's healthy development. These programs may help fathers establish and maintain positive connections with their child and encourage their active participation in raising their child. A nine-year follow-up study—Fragile Families and Child Wellbeing in Middle Childhood—was funded via a $17 million grant from the National Institute of Child Health and Human Development (NICHD) of HHS. The purpose of this project was to combine the core telephone surveys, in-home study, and teacher surveys into one larger project. Data collection began in 2007 and continued through the spring of 2010. Short summaries, based on data from the Fragile Families and Child Wellbeing Study, have been prepared since that time to highlight recent research findings and suggest policy implications on issues related to child well-being and the social and economic circumstances faced by unwed parents. To further the national child support program's mission and goals, the federal Office of Child Support Enforcement (OCSE) operates a number of competitive grant programs that provide federal funds for research and demonstration programs and special projects of regional and national significance for operating state child support programs. These programs and projects are funded through OSCE's grant-making or waiver authority under Section 1115 of the Social Security Act. In FY1999, OCSE provided $2.0 million for Responsible Fatherhood demonstration programs. The programs operated in eight states from October 1998 through December 2000. The following eight states received Section 1115 grants or waivers from OCSE/ACF to implement and test responsible fatherhood programs: California, Colorado, Maryland, Massachusetts, Missouri, New Hampshire, Washington, and Wisconsin. These projects attempted to improve the employment and earnings of underemployed and unemployed noncustodial parents, and to motivate them to become more financially and emotionally involved in the lives of their children. Although the projects shared common goals, they varied with respect to service components and service delivery. OCSE also provided about $500,000 for an evaluation of the demonstration projects. An outcome report on the programs found that (1) low-income noncustodial fathers are a difficult population to recruit and serve; (2) many of the participants found jobs with the programs' help, but they were low-paying jobs and relatively few of the participants were able to increase earnings enough to meet their financial needs and those of their children; (3) problems with the noncustodial father's access to his children were hard to define and resolve, and mediation should be used more extensively; (4) child support guidelines result in orders for low-income noncustodial parents that are unrealistically high; (5) CSE agencies should collaborate with fatherhood programs and pursue routine enforcement activities, as well as adopt policies and incentives that are responsive to low-income fathers; and (6) criminal history was the norm rather than the exception among the program participants, many participants faced ongoing alcohol and substance abuse problems, many did not have reliable transportation, and many lacked a court-ordered visitation arrangement. The outcome report also found that employment rates and earnings increased significantly, especially for noncustodial parents who were previously unemployed. In addition, child support compliance rates increased significantly, especially for those who had not been paying previously. Moreover, the report found that 27% of the fathers reported seeing their children more often after completion of the program. In FY2012, OCSE established the National Child Support Noncustodial Parent Employment Demonstration (CSPED). The purpose of the demonstration was to increase the reliable payment of child support by noncustodial parents who were willing but unable to pay, and to test the efficacy of CSE agency-led employment strategies. Consequently, OCSE required CSPED grantees to be child support agencies, serving as fiscal agents for the grants and managing day-to-day operations. Eight state CSE programs were selected through a competitive grant process to participate in the five-year demonstration from October 2012 to September 2017. The eight states were California, Colorado, Iowa, Ohio, South Carolina, Tennessee, Texas, and Wisconsin. The first year was a planning year. In October 2013, sites began enrollment and random assignment, which ran through September 2016. During the final year, grantees were expected to continue to serve noncustodial parents as the demonstration wound down. Each grantee was to receive $775,000 in Section 1115 demonstration funds over five years. Once Federal Financial Participation (FFP) was added, the total amount of funding available to each grantee over five years was $2.3 million. Under the demonstration, each grantee attempted to recruit 1,500 eligible noncustodial parents into CSPED. Half of the enrollees were randomly assigned to receive CSPED services; half were assigned to a control group and did not receive the extra services. Each site was required to offer four core services: enhanced child support services, employment assistance, parenting education delivered in a peer support format, and case management. The CSE agency partnered with community service providers for employment and parenting services; case management could be provided by child support or a partner agency. Grantees were also required to work with domestic violence consultants to develop a domestic violence plan. While OCSE provided grantees with guidance on design features and core services, it allowed the grantees to align their efforts with preexisting policies, procedures, and the local social service context. The Institute for Research on Poverty at the University of Wisconsin and Mathematica Policy Research are conducting the evaluation of CSPED. According to the initial implementation report, among the early lessons learned was the need to (1) deploy child support workers who support CSPED's goals to identify and recruit participants; (2) develop services that take into account the challenges faced by the target population; (3) design services to promote sustained participant engagement; and (4) invest in strong partnerships and communication systems. According to the evaluators, a final implementation report will examine the full implementation period and provide a more comprehensive assessment of the types of services participants received. It is also expected to examine CSPED's impacts on participants' outcomes and include a benefit-cost analysis. An HHS-sponsored evaluation of responsible fatherhood programs, called the National Evaluation of the Responsible Fatherhood, Marriage, and Family Strengthening Grants for Incarcerated and Reentering Fathers and Their Partners (MFS-IP), began in 2006. MFS-IP grantees included government (state, local, and tribal) and private (community- and faith-based) organizations. With a funding level of up to $500,000 per year for five years, the programs implemented under the MFS-IP priority area were designed to promote and sustain healthy marriages and strengthen families affected by incarceration. Thirteen grantees in 12 different states received five-year grants from the OFA to implement multiple activities to support and sustain marriages and families of fathers during and after incarceration. Grantees may also provide support for reentering the family and community from prison, parenting support including visitation during incarceration, and education and employment services during and after incarceration. To evaluate the overall effectiveness of the 13 MFS-IP grantees, the Assistant Secretary for Planning and Evaluation (ASPE) awarded a contract to RTI International to conduct an implementation evaluation as well as a multisite, longitudinal, impact evaluation of selected grantees. The evaluation was a multiyear (quasiexperimental) study that was conducted from 2006 through 2014. According to an HHS Research Brief: The implementation experiences of the MFS-IP grantees can inform future efforts to build healthy relationship skills among families affected by incarceration. While incarcerated, many individuals are interested in improving themselves and their relationships with their partners, children, and other family members. Although not all incarcerated persons are married or in intimate relationships, healthy relationship skills broadly apply to many types of interpersonal relationships. As observed by several grantees, relationships such as parent-child, correctional officer-inmate, inmate-inmate, and employer-employee could be improved by healthy relationship skills training. The impact study component of the MFS-IP evaluation, concluding in 2015, will determine the effectiveness of relationship education and other MFS-IP program components in strengthening relationship quality and stability and facilitating successful community reentry. Research suggests that healthy relationships contribute to reentry success, yet little is known about how to improve relationship quality for couples affected by incarceration. Relationship education that builds healthy relationship skills could play an important role in relationship quality throughout incarceration and during the critical reentry period. Even for lengthy periods of incarceration, communication and conflict resolution skills could result in more supportive relationships, improved co-parenting, and increased familial contact—all of which could be beneficial upon the individual's eventual release. HHS has invested resources in multiple federal evaluations to document successes, challenges, and lessons from fatherhood programs in order to provide useful information to program operators and policymakers. The 2011 application announcement for RF program grants required that grantees operate comprehensive fatherhood programs that integrate robust economic stability services, healthy marriage activities, and activities designed to foster responsible parenting. It also indicated that, as a condition of acceptance of an RF grant, grantees would be required to participate fully in HHS-sponsored evaluations. According to HHS, in September 2011 60 RF grants were awarded for three years. These grants were initially scheduled to run through September 2014, but were extended for an additional year in the form of noncompetitive continuations awards. According to a 2012 report that provides a review of the fatherhood program and policy arena: At the state and local level, although awareness of the importance of evaluation appears to be high, it does not appear that programs have reached the point of being able to conduct scientifically rigorous evaluations. Moving forward, the field will need to ensure that agencies are equipped with the proper knowledge and tools for conducting meaningful evaluations, including appropriate measures to provide an accurate representation of program outcomes and impacts. In the last several years there has been a spate of fatherhood research and evaluations, some of which are using an experimental design model. The outcomes and findings are expected to provide necessary information on the types of programs and strategies that are most effective in helping noncustodial parents, particularly fathers, better connect with their children. The 2015 round of RF grants (mentioned earlier) are subject to the continued requirement that grantees participate fully in HHS-sponsored evaluations. These grants, which are scheduled to run through FY2020, have also included a new emphasis on key short- and long-term outcomes intended to enhance evaluation and strengthen program design. According to the OFA, it is expected that the fatherhood programs funded by these grants (and their evaluations) will increase the understanding of policymakers and others of what works and why. In the late 1990s, when interest in federally funding responsible fatherhood programs first gained national attention, some were concerned that an emphasis on the importance of fathers could lead to unintended consequences for single mothers if too much emphasis was placed on the value of two-parent homes, or on the ability of noncustodial spouses to challenge child custody, child support, and visitation arrangements. Although that underlying tension has not disappeared completely, then and now, it was thought that (in order to be productive and nondivisive) the policy debate on responsible fatherhood initiatives had to be based on the view that the welfare of fathers, mothers, and children are intertwined and interdependent. In addition, over the past 20 years, the results of the research and evaluations discussed earlier in this report have shed additional light on how certain factors, such as economic opportunity, affect the ability of fathers to be involved in the lives of their children. As a result of these and other factors, the policy debate on responsible fatherhood now recognizes that addressing the issues that directly affect the noncustodial parent could potentially strengthen the custodial parent's household as well. Many issues are associated with the federal government's support of fatherhood initiatives. A few examples are: Is the goal of federal policy to promote and support the involvement of fathers in their children's lives regardless of the father's relationship with the children's mother? What if the parent has children with more than one person? What is the federal policy with regard to incarcerated parents and parents recently released from prison? Does the federal government support counseling, education, and supervised visitation for abusive parents so that they can reconnect with their children? The discussion below examines three issues that will likely impact the success of congressional fatherhood initiatives. The first deals with the role of the CSE agency in responsible fatherhood programs. Some analysts contend that since many noncustodial parents have a negative view of and/or contentious relationship with the CSE program, the use of the CSE program to recruit fathers does not bode well for the success of such programs. Currently, most federally funded responsible fatherhood programs are provided through competitive grants to community organizations and other groups that have experience in working with low-income men. The second issue examines father involvement in the context of the father's relationship with the child's mother. This issue is based on the premise that formal marital relationships last longer and are more conducive to long-term interaction between fathers and children than other types of relationships. The third issue examines the importance of employment programs and job supports for noncustodial parents. This issue acknowledges that economic pressures and instability, often because of unemployment or low wages, frequently contribute to nonpayment of child support and dysfunctional relationships. During the period from FY1978 to FY2016, child support payments collected by the CSE agencies increased from $1 billion to $28.8 billion. Moreover, the program has made significant improvements in other program measures as well, such as the number of parents located, paternities established, and child support orders established. Advocates of the CSE program say that this dramatic program performance is aside from the indirect and intangible benefits of the program, such as increased personal responsibility and welfare cost-avoidance. Critics of the CSE program contend that even with an unprecedented array of "big brother" enforcement tools such as license (professional, driver's, recreational) and passport revocation; seizure of banking accounts, retirement funds, and lottery winnings; and automatic income withholding from pay checks, the program still collects only 20% of child support obligations for which it has responsibility and collects payments for only 60% of its caseload. Information obtained from both custodial and noncustodial parents through various surveys and studies consistently tells the same story. Noncustodial parents generally indicate that they (1) want more access to their children, (2) need to learn more relationship skills so they can coparent their children, and (3) need help finding and maintaining employment. In addition, many noncustodial parents maintain that the CSE system is dismissive of their financial condition and continues to pursue child support payments (current support as well as arrearages) even when it knows that many of them can barely support themselves. Although the CSE program has historically been the policy answer to the challenge of father absence, because its focus until recently was exclusively on financial support, it has had the practical effect of alienating many low-income noncustodial parents who are unable to meet their child support obligations. Some policy analysts maintain that noncustodial parents are, in effect, devalued when their role in their children's lives is based solely on their cash contributions. Many observers maintain that noncustodial parents and the CSE program have differences that may be irreconcilable. In light of this challenge, they argue that the most that should be expected is for the noncustodial parent to clearly understand the purposes of the CSE program, the requirements imposed on the custodial parent, and the noncustodial parents' rights to have their child support payments modified if they incur a financial change in circumstances. If the CSE program continues to be one of the ways that noncustodial parents are connected with fatherhood programs, many observers contend that the CSE program must become more effective in gaining the cooperation and trust of noncustodial parents. In contrast, others assert that, more than any other agency of state government, the CSE program has the responsibility and is in the position to reach out to noncustodial parents who need supportive services. They point out that CSE agencies are already involved in forging relationships with these parents through partnerships with community-based organizations. They also note that CSE agencies provide a natural link to coordinate with TANF agencies to help families achieve self-sufficiency. The first finding included in the 1996 welfare reform law is that marriage is the foundation of a successful society. The second finding is that marriage is an essential institution of a successful society that promotes the interests of children. However, some child welfare advocates argue that marriage is not necessarily the best alternative for all women and their children. It is generally agreed that one-parent homes are a better alternative for children than living with an abusive parent. Many observers caution that government must be careful about supporting programs that provide cash incentives to induce people to marry or that coerce people into marrying. They note the problems associated with marriages between youths and unions that are formed in response to pregnancy. Others respond that many long-lasting marriages were based on financial alliances (e.g., to increase economic status, family wealth, status in the community, etc.). They also point out that most government programs are sensitive to the issues of domestic violence and include supports to prevent or end such actions. Many young children live with parents who are not married but who are cohabiting. Noting this, some analysts argue that policies designed to promote certain types of family structures (e.g., nuclear families) at the expense of others may undermine nontraditional family relationships. They contend that more emphasis should be placed on trying to meet the needs of these fragile families to enable them to stay together for longer periods of time. From their perspective, a single-focus policy, no matter whether it aims to support traditional family relationships or fragile families, can place children in less desirable situations. For instance, promoting the marriage of biological parents could result in supporting situations where a biological parent is absent if all children in the household are not all from the same union. In response, some promarriage analysts point out that about 65% of children born to cohabiting parents will see their parents separate before they reach age 12, compared to about 24% of those born to married parents. In light of these trends, they note that even with supports it is unlikely that fragile families (unmarried couples) will remain together as long as married families. Some observers contend that skills such as how to choose a good partner and how to keep a relationship going should be part of responsible fatherhood programs. They argue that the promotion of marriage should be incorporated into fatherhood programs if the goal is lifetime involvement of fathers in the lives of their children. Another related concern raised by some analysis is that fatherhood initiatives might sometimes be incompatible with initiatives that encourage the formation and maintenance of two-parent families, and with initiatives that promote marriage. As a result, such observers argue that the focus of the program should be the participation of fathers in their children's lives, regardless of the marital status of the parents. As part of the 1996 welfare reform effort, a fourth purpose of the TANF block grant was included, to "encourage the formation and maintenance of two-parent families." At that time, there was some discussion about whether the fourth purpose means married-couple families or just two parents who are involved in their children's lives, regardless of whether they are married or even living together. In late 1999, the Clinton Administration issued A Guide on Funding for Children and Families through the TANF program, which broadly interpreted two-parent families to mean not only married-couple families, but also never-married, separated, and divorced parents, whether living together or not. Thus, many states classify their fatherhood programs and programs that encourage visitation by noncustodial parents under the rubric of fulfilling the purposes of the TANF program. It is generally agreed that many low-income fathers, like low-income mothers, lack the education and training they need to get jobs that pay enough to sustain them and their families. The 1996 welfare reform law placed work requirements on TANF recipients, mainly custodial mothers. It also required states, as part of their collection tools, to require state child support officials to have the authority to seek a judicial or administrative order that directs any noncustodial parent owing past-due support to a child receiving TANF benefits to pay that child support in accordance with a plan approved by the court or to participate in appropriate work activities. After welfare reform, Representative Nancy Johnson, the chair of the Ways and Means Subcommittee on Human Resources during the 106 th Congress, stated, "To take the next step in welfare reform we must find a way to help children by providing them with more than a working mother and sporadic child support." She noted that many low-income fathers have problems similar to those of mothers on welfare—namely, they are likely to have dropped out of high school, to have little work experience, and to have significant barriers that lessen their ability to find and/or keep a job. She also asserted that in many cases these men are "dead broke" rather than "dead beats," and that the federal government should help these noncustodial fathers meet both their financial and emotional obligations to their children. As mentioned earlier, "Activities to foster economic stability" are a part of the purpose of responsible fatherhood programs. Federal law lists some examples of activities that foster economic stability, namely job search, job training, subsidized employment, job retention, job enhancement, and education including career-advancing education; coordination with existing employment services; and referrals to local employment training initiatives. In addition, as was noted in the earlier section of this report on evaluations, many of the responsible fatherhood evaluations that included an impact analysis indicated that programs that included work-oriented strategies showed a significant increase in child support payments made by the participants. According to a 2015 report that summarizes information gained from in-depth interviews with participants of responsible fatherhood programs: While fathers generally provided positive feedback about the job readiness and job search skills they obtained through the RF programs, the employment challenges these men typically face are significant. Most were still struggling to find steady employment, earn enough to make ends meet, and meet their child support obligations. Although these fathers faced a myriad of barriers to gaining and maintaining employment, the most commonly cited obstacle was fathers' past incarceration and criminal records. These findings suggest that the economic stability component of RF programs may need to be strengthened to improve the chances that fathers will be successful at securing good jobs with steady and adequate wages. Any employment approach should include assistance in expunging or sealing criminal records when possible. As of February 2014, 30 states and the District of Columbia were operating 77 work-oriented programs for noncustodial parents with active CSE agency involvement. Although most of the programs were not statewide, Georgia, Maryland, and North Dakota were identified as operating statewide programs, and many other states were operating programs in multiple counties. OCSE estimated that roughly 30,000 noncustodial parents were served by these programs in 2013. In many of these states, the work-oriented programs discussed in the report were available to all noncustodial parents who are unable to make their child support payments in a timely manner, not just those noncustodial parents who have a child enrolled in the TANF program. Current job training and workforce programs generally are not targeted to noncustodial parents, and only some focus on low-income individuals. Some observers note that while the CSE agency and responsible fatherhood programs are making some inroads, a lot more needs to be done on a much broader scale. They contend that in these times of federal and state budget constraints, the TANF program is an untapped resource. They maintain that states should use TANF and MOE funds to provide work opportunities and work supports for noncustodial parents. In November 2014, a Notice of Proposed Rulemaking (NPRM) was released that proposed revisions to CSE program operations and enforcement procedures. These revisions included a proposal to provide the CSE program with the ability to directly fund job services for noncustodial parents at the regular CSE matching rate (66%). Advocates commented that, given that employment services have been seriously underfunded for many years, allowing states to be reimbursed at an open-ended 66% federal matching rate could make a significant difference for noncustodial parents who are unable to comply with their child support obligations because of unemployment or low wages. Although there are many supporters of the idea of providing CSE federal matching funds for work-oriented programs for noncustodial parents, there was concern among both supporters and opponents of the provision that the Obama Administration may have overstepped its authority (i.e., they say the Administration was legislating through its regulations). When the final rule was issued on December 19, 2016, the job service-related provisions were omitted. In its commentary on the final rule, OCSE explained, This proposed provision received overwhelming support from states, Members of Congress, and the public, but it also was opposed by some Members of Congress who did not think the provision should be included in the final rule. While we appreciate the support the commenters expressed, we think allowing for federal IV-D reimbursement for job services needs further study and would be ripe for implementation at a later time. Therefore, we are not proceeding with finalizing the proposed provisions.... Appendix A. Temporary Extensions of the Healthy Marriage Promotion and Responsible Fatherhood Grant Program Appendix B. Legislative History of Federally Funded Responsible Federal Fatherhood Programs Beginning with the 106 th Congress and with each subsequent Congress, responsible fatherhood programs have received both presidential and congressional attention. 106 th Congress (1999-2000) Through the FY2001 appropriations process, $3 million was set aside for a nongovernmental national fatherhood organization named the National Fatherhood Initiative ( P.L. 106-553 ), $500,000 for the National Fatherhood Initiative, and $500,000 for the Institute for Responsible Fatherhood and Family Revitalization ( P.L. 106-554 ). President Clinton's FY2001 budget included $255 million for the first year of a proposed "Fathers Work/Families Win" initiative to help low-income noncustodial parents and low-income working families work and support their children. The "Fathers Work/Families Win" initiative would have been administered by the Department of Labor (DOL). The "Fathers Work" component ($125 million) would have been limited to noncustodial parents (primarily fathers) and the "Families Win" component ($130 million) would have been targeted more generally to low-income families. Neither the House nor the Senate versions of the FY2001 appropriations bill ( H.R. 4577 , 106 th Congress) for the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) included funding for the Fathers Work/Families Win proposal. In addition, legislation that included funding for a nationwide responsible fatherhood grants program was twice passed by the House (but not acted on by the Senate). H.R. 3073 , the proposed Fathers Count Act of 1999, and H.R. 4678 , the proposed Child Support Distribution Act of 2000, would have authorized funding ($140 million over two years in H.R. 3073 and $140 million over four years in H.R. 4678 ) to establish a program (usually referred to as fatherhood initiatives) to make grants to public or private entities for projects designed to promote marriage, promote successful parenting and the involvement of fathers in the lives of their children, and help fathers improve their economic status by providing job-related services to them. 107 th Congress (2001-2002) From the beginning of his presidency, President George W. Bush indicated his support for responsible fatherhood initiatives. President Bush's FY2002 budget proposed $64 million in 2002 (and $315 million over five years) to strengthen the role of fathers in the lives of families. This initiative would have provided competitive grants to faith-based and community organizations that help unemployed or low-income fathers and their families avoid or leave cash welfare, as well as to programs that promote successful parenting and strengthen marriage. His FY2003 budget proposed $20 million (for FY2003) for competitive grants to community and faith-based organizations for programs that help noncustodial fathers support their families to avoid or leave cash welfare, become more involved in their children's lives, and promote successful parenting and encourage and support healthy marriages and married fatherhood. Several bills ( H.R. 1300 / S. 653 , H.R. 1471 , S. 685 , S. 940 / H.R. 1990 , H.R. 2893 , H.R. 3625 , H.R. 4090 , S. 2524 , and H.R. 4737 ) that included fatherhood initiatives were introduced, but none were enacted. The purposes of the fatherhood programs in the bills introduced generally were the same: fatherhood programs must be designed to promote marriage through counseling, mentoring, and other activities; promote successful parenting through counseling, providing information about good parenting practices including payment of child support, and other activities; and help noncustodial parents and their families avoid or leave cash welfare by providing work-first services, job training, subsidized employment, career-advancing education, and other activities. However, the structure of the fatherhood programs differed. Although H.R. 4737 , as amended, was passed by the House on May 16, 2002 ( H.Rept. 107-460 , Part 1), and reported favorably in the nature of a substitute by the Senate Finance Committee ( S.Rept. 107-221 ) on July 25, 2002, it was not passed by the full Senate. 108 th Congress (2003-2004) President Bush's FY2004 budget proposed $20 million annually (for FY2004-FY2008) for promotion and support of responsible fatherhood and healthy marriage. The FY2004 budget proposal also would have gradually increased the annual funding of the CSE access and visitation grant program from $10 million annually, to $20 million annually by FY2007. His FY2005 budget proposed $50 million (for FY2005) for 75 competitive grants to faith-based and community organizations, together with Indian tribes and tribal organizations, to encourage and help fathers to support their families, avoid welfare, and improve their ability to manage family business affairs, and to support healthy marriages and married fatherhood. Several bills that included responsible fatherhood provisions ( S. 5 , S. 448 , S. 604 , S. 657 , S. 1443 , and S. 2830 ; H.R. 4 and H.R. 936 ) were introduced, none of which became law. On February 13, 2003, the House passed H.R. 4 , a welfare reauthorization bill that would have provided $20 million per year for each of FY2004-FY2008 for a responsible fatherhood grant program. This bill was essentially identical to H.R. 4737 as passed by the House in 2002. On September 10, 2003, the Senate Finance Committee approved its version of H.R. 4 ( S.Rept. 108-162 ), which would have established a $75 million responsible fatherhood program composed of four components for each of FY2004-FY2008: (1) a $20 million grant program for up to 10 eligible states to conduct demonstration programs; (2) a $30 million grant for eligible entities to conduct demonstration programs; (3) $5 million for a nationally recognized nonprofit fatherhood promotion organization to develop and promote a responsible fatherhood media campaign; and (4) a $20 million block grant for states to conduct responsible fatherhood media campaigns. Although H.R. 4 was debated on the Senate floor during the period March 29-April 1, 2004, consideration of the bill was not completed when a motion to limit debate on the bill failed to garner the necessary 60 votes. The Senate did not bring the bill back to the floor before the end of the session. 109 th Congress (2005-2006) President Bush's FY2006 budget proposed $40 million (for FY2006) for a responsible fatherhood competitive grant program. The FY2007 budget proposed $100 million for competitive matching grants to states for marriage promotion. It also included the $150 million for HMP and RF grants that was enacted in the DRA during the prior Congress. Several bills that included responsible fatherhood provisions were introduced. Two of the bills were standalone bills that had been introduced in a previous Congress ( S. 3607 and S. 3803 ) and four were welfare reauthorization bills that included some responsible fatherhood provisions ( H.R. 240 / S. 105 , S. 6 , and S. 667 ). The Deficit Reduction Act of 2005 ( S. 1932 ; DRA), which also included a provision that provided competitive grants for responsible fatherhood activities, was enacted into law. Among other things, the DRA reauthorized the TANF block grant at $16.5 billion annually through FY2010 and included a provision that provided $150 million in funding for the new HMP and RF competitive grants programs for each of the fiscal years, FY2006 through FY2010. Of the $150 million, up to $50 million per year in grants was to be provided to states, territories, Indian tribes and tribal organizations, and public and nonprofit community organizations, including religious organizations, for responsible fatherhood initiatives. Under the DRA, RF grant funds could be spent on activities to promote responsible fatherhood through (1) marriage promotion (through counseling, mentoring, disseminating information about the advantages of marriage and two-parent involvement for children, etc.), (2) parenting activities (through counseling, mentoring, mediation, disseminating information about good parenting practices, etc.), (3) fostering economic stability of fathers (through work first services, job search, job training, subsidized employment, education, etc.), or (4) contracting with a nationally recognized nonprofit fatherhood promotion organization to develop, promote, or distribute a media campaign to encourage the appropriate involvement of parents in the lives of their children, focusing particularly on responsible fatherhood; and/or to develop a national clearinghouse to help states and communities in their efforts to promote and support marriage and responsible fatherhood. 110 th Congress (2007-2008) President Bush's FY2008 and FY2009 budget included the $150 million for HMP and RF programs that was included in the DRA as part of welfare reauthorization. As noted, pursuant to the DRA, $50 million was specifically allocated for responsible fatherhood programs for each of FY2006-FY2010. Two bills that included responsible fatherhood provisions were introduced, S. 1626 , and a House companion bill, H.R. 3395 . Among other things, S. 1626 / H.R. 3395 , would have increased funding for the RF grants (authorized by the DRA) to $100 million per year for each of FY2008-FY2010. (The total for the HMP and RF grants would have increased from $150 million to $200 million per year for each of FY2008-FY2010.) The bills were not reported out of committee. 111 th Congress (2009-2010) The Obama Administration's FY2011 budget included a new proposal to redirect funds from the HMP and RF Grant Programs to the proposed $500 million Fatherhood, Marriage, and Families Innovation Fund. The proposed Fatherhood, Marriage, and Families Innovation Fund would have been available for one year (FY2011) to provide three-year competitive grants to states. According to one budget document, "The Fatherhood, Marriage, and Families Innovation Fund will serve as a catalyst for innovative service models that integrate a variety of service streams. The results from these demonstrations could form the basis for possible future TANF and CSE program changes at the federal or state level based on a multidimensional picture of the dynamics of family functioning and material self-sufficiency and child well-being." The Fatherhood, Marriage, and Families Innovation Fund proposal was not acted on by either the House or the Senate. Three bills that included responsible fatherhood provisions were introduced, all three of which had been introduced in a previous Congress. None of the bills received congressional action. The first two bills were companion proposals that were almost identical to bills that were introduced in the 110 th Congress. The Senate proposal, S. 1309 , was referred to as the Responsible Fatherhood and Healthy Families Act of 2009. The House proposal, H.R. 2979 , was referred to as the Julia Carson Responsible Fatherhood and Healthy Families Act of 2009. The bills would have (1) increased funding for RF grant programs from $50 million per year to $100 million per year (for each of FY2008-FY2010); (2) expanded procedures to address domestic violence; (3) expanded activities promoting responsible fatherhood; (4) provided grants to healthy family partnerships for domestic violence prevention, for services for families and individuals affected by domestic violence, and for developing and implementing best practices to prevent domestic violence; and (5) eliminated the separate TANF work participation rate for two-parent families. The bills would have also made several changes to the CSE program and addressed the issue of employment for noncustodial and disadvantaged parents. The HHS Secretary would have been directed to award grants to states for an employment demonstration project involving a court- or state child support agency-supervised program for noncustodial parents so they can pay child support obligations. In addition, the Secretary of Labor would have been required to award grants for transitional jobs programs and for public-private career pathways partnerships to help disadvantaged parents obtain employment. The third proposal, S. 939 , was the Protecting Adoption and Promoting Responsible Fatherhood Act of 2009. The bill would have required the HHS Secretary to establish an automated National Putative Father Registry. Among other things, S. 939 would have directed the Secretary to establish a nationwide responsible fatherhood and putative father registry educational campaign designed to (1) inform men about the National Putative Father Registry, the advantages of registering with a State Putative Father Registry, and the rights and responsibilities of putative fathers; and (2) inform women about the National Registry and its potential role in a pending or planned adoption or a termination of a putative father's rights. In addition, it would have required each state that desired to receive such a grant to develop and implement a state plan for promoting responsible fatherhood and permanency for children. The Claims Resolution Act of 2010, enacted December 8, 2010 ( P.L. 111-291 ), extended the RF grant program through FY2011 and its funding was increased from $50 million to $75 million. Funding for the HMP grants was reduced to $75 million. 112 th Congress (2011-2012) The Obama Administration's FY2012 and FY2013 budget proposed continued funding of $150 million to support HMP and RF grant programs for FY2012. This budget proposal also would have made changes to the purpose clause of the CSE program to include access and visitation and other fatherhood involvement activities. These activities would have become core parts of the CSE program and thereby states would have been reimbursed by the federal government for expenditures on such activities at an open-ended 66% matching rate. The budget proposal would have required states to establish access and visitation responsibilities in all initial child support orders. It would have encouraged states to undertake activities that support access and visitation, implementing domestic violence safeguards as a critical component of this new state responsibility. (The estimated cost of the proposal was $570 million over 10 years.) The Julia Carson Responsible Fatherhood and Healthy Families Act of 2011, was reintroduced as H.R. 2193 . Similar to the bill introduced in the 111 th Congress, H.R. 2193 , among other things, would have reauthorized and provided $75 million per year for the RF grant program for each of the years FY2011 through FY2015. This measure did not receive congressional action. Instead, the programs were extended temporarily at their FY2012 levels ($150 million per year on a pro rata basis, divided equally between the two programs), through three laws: P.L. 112-78 , the Temporary Payroll Tax Cut Continuation Act of 2011 (enacted December 23, 2011), provided funding for the HMP and RF grant programs through February 29, 2012. P.L. 112-96 , the Middle Class Tax Relief and Job Creation Act of 2012 (enacted February 22, 2012), provided funding for the HMP and RF grant programs through September 30, 2012. P.L. 112-175 (the government-wide continuing resolution enacted on September 28, 2012) extended funding for the HMP and RF grant programs through March 2013 (i.e., the first six months of FY2013). 113 th Congress (2013-2014) The Obama Administration's FY2014 and FY2015 budgets proposed continued funding of $150 million to support HMP and RF grant programs each of those fiscal years. These funds would have been split equally among HMP and RF activities. These budget proposals were very similar to the FY2012 and FY2013 proposals with regard to fatherhood programs. (However, the FY2013 budget would have provided $580 million over 10 years to support the increased access and visitation services while the FY2014 and FY2015 budgets would have provided $448 million over 10 years for such services.) During the 113 th Congress, the HMP and RF grant programs were extended and funded thorough a number of appropriations acts. All of these appropriations acts provided $150 million per year (either through a full year of funding or on an annualized basis), divided equally between the programs. For FY2013, a full-year continuing resolution ( P.L. 113-6 , enacted on March 26, 2013) extended funding for the HMP and RF grant programs through September 30, 2013. For FY2014, the programs were initially extended and funded through an interim continuing resolution ( P.L. 113-46 , enacted on October 17, 2013), and subsequently provided full-year appropriations through September 30, 2014 ( P.L. 113-76 , enacted on January 17, 2014). For FY2015, the programs were initially extended and funded through three continuing appropriations acts: (1) P.L. 113-164 , enacted on September 19, 2014; (2) P.L. 113-202 , enacted on December 12, 2014; and (3) P.L. 113-203 , enacted on December 13, 2014). Later in the fiscal year, full-year appropriations were provided through September 30, 2015 ( P.L. 113-235 , enacted on December 16, 2014). Other pieces of legislation affecting the HMP and RF programs were introduced during the 113 th Congress, though none received congressional action. H.R. 2359 , the Julia Carson Responsible Fatherhood and Healthy Families Act of 2013, was reintroduced. Similar to the bill ( H.R. 2193 ) introduced in the 112 th Congress, H.R. 2359 , among other things, would have reauthorized and provided $75 million per year for RF programs for each of the years FY2014 through FY2018. 114 th Congress (2015-2016) The Obama Administration's FY2016 and FY2017 budgets proposed continuing funding of $150 million to support HMP and RF grant programs for each of those fiscal years. These funds would have been split equally among Healthy Marriage and Responsible Fatherhood activities. These budget requests also continued to propose $448 million over 10 years to support increased access and visitation services and integrating those services into the core CSE program. The HMP and RF programs were extended and funded through a number of appropriations acts. All of these appropriations acts provided $150 million per year (either through a full year of funding or on an annualized basis), divided equally between the programs. For FY2016, the programs were initially funded through three interim continuing resolutions: (1) P.L. 114-53 , enacted September 30, 2015; (2) P.L. 114-96 , enacted December 11, 2015; and (3) P.L. 114-100 , enacted December 16, 2015. Full-year funding for FY2016 was provided via P.L. 114-113 (enacted December 18, 2015). For FY2017, the programs did not receive full-year appropriations during the 114 th Congress, and instead were funded through two continuing resolutions: (1) P.L. 114-223 , enacted on September 29, 2016; and (2) P.L. 114-254 , enacted on December 10, 2017. The continuing appropriations in P.L. 114-254 were scheduled to expire on April 28, 2017. Other pieces of legislation affecting the Healthy Marriages and Responsible Fatherhood programs were introduced during the 114 th Congress, though none received congressional action. H.R. 3005 , the Julia Carson Responsible Fatherhood and Healthy Families Act of 2015, was reintroduced. Similar to the bill ( H.R. 2359 ) introduced in the 113 th Congress, H.R. 3005 , among other things, would have reauthorized and provided $75 million per year for responsible fatherhood programs for each of five fiscal years (FY2016 through FY2020). Also during the 114 th Congress, two pieces of legislation were introduced that specify that HHS may not take any action to finalize, implement, enforce, or otherwise give effect to the proposed rule entitled "Flexibility, Efficiency, and Modernization in Child Support Enforcement Programs" or any proposal set forth in the proposed rule ( S. 1525 and H.R. 2688 ). Neither of those pieces of legislation received congressional action. (The final rule was issued on December 19, 2016.) 115 th Congress (2017-2018) The Trump Administration's FY2018 budget proposed that funding for the HMP and RF grants be continued through FY2018 at current law levels ($75 million for each program). The HMP and RF grant programs were temporarily extended by two appropriations laws. The first, enacted on April 29, 2017, extended the program through May 5, 2017 ( P.L. 115-30 ). The second, enacted on May 5, 2017, extended the program for a comparatively longer time period, through September 30, 2018 ( P.L. 115-31 ). The Julia Carson Responsible Fatherhood and Healthy Families Act of 2017 ( H.R. 3465 ) was reintroduced, which would, among other things, reauthorize the program through FY2023. No legislative action on that proposal has occurred. | Long-standing research indicates that children raised in one-parent homes are more likely than children raised in homes with both biological parents to do poorly in school, have emotional and behavioral problems, become teenage parents, and have poverty-level incomes as adults. In an effort to improve the long-term outlook for children in one-parent homes, federal, state, and local governments, along with public and private organizations, have supported programs and activities that promote the financial and personal responsibility of noncustodial parents to their children and reduce the incidence of parental absence in the lives of children. Fatherhood initiatives include campaigns that seek to encourage noncustodial parents to connect with their children; counseling and training on "soft skills," including relationship skills, to help noncustodial parents connect with them; and employment and training services so that they can help financially support them. Over the years, sources of federal funding for fatherhood programs have included the Temporary Assistance for Needy Families (TANF) program, TANF state Maintenance-of-Effort (MOE) funding, Child Support Enforcement (CSE) funds, and Social Services Block Grant (Title XX) funds. However, the need for a specific funding stream for the program was identified in legislation as early as the 106th Congress, and President George W. Bush included funding for such programs in each of his budgets. Ultimately, funding for a competitive Healthy Marriage Promotion (HMP) and Responsible Fatherhood (RF) grants program was enacted as part of the Deficit Reduction Act of 2005 (P.L. 109-171). Between FY2006 and FY2010, the act provided up to $50 million per year for the RF grants and about $100 million per year for the HMP grants, but the Claims Resolution Act of 2010 (P.L. 111-291) subsequently altered the split between the programs to $75 million each. Funding for these programs has been extended on multiple occasions since that time, usually through provisions in appropriations acts. Most recently, on May 5, 2017, funding was extended through the end of FY2018 by the Consolidated Appropriations Act, 2017 (P.L. 115-31). Most fatherhood programs include media campaigns that emphasize the importance of emotional, physical, psychological, and financial connections of fathers to their children. They also include elements such as parenting education; responsible decisionmaking; mediation services for both parents; information on the CSE program; skills development related to conflict resolution, coping with stress, and problem-solving; peer support; and job-training opportunities. RF grantees include states, territories, Indian tribes and tribal organizations, and public and nonprofit community groups (including religious organizations). The 42 most recently awarded RF grants, which are scheduled to run through FY2020, have included a new emphasis on key short- and long-term outcomes intended to enhance evaluation and strengthen program design. According to the Office of Family Assistance (in the Administration for Children and Families of the Department of Health and Human Services), it is expected that the new RF grant-funded programs (and their evaluations) will increase the understanding of policymakers and others of what works and why. |
Figure 1. Map of HondurasSource: Map Resources. Adapted by CRS Graphics. Prior to the military-imposed exile of President Manuel Zelaya, Honduras, a Central American nation of 7.4 million people, enjoyed 27 years of uninterrupted elected civilian democratic rule. The Liberal (PL) and National (PN) parties have been Honduras' two dominant political parties since the military relinquished control of the country in 1982. Both are considered to be ideologically center-right, and there appear to be few major differences between the two. Manuel Zelaya of the PL was elected president in November 2005, narrowly defeating his PN rival, Porfirio Lobo Sosa. Zelaya—a wealthy landowner with considerable investments in the timber and cattle industries—was generally regarded as a moderate when he was inaugurated to a four-year term in January 2006. As his term progressed, however, Zelaya advanced a number of populist policies, including free school enrollment, an increase in teachers' pay, and a 60% increase in the minimum wage. Zelaya also forged closer relations with Venezuelan President Hugo Chávez, joining PetroCaribe and the Bolivarian Alternative for the Americas (ALBA) in 2008. Although Zelaya's populist policies allowed him to maintain considerable support among certain sectors of Honduran society, they alienated many within the traditional economic and political elite. Likewise, his Administration's inability to achieve concrete results on a number of issues of importance—such as poverty and violent crime—significantly weakened his public standing. Opinion polls indicated that Zelaya's approval rating had fallen to about 30% prior to his ouster. In March 2009, President Zelaya issued an executive decree introducing a process that eventually could have led to changes to the Honduran constitution. The decree called on the National Statistics Institute (INE) to hold a popular referendum on June 28, 2009, to determine if the country should include a fourth ballot box during the general elections in November 2009. The fourth ballot would consult Hondurans about whether the country should convoke a national constituent assembly to approve a new constitution. In May 2009, Zelaya repealed the March decree and issued a new decree—not published until June 25, 2009—that made the referendum non-binding and removed the reference to a new constitution. The non-binding referendum would have asked Hondurans, "Do you agree that in the general elections of 2009, a fourth ballot box should be installed in which the people decide on the convocation of a National Constituent Assembly?" Zelaya argued that the constitution—drafted in 1982—should be amended to reflect the "substantial and significant changes" that have taken place in Honduran society in recent years. The proposal was immediately criticized by a number of officials. President of Congress Roberto Micheletti expressed ardent opposition, the 2009 presidential nominees of the PL and the PN—both of whom later indicated that they were open to a constitutional assembly —accused Zelaya of trying to perpetuate himself in power, the Attorney General's office accused Zelaya of violating the constitution, and the Honduran judiciary declared Zelaya's proposal unconstitutional. Nonetheless, Zelaya pushed forward, maintaining that the law of citizen participation approved shortly after he took office allowed him to consult the people of Honduras in a non-binding poll. Zelaya also noted that the referendum did not propose specific constitutional changes, and any changes arising from an eventual assembly would take place after he left office. President Zelaya's refusal to accept the court rulings, however, sparked rumors that he was planning an institutional coup that would dissolve Congress and immediately call a constitutional assembly. The political situation in the country deteriorated considerably the week before the non-binding referendum was to be held as Honduran society and the country's governmental institutions became increasingly polarized. On June 23, 2009, the National Congress created an additional legal obstacle to the referendum, passing a law preventing referenda from occurring 180 days before or after general elections. A day later, Zelaya ordered the resignations of Honduran Defense Minister Edmundo Orellana Mercado and Chairman of the Joint Chiefs of Staff Romeo Vasquez Velasquez after they informed him that the Honduran military would not provide logistical support for the non-binding referendum since the courts had ruled it unconstitutional. The removal of Orellana and Vasquez prompted the resignation of 36 other Honduran military commanders, including the heads of the army, navy, and air force. On June 25, 2009, the Supreme Court ordered that the Defense Minister and Armed Forces Chief should be restored to their positions, and the National Congress began debate on the possibility of censuring Zelaya. In response, Zelaya declared that the legislature and courts were working with the country's oligarchy to carry out a technical coup. By the day the non-binding referendum was to be held, Honduras was extremely divided. The legislature, the judiciary, the Attorney General, the Human Rights Ombudsman, the hierarchy of the Catholic Church, evangelical groups, business associations, and four of the five political parties represented in the National Congress—including Zelaya's own PL—opposed the referendum. Nearly all of these political and social actors called on the people of Honduras to boycott the vote. Proponents of the referendum—who saw it as a mechanism to overcome political and economic exclusion—included unions, peasants, women's groups, groups of ethnic minorities, and the small leftist Democratic Unification party (DU). On June 28, 2009, shortly before the polls were to open for the non-binding referendum, the Honduran military surrounded the presidential residence, arrested President Zelaya, and flew him to exile in Costa Rica. The military also confiscated all referendum materials from polling places across the country. In the aftermath of the ouster, the Honduran Supreme Court produced documents asserting that an arrest warrant for President Zelaya had been issued in secrecy on June 26, 2009, as a result of the executive branch's noncompliance with judicial rulings that had declared the non-binding referendum unconstitutional. Zelaya was charged with crimes against the form of government, treason, abuse of authority, and usurpation of functions for calling a referendum without the approval of the National Congress and intending to use the INE to supervise the vote rather than the Supreme Electoral Tribunal. The judicial process was halted before a trial could be held, however, as a result of the Honduran military's actions. The Honduran National Congress ratified the ouster soon after the military forced Zelaya from the country. The Congress accepted a letter of resignation allegedly signed by the exiled president, which Zelaya immediately declared to be fraudulent. It then passed a decree that disapproved of Zelaya's conduct for "repeated violations against the Constitution and laws of the Republic and nonobservance of the resolutions and rulings of the judicial organs," removed Zelaya from office, and named Roberto Micheletti—the President of Congress and the next in line constitutionally—the President of Honduras for the remainder of Zelaya's term, which ended on January 27, 2010. Although some maintain that Zelaya's removal was done through legal means, others assert that the actions of the military and Congress were unconstitutional. According to most analysts, the Honduran military's decision to force Zelaya into exile directly violated the Honduran Constitution, which forbids the expatriation of Honduran citizens. Those involved in the ouster maintain that their actions were necessary to avoid chaos. On January 26, 2010, a Honduran Supreme Court judge dismissed charges against members of the joint command of the Honduran military for their role in Zelaya's expatriation, asserting that the Honduran military had acted to "preserve democracy" and "avoid bloodshed." Some Honduran legal observers also have asserted that the actions of the Honduran National Congress were unconstitutional. They maintain that the power to remove a president is reserved for the judicial branch. They also note that since Zelaya never resigned and the judicial process against him was terminated prematurely by the military's actions, Zelaya was still president and there was no vacancy to be filled. Nevertheless, the Honduran Supreme Court appears to have accepted the legality of the actions of Congress. On June 29, 2009, it ordered Zelaya's legal proceedings to continue through the ordinary judicial process since he "no longer holds high office;" however, the Court has never directly ruled on the legality of Congress's actions. Roberto Micheletti assumed the office of the presidency following Zelaya's removal. Throughout the seven months between the ouster and the inauguration of President Lobo, Micheletti maintained that he was the legitimate president of Honduras as a result of a "constitutional substitution." Upon assuming office, he named a new cabinet, announced a plan of governance, and assured the public that general elections would be held in November 2009, as previously planned. Micheletti and the Honduran National Congress passed a 2009 budget, which included a 10% cut to the central government and a 20% cut to decentralized state bodies as a result of the loss of international support. They also annulled more than a dozen decrees and reforms approved under Zelaya, including Honduras' accession to the Venezuelan-led trade bloc known as ALBA. Micheletti received strong support from some sectors of Honduran society throughout his government. On various occasions, Hondurans held large demonstrations in support of his government. Likewise, prior to adjourning in mid-January 2010, the Honduran National Congress named Micheletti a "deputy-for-life," and offered life-long security to Micheletti and some 50 other Honduran officials involved in his government or the ouster of Zelaya. Nonetheless, an October 2009 poll found that just 36% of Hondurans approved of Micheletti's job in office and 59% believed he rarely or never did what was in the interest of the Honduran people. The same poll found that 42% of Hondurans recognized Zelaya as president, while 36% recognized Micheletti. During his government, Micheletti implemented a number of measures that placed Honduran society under strict control. On the day of the ouster, security forces patrolled the streets, a curfew was put in place, and a number of local and international television and radio stations were shut down or intimidated. Likewise, members of Zelaya's Administration, other political and social leaders, and some members of the press were detained or forced to go into hiding. Over the next several months, the Micheletti government periodically implemented curfews—often arbitrarily and with little or no prior notification—and issued decrees restricting civil liberties. Micheletti declared a 45-day state of siege following Zelaya's September 21, 2009, announcement that he had clandestinely returned to Honduras and taken refuge in the Brazilian Embassy in Tegucigalpa. The decree suspended freedom of the press and freedom of movement, required police or military authorization for public meetings, allowed detention without a warrant, and led to the government shutdown of two of the leading sources of media opposition to the Micheletti government. Although criticism from the country's presidential candidates, members of the National Congress, and the Supreme Electoral Tribunal ultimately led Micheletti to revoke the decree three weeks later, repressive actions continued. The Inter-American Commission on Human Rights (IACHR), an autonomous organ of the Organization of American States, monitored the human rights situation in Honduras during the Micheletti government. The IACHR asserts that serious violations of human rights occurred, including "deaths, an arbitrary declaration of a state of emergency, suppression of public demonstrations through disproportionate use of force, criminalization of public protest, arbitrary detentions of thousands of persons, cruel, inhuman and degrading treatment and grossly inadequate conditions of detention, militarization of Honduran territory, a surge in incidents of racial discrimination, violations of women's rights, serious and arbitrary restrictions on the right to freedom of expression, and grave violations of political rights." The IACHR also asserts that the Honduran judicial system failed to investigate, prosecute, and punish those responsible for human rights violations. The international community reacted quickly and forcefully to the events of June 28, 2009. The United States, European Union, and United Nations condemned the ouster and called for Zelaya's immediate return, as did every regional grouping in the hemisphere from the System of Central American Integration (SICA) to the Caribbean Community (CARICOM) to the Union of South American Nations (UNASUR). On July 4, 2009, in accordance with Article 21 of the Inter-American Democratic Charter, the member states of the Organization of American States (OAS) unanimously voted to suspend Honduras from the organization for an unconstitutional interruption of the democratic order. Moreover, countries throughout Latin America and Europe withdrew their ambassadors, diplomatically isolating the Micheletti government, which was not recognized by a single country. Economic pressure was also placed on Honduras, which was already suffering as a result of the global financial crisis and U.S. recession. Some Central American countries imposed a 48-hour commercial blockade, international financial institutions withheld access to some $485 million in loans and other transfers, the European Union suspended an estimated $93 million in budget support, the United States terminated nearly $33 million in economic and military aid, and Venezuela—which provided 50% of Honduras' petroleum imports in 2008—stopped supplying the country with oil. After the initial sanctions failed to return Zelaya to power, the international community focused its efforts on facilitating a negotiated solution to the political crisis. In July 2009, Zelaya and Micheletti agreed to participate in talks mediated by Costa Rican President Oscar Arias, who won a Nobel Peace Prize in 1987 for his efforts to end conflicts in Central America during his previous administration (1986-1990). Following initial meetings with President Arias, both leaders designated groups of negotiators to continue on their behalves. President Arias eventually proposed a 12-point plan known as the "San José Accord." Among other provisions, the proposal called for President Zelaya's reinstatement, the creation of a national unity government, a general amnesty for all political crimes committed before and after Zelaya's removal, an agreement not to pursue constitutional reform, and the creation of a verification commission to guarantee compliance with the accord. Although Zelaya initially declared the negotiation process a failure, he later signaled that he would accept the Arias proposal. Micheletti's negotiators said they would take the proposal back to the independent branches of the government to consider. They subsequently rejected the accord. Nonetheless, the international community continued to push all of the parties involved to accept the San José Accord. Following a new round of talks supported by the OAS and the United States, Zelaya and Micheletti signed an agreement on October 30, 2009. Based largely on the San José Accord, the "Tegucigalpa/San José Accord" called for (1) the formation of a national unity and reconciliation government; (2) a renunciation of any attempts to reform the non-amendable provisions of the constitution; (3) a recognition of the November elections with international observation; (4) the transfer of supervision of the armed forces (who traditionally assist in election logistics) to the Supreme Electoral Tribunal one month prior to the election; (5) a congressional vote—considering the input of the Supreme Court—on Zelaya's restitution to the presidency; (6) the creation of a verification commission to ensure the accord's implementation, and a truth commission to investigate the events before, during, and after the June 28 ouster; and (7) international recognition of Honduras and the removal of all sanctions against the country. The agreement also set a timeline for implementation: transfer of the agreement to Congress to consider Zelaya's restitution was to occur on October 30, 2009, the verification commission was to be formed by November 2, 2009, the national unity government was supposed to take office by November 5, 2009, and the formation of the truth commission was scheduled to occur in the first half of 2010. Despite proclamations by some in the international community that the accord signaled the end of the political crisis in Honduras, little changed in the country following the agreement. Although a verification committee was created according to schedule, a national unity government was never formed. Likewise, the accord was immediately sent to the legislative branch, yet the National Congress did not consider Zelaya's reinstatement until December 2, 2009—three days after the presidential election—at which point it reaffirmed his ouster. As a result, Zelaya and members of the "National Resistance Front Against the Coup d'état" boycotted the November 2009 elections and refused to recognize the results. Moreover, Micheletti refused to allow Zelaya to leave the Brazilian embassy, maintaining that the deposed president had to renounce his claim to the presidency and request refugee status in order to be given safe passage. On November 29, 2009, Honduras held general elections to fill nearly 3,000 posts nationwide, including the presidency and all 128 seats in the unicameral National Congress. Former President of Congress and 2005 National Party (PN) presidential nominee Porfirio Lobo easily defeated his closest rival, former Vice President Elvin Santos of the Liberal Party (PL), 56.6% to 38.1%. Lobo's PN also won 71 of the 128 seats in Congress, up from 55 in the 2005 election. The PL won just 45 seats in Congress, down from 62 in 2005. A number of analysts have interpreted the vote as a clear rejection of the PL, which Hondurans saw as responsible for the country's political crisis as a result of Zelaya and Micheletti both belonging to the party. A poll taken prior to the election found that 63% of Hondurans thought the election would help end the country's political crisis. There has been considerable debate—both in Honduras and the international community—concerning the legitimacy of the November 2009 elections. Supporters of the elections note that the electoral process was initiated, and the members of the autonomous Supreme Electoral Tribunal (TSE) were chosen, prior to Zelaya's ouster. They also note that the candidates were selected in internationally observed primary elections in November 2008, and that election day was largely free of political violence. Nonetheless, some Hondurans and international observers have argued that the Micheletti government's suppression of opposition media and demonstrators prevented a fair electoral campaign from taking place. This led to election boycotts and a number of candidates for a variety of offices withdrawing from the elections, including an independent presidential candidate and some incumbent Members of Congress. It also led organizations that traditionally observe elections in the hemisphere, such as the OAS, the EU, and the Carter Center, to cancel their electoral observation missions. Critics of the elections also assert that the electoral turnout, which was just under 50% (5 points lower than 2005), demonstrated a rejection of the elections by the Honduran people. Supporters of the elections counter this assertion by arguing that Lobo won more absolute votes in 2009 than Zelaya did in 2005, and that the electoral rolls are artificially inflated—distorting the turnout rate—as a result of Honduras not purging the rolls of those who have died or migrated overseas. Although a growing number of Hondurans and members of the international community have recognized Lobo as the legitimate President of Honduras, some have refused to do so. President Lobo has already taken a number of steps to ease the political polarization in Honduras. Since his election, Lobo has called for a government of national unity and pledged to engage in dialogue with all sectors of Honduran society. He intends to create two outside advisory councils: one composed of former presidents and another composed of members of the business community, the churches, unions, peasant organizations, and the media. Lobo has included three of his presidential rivals in his administration, and the new Honduran National Congress, which is controlled by Lobo's National Party, incorporated members of each of the political parties into the leadership committee. Moreover, Lobo arranged safe passage out of the country for Zelaya and immediately signed a bill providing political amnesty to Zelaya and those who removed him from office. The amnesty covers political and common crimes committed prior to and after the removal of President Zelaya, but does not include acts of corruption or violations of human rights. Although these actions have partially reduced the polarization of Honduran society, a number of analysts caution that the underlying cause of the crisis—the failure of the political elite to respond to the interests of the majority of the population—remains. They assert that those who made up the "National Resistance Front Against the Coup d'état," an umbrella group of those opposed to Zelaya's removal, are still fully committed to reforming the Honduran constitution and pushing for greater political, economic, and social rights for traditionally excluded sectors of the Honduran population. These analysts maintain that Honduras will continue to be susceptible to political instability if Honduran leaders simply revert to that status quo that existed prior to the political crisis and largely ignore the basic needs of the 70% of the population that lives below the poverty line. President Lobo faces a challenge in winning support from the international community. Following the ouster of President Zelaya, many nations expressed concern about the state of democracy in Latin America and the possibility that the events of June 28, 2009, could serve as an example for other countries. Not a single nation recognized the Micheletti government, and since Zelaya was not returned to office prior to the November 2009 election, a number of countries refused to recognize the result. Lobo has called on the international community to stop "punishing" the people of Honduras for Zelaya's ouster. Although the United States and several other countries in the region have indicated that they will support Lobo, he still needs to win the support of others—such as Brazil—in order to reintegrate Honduras into the international community and end the diplomatic and economic sanctions that have been leveled against the country. According to a number of analysts, the international community is likely to slowly restore relations with Honduras. They assert that several countries have responded positively to Lobo's preliminary attempts at national reconciliation and have softened their positions. They also assert that countries that have yet to recognize Lobo have few remaining options since a growing number of nations and the majority of Hondurans have already recognized the new government. Lobo's third major challenge is Honduras' faltering economy. The political crisis exacerbated economic problems that were already present as a result of the global financial crisis and U.S. recession. Steep declines in tourism and investment were added to already significant declines in exports and remittances. Likewise, steep declines in international loans and assistance were added to already significant declines in government revenue. As a result, Micheletti and the Honduran Congress were forced to slash central government spending by 10% and decentralized state bodies by 20%, and the Honduran economy contracted by an estimated 4.4% in 2009. According to some analysts, Lobo will need to re-establish flows of bilateral and multilateral aid in order to turn the economy around. This will allow Lobo to address Honduras' growing fiscal deficit and restore some of the spending that was cut in 2009. Although analysts suggest that the improving international economy should aid Honduras' recovery, they caution that it will be years before Honduras regains what was lost as a result of the political crisis. In the weeks and months leading up to President Zelaya's proposed non-binding referendum, the United States expressed its support for a democratic solution to the political impasse in Honduras. The U.S. embassy repeatedly asserted that the referendum was a matter for Hondurans to resolve and that whatever was decided should comply with Honduran law. As the situation deteriorated in the days before the proposed referendum was to take place, the United States continued to "urge all sides to seek a consensual democratic resolution." The efforts of U.S. officials, however, failed to prevent Zelaya's forced removal. The United States government quickly responded to Zelaya's ouster. President Obama initially expressed deep concern about the situation and called on all Hondurans to respect democratic norms and resolve the dispute peacefully. The Obama Administration later condemned the events more forcefully, declared them illegal, and asserted that the United States viewed Zelaya as the legitimate president of Honduras. Following its preliminary statements, the United States addressed the situation in Honduras in a variety of ways. In the days after Zelaya's forced removal, U.S. Southern Command minimized cooperation with the Honduran military, the U.S. State Department suspended some non-humanitarian foreign assistance, the U.S. embassy provided security and refuge for Zelaya's family, and U.S. officials met with President Zelaya in Washington, DC. The United States also strongly supported the mediation of Costa Rican President Oscar Arias, advising both Zelaya and Micheletti to accept the proposed San José Accord. In order to place pressure on Honduran officials to accept the accord, the State Department revoked the visas of members and supporters of the Micheletti government, suspended non-emergency and non-immigrant visa services in the consular section of the U.S. embassy in Honduras, and announced that it would not recognize the results of the November 2009 general election in Honduras unless the situation changed. In September 2009, the United States terminated $32.7 million in foreign assistance appropriated for Honduras for FY2009. Some $10.3 million was intended for security assistance. Another $11.4 million was intended for economic and social development programs administered by the government of Honduras, including funds for anti-gang activities, trade capacity building, and aid to small farmers. The final $11 million was intended for two transportation projects, and was all that remained of the $215 million MCC compact that Honduras signed in 2005. Nonetheless, Honduras still received an estimated $42.5 million in U.S. foreign aid in FY2009, which provided direct assistance to the Honduran people. The assistance included funds for education, disease prevention, and democracy promotion. The U.S. government would have been legally required to terminate some foreign assistance if it had declared Zelaya's ouster a "military coup." Although the United States never made such a declaration, it terminated the foreign assistance that it would have been required to discontinue had it done so. Upon the signing of the ill-fated Tegucigalpa-San José Accord in late October 2009, the United States announced that it would support the November 2009 elections in Honduras. Although the agreement began to fall apart almost immediately, the United States continued to urge compliance with the accord's provisions. U.S. officials also announced that they would support the Honduran elections no matter what happened with the accord, maintaining elections represented a "significant step in Honduras' return to the democratic and constitutional order. " Following the elections, the United States commended the Honduran people for "peacefully exercising their democratic right to select their leaders;" however, the United States noted that "significant work" remained to be done in order to end the political crisis. The U.S. State Department then urged Honduran officials to implement the remaining provisions of the Tegucigalpa-San José Accord, including the vote on Zelaya's restitution, the creation of a national unity government, and the formation of a truth commission. U.S. officials expressed disappointment over the Honduran National Congress vote against Zelaya's restitution as well as Micheletti's refusal to step down in favor of a unity government. Nonetheless, U.S. officials have been encouraged by President Lobo's decision to form a unity government and his willingness to appoint a truth commission. As a result, the United States has offered its full support to Lobo and has called on other nations to do the same. Congress has expressed considerable interest in the situation in Honduras since Zelaya's forced removal on June 28, 2009. On July 10, 2009, the House Committee on Foreign Affairs Subcommittee on the Western Hemisphere held a hearing on the crisis in Honduras. Over the course of the following months, a number of congressional delegations traveled to the country to observe the conditions on the ground and meet with Hondurans. Some Members of the Senate also placed temporary holds on the nominations of Arturo Valenzuela to be Assistant Secretary of State for Western Hemisphere Affairs and Thomas Shannon to be Ambassador to Brazil in protest of the Obama Administration's punitive policies toward Honduras and the Micheletti government. Several resolutions were introduced in the first session of the 111 th Congress regarding the political crisis. On July 8, 2009, H.Res. 619 (Mack) and H.Res. 620 (Serrano) were introduced in the House. H.Res. 619 condemned Zelaya for his "unconstitutional and illegal" actions and called on all parties to seek a peaceful resolution. H.Res. 620 called upon the Micheletti government to end its "illegal seizure of power" and work within the rule of law to resolve the situation. On July 10, H.Res. 630 (Delahunt) was introduced in the House. It condemned the "coup d'etat" in Honduras; refused to recognize the Micheletti government; called for the reinstatement of Zelaya; urged the Obama Administration to suspend non-humanitarian assistance to Honduras; called for international observation of the November 2009 elections; and welcomed the mediation efforts of Costa Rican President Oscar Arias. On September 17, H.Res. 749 (Ros-Lehtinen) was introduced in the House. The resolution called for the Secretary of State to work with Honduran authorities to ensure free and fair elections in Honduras. It also called on President Obama to recognize the November elections "as an important step in the consolidation of democracy and rule of law in Honduras." The Honduran political crisis also influenced a change to one of the provisions of the FY2010 Consolidated Appropriations Act ( P.L. 111-117 ). The heading of section 7008 of the "Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010" (Division F) was changed from "Military Coups" to "Coups d'État." Section 7008 requires the U.S. government to terminate some foreign assistance to any country "whose duly elected head of government is deposed by military coup or decree." The U.S. Department of State has asserted that although Zelaya's ouster could be considered a "coup d'état," it was not a "military coup" and a termination of assistance was not legally required. The House report to the appropriations bill ( H.Rept. 111-366 ) notes that there are no substantive changes to section 7008, but conferees are "concerned that the previous title implied an unintended limitation of the provision's application." The House report also directs the Department of State's Office of the Legal Advisor to "undertake a review of events necessary to trigger the provisions of this section and submit a report on such events to the Committees on Appropriations not later than 45 days after enactment" of the bill. On March 23, 2009, President Zelaya announced an executive decree—which was never officially published—calling for a popular referendum on June 28 on whether to include a fourth ballot box during the November 2009 general elections. The fourth ballot would have consulted Hondurans about whether the country should convoke a national constituent assembly to approve a new constitution. On May 26, 2009, President Zelaya issued two executive decrees that were officially published on June 25, 2009. One annulled the March 23 decree. The other called for a non-binding referendum on June 28 on whether to include a fourth ballot box during the November 2009 general elections in which Hondurans could choose to convoke a national constituent assembly. On May 27, 2009, a Honduran lower court judge ordered the suspension of the referendum that President Zelaya proposed on March 23. On May 29, 2009, a Honduran lower court judge issued an order clarifying that the May 27 ruling applied to any other executive decree that would lead to the same ends as the suspended decree. On the same day, President Zelaya ordered the Honduran military and police to provide logistical support for the proposed referendum. On June 16, 2009, a Honduran Appeals Court upheld the lower court ruling that declared President Zelaya's proposed non-binding referendum illegal. On June 19, 2009, the Honduran Supreme Court ordered the Honduran security forces not to provide any support for the proposed non-binding referendum. On June 23, 2009, the Honduran Congress passed a plebiscite and referendum law that prevents referenda from occurring within 180 days of a general election. On June 24, 2009, President Zelaya asked for the resignations of the Chairman of the Joint Chiefs of Staff and the Defense Minister after they refused to provide logistical support for the proposed non-binding referendum. On June 25, 2009, the Honduran Supreme Court ruled that the Chairman of the Joint Chiefs of Staff and the Defense Minister should remain in their positions despite Zelaya's request for their resignations. On the same day, Zelaya and a group of supporters removed referendum materials from an air force base in Tegucigalpa. On June 26, 2009, the Organization of American States (OAS) adopted a resolution that offered support for the preservation of democratic institutions and the rule of law in Honduras and called on all social and political actors to maintain social peace and prevent the rupture of the constitutional order. On June 28, 2009, shortly before the polls were to open for the non-binding referendum, the Honduran military arrested President Zelaya, flew him to Costa Rica, and seized all referendum materials. The Honduran Supreme Court indicated that an arrest warrant had previously been issued for the deposed president, and the National Congress replaced Zelaya with the President of Congress, Roberto Micheletti. The United States and governments around the world condemned the action and called for President Zelaya's reinstatement. On July 1, 2009, the OAS adopted a resolution that would suspend Honduras' membership in the organization if the country failed to restore President Zelaya to power within three days. On the same day, the United Nations General Assembly adopted a resolution that condemned Zelaya's ouster and called for his immediate return, U.S. Southern Command ordered U.S. troops to minimize contact with the Honduran military, and the Honduran National Congress suspended a number of constitutional rights—such as the freedom of association and the freedom of movement—during curfew hours. On July 2, 2009, the U.S. State Department announced it would suspend foreign assistance programs to Honduras that it would be legally required to terminate should it declare the events in Honduras a "military coup." On July 4, 2009, the OAS unanimously voted to suspend Honduras for an unconstitutional interruption of the democratic order in accordance with Article 21 of the Inter-American Democratic Charter and the OAS resolution adopted three days earlier. On July 5, 2009, Zelaya attempted to return to Honduras but the Micheletti government prevented his plane from landing. On July 7, 2009, Zelaya met with U.S. Secretary of State Hillary Clinton in Washington, DC. Following their meeting, Secretary Clinton announced that Zelaya and Micheletti had agreed to engage in negotiations mediated by Costa Rican President Oscar Arias. On July 9, 2009, Zelaya and Micheletti met separately with President Arias in Costa Rica to discuss a solution to the situation in Honduras. Zelaya and Micheletti never spoke face to face, and left the country after the meetings, designating representatives to continue negotiations. On July 18, 2009, Costa Rican President Oscar Arias proposed a seven-point plan to end the political conflict in Honduras. Although the plan was agreed to in principle by Zelaya's representatives, it was rejected by Micheletti. On July 22, 2009, Costa Rican President Oscar Arias modified his previously rejected proposal and offered a 12-point plan, known as the "San José Accord," to resolve the Honduran political crisis. Zelaya accepted the plan. Micheletti's negotiation team said it would take the proposal back to the independent branches of government in Honduras to consider. It later rejected the accord. On July 24, 2009, exiled President Manuel Zelaya briefly crossed the Nicaraguan border, entering Honduras for the first time since his June 28, 2009 forced removal. On July 28, 2009, the U.S. Department of State announced that it had revoked the diplomatic visas of four members of the Honduran government and was reviewing the visas of others. On August 21, 2009, the Inter-American Commission on Human Rights (IACHR) concluded a five-day visit to Honduras. The Commission—which met with representatives of the Micheletti government, representatives of various sectors of civil society, and more than 100 individuals—"confirmed the existence of a pattern of disproportionate use of public force on the part of police and military forces, arbitrary detentions, and the control of information aimed at limiting political participation by a sector of the citizenry." On August 25, 2009, a delegation of foreign ministers from the OAS left Honduras after a three-day mission that failed to convince the Micheletti government to accept the San José Accord. On the same day, the U.S. State Department announced that it was suspending non-emergency, non-immigrant visa services in the consular section of the embassy in Honduras. On September 3, 2009, exiled President Manuel Zelaya met with U.S. Secretary of State Hillary Clinton. On the same day, the U.S. State Department announced that it was terminating nearly $22 million in previously suspended foreign assistance to Honduras, revoking the visas of some members and supporters of the Micheletti government, and would be unable to support the outcome of the November elections under the existing conditions On September 9, 2009, the Millennium Challenge Corporation terminated two transportation projects totaling $11 million from its compact with Honduras and put another $4 million on hold. On September 21, 2009, President Manuel Zelaya revealed that he had returned to Honduras and was sheltered in the Brazilian embassy in the capital, Tegucigalpa. On September 25, 2009, the United Nations Security Council condemned acts of intimidation against the Brazilian embassy by the Honduran military. On September 26, 2009, the Micheletti government published a decree—dated September 22, 2009—that declared a state of siege and suspended a number of basic civil liberties for 45 days. The decree suspended freedom of the press and freedom of movement, required police or military authorization for public meetings, and allowed for detention without a warrant. On September 27, 2009, Honduras expelled four diplomats from the OAS who formed part of an advance team planning a visit of foreign ministers from the region. On the same day, the Micheletti government warned Brazil that it would strip its embassy of diplomatic status if Brazil did not grant Zelaya political asylum or hand him over to Honduran authorities within 10 days. On September 28, 2009, the Honduran military shut down Radio Globo and television Channel 36, two of the principal sources of media opposition to the Micheletti government. On October 7, 2009, the Micheletti government issued a decree allowing it to revoke or cancel the licenses of any media outlet "fomenting social anarchy." On the same day, a new round of talks between Micheletti and Zelaya were initiated under the guidance of the OAS. On October 19, 2009, the Micheletti government formally revoked the state of siege that entered into force on September 26, allowing Radio Globo and television Channel 36 to return to the air. On October 28, 2009, then U.S. Assistant Secretary of State for Western Hemisphere Affairs, Thomas Shannon, and the National Security Council's director for the Western Hemisphere, Dan Restrepo, traveled to Honduras to restart dialogue between Zelaya and Micheletti. On October 30, 2009, Micheletti and Zelaya signed an agreement designed to end the political crisis in Honduras known as the "Tegucigalpa/San José Accord." On November 2, 2009, a four-member verification commission intended to ensure implementation of the accord, including two members appointed by the OAS and two members appointed by Zelaya and Micheletti, was created. On November 4, 2009, the executive council of the Honduran National Congress voted to solicit non-binding legal opinions on Zelaya's restitution from the Supreme Court and other Honduran institutions and postponed convening an extraordinary session of Congress to consider the matter until it received the responses. On November 5, 2009, Micheletti named a "national unity and reconciliation government" headed by himself, which Zelaya and his supporters refused to recognize. On November 8, 2009, members of the "National Resistance Front Against the Coup d'état," including independent presidential candidate Carlos Reyes, announced that they would boycott the elections on November 29, 2009. They asserted that a fair election could not be held given the conditions under which the campaign had been conducted and the fact that Zelaya had not been restored to office. On November 14, 2009, Zelaya released a letter to President Obama that announced that he was no longer willing to recognize the November 29, 2009, elections nor accept any reinstatement deal that would serve to legitimize the June 28, 2009, ouster. On November 17, 2009, the President of the Honduran National Congress announced that a special legislative session would be convoked on December 2, 2009 (three days after the election), to consider the restoration of Zelaya. On November 19, 2009, Micheletti announced that he would temporarily halt the "exercise of [his] public duties" between November 25 and December 2, in order to ensure that the attention of all Hondurans was "concentrated on the electoral process and not the political crisis." On November 29, 2009, Porfirio Lobo of the National Party was elected president of Honduras. Lobo defeated his closest rival, Elvin Santos of the Liberal Party, 56.6% to 38.1%. On December 2, 2009, 111 of the 128 deputies in the Honduran National Congress voted against restoring Zelaya to the Honduran presidency. On December 9, 2009, Micheletti refused to allow Zelaya safe passage from the Brazilian embassy in Tegucigalpa to Mexico unless the deposed president renounced his claim to the presidency and requested political refugee status. On January 6, 2010, the attorney general and anti-corruption prosecutor in Honduras filed charges against six members of the joint command of the Honduran military for their forced expatriation of Zelaya on June 28, 2009. On January 13, 2010, the Honduran National Congress named Roberto Micheletti a "deputy-for-life" and approved a decree providing life-long security to Micheletti and some 50 other Honduran officials involved in his government or the ouster of Zelaya On January 19, 2010, the U.S. State Department revoked the visas of five additional members of the Micheletti government. On January 20, 2010, President-elect Lobo reached an agreement with President Leonel Fernández of the Dominican Republic to provide Zelaya safe passage from the Brazilian embassy in Tegucigalpa to the Dominican Republic. On January 21, 2010, Roberto Micheletti took a leave of absence from his public functions in order to avoid a distraction from the transfer of power to the new president. Nevertheless, Micheletti continued to exercise the powers of the presidency until the inauguration of President Lobo. On January 25, 2010, the new Honduran National Congress took office for its four-year term. On January 26, 2010, a Honduran Supreme Court judge dismissed charges against members of the joint command of the Honduran military for their forced expatriation of Zelaya. The judge asserted that the Honduran military had acted to "preserve democracy and avoid bloodshed." On January 27, 2010, Porfirio "Pepe" Lobo Sosa was inaugurated President of Honduras. On the same day, Zelaya was granted safe passage from the Brazilian embassy in Tegucigalpa to the Dominican Republic, and the Honduran National Congress approved a political amnesty for Zelaya and those involved in his ouster. | On June 28, 2009, the Honduran military detained President Manuel Zelaya and flew him to exile in Costa Rica, ending 27 years of uninterrupted democratic, constitutional governance. Honduran governmental institutions had become increasingly polarized in the preceding months as a result of Zelaya's intention to hold a non-binding referendum and eventually amend the constitution. After the ouster, the Honduran Supreme Court asserted that an arrest warrant had been issued for Zelaya as a result of his noncompliance with judicial decisions that had declared the non-binding referendum unconstitutional. However, the military's actions halted the judicial process before a trial could be held. The Honduran National Congress then adopted a resolution to replace Zelaya with the President of Congress, Roberto Micheletti. Micheletti insisted that he took power through a "constitutional succession" throughout the seven months between Zelaya's forced removal and the inauguration of new President Porfirio "Pepe" Lobo Sosa. He also maintained tight control of Honduran society, severely restricting political activity that opposed his government. President Lobo, who won a November 2009 election that had been scheduled prior to the ouster, took office on January 27, 2010. Some Hondurans declared the election illegitimate, however, as a result of the conditions in the country at the time it was held. The political crisis has left Lobo with a number of challenges, including considerable domestic political polarization, a lack of international recognition, and a faltering economy. The United States and the rest of the international community universally condemned Zelaya's ouster. They leveled a series of diplomatic and economic sanctions against the Micheletti government and pushed for a negotiated agreement to end the crisis. Although an accord was signed roughly one month before the November 2009 election, it quickly fell apart. The unity of the international community crumbled along with the agreement, as some countries—such as the United States—agreed to recognize the results of the election despite Zelaya never being restored to office, while others refused to do so. Members demonstrated considerable interest in the Honduran political crisis during the first session of the 111th Congress. A number of resolutions were introduced regarding the situation. On July 8, 2009, H.Res. 619 (Mack) and H.Res. 620 (Serrano) were introduced in the House. H.Res. 619 condemned Zelaya for his "unconstitutional and illegal" actions and called for a peaceful resolution. H.Res. 620 called upon the Micheletti government to end its "illegal seizure of power." On July 10, 2009, H.Res. 630 (Delahunt) was introduced in the House. It condemned the "coup d'état" in Honduras; refused to recognize the Micheletti government; urged the Obama Administration to suspend non-humanitarian aid; and called for international observation of the November 2009 elections. On September 17, 2009, H.Res. 749 (Ros-Lehtinen) was introduced in the House. It called for the Secretary of State to work with Honduran authorities to ensure free and fair elections and for President Obama to recognize the November elections "as an important step in the consolidation of democracy and rule of law in Honduras." This report examines the political crisis in Honduras, with specific focus on the events between June 2009 and January 2010. It concludes with the inauguration of President Lobo. For more information on the current political situation in Honduras, see CRS Report RL34027, Honduran-U.S. Relations. |
The Chesapeake Bay (the Bay) is the largest estuary in the United States. Congress has described it as a "national treasure" ( P.L. 106-457 ), and it is recognized as a "Wetlands of International Importance" by the Ramsar Convention. The Chesapeake Bay estuary resides in a more than 64,000-square-mile watershed that extends across parts of Delaware, Maryland, New York, Pennsylvania, Virginia, West Virginia, and the District of Columbia. It is home to more than 18 million people and thousands of species of plants and animals. Over time, the Bay's ecological conditions have deteriorated due to land-use changes, increased sediment loads and nutrient pollution, the use and spread of chemical contaminants, overfishing and overharvesting of aquatic species, and the introduction of invasive species. These changes have resulted in reductions to economically important fisheries, such as oysters and crabs; the loss of habitat, such as underwater vegetation and sea grass; annual dead zones, as nutrient-driven algal blooms die and decompose; and potential impacts to tourism, recreation, and real estate values. Joint state and federal restoration attempts did not begin until the early 1980s. Since then, federal agencies have worked together under a watershed-wide agreement and through a restoration program spearheaded by the U.S. Environmental Protection Agency (EPA). Congress has and may continue to examine Chesapeake Bay restoration efforts. Actions in the Chesapeake watershed have served as examples for other estuary restoration efforts in the United States. This report provides background on the physical and ecological properties of the Bay and watershed, its economic value, the health of the ecosystem over time, and federal governance of Bay restoration efforts. It then discusses issues facing Congress as work continues toward 2025 restoration goals set by several state and federal plans. The Chesapeake Bay receives water from across the Chesapeake Bay watershed, including parts of six states (Delaware, Maryland, New York, Pennsylvania, Virginia, and West Virginia) and the entirety of the District of Columbia (DC) ( Figure 1 ). The Bay watershed is more than 64,000 square miles in size, and its land-to-water surface area ratio (14:1) is the largest of any coastal water body in the world. More than 100,000 streams and rivers flow into the Chesapeake Bay. The Bay and its tidal tributaries have almost 11,700 miles of shoreline and an average depth between 26 feet and 33 feet with deep troughs that reach up to 174 feet in depth. The Bay's waters are roughly 50% freshwater and 50% salt water. The Susquehanna River supplies 45% of the Bay's freshwater. Four other rivers, the Rappahannock, York, James, and Potomac, provide another 45%. The remaining 10% of the Bay's freshwater comes from smaller rivers and tributaries. More than 3,600 species of plants, fish, and animals—including 348 species of finfish, 173 species of shellfish, more than 2,700 plant species, and 16 species of underwater grasses—are part of the Bay watershed ecosystem. The Bay is part of the Atlantic Flyway, and at least 140 species of birds regularly use the Bay's aquatic resources; every year, 1 million waterfowl winter in the Bay region. The watershed is also home to 46 plants and 113 animals listed as threatened or endangered species as of August 2014. In 2016, more than 18 million people lived in the Chesapeake Bay watershed. According to the U.S. Geological Survey (USGS), that number is likely to rise to 20 million by 2030. The Bay's economy centers on seafood, tourism, recreation, and real estate. Few reports estimating the total economic value of the Chesapeake Bay are available. Instead, reports focus on a limited set of industries and services. For example, in 1989, Maryland state economists estimated that the Bay added $678 billion annually to the economies of Maryland and Virginia in annual incomes generated from commercial fishing; activities for the ports, ship and boat building, ship repair, and tourism; and waterfront property premiums. NOAA reported that the commercial seafood industry in Maryland and Virginia landed more than 440 million pounds of seafood, for a total value of nearly $300 million, in 2016. In 2013, researchers estimated that the value of the Chesapeake Bay watershed for selected ecosystem services (food production, climate stability, air pollution treatment, water supply, water regulation, waste treatment, aesthetics, and recreation) was $107 billion per year. According to the researchers, the aesthetic value of the Bay was worth over $38 billion per year and accounted for the largest component of the total. The Chesapeake Bay has experienced various natural and man-made changes over the course of its existence. Land use has been changing in the watershed, with trends toward loss of forests, wetlands, and underwater vegetation and increases in agricultural, urban, and suburban development. Forest, wetlands, and underwater vegetation regulate water flow and sediment, provide food and habitat for wildlife, and filter contaminants. Some scientists estimate that the Bay's watershed was once fully forested and became primarily used for agriculture by the early 1900s. The most recently available data from 2012 show that forested areas cover about 55% of the watershed ( Figure 2 ), with the remaining land cover divided between agricultural and urban/mixed uses. Wetlands and underwater vegetation (known as submerged aquatic vegetation ) once covered up to 600,000 acres of the Bay and its tidal tributaries but have decreased in area since the 1960s. However, this trend has been reversing. For example, in 2017, scientists found the highest amounts of submerged aquatic vegetation in the Bay since 1984, estimated at more than 100,000 acres. Forest and wetland conversion into agricultural, urban, or suburban areas, and underwater vegetation loss or degradation can affect the Bay's water resources in several ways. Two key effects, according to scientists, are increased sediment loads and nutrient pollution, as discussed below. Deforestation, agriculture, and increases in the amount of impervious surfaces from urban and suburban development have lowered the Bay ecosystem's ability to regulate and filter sediment. These land-use changes can accelerate water flow off of the land and into water bodies and increase erosion, transporting sediment along the way. In some parts of the Bay, sedimentation rates have increased by four to five times since the 1800s. In terms of human and wildlife health, sediment can lower light penetration, affecting underwater grasses, and can transport toxic contaminants, diseases, and excess nutrients downstream. Accreted sediments also can cause navigational hazards and block waterways. The Chesapeake Bay also is affected by excess nutrient concentrations. Nutrients, such as nitrogen and phosphorus, enter the Bay from sources such as agricultural runoff, urban runoff, and wastewater treatment plant discharges. High nutrient amounts can lead to the growth of excess algae or blooms, and potentially harmful algal blooms (HABs) that may produce toxins that can pose a threat to human and aquatic ecosystem health. The decomposition of algal blooms, even when nontoxic, can develop into areas of low oxygen or hypoxia known as dead zones , which are harmful to aquatic life that may not be able to survive in low-oxygen waters ( Figure 3 ). Changes to the land that remove natural filters, such as forests and wetlands, and that increase impervious surfaces can increase nutrient concentrations. The amounts of nitrogen and phosphorus added to the Bay have varied since EPA began monitoring; high amounts of rain and large river flows have correlated with higher amounts of nitrogen and phosphorus. Since 1985, the Bay watershed has hosted an annual dead zone that is, on average, 1.7 cubic miles in volume. Ecologists forecast a larger-than-average dead zone of 1.9 cubic miles in 2018 due to high spring rainfall, which can increase nutrient loads into the bay. Chesapeake Bay waters and sediments contain a wide array of contaminants, such as potentially toxic metals and organics. Chemical contaminants affect humans and wildlife. In wildlife, contaminants may lead to infectious disease and parasite infestations, endocrine disruption, and impaired reproduction. Chemical contaminants also can build up in fish tissue and may affect humans who consume fish. Mercury and polychlorinated biphenyl's (PCBs) are the most commonly found metal and organic contaminants across the watershed, respectively. Chemical contaminants are linked to industry and vehicle air pollution, agricultural and stormwater runoff, and wastewater discharge. In 2014, the Chesapeake Bay Program (CBP) reported that approximately 80% of the Bay's tidal-water segments were fully or partially impaired due to the presence of toxic chemical contaminants ( Figure 4 ). Recreational fishing data is unavailable, but annual commercial harvests of all fisheries species landed in the Chesapeake Bay more than doubled between 1950 and 1990 with harvests decreasing since 1990. Several factors, such as changes in gear technology, regulations, and environmental conditions, may have led to the increase and subsequent decrease of commercial harvests. For example, eastern oyster, blue crab, menhaden, Atlantic surf clam, Atlantic croaker, striped bass, and alewife harvests have fluctuated over time but generally have decreased since the mid-1990s due to water quality issues and overharvesting. Oysters are a popular recreational fishery and an economic resource for Bay fisherman and the region, worth more than $46 million in commercial harvests in 2016. Oysters also improve ecological conditions in the Bay by filtering water and providing habitat for other species. Bay commercial oyster landings rose steeply in the late 1800s, reaching more than 120 million pounds, and began to decline in the early 1900s, leading to state and federal regulations on the industry. Oyster populations were further affected by diseases such as Dermo and MSX. Poor water conditions, disease, habitat loss, and overfishing led to harvests of less than 1 million pounds of landings in the 1990s and 2000s ( Figure 5 ). Since 2007, oyster landings have increased relative to its low point, with almost 5 million pounds landed in 2016. Blue crabs are commercially and recreationally harvested and have been affected by habitat loss and overharvesting in the Bay. The Bay blue crab fishery has experienced high and low commercial harvest years ( Figure 5 ). Volume of blue crab landed reached a high point in 1993, with more than 110 million pounds, and a low of approximately 42 million pounds in 1955. The Bay and its watershed are home to thousands of species of plants and wildlife, including 46 plants and 113 animals listed as threatened or endangered species as of August 2014. Plants and wildlife populations in the Bay are principally affected by loss of habitat and in some cases disease and toxins. For example, the Bay region has one of the highest concentrations of bald eagles and osprey in the country. Although the birds are recovering from the effects of DDT pesticide use in the 20 th century, they continue to be affected by habitat loss. The Bay is also home to more than 300 invasive species, which can have negative ecological and economic effects on native plants and wildlife. For example, nutria, which are semi-aquatic South American rodents introduced to Maryland in 1943, have destroyed some wetlands with their feeding habits. Efforts by federal, state, and local government, and nongovernmental organizations (NGOs) to remove the invasive rodent began in 2002; the known nutria populations were removed by 2016, and monitoring is ongoing. According to stakeholders, restoring the Bay ecosystem state is a complicated process due to the size of the Bay's watershed, the variety of stakeholders, and the complexity of Chesapeake Bay ecosystems. The Bay transcends geographical and political boundaries and affects numerous jurisdictions. Restoration efforts are challenging because they require cooperation and coordination between multiple federal and state agencies, tribes, local governments, NGOs, and private stakeholders. Planning and implementing complex environmental and ecosystem restoration efforts raises many technical, policy, and organizational issues. Congress began to concentrate on Bay issues in the 1960s, as public and stakeholder pressure grew for federal government involvement in Bay restoration. Congress ordered a series of reports from the U.S. Army Corps of Engineers (USACE) and the EPA to investigate issues including the decline in fisheries, "control of noxious weeds," water pollution, and water quality control in the Chesapeake Bay. Since then, federal restoration activities have expanded across several federal agencies and are primarily coordinated by the Chesapeake Bay Program (CBP). The CBP was established by the 1983 Chesapeake Bay Agreement. In 1987, Congress codified the CBP and directed the EPA Administrator to achieve and maintain water quality and to conduct habitat restoration and conservation for the benefit of Bay living resources in Section 117 of the Clean Water Act ( P.L. 100-4 ). The CBP is a partnership of federal, state, and local agencies; tribes; academic institutions; and NGOs, and restoration activity implementation authority lies within individual agency program authorizations and the states. The CBP works with states through a committee structure to develop actions and strategies for restoration. The program's organization has changed over time as partners, agreements, and priorities have shifted. The program's organization may continue to change under the CBP's adaptive management approach. CBP activities have been led by an Executive Council (EC). The EC establishes policy direction for restoring and protecting the Bay and its living resources and is accountable to the public for progress made under the agreement ( Figure 6 ). The EC is supported by the Principals' Staff Committee. Strategic planning, creation of guidance, and implementation of activities toward Agreement goals occur in the five different groups below the Principals' Staff Committee. The entire effort is informed by three Advisory Committees. Federal agency representatives are involved at each level of the CBP organization, including membership on the Executive Council; Principals' Staff Committee; Management Board; Goal Implementation Teams; and Science, Technical Analysis, and Reporting group. EPA has been considered the lead federal agency for implementing the program because it was directed by Congress to continue the CBP (33 U.S.C. 1267(b); Figure 6 ). Congress also directed the EPA to maintain an EPA Chesapeake Bay Program office (33 U.S.C. 1267(b)), which is staffed by employees from a number of federal and state agencies, academic institutions, and NGOs. Federal agencies are also partners through formal memoranda of understanding with EPA. The agencies also coordinate through the Federal Leadership Committee (FLC), which was established through President Obama's 2009 Executive Order 13508. In addition, federal agencies have various authorities to implement restoration programs and activities in the Bay on their own, as discussed in the section titled " What Authorities Are Federal Agencies Working Under to Restore the Chesapeake Bay? " Each of the states in the Bay watershed conduct restoration efforts on an independent or joint basis. State restoration activities are formally shared and coordinated through proceedings of the CBP Executive Council. Congress directed EPA to aid states in developing action plans to reach restoration objectives (33 U.S.C. 1267). In addition to information sharing and coordination, federal agencies may award grants to the states to improve water quality and living resources in the Bay. E.O. 13508 sought to strengthen federal coordination with state and local governments. In its oversight role, Congress continues to weigh if and how Chesapeake Bay federal restoration efforts should continue. If there is a federal role, Congress may consider how Bay restoration is coordinated, how much funding is available and may be needed for Bay restoration efforts, and what progress is being made in restoring the Bay. A large, multi-jurisdictional ecosystem restoration initiative, such as in the Bay, raises several questions for Congress about the federal role in restoration. Congress may consider the mechanisms in place to guide restoration activities, what role the federal government has in Bay restoration, and what federal agency authorities exist or are needed to complete, coordinate, and fund restoration activities in the Bay. Although various state and federal stakeholders have set forth several frameworks, agreements, and visions for restoring the Chesapeake Bay, which address different jurisdictions, Bay issues and timelines, no single, comprehensive ecosystem restoration plan exists to facilitate coordination of these efforts. There are currently three guiding documents for restoration and one draft plan: the 2010 Strategy for Protecting and Restoring the Chesapeake Bay Watershed (pursuant to President Obama's 2009 E.O. 13508), the EPA's 2010 Chesapeake Bay total maximum daily load (TMDL), the 2014 Chesapeake Bay Watershed Agreement, and the draft 2018 USACE Chesapeake Bay Comprehensive Water Resource and Restoration Plan. Table 1 briefly compares these guiding documents. The extent to which one of these plans guides restoration efforts is unclear. The plans cover different jurisdictions and vary in terms of implementation. The plans also relate to each other in different ways. Select differences include the following: Implementation of the 2010 E.O. strategy, 2010 TMDL, and 2014 Chesapeake Bay Watershed Agreement is led by the EPA, with other federal agencies involved in some cases, and each plan contains two-year work plans or milestones. In comparison, the 2018 USACE draft comprehensive plan does not specify a certain timeline, contain specific goals or objectives, or require periodic sub-plans. The 2014 Chesapeake Bay Watershed Agreement includes many of the actions outlined in the 2010 E.O. strategy and the 2010 TMDL, and has guided the development of the 2018 USACE draft comprehensive plan. Stakeholders utilize the plans in different ways. The Trump Administration has left the 2009 E.O. in place, but the 2010 E.O. strategy's use as a guiding mechanism is uncertain. Some federal program managers have argued that the 2010 E.O. strategy is no longer a focus and that the 2018 draft USACE comprehensive plan could serve as an organizing document for federal agencies when considering where to focus restoration efforts geographically. Some stakeholders have lauded the 2014 Chesapeake Bay Watershed Agreement's success in obtaining consensus results largely without regulatory or legally required action, in contrast to the actions required by the 2010 TMDL (see next section for more information). Others argue that the voluntary nature of the 2014 Chesapeake Bay Watershed Agreement weakens restoration efforts. Finally, some may contend that the 2010 TMDL, which is focused on specific water quality factors, is not holistic in terms of addressing the entire ecosystem. Congress may consider other questions related to the plans, such as whether the current plans successfully integrate efforts across agencies, states, and local governments or whether they overlap and may cause confusion. In addition, Congress may continue to consider if the plans are most effective in their current states or with changes to jurisdictions, leadership, and enforcement, and if state and local stakeholders have been or should be equal partners in the implementation of the plans. Congress may examine the federal government's role in restoration efforts. The federal government is authorized to perform restoration activities under several congressional authorizations (see next section). Federal agencies complete restoration activities on their own or in partnership with other agencies. Federal agencies execute these collaborations through memoranda of understanding. Congress may also examine the role of state restoration efforts as they are coordinated and integrated with federal work in the Chesapeake Bay. With the exception of the statutory relationship between the federal government and states in protecting water quality under the Clean Water Act, the federal and state roles in Bay restoration are not defined by law. This is in contrast to other restoration initiatives, such as the Comprehensive Everglades Restoration, which considers the State of Florida as a nonfederal partner with formal duties under law ( P.L. 106-541 , Title VI, §601). In the Chesapeake Bay, coordination of broad restoration activities between state and federal agencies is largely achieved through the voluntary Chesapeake Bay Watershed Agreement and CBP, where decisions are determined by consensus. Some have challenged the extent of the federal government's role in managing restoration of the Chesapeake Bay. These stakeholders and Members of Congress contend that the federal government has overreached its authority and intruded upon the states' powers to regulate land use, especially in regard to the EPA TMDL. For example, a lawsuit challenged the extent of EPA's authority and oversight over state actions, in regard to the TMDL, with the Third Circuit of Appeals finding that the EPA had acted within its authority. In the 115 th Congress, the FY2019 House Interior, Environment, Financial Services, and General Government appropriations bill ( H.R. 6147 ) was amended to include a provision that would prohibit EPA funding for actions against watershed states and DC in the event the jurisdiction did not meet TMDL goals. The Trump Administration has encouraged "the six Chesapeake Bay states and Washington, D.C. to continue to make progress in restoring the Bay from within [EPA] core water programs" in the proposed FY2018 EPA budget. In contrast, other stakeholders—such as some environmental groups, local government officials, and other Members of Congress—support federal government involvement in Bay restoration. These stakeholders argue that the federal government should lead restoration efforts and should provide greater federal funding for restoration activities. Several federal agencies conduct restoration activities in the Chesapeake Bay watershed independently or with other agencies under various authorities. In contrast to restoration efforts in other large estuaries, such as the Great Lakes or Everglades, Congress has not authorized restoration work in the Bay under a single comprehensive law. Some of the restoration work is authorized under a variety of Chesapeake Bay-specific laws and regulations ( Appendix C ). For example, Congress has directed the EPA to maintain a Chesapeake Bay Program (33 U.S.C. §1267), offer Chesapeake Bay restoration-related grants (33 U.S.C. §1267(d) & (e)), and perform annual Bay grass surveys (33 U.S.C. §2803(d)), among other activities. Congress has also authorized federal agencies to perform more general activities that may be applied in the Chesapeake Bay, such as the Clean Water Act (33 U.S.C. §§1251 et. seq.) and the Aquatic Nuisance Prevention and Control Act (16 U.S.C. §§4701 et seq.) ( Appendix C ). Some stakeholders may contend that directing agencies to work together under a specific federal authority and with an organizing structure would encourage more efficient progress toward restoration. Congress has enacted organizing entities for the Great Lakes Task Force, under the Great Lakes Restoration Initiative ( P.L. 111-88 , Title I), and the South Florida Ecosystem Restoration Task Force, under the Comprehensive Everglades Restoration Plan ( P.L. 106-541 , Title VI, Section 601). Other stakeholders, however, may note that legislation authorizing coordination and collaboration among federal agencies is not necessary, as restoration activities are already authorized for the EPA and several other agencies under more general authorities. Further, these individuals may note that federal agencies are coordinating efforts under the Chesapeake Bay Watershed Agreement and through the CBP. Congress continues to consider how much funding has been spent, how much should be allocated to Chesapeake Bay restoration, and the total costs of restoring the Bay. Answering these questions is complicated by the number of federal programs and states involved in restoring the Chesapeake Bay. Congress has been interested in how much has been appropriated for Bay restoration, in part, to evaluate the appropriate level of federal spending on restoration activities. Most federal funding to restore the Chesapeake Bay is discretionary, subject to the annual congressional appropriations process. Until recently, tracking the amounts federal agencies have spent on restoration has been difficult, as many nationwide programs support restoration activities in the watershed but do not specify the level of funding for Chesapeake Bay efforts in their budget. Congress has been interested in tracking costs related to Bay restoration and enacted the Chesapeake Bay Accountability and Recovery Act in 2014 (CBARA; P.L. 113-273 ), which requires the Office of Management and Budget (OMB) to compile Chesapeake Bay restoration funding information from the seven federal departments on the FLC in an annual crosscut report. OMB released crosscut reports in 2016 and 2017 for funding information between FY2014 and FY2016, and estimates for FY2017 ( Table 2 ). The reported amounts have specific limitations and assumptions (see text box below). According to the Chesapeake Bay crosscut reports, the federal government had between $460 million and $570 million per year in budget authority for restoration activities in the Bay between FY2014 and FY2017 ( Table 2 ). According to the crosscut, EPA and the Department of Agriculture (USDA) provided the most funding to the overall total budget authority. EPA distributed two-thirds through grants to state and local partners. The remaining EPA funding supported CBP office and personnel, contracts and interagency agreements, and scientific analysis and decision-support tools. USDA distributed most of its restoration funding through the nationwide Natural Resource Conservation Service, which supports conservation easement programs and provides technical and financial assistance to farmers and private landowners. Stakeholders have various viewpoints on how much funding should be appropriated to Chesapeake Bay restoration that Congress may consider during the appropriations process. For example, some stakeholders and Members of Congress have emphasized that consistent federal funding for activities is key to successful restoration and that the elimination or significant reductions of restoration funding could halt current progress on restoring the Bay. Others contend that the federal government is spending too much on restoration and that financial responsibility for restoring the Bay should fall to the states. For instance, the Trump Administration proposed to eliminate FY2018 funding for the EPA CBP and noted that EPA would "encourage the six Chesapeake Bay states and Washington, D.C. to continue to make progress in restoring the Bay from within core [EPA] water programs" and return "responsibility for funding local environmental efforts and programs to state and local entities." In FY2019, the Administration's EPA budget request proposed $7.3 million for the CBP for state and local water quality monitoring and science coordination activities. Some stakeholders may contend that the Chesapeake Bay restoration effort would have a higher chance of receiving consistent funding if the authorization for funding for the CBP were current. The CBP authorization for appropriations expired in 2005. Similarly, other stakeholders, who believe that federal restoration efforts receive insufficient funding, may argue that if all federal restoration efforts were authorized and organized under one law, the efforts may receive more funding. For example, Great Lakes restoration activities were supported by appropriations of $888 million to $986 million per year between FY2012 and FY2016, the largest component of which supported the Great Lakes Restoration Initiative, a program with dedicated Great Lakes funding, in addition to agency Great Lakes restoration work. Some could disagree by arguing that gathering all restoration activities under one authorization could create a large target for funding decreases, implying that having restoration efforts spread across several authorities is more advantageous for receiving appropriations. Several groups have attempted to estimate the total cost of restoring the Bay and maintaining a restored Bay, with varying results. Cost estimates have ranged from $7 billion for individual state costs to $28 billion for the entire watershed, with additional annual maintenance costs projected once restoration is complete. Costs estimates vary depending on the restoration metrics, assumptions, and measures (e.g., nutrient-reduction technology, agricultural best management practices, etc.) included in the calculations. Some stakeholders contend that the increase in social and economic benefits to the watershed will justify the final cost. They add that the current cost of restoration is likely to be less than the cost of restoration in the future. Other stakeholders argue that the costs have and will result in continual, if slow, improvements to Bay conditions. Others, including some Members of Congress, question the justification for funding Bay restoration because a comprehensive cost-benefit analysis of restoration has not been completed. Some stakeholders may also contend that the reported improvements in water quality and habitat do not justify the funding already spent nor the expected final cost to restore the Bay. Congress continues to be interested in whether progress is being made in restoring the Bay. The Chesapeake Bay Watershed Agreement contains milestones for achieving its goals, and progress toward meeting those goals by 2025 is evaluated periodically. Even with these evaluations, it is unclear whether progress is being made toward the stated goals. Since the CBP's inception, stakeholders have considered whether appropriate progress is being made to restore the Chesapeake Bay and its resources. Several Chesapeake Bay evaluations are conducted on an ongoing basis to measure the progress of Bay restoration over time, each with unique methodologies. Chesapeake Bay restoration progress results differ among evaluations. The differences may be due to different priorities, methodologies, data sets, metrics, and timescales of interest. The CBP has periodically assessed progress in restoring the Bay since the 1983 Chesapeake Bay Watershed Agreement. Goals set in the Bay agreements have been largely missed, such as in the 2000 Chesapeake Bay Agreement, which aspired to restore the Bay to certain conditions by 2010. The 2014 Chesapeake Bay Watershed Agreement set 2025 as its target year to reach certain goals (and underlying outcomes) and tracks biennial progress toward the goals. For 2016-2017, CBP reports that progress was made in five goals, and five goals showed no progress/regress. For example, progress was made toward the sustainable fisheries goal due to reported increases in the blue crab and oyster populations. In July 2018, the EPA released its midpoint assessment of progress in implementing practices to reach a 60% reduction of nutrients and sediment by 2017, as set in the TMDL. According to the EPA, jurisdictions have implemented practices to achieve the phosphorus and sediment reductions, but did not reach the nitrogen reduction. In addition to federal reporting, several NGOs have evaluated restoration progress over time. Non-federal evaluations of restoration progress generally have been critical of the level of progress. The 2016 Chesapeake Bay Foundation (CBF) State of the Bay report assigned the Chesapeake Bay a rating of 34 out of 100, a slight increase from the 2014 rating of 32. Since 1998, CBF has rated the Bay between 27 and 34; CBF would consider the Bay restored at a rating of 70. Similar Chesapeake Bay conditions were reported by an evaluation completed by the University of Maryland Center for Environmental Science (UMCES). According to UMCES, in 2017 decreased nutrient levels were "significantly improving" the Bay, but poor to moderate water clarity and nitrogen, among other indicators, persisted. UMCES rated the Bay at a C, or 54% overall; since 1986, UMCES has rated the Bay between 36% and 55%. Stakeholders have a range of opinions on whether Bay restoration is progressing. Some stakeholders may contend that Bay conditions are improving at an acceptable rate for the resources being spent on restoration. Others argue that restoration efforts are progressing even though restoration ratings remain stable or show minor improvements. These stakeholders note that a stable ecosystem is progress since there has been no further deterioration of conditions despite population growth, increasing impermeable surfaces, and growing nutrient loads in the watershed. Others may contend that although the Bay is improving, it could be doing so at a faster pace. Finally, some stakeholders may argue that it may not be possible to restore the Bay to a pristine or semi-pristine level due to the persistence of original problems such as excess nutrients and habitat loss, among others. These stakeholders may argue for lower expectations to measure restoration success or concede that a man-made ecosystem should be the goal of restoration. Since 1983, the progress of the Bay's resources and restoration efforts has received oversight from both the public and different levels of government. Congress, GAO, and the EPA Office of Inspector General (OIG) have addressed the CBP's reporting of Bay health and restoration progress. GAO recommended the establishment of an independent evaluator or peer review in 2005, again in 2008, with the EPA OIG echoing these concerns in 2008 as well. President Obama's 2009 Executive Order 13508 called for a consistent, periodic evaluation in coordination with the FLC. In response, some CBP stakeholders argued for the creation of an outside review group, an independent entity within the CBP with an enforcement role, or an internal audit committee. Some noted that the use of a one-time National Academy of Science evaluation in 2011, while helpful to evaluate the short-term scientific and technical efforts of restoration, could not hold the CBP accountable in the long term. Others argued that the CBP's adoption of an adaptive management framework, which allows internal program evaluations, removed the need for external evaluation. In 2014, Congress directed EPA to appoint an independent evaluator to report its findings and recommendations to Congress on a biannual basis (Chesapeake Bay Accountability and Recovery Act; CBARA; P.L. 113-273 ). Under CBARA, EPA must appoint an independent evaluator from a list of nominees provided by the CBP Executive Council. In June 2018, CBP stated that the implementation of an independent evaluator was "on hold pending direction from the [Principle Staff Committee]." Appendix A. Chronology Appendix B. Chesapeake Bay Agreement Over Time Appendix C. Selected Federal Authorities Related to Chesapeake Bay Restoration | The Chesapeake Bay (the Bay) is the largest estuary in the United States. It is recognized as a "Wetlands of International Importance" by the Ramsar Convention, a 1971 treaty about the increasing loss and degradation of wetland habitat for migratory waterbirds. The Chesapeake Bay estuary resides in a more than 64,000-square-mile watershed that extends across parts of Delaware, Maryland, New York, Pennsylvania, Virginia, West Virginia, and the District of Columbia. The Bay's watershed is home to more than 18 million people and thousands of species of plants and animals. A combination of factors has caused the ecosystem functions and natural habitat of the Chesapeake Bay and its watershed to deteriorate over time. These factors include centuries of land-use changes, increased sediment loads and nutrient pollution, overfishing and overharvesting, the introduction of invasive species, and the spread of toxic contaminants. In response, the Bay has experienced reductions in economically important fisheries, such as oysters and crabs; the loss of habitat, such as underwater vegetation and sea grass; annual dead zones, as nutrient-driven algal blooms die and decompose; and potential impacts to tourism, recreation, and real estate values. Congress began to address ecosystem degradation in the Chesapeake Bay in 1965, when it authorized the first wide-scale study of water resources of the Bay. Since then, federal restoration activities, conducted by multiple agencies, have focused on reducing pollution entering the Chesapeake Bay, restoring habitat, managing fisheries, protecting sub-watersheds within the larger Bay watershed, and fostering public access and stewardship of the Bay. Congress has authorized various programs and activities to restore the Chesapeake Bay, including the Chesapeake Bay Program (CBP), created in 1983. The CBP implements the Chesapeake Bay Agreement, a periodically renewed agreement between executives in the watershed states, a joint Bay state legislative body, and select federal agencies that aims to coordinate Bay restoration efforts. The most recent agreement was signed in 2014 (known as the 2014 Chesapeake Bay Watershed Agreement) and set a series of restoration goals and actions to be completed by 2025. The 2014 Chesapeake Bay Watershed Agreement, like others in the past, is not binding. Other restoration plans—including the 2010 Chesapeake Bay Strategy for Protecting and Restoring the Chesapeake Bay Watershed (pursuant to President Obama's 2009 Executive Order 13508), the U.S. Environmental Protection Agency's 2010 Chesapeake Bay Total Maximum Daily Load, and a draft Comprehensive Plan from the U.S. Army Corps of Engineers—harmonize with the goals of the 2014 Chesapeake Bay Watershed Agreement and contain objectives for federal agencies and states. As work continues toward the 2025 restoration goals set by state and federal plans, Congress may consider what role the federal government plays in Chesapeake Bay restoration, if any. In considering the federal role in Chesapeake Bay restoration, Congress may weigh issues related to coordination of federal activities and federal agency authority, funding and total cost of activities, and the rate of progress toward restoration. |
Until they were placed under government conservatorship in September 2008, Fannie Mae and Freddie Mac were stockholder-controlled companies that were chartered by Congress to improve the nation's residential mortgage market and are known as government-sponsored enterprises (GSEs). The charters convey special privileges, but also impose certain restrictions on the GSEs' business activities. Congress enacted the modern conforming loan limit, which establishes the maximum size mortgage that the GSEs can purchase, in the Housing and Community Development Act of 1980. The initial limit was $93,750 for a single-family home (39% above the Federal Housing Administration (FHA) ceiling at the time), and the law provided for annual increases in the loan limit to adjust for rising prices, as reflected in a housing price index published by the Federal Housing Finance Board (FHFB). This loan limit is the maximum value of a mortgage that Fannie Mae and Freddie Mac can purchase. The loan limit was initially set at a level significantly higher than the national average home price, and with indexation it has remained higher. In 2007, the conforming loan limit stood at 145% of the average new home price, and 162% of the average resale price of an existing home. Since 2006, the basic conforming loan limit has held steady at $417,000. In 2008, the passage of the Economic Stimulus Act of 2008 (ESA; P.L. 110-185 ) created a temporary higher loan limit in high-cost areas that was 125% of the area median house price, but no greater than 175% of the national median house price. This resulted in limits greater than $417,000 in areas where the median house price exceeded $333,600. The Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289 ) and the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) made temporary and permanent changes to the limits for high-cost areas. With the expiration of the Continuing Appropriations Act of 2011, the conforming loan limit in high-cost areas is determined by the Housing and Economic Recovery Act of 2008 ( P.L. 110-289 ): 115% of area median house price, but not to exceed 150% of the national conforming loan limit, which results in a high-cost limit of $625,500. This results in limits greater than $417,000 in areas where the median house price exceeds $362,609. According to a study by Federal Reserve economists, if the HERA limits had applied in 2010, 1.3% of home-purchase mortgages and 1.3% of refinance mortgages that were eligible for GSE purchase would not have been eligible for purchase by Fannie Mae and Freddie Mac. On the other hand, of those mortgages that would have lost their eligibility, 53.4% of those used to purchase a home and 59.6% of those used to refinance were purchased by the GSEs. The Consolidated and Further Continuing Appropriations Act of 2012 ( P.L. 112-55 ) set the high-cost limit for mortgages insured by the Federal Housing Administration (FHA) at 125% of area median house price, not to exceed 175% of the national limit or $729,750. Prior to this law, the high-cost FHA mortgage limit was identical to the GSE high-cost conforming loan limit. In other areas, the FHA mortgage limit was and is 65% of the national conforming loan limit or $271,050. The interaction between the 125% of area median house price and the $271,050 national limit raises the high-cost limit in areas where the median house price is greater than $216,840. According to recent congressional testimony, most recent home purchase mortgages are guaranteed by FHA and securitized by Ginnie Mae; the majority of mortgages purchased recently by Fannie Mae and Freddie Mac have refinanced existing mortgages. Since 2008, Congress has adjusted the conforming loan limit five times. The first bill was ESA, which enacted a temporary increase in the conforming loan limit. For mortgages originated between July 1, 2007, and December 31, 2008, the loan limit for an area was the greater of (1) the existing limit of $417,000 or (2) 125% of the area median home price, not to exceed a ceiling of 175% of the statutory limit, or $729,750. A total of 71 metropolitan and micropolitan statistical areas had higher 2008 conforming loan limits, including 224 counties and cities not in counties. There were 21 counties outside of metropolitan or micropolitan areas with increases in 2008. HERA permanently removed the single conforming loan limit for the contiguous 48 states. The loan limit is higher in metropolitan statistical areas—defined as "high-cost"—where the median home sale price exceeds the current conforming loan limit. Under HERA, the conforming loan limit for those areas was 115% of the median home price in the area, except that increases were to be capped at 150% of the statutory loan limit (the limit that now applies to Alaska, Hawaii, and the two island territories). This system for determining the limit took effect when the temporary limits set by the stimulus act expired on December 31, 2008. Subject to the requirement in their charters that loans purchased be no more than one year old, the GSEs were able to purchase high-cost conforming loans after December 31, 2008. ARRA returned the conforming loan limits for mortgages originated in 2009 in high-cost areas to the 2008 ESA limit, that is, the high-cost limit was set at 175% of the statutory limit or $729,750. The Federal Housing Finance Agency (FHFA), which is both regulator and conservator of the GSEs, was authorized to create subarea limits, but has declined to do so. The FY2010 Department of the Interior Appropriations Act ( P.L. 111-88 ) applies the ESA limits to mortgages originated in calendar 2010. The Continuing Appropriations Act of 2011 ( P.L. 111-242 ) continued the ESA limits to mortgages originated in FY2011. They were not continued, however, into FY2012. Therefore the current limits are those set by HERA. A look at median prices in various metropolitan areas of the country shows that the conforming limit is rising in several localities under ESA, and (in fewer areas) has risen under HERA. Table 2 shows the current conforming loan limit for selected areas. Some areas (including Barnstable, MA; Boulder, CO; Miami, FL; and Riverside, CA) are now subject to the nationwide conforming loan limit, but under earlier law were high-cost areas. The existence of high-cost housing areas implies that the benefits of the GSE subsidy are not distributed uniformly. GSE status allows Fannie and Freddie to borrow at lower interest rates than non-GSE financial institutions. A portion of this subsidy is passed on to home buyers whose mortgage loans are purchased and securitized by the GSEs. In 2003, Fannie and Freddie purchased 35.1% of all mortgages (by dollar value) originated nationwide. This percentage varied from state to state. In three states (California, New York, and Connecticut) and the District of Columbia, the GSEs purchased less than 30% of new mortgages. In 15 states, on the other hand, the two GSEs purchased more than 40% of new mortgages. In high-cost areas, the GSEs' mortgage purchase and securitization operations are constrained by the conforming loan limit. Loans that exceed the conforming loan limits can only be securitized by non-GSE issuers, and prior to the recent recession, there was a large secondary market for jumbo mortgage loans. In 2006, total prime jumbo loan originations were estimated at $480 billion, while $219 billion in prime jumbo mortgage-backed securities (MBS) were issued, implying a securitization rate for jumbo mortgages of 45.6%. By contrast, Fannie and Freddie securitized 83% of loans originated in 2006 in the conventional, conforming mortgage markets where they are allowed to operate. Conforming mortgage loans tend to carry lower interest rates than nonconforming loans. A number of studies have attempted to measure the spread between conforming mortgage and jumbo loan rates and the extent to which the rate differential can be attributed to the subsidy contained in GSE status. Most estimates of the spread between conforming and jumbo loans have fallen into the range of 18-60 basis points. (A basis point is one one-hundredth of a percent.) All researchers assume that at least part of this spread is due to the GSE subsidy, but other factors are involved. For example, as properties become more expensive, lenders worry more about price volatility. That is, as the risk of a significant drop in the market value of the house—the loan's collateral—increases, lenders raise rates to compensate for that risk. Second, the existing jumbo secondary market cannot realize certain economies of scale because market participants are largely frozen out of the conforming loan market (due to their inability to compete with the GSEs). These and other factors suggest that allowing the GSEs into the jumbo market would not cause the entire spread to disappear. There is no consensus as to how much of the 18-60 basis point spread is due to the GSE subsidy—estimates range as low as 4 basis points. Thus, it is uncertain how significant the benefits would be if the conforming loan limit were increased during normal times. As a rough guide to the size of potential savings, assume that the interest rate on a 30-year, 4.00% mortgage is reduced to 3.75%. Over the 10-year average life of a mortgage, the savings would be about $10,750, or approximately $90 per month. Of course, this figure shrinks if some portion of the rate spread persists, if, that is, not all the savings are passed through to borrowers. If the interest rate paid by the hypothetical home buyer in the example above falls by only seven basis points, the monthly payments are lower by about $28 a month, and interest savings would be about $4,400 over 10 years. With the housing market downturn that began in 2006, there is a new rationale for a higher conforming loan limit: to stimulate the jumbo mortgage market, which would in turn provide stimulus for the housing sector and the economy. Credit conditions in the jumbo market are said to be unusually tight—the spread between jumbo and conforming loan rates has widened. In August 2013, the interest rate on a "conforming jumbo" was approximately the same as the interest rate on a conforming mortgage and the spread on a "non-conforming jumbo" was around 34 basis points. Since 2007, the market for private, non-GSE mortgage-backed securities has all but disappeared, as investors are unwilling to accept the risks without the GSE guarantee. Another reason why non-conforming loans are more expensive is that in the absence of a secondary market for jumbo loans, lenders must hold the loans on their own books and bear the risk of further drops in home prices and increases in defaults due to the weak economy. Allowing the GSEs to securitize some jumbo loans restored liquidity to the part of the secondary market covered by the higher limits, enabled lenders to transfer the risk of holding jumbo mortgages, and made loans more affordable and available. The conservatorship of Fannie and Freddie and the Treasury financial support are indicative of strong government support for the GSEs that should reduce the risk to lenders of jumbo loans that are purchased by the GSEs. According to the Securities Industry and Financial Markets Association (SIFMA), there has been a very slight resurgence in non-GSE MBS issuance—the value of such bonds issued in the first six months of 2013 was $39.8 billion, compared with $946.4 billion issued by the government agencies: Fannie Mae, Freddie Mac, the Federal Home Loan Banks, and Ginnie Mae. In the first six months of 2012, $16.7 billion of MBS was issued by the private sector as compared with $789.9 billion by government agencies. The case for a higher conforming loan limit is based partly on equity concerns. Home buyers in the conforming mortgage market may receive part of the GSE subsidy in the form of lower interest rates. Because housing prices vary across the nation, the geographical distribution of this benefit is uneven. Before the increases in high-cost areas, the loan limit was $417,000; in many parts of the country, this amount covers all but the top end of the housing market. In high-cost areas such as San Francisco or New York City, on the other hand, a large proportion of real estate transactions exceed that limit. A counter-argument is that the additional subsidy created by raising the loan limit would go overwhelmingly to mortgage holders with high incomes. If the purpose of the GSEs is to foster home ownership, the impact of raising the limit is likely to be minor: those who would benefit from the change already have high homeownership rates. Another key issue is risk. As noted above, the non-conforming jumbo home market is dormant because perceptions of risk are sharply higher than they were during the boom. Lenders are more cautious because the value of their collateral—the house—may drop further. MBS investors have the same fear, making it harder for lenders to transfer price and credit risk to the secondary market. GSE entry into the jumbo market would appear to meet the needs of both lenders and investors: the GSE (and the implicit Treasury) guarantee would reassure MBS buyers, leading to a resumption of securitization, in turn encouraging lenders to make loans at more affordable rates. But GSE participation would not reduce overall risk in the market, it would simply shift that risk to the taxpayers. As house prices continue to fall, and delinquencies and foreclosures continue to rise, the GSEs have lost billions of dollars and now depend on special support from the federal government. The ultimate cost to taxpayers of this intervention is unknown. If the current tightness in the mortgage market reflects an overreaction on the part of market participants in the grip of panic, some argue that a higher conforming loan limit may be a useful corrective and avert unnecessary damage to housing markets and the economy. On the other hand, if market fundamentals dictate that home prices decline further, the assumption of more risk by the GSEs (and, more or less implicitly, by the Treasury) could arguably slow the market adjustment process and foster an unwelcome expectation in financial markets that investors will be rescued from the consequences of their own mistakes. | Congress is concerned with the pace of the recovery in the housing and mortgage markets. A series of laws starting with the Economic Stimulus Act of 2008 (ESA; P.L. 110-185) were designed to increase the availability and affordability of mortgages in "high-cost" areas. This concern about housing and mortgage markets is balanced by attention being paid to possible taxpayer financial risks and the desire to minimize government intervention in economic markets. Two congressionally chartered government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, provide liquidity to the mortgage market by purchasing residential mortgages from the original lenders and either reselling them as mortgage-backed securities to investors or holding them as investments in their own portfolios. Their charters include a ceiling on the size of loans the GSEs can buy. Since the end of FY2011 (September 30, 2011), the maximum limit in high-cost areas was reduced to $625,500 from $729,750. The current high-cost limit is calculated as 115% of the area median house price, but cannot exceed 150% of the national limit or $625,500. The limit in other areas of the nation remains unchanged since 2006 at $417,000. Securitization of mortgages that exceed the applicable limit—called non-conforming jumbo loans—is done by private financial institutions, although in the present financial environment virtually no jumbo mortgages are being securitized. GSE status allows Fannie and Freddie to issue debt at lower cost than other private firms; part of this subsidy is passed on to home buyers in the form of lower interest rates. Interest rates on jumbo mortgages are slightly higher than those on the conforming loans that the GSEs can purchase. The spread between non-conforming jumbo and conforming loan rates has been elevated since the start of the financial crisis and is now about three-fourths of 1%. According to recent congressional testimony, most recent home purchase mortgages are guaranteed by FHA and securitized by Ginnie Mae; the majority of mortgages purchased recently by Fannie Mae and Freddie Mac have refinanced existing mortgages. S. 1217, the Housing Finance Reform and Taxpayer Protection Act of 2013, would reduce the maximum high-cost limit from 150% of the national limit ($625,500) to 130% of the national limit ($542,100). H.R. 2767, the Protecting American Taxpayers and Homeowners (PATH) Act of 2013, could reduce the high-cost limit to $525,500. This report analyzes the implications of the higher conforming loan limit in high-cost areas. It will be updated as legislative and market developments warrant. |
This report pr ovides an overview and analysis of the two patent cases decided by the U.S. Supreme Court during its October 2015 Term, Halo Electronics, Inc. v. Pulse Electronics, Inc. (regarding the award of enhanced damages in "egregious" patent infringement cases) and Cuozzo Speed Technologies , LLC v. Lee (assessing the claim construction standard applied by the Patent Trial and Appeal Board in certain patent revocation proceedings). The report will begin with a review of the general principles of patent law. It will then describe the law governing enhanced damages and patent revocation proceedings prior to these two opinions. After providing that context, the report will discuss and analyze how the Supreme Court's opinions in Halo and Cuozzo affect current patent law. One of the primary purposes for United States patent law is to provide individuals, companies, and institutions with economic incentives to engage in research and development that lead to new products or processes. By granting inventors a limited monopoly over the use of their inventions and discoveries, patent holders will be able to receive a return on investment from their creations. Without patent protection, competitors could "free ride" on the inventor's research and development efforts and easily duplicate or otherwise practice the new inventions without having incurred the costs to develop them. According to Section 101 of the Patent Act (or the Act), one who "invents or discovers any new and useful process, machine, manufacture, or any composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title." Thus, an invention is eligible for patent protection if it falls within one of the four statutory categories of patent-eligible subject matter: processes, machines, manufactures, and compositions of matter. Whether the discovery is patentable subject matter is a threshold inquiry that "must precede the determination of whether that discovery is, in fact, new or obvious." The U.S. Patent and Trademark Office (USPTO) issues a patent to an inventor after its examiners approve the submitted patent application for an allegedly new invention. An application for a patent consists of two primary parts: (1) a "specification," which is a written description of the invention enabling those skilled in the art to practice the invention, and (2) one or more claims that define the scope of the subject matter which the applicant regards as his invention. These claims define the scope of the patentee's rights under the patent. Before a patent may be granted, the USPTO examiners must find that the new invention (1) is patentable subject matter and (2) satisfies several substantive requirements set forth in the Act. One of the statutory requirements for patentability of an invention is "novelty." For an invention to be considered "novel," the subject matter must be different than, and not be wholly "anticipated" by, the so-called "prior art," or public domain materials such as publications and other patents. Another statutory requirement is that the subject matter of an alleged invention must be "nonobvious" at the time of its creation. A patent claim is invalid if "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains." Finally, the invention must also be "useful," which means that the invention provides a "significant and presently available," "well-defined and particular benefit to the public." Once a patent is issued by the USPTO, it is presumed to be valid; however, members of the public may challenge the agency's decision to grant the patent either in litigation or in an administrative proceeding, as discussed in detail later in this report. A patent holder has the exclusive right to exclude others from making, using, offering for sale, or selling their patented invention throughout the United States, or importing the invention into the United States. Whoever performs any one of these five acts during the term of the invention's patent, without the patent holder's authorization, is liable for infringement. A patent holder may file a civil action against an alleged infringer in order to enjoin him or her from further infringing acts (by securing an injunction, also referred to as injunctive relief). The Act also provides federal courts with discretion to award damages to the patent holder that are "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." The usual term of patent protection is 20 years from the date the patent application is filed. At the end of that period, others may use the invention without regard to the expired patent. Because the Act expressly provides that "patents shall have the attributes of personal property," patent holders may sell their patent rights in a legal transfer called an "assignment." Alternatively, patent holders may grant others a "license" to exercise one of the five statutory patent rights. A license is not a transfer of ownership of the patent, but rather is the patent holder's permission to another entity to use the invention in a limited way, typically in exchange for periodic royalty payments during the term of the patent. A patent holder may grant to a licensee the right to practice the invention through a contract (typically known as a patent licensing agreement). The terms of the licensing agreement, however, may include conditions upon the grant of rights—for example, restricting the licensee from making the invention but allowing that party to sell it. A licensee that performs an act that exceeds the scope of the license (through a violation of the limitations and conditions of the grant of rights) or refuses to comply with the terms of the license agreement (such as by refusing to pay the required royalties) is potentially liable to the patent holder for breach of contract as well as for patent infringement. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit) is a specialized tribunal established by Congress that has exclusive appellate jurisdiction in patent cases. Parties dissatisfied with the Federal Circuit's rulings may petition the U.S. Supreme Court to review the appellate court's decision. However, the Supreme Court is not required to entertain the appeal; it has discretion to decide whether to grant certiorari to review the case. The next section of the report will describe the law governing the award of enhanced damages in patent infringement cases and how the Supreme Court's June 2016 opinion in Halo Electronics, Inc. v. Pulse Electronics, Inc. may affect it. The Patent Act provides that a court "may increase the damages up to three times the amount found or assessed" The Patent Act does not specify the circumstances in which "treble" damages are appropriate, and thus, an award of enhanced damages in patent infringement cases, as well as the amount by which the damages will be increased, falls within the district court's discretion. Nonetheless, the Federal Circuit has limited enhanced damages awards to cases of "willful infringement." The appellate court has explained that willful infringement occurs when "the infringer acted in wanton disregard of the patentee's patent rights" based upon such circumstances as whether the infringer deliberately copied the ideas or design of the patentee, the closeness of the willfulness determination, the infringer's concealment of its conduct, and the infringer's motivations. The court opined that willful infringement "is not simply a conduit for enhancement of damages; it is a statement that patent infringement, like other civil wrongs, is disfavored, and intentional disregard of legal rights warrants deterrence." A 1992 Federal Circuit opinion stated that: Willfulness is a determination as to a state of mind. One who has actual notice of another's patent rights has an affirmative duty to respect those rights. That affirmative duty normally entails obtaining advice of legal counsel although the absence of such advice does not mandate a finding of willfulness. Under the willful infringement doctrine that existed since the 1980s until 2007, courts assessed whether the adjudicated infringer knew of the patent before being charged with infringement in court, or if the infringer acted with the reasonable belief that the patent was not infringed or that it was invalid. During this time period, Federal Circuit decisions emphasized the affirmative duty of someone with actual notice of a competitor's patent to exercise due care in determining if his or her acts will infringe that patent. Prior to 2004, the Federal Circuit held that when an accused infringer invoked the attorney-client or work-product privilege in refusing to answer interrogatories on whether the party had obtained the advice of legal counsel before it began allegedly infringing acts, courts were permitted to reach an adverse inference that either (1) no advice of counsel had been obtained or (2) the legal opinion had been obtained and was contrary to the infringer's desire to continue practicing the patented invention. However, in its 2004 decision Knorr-Bremse Systeme fuer Nutzfahrzeuge GmbH v. Dana Corp. , the Federal Circuit expressly rejected this principle and eliminated the adverse inference. The appellate court emphasized that a court may not draw an adverse inference with respect to willful infringement when the defendant in an infringement suit invokes the attorney-client or work-product privilege (because of the inappropriate burden it may place on the attorney-client relationship in patent cases) or when the defendant has failed to seek legal advice (because of the burdens and costs of such a requirement). Following the Knorr-Bremse opinion, willful infringement determinations are based upon "the totality of circumstances, but without the evidentiary contribution or presumptive weight of an adverse inference that any opinion of counsel was or would have been unfavorable." In 2011, Congress essentially codified the holding of Knorr-Bremse with the passage of the Leahy-Smith America Invents Act, which included language specifying that the "failure of an infringer to obtain the advice of counsel ... may not be used to prove that the accused infringer willfully infringed the patent.... " The Federal Circuit made significant changes to the willful infringement doctrine in its 2007 decision, In re Seagate Technology . The appellate court overturned two decades of its precedent by opting to "abandon the affirmative duty of due care." The Federal Circuit instead explained that accused infringers had no obligation to obtain an opinion of counsel. Rather, "proof of willful infringement permitting enhanced damages requires at least a showing of objective recklessness." Under this view, which the appellate court believed was required by Supreme Court precedent, the "state of mind of the accused infringer is not relevant to this objective inquiry." Thus, in order for a patent holder to establish willful infringement, "a patentee must show by clear and convincing evidence that the infringer acted despite an objectively high likelihood that its actions constituted infringement of a valid patent." Furthermore, if this objective standard is met, the patent holder must also demonstrate (also by clear and convincing evidence) that the infringer knew or should have known of the objectively high risk of infringement. Seagate thus requires a two-prong analysis, involving both an objective and subjective inquiry, that must be satisfied before the district court can exercise its discretion to increase damages pursuant to Section 284 of the Patent Act. In addition, Federal Circuit precedent establishes a multipart standard of appellate review of an award of enhanced damages in patent cases: 1. Part one of the Seagate test regarding objective recklessness is subject to de novo review. 2. Part two of the Seagate test regarding subjective knowledge is reviewed under a substantial evidence standard. 3. The final decision by the court to award enhanced damages is reviewed for abuse of discretion. The Seagate standard was used by courts until the Supreme Court heard Halo Electronics, Inc. v. Pulse Electronics, Inc. , as discussed in detail below. Both Halo Electronics and Pulse Electronics are suppliers of electronic components. Halo believed that Pulse had infringed its patents pertaining to the design of certain types of electronics that are to be mounted onto the surface of printed circuit boards inside devices such as computers and Internet routers. In 2002, Halo sent letters to Pulse offering to license Halo's patents, but the letters did not accuse Pulse of infringement. However, after an engineer working for Pulse determined that Halo's patents were invalid, Pulse continued to sell the electronic components at issue independent of any agreement with Halo. Pulse did not obtain the advice of counsel on the validity of Halo's patents after the engineer had reviewed the patents. In March 2007, Halo filed a patent infringement lawsuit against Pulse in the U.S. District Court for the District of Nevada. The jury found that Pulse had directly infringed Halo's patents and awarded Halo $1.5 million in reasonable royalty damages. The jury also found that it "was highly probable that Pulse's infringement was willful." However, the district court concluded there was no willful infringement because Pulse had presented a defense at trial (claiming Halo's patents were invalid for obviousness) that, while ultimately unsuccessful, "was not objectively baseless." Thus, the district court held that the "objective prong" of the Seagate willfulness inquiry was not satisfied in this case. The Federal Circuit affirmed the district court's decision to decline an award of enhanced damages. The appellate court agreed with the district court that Pulse's obviousness defense was not objectively unreasonable and thus Pulse did not willfully infringe Halo's patents. In July 2015, Halo petitioned the Supreme Court for a writ of certiorari to review the Federal Circuit's judgment, which the Court granted. On June 13, 2016, in a unanimous opinion authored by Chief Justice Roberts, the Supreme Court ruled that the Federal Circuit's Seagate test for enhanced damages was inconsistent with Section 284 of the Patent Act. In addition, the Court rejected Seagate 's requirement that a patent holder must prove recklessness by clear and convincing evidence because Section 284 "supplied no basis for imposing such a heightened standard." Instead, the appropriate standard of proof is a preponderance of the evidence, a lesser standard. The Court also rejected the Federal Circuit's multi-part standard for appellate review of an award of enhanced damages, explaining that a district court's discretion to award enhanced damages under Section 284 against adjudged patent infringers is reviewable on appeal for abuse of that discretion. Because the district court and Federal Circuit had applied the now-invalidated Seagate framework to Halo , the Supreme Court vacated the judgment of the Federal Circuit and remanded the case. In reaching its conclusions in Halo , the Court relied significantly on its 2014 opinions, Octane Fitness LLC v. Icon Health & Fitness , Inc. and Highmark, Inc. v. Allcare Health Management Systems, Inc., which concerned Section 285 of the Patent Act ( granting courts discretion to award "reasonable" attorney's fees to the prevailing party "in exceptional cases"). Similar to its Seagate two-prong test for enhanced damages under Section 284, the Federal Circuit had articulated a two-part test for determining when a case was sufficiently "exceptional" under Section 285 to warrant the award of attorney's fees—when the claim asserted is both (1) brought in subjective bad faith and (2) objectively baseless. However, the Supreme Court in Octane Fitness invalidated the Federal Circuit's test for exceptional cases because the standard improperly confined the ability of district courts to exercise the discretion to award attorney's fees that the Patent Act commits to them. The Octane Fitness Court also rejected the Federal Circuit's requirement that prevailing parties establish their entitlement to attorney's fees by "clear and convincing evidence" and instead embraced a "preponderance of the evidence" standard. In Highmark, an opinion issued on the same day as Octane Fitness, the Court rejected the Federal Circuit's position that a district court's "exceptional case" determination is to be reviewed on appeal "de novo" and "without deference." Instead, the Court held that the district court's determination must be reviewed on appeal under an abuse-of-discretion standard. The Halo Court explained that the reasoning and holdings in Octane Fitness and Highmark are "instructive" for its analysis of the Seagate test and the Federal Circuit's tripartite framework for appellate review of enhanced damages. The Court noted that the express language of Section 284 "contains no explicit limit or condition," nor does the statutory text provide a "precise rule or formula" for awarding enhanced damages. In contrast, the Court found that the Seagate test "is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to the district courts." According to the Court, the consequence of the Seagate approach is that "it can have the effect of insulating some of the worst patent infringers from any liability for enhanced damages." The Court explained that the "principal problem" with the Seagate test is that it requires a court to determine, as a threshold matter, that the defendant's infringement was "objectively" reckless, as a prerequisite to the possibility of awarding enhanced damages. Instead, the Court stated that "the subjective willfulness of a patent infringer, intentional or knowing, may warrant enhanced damages, without regard to whether his infringement was objectively reckless." Furthermore, the Seagate test "aggravates the problem" because it allows an adjudged infringer to avoid enhanced damages by offering a reasonable defense at trial, "even if he did not act on the basis of the defense or was even aware of it." While the Halo opinion frees district courts from the constraints of the mechanical Seagate analysis in deciding whether to award enhanced damages (and in what amount), the Court cautioned district courts to exercise their discretion in a manner consistent with Supreme Court precedent that generally reserves such punishment for "egregious cases of misconduct beyond typical infringement." The Court explained that "[t]he sort of conduct warranting enhanced damages has been variously described in our cases as willful, wanton, malicious, bad-faith, deliberate, consciously wrongful, flagrant, or—indeed—characteristic of a pirate." Justice Breyer issued a concurring opinion, joined by Justices Kennedy and Alito, that expressed his understanding of the limits on district courts' discretion to award enhanced damages. He first explained that "the Court's references to 'willful misconduct' do not mean that a court may award enhanced damages simply because the evidence shows that the infringer knew about the patent and nothing more. " Rather, courts must examine whether the circumstances in the case "transform[] simple knowledge into such egregious behavior" that merits a punitive sanction. Second, Justice Breyer emphasized that the Court's interpretation of Section 284 is not intended to diminish or otherwise affect a new section of the Patent Act added by the Leahy-Smith America Invents Act that states: "The failure of an infringer to obtain the advice of counsel with respect to any allegedly infringed patent ... may not be used to prove that the accused infringer willfully infringed the patent.... " He cited the likely high costs to small businesses and individual inventors in obtaining an opinion of counsel to determine if their products infringe a particular patent or if the patent is probably invalid; such costs could prevent or "discourag[e] lawful innovation." By enacting this section of the Patent Act, "Congress has thus left it to the potential infringer to decide whether to consult counsel—without the threat of treble damages influencing that decision." Finally, Justice Breyer urged courts to carefully use their discretion in awarding enhanced damages, ensuring that such punitive measures be limited to cases involving egregious misconduct. If increased damages are more readily available in any case involving intentional infringement, innovation could be hindered, he warned. As an example, he specifically mentioned the risk that small businesses face when they receive "demand letters" sent by "patent assertion entities" (firms that do not develop, manufacture, or sell any product, but rather use patents primarily to obtain licensing fees from others): How is a growing business to react to the arrival of such a letter, particularly if that letter carries with it a serious risk of treble damages? Does the letter put the company "on notice" of the patent? Will a jury find that the company behaved "recklessly," simply for failing to spend considerable time, effort, and money obtaining expert views about whether some or all of the patents described in the letter apply to its activities (and whether those patents are even valid)? These investigative activities can be costly. Hence, the risk of treble damages can encourage the company to settle, or even abandon any challenged activity. Some patent practitioners have called the Halo decision a significant victory for patent owners because the Federal Circuit's Seagate test had made it almost impossible for patentees to recover enhanced damages in cases of willful infringement. Other observers were not surprised by the outcome in Halo, given the Court's 2014 Octane Fitness opinion. One organization that represents technology companies such as Amazon, Cisco, and Google, raised concerns that the Halo decision may incentivize patent assertion entities (sometimes pejoratively referred to by their critics as "patent trolls") to file more lawsuits and may also encourage patent holders to "forum shop" for district courts that have a reputation for being more willing to award enhanced damages. In an effort to demonstrate his disagreement with the Supreme Court's Halo decision, Senator Orrin Hatch filed a "sense of Congress" amendment to the Commerce, Justice, and Science Appropriations Bill that expressed Congress's views on willful infringement in patent cases. The amendment's findings section indicates that Congress, in enacting the America Invents Act in 2011, was "well aware of the Seagate standard" and chose not to substantively amend Section 284 at that time, "knowing that no action from Congress would be required to ensure that the standard established in Seagate would remain in place and continue to govern the enhancement analysis under that section." The amendment then expressed the sense of Congress that "(1) the Seagate standard has governed and continues to govern the enhanced damages analysis under section 284 of title 35, United States Code; and (2) this intent of Congress should be considered in any decisions interpreting that section." As of the date of this Report, the Senate has not voted on this legislation or the amendment. In January 2016, Senator Hatch had filed an amicus brief in the Halo case, joined by Senators Leahy and Bennet and Representatives Bob Goodlatte, Lamar Smith, and Steven Chabot, that urged the Court not to alter or overturn the Seagate standard. By rejecting the stringent Seagate test and lowering the patent holder's evidentiary burden of proof to establish an infringer's reckless actions, the Halo decision may possibly make it easier for patent holders to receive enhanced damages in certain circumstances. In addition, once a patent holder is awarded enhanced damages by the district court, the Federal Circuit is unlikely to overturn that decision under Halo's "abuse of discretion" standard of appellate review. However, a patent practitioner has argued that "[t]he percentage of cases where district courts actually award enhanced damages may not go up much because the Supreme Court has set a high bar of 'egregious' behavior." Another practitioner notes that, as a practical matter, the challenge facing patent holders and third parties "is predicting where the line will ultimately fall between typical infringement and egregious cases, as well as what an accused infringer should do—or must do—to be on the safe side of that line." In future cases, courts will likely need to determine the range of "egregious misconduct" that may warrant enhanced damages under the Halo standard. The remaining portion of this report will describe the mechanics of the USPTO's patent reexamination proceedings, including the claim construction standard that applies to them. It will then discuss the impact of the Supreme Court's June 2016 opinion in Cuozzo Speed Technologies v. Lee on these proceedings. Although patents issued by the USPTO are presumed to be valid, accused infringers may assert in court that a patent is invalid or unenforceable on a number of grounds. The accused infringer could raise this argument as an affirmative defense or counterclaim when sued for patent infringement. A party could also preemptively file a "declaratory judgment action" against a patent owner to challenge a patent's validity if there is a case or controversy between them. However, the constitutionally based "case or controversy" requirement for federal judicial proceedings significantly limits the ability of members of the general public to challenge the USPTO's decision to grant a patent. Unless the patent holder becomes involved in an actual, continuing controversy with another person, that person may have difficulty requesting that a federal court determine that a patent is invalid. To address this perceived deficiency, Congress in 1980 established an administrative reexamination mechanism through which the USPTO may reconsider its initial decision to approve a patent application. Members of the public may challenge the validity of an issued patent in these patent reexamination proceedings, which need not satisfy the constitutional "case or controversy" requirement because the proceedings are administrative in nature and do not involve a use of the federal judicial power. Furthermore, the proceedings serve as a potentially faster and cheaper alternative to judicial determinations of patent validity. There are several possible outcomes of reexamination proceedings: a certificate confirming the patentability of the original claims, an amended patent with narrower claims, or a declaration of patent invalidity. Subtitle F of the American Inventors Protection Act of 1999, entitled the Optional Inter Partes Reexamination Procedure Act of 1999, renamed the original reexamination proceeding as an "ex parte reexamination" and also provided a new administrative proceeding called an "inter partes reexamination." The inter partes reexamination allowed the patent challenger to participate more fully in the proceedings through the submission of arguments and the filing of appeals. However, the number of requests for reexamination under either type of proceeding was fewer than some observers had anticipated. Some commentators also questioned the proceedings' effectiveness. In 2011, Congress enacted the Leahy-Smith America Invents Act (AIA), which made significant changes to the USPTO's reexamination proceedings. The AIA first created the Patent Trial and Appeal Board (PTAB) within the USPTO to handle these proceedings. The PTAB's membership consists of the USPTO director, deputy director, the Commissioner for Patents, the Commissioner for Trademarks, and the administrative patent judges. A panel of at least three members of the PTAB, who are designated by the USPTO director, hears challenges to a patent's validity. The AIA introduced a new proceeding called "post-grant review" (PGR) and also replaced the existing inter partes reexamination system with an "inter partes review" proceeding (IPR). In a PGR proceeding, petitioners may challenge the validity of an issued patent based on any ground of patentability (such as unpatentable subject matter, or failure to meet the statutory standards of novelty and nonobviousness). A petition to initiate a PGR must be filed with the USPTO within nine months of the date of patent grant. To authorize a PGR to be instituted, the USPTO director must determine that the petitioner has presented information in the petition that, if not rebutted, would demonstrate that it is "more likely than not that at least one of the claims" is unpatentable. A PGR must be completed within a year of its commencement, with an extension of six months possible for good cause shown. A challenger to a patent may file a petition with the USPTO requesting the institution of an IPR proceeding nine months after a patent issues or reissues , or the conclusion of any post-grant review, whichever occurs later. In an IPR proceeding, petitioners may challenge the validity of an issued patent only on the basis of prior art consisting of patents or printed publications. As a result, patent challenges under IPR are limited to the patentability issues of novelty and nonobviousness. To authorize an IPR to be instituted, the USPTO director must determine that the petitioner has provided information in the petition that there is a "reasonable likelihood" that he or she would prevail with respect to at least one claim. An accused infringer may not petition for an IPR if he or she has already filed a declaratory judgment action in federal court challenging the patent, or more than a year has passed since the date the accused infringer was served with a complaint alleging infringement of that patent. Should the patent survive the IPR proceeding, the individual who commenced the proceeding, along with his privies, are barred in the future from raising issues that were "raised or reasonably could have been raised." An IPR must be completed within a year of its commencement, with an extension of six months possible for good cause shown. The timing and scope of the two USPTO patent revocation proceedings described above are as follows: 1. A patent may be challenged at the USPTO on any basis of any patentability issue within nine months from the date the patent issued (by filing a petition for a PGR proceeding). 2. Thereafter, and throughout its entire term, a patent may be challenged at the USPTO only on the grounds of novelty and nonobviousness (via an IPR). In an IPR or PGR proceeding, "the petitioner shall have the burden of proving a proposition of unpatentability by a preponderance of the evidence." A party dissatisfied with the PTAB's final written decision in an IPR or PGR proceeding may appeal directly to the Federal Circuit. As described earlier in this report, an application for a patent consists of a "specification," which is a written description of the invention, and one or more "claims," which define the scope of the subject matter which the applicant regards as his invention. "Claim construction" refers to the interpretation of the language of these claims; specifically, to construe the meaning of a patent claim to establish the boundaries of the invention. Patent claim interpretation is the process in which a court and the USPTO determine the scope of the patent holder's proprietary rights. The AIA is silent on what claim construction standard is appropriate in the IPR and PGR proceedings conducted by the PTAB. However, the AIA granted the agency authority to issue "regulations … establishing and governing inter partes review under this chapter." Exercising this authority, the USPTO promulgated a regulation in August 2012 that provided the following standard for claim construction in an IPR: "[a] claim in an unexpired patent shall be given its broadest reasonable construction in light of the specification of the patent in which it appears." Such an interpretive standard is also referred to as the "broadest reasonable interpretation" (BRI). The BRI standard arguably makes it more likely that the PTAB finds a patent claim to be obvious or not novel (and thus subject to invalidation in an IPR), compared to in a judicial proceeding in which a court construes patent claims according to the "plain and ordinary meaning" of the claims' language (a narrower standard). The AIA includes a provision designed to prevent a court from considering a challenge to the USPTO's decision regarding the institution of an IPR, stating that "[t]he determination by the Director whether to institute an inter partes review under this section shall be final and nonappealable." Elements of the IPR process, including the claim construction standard, were considered by the Supreme Court in the recent case Cuozzo Speed Technologies, LLC v. Lee , discussed in detail below. Cuozzo Speed Technologies (Cuozzo) holds the patent at issue in this case (Cuozzo Patent). The patent's 20 claims pertain to a speedometer that displays a vehicle's current speed as well as the speed limit, thereby showing a driver when he or she is driving above the limit. In September 2012, a car GPS device manufacturer, Garmin, filed a petition with the USPTO to institute IPR of the Cuozzo Patent's claims 10, 14, and 17, arguing that claim 17 was invalid for obviousness in light of three prior patents, though it was silent on the grounds for challenging claims 10 and 14. The USPTO agreed to review the Cuozzo Patent's claim 17, as well as claims 10 and 14. The PTAB acknowledged that Garmin had not expressly identified in its IPR petition the specific grounds on which it was challenging claims 10 and 14. However, "believing that 'claim 17 depends on claim 14 which depends on claim 10,' the [PTAB] reasoned that Garmin had 'implicitly' challenged claims 10 and 14 on the basis of the same prior inventions." The PTAB conducted the IPR proceedings and determined that claims 10, 14, and 17 of the Cuozzo Patent were obvious in light of the patents that Garmin had cited and ordered the cancellation of those claims. Cuozzo appealed the PTAB's decision to the Federal Circuit, arguing that the USPTO had improperly instituted IPR with respect to claims 10 and 14 because the agency had found that Garmin only implicitly challenged those claims, in apparent violation of the Patent Act's requirement that IPR petitions must state "with particularity" the grounds on which the challenge for each claim is based. Cuozzo also asserted that the PTAB had improperly used the "broadest reasonable interpretation" standard in construing patent claims in an IPR; instead, the company argued that the PTAB should apply the same claim construction standard used by federal courts when assessing a patent's validity ("i.e., it should have given those claims their 'ordinary meaning … as understood by a person of skill in the art.'"). In February 2015, a divided panel of the Federal Circuit rejected both of Cuozzo's arguments. First, the appellate court asserted that Section 314(d) of the Patent Act precludes its review of the USPTO's decision to institute IPR. The court then upheld the PTAB's use of the BRI standard in claim construction, holding that the USPTO's regulation requiring such a standard was a reasonable exercise of the agency's rulemaking authority that had been granted by the AIA. The Federal Circuit explained that by applying the BRI standard, the USPTO "reduce[s] the possibility that, after the patent is granted, the claims may be interpreted as giving broader coverage than is justified." The appellate court noted that the USPTO has long applied the BRI standard in a variety of proceedings, including initial examinations, interferences, and reissue and reexamination proceedings. Finally, the court observed that "[t]here is no indication that the AIA was designed to change the claim construction standard that the PTO has applied for more than 100 years. Congress is presumed to legislate against the background of the kind of longstanding, consistent existing law that is present here." Thus, according to the Federal Circuit, "Congress implicitly adopted the broadest reasonable interpretation standard in enacting the AIA." In July 2015, the Federal Circuit, by a narrow vote of 6 to 5, denied Cuozzo's petition for rehearing en banc (by the full court). In October 2015, Cuozzo filed a petition with the Supreme Court for a writ of certiorari to review the Federal Circuit's judgment, which the Court granted. In an opinion authored by Justice Breyer, the Supreme Court in Cuozzo held that Section 314(d) of the Patent Act "bar[s] judicial review of the kind of mine-run claim at issue here, involving the Patent Office's decision to institute inter partes review," though it may not prevent courts from considering a constitutional question. This conclusion was supported by six justices, with two dissenting. Second, the Supreme Court unanimously ruled that Congress had given the USPTO the statutory authority to issue the regulation specifying that the PTAB apply the broadest reasonable interpretation standard in construing patent claims in an IPR proceeding. The Supreme Court's majority opinion on this first question agreed with the Federal Circuit that the decision of the USPTO whether to institute an IPR is nonappealable. Although recognizing the "strong presumption" in favor of judicial review, even for statutes that purport to limit or preclude review, the Court noted that the presumption can "be overcome by clear and convincing indications, drawn from specific language, specific legislative history, and inferences of intent drawn from the statutory scheme as a whole, that Congress intended to bar review." The Court found that this standard was satisfied in this case. In the AIA, Congress elected to make the USPTO's decision on whether an IPR should proceed "final and nonappealable"; thus, the Court's "conclusion that courts may not revisit this initial determination gives effect to this statutory command." However, the majority opinion explained that its conclusion applies to issues relating specifically to IPR proceedings and not necessarily those that involve constitutional questions, other sections of the Patent Act, or other federal statutes: We emphasize that our interpretation applies where the grounds for attacking the decision to institute inter partes review consist of questions that are closely tied to the application and interpretation of statutes related to the Patent Office's decision to initiate inter partes review. … This means that we need not, and do not, decide the precise effect of § 314(d) on appeals that implicate constitutional questions, that depend on other less closely related statutes, or that present other questions of interpretation that reach, in terms of scope and impact, well beyond "this section." Justice Alito wrote a dissenting opinion to this part of the Cuozzo opinion , which was joined by Justice Sotomayor, in which he disagreed with the majority's view that Congress intended to shield "from all judicial scrutiny" the USPTO's compliance (or noncompliance) with statutory requirements that govern the agency's decision to institute an IPR proceeding. He first observed that Section 314(d) "does not say that an institution decision is 'not subject to review,'" but rather makes such decision "nonappealable." He would interpret this statutory language to "bar only an appeal from the institution decision itself, while allowing review of institution-related issues in an appeal from the Patent Office's final written decision at the end of the proceeding." Under Justice Alito's interpretation of Section 314(d), a court cannot prevent an IPR proceeding from commencing (because the decision to institute IPR is "final and nonappealable"), but "the question whether it was lawful to institute review will not escape judicial scrutiny." However, he then took "the Court at its word that today's opinion will not permit the Patent Office to act outside its statutory limits." Nevertheless, he argued that the Court should have held that Section 314(d) "does not bar judicial review of the Patent Office's compliance with any of the limits Congress imposed on the institution of patent review proceedings," which would include the statutory condition that Cuozzo alleged was violated by Garmin in this case, i.e., Section 312(a)(3) of the Patent Act's requirement that IPR petitioners must state the grounds on which the challenge for each claim is based "with particularity". Regarding the other question presented in Cuozzo's certiorari petition , a unanimous Supreme Court agreed that the Federal Circuit did not err in holding that the Patent Act grants the USPTO the legal authority to require the PTAB to apply the BRI standard to claim construction in IPR proceedings. The Court first noted that no part of the IPR statute "unambiguously directs the agency to use" the BRI standard or the standard used by federal courts, which construe the claims in an issued patent according to their "plain and ordinary meaning". Because the statute leaves a "gap" or is "ambiguous" on this matter, courts "typically interpret it as granting the agency leeway to enact rules that are reasonable in light of the text, nature, and purpose of the statute." In addition, the Court observed that Section 316(a)(4) of the Patent Act expressly delegated rulemaking authority to the USPTO to issue "regulations ... establishing and governing inter partes review under this chapter," which would include the power to promulgate a rule filling that gap in the IPR statute with the BRI standard. Furthermore, the Court could not find anything in the statutory language, its purpose, or its legislative history to "suggest that Congress considered what standard the agency should apply when reviewing a patent claim in inter partes review." The Court then held that the BRI regulation is a reasonable exercise of the USPTO's rulemaking authority, for several reasons. First, in the Court's view, applying a BRI standard to claim construction helps to protect the public interest: Because an examiner's (or re-examiner's) use of the broadest reasonable construction standard increases the possibility that the examiner will find the claim too broad (and deny it), use of that standard encourages the applicant to draft narrowly. This helps ensure precision while avoiding overly broad claims, and thereby helps prevent a patent from tying up too much knowledge, while helping members of the public draw useful information from the disclosed invention and better understand the lawful limits of the claim. Second, the Court explained that the USPTO has used the BRI standard for over a century in its administrative proceedings, and thus this precedent supports the reasonableness of its regulation in this case. The Court stated that "we cannot find unreasonable the Patent Office's decision to prefer a degree of inconsistency in the standards used between the courts and the agency, rather than among agency proceedings." Finally, the Court downplayed Cuozzo's concern that the use of different claim construction standards by the USPTO and the courts to interpret the same patent claims may lead to inconsistent and conflicting results, such that a court could uphold the validity of a patent claim while the agency may cancel that same claim in an IPR proceeding: This possibility … has long been present in our patent system, which provides different tracks—one in the Patent Office and one in the courts—for the review and adjudication of patent claims. As we have explained above, inter partes review imposes a different burden of proof on the challenger. These different evidentiary burdens mean that the possibility of inconsistent results is inherent to Congress' regulatory design. Some observers have called Cuozzo a victory for companies, particularly those in the technology industry, that want to utilize the faster and cheaper IPR proceedings to invalidate "bad patents." On the other hand, some believe that Cuozzo leaves in place a process that may negatively impact companies that value strong patent protections, such as those in the pharmaceutical drug and biotechnology industries. It remains to be seen whether Congress will legislatively "overrule" parts of the Cuozzo opinion. Legislation in the 114 th Congress, the Innovation Act and the PATENT Act, would require that the PTAB, in IPR proceedings, use the same claim construction standard that is applied by federal courts; that is, the PTAB would need to construe a patent claim "in accordance with the ordinary and customary meaning of such claim as understood by one of ordinary skill in the art and the prosecution history pertaining to the patent" rather than use the BRI standard. However, this legislation has not been enacted into law. | This report examines the two patent law cases decided by the U.S. Supreme Court in its October 2015 Term. The first patent case, decided on June 13, 2016, Halo Electronics, Inc. v. Pulse Electronics, Inc., concerns the circumstances in which the awarding of enhanced damages in a patent infringement case are warranted and the discretion of the district courts to award them. Section 284 of the Patent Act provides that the court may increase damages up to three times the amount found by a jury or assessed by the court, but does not provide any guidance to the court, or any express limits or conditions, in how to exercise its discretion to do so. The U.S. Court of Appeals for the Federal Circuit (Federal Circuit), a specialized tribunal established by Congress that has exclusive appellate jurisdiction in patent cases, limited such awards to cases of "willful infringement." Specifically, in its 2007 opinion, In re Seagate Technology, the Federal Circuit established a two-part test that must be met before the district court can exercise its discretion to increase damages under Section 284. This strict standard arguably made such awards very difficult for patent holders to recover. In a unanimous opinion, the Halo Supreme Court rejected the Seagate test for enhanced damages, determining that it was unduly rigid and inconsistent with the statutory grant of discretion to courts to decide when to award punitive damages. In invalidating the strict Seagate test, the Halo opinion advised district courts to exercise their discretion to award enhanced damages in a manner consistent with Supreme Court precedent that generally reserves such punishment for "egregious cases of misconduct beyond typical infringement." The Court's second patent opinion of its October 2015 Term, issued on June 20, 2016, involves the "claim construction" standard used by the Patent Trial and Appeal Board (PTAB) of the U.S. Patent & Trademark Office (USPTO) in an administrative proceeding called an inter partes review (IPR), where members of the public may challenge the validity of issued patents. In Cuozzo Speed Technologies, LLC v. Lee, the Court upheld a USPTO regulation that requires the PTAB, in IPR proceedings, to read a disputed patent claim according to its "broadest reasonable interpretation." Such an interpretive standard arguably makes it more likely that the PTAB finds a patent claim to be obvious or not novel (and thus subject to invalidation), compared to in a judicial proceeding in which a court construes patent claims according to the "plain and ordinary meaning" of the claims' language (a narrower standard). Furthermore, the Cuozzo Court held that a provision of the Patent Act precludes judicial review of the USPTO's decision whether to institute an IPR proceeding. The Halo opinion arguably favors patent holders by improving the chances of receiving enhanced damages in patent infringement cases, while Cuozzo leaves in place a process that may help third parties seeking to challenge the validity of issued patents. However, the impact of these decisions could be affected in the future by Congress, as some Members have expressed their disagreement with the Halo decision, and legislation pending in the 114th Congress (the Innovation Act (H.R. 9)) and the Protecting American Talent and Entrepreneurship Act (PATENT Act (S. 1137)) would require that the PTAB use the same claim construction standard in IPR proceedings that is applied by federal courts. |
On February 13, 2009, both the House and Senate passed the conference version of H.R. 1 , the American Recovery and Reinvestment Act of 2009 (ARRA). Subsequently, the ARRA was signed into law by President Obama on February 17, 2009 ( P.L. 111-5 ). The primary purposes of the ARRA focus on promoting economic recovery, assisting those most affected by the recession, improving economic efficiency by "spurring technological advances in science and health," investing in infrastructure, and stabilizing state and local government budgets. The House had previously passed its version of H.R. 1 on January 28, 2009, while the Senate passed S.Amdt. 570 , an amendment in the nature of a substitute to H.R. 1 , on February 10, 2009. The ARRA provides funds to several existing education programs administered by the U.S. Department of Education (ED), including programs authorized by the Elementary and Secondary Education Act (ESEA), the Individuals with Disabilities Education Act (IDEA), and the Higher Education Act (HEA). It also provides general state fiscal stabilization grants to support education at the elementary, secondary, and postsecondary levels, as well as "public safety and other government services." Funds made available through the State Fiscal Stabilization Fund may be used for modernization, renovation, or repair of public school or higher education facilities. Under the House and Senate versions of H.R. 1 (hereafter referred to the House bill and the Senate bill, respectively), funds also would have been provided to several existing education programs administered by the U.S. Department of Education (ED), including programs authorized by the ESEA, IDEA, and HEA. The House bill, but not the Senate bill, would have created new programs to support school modernization, renovation, and repair at the elementary, secondary, and postsecondary education levels. Both the House bill and the Senate bill would have provided general funds for education to support state fiscal stabilization. This report provides a brief overview of the key provisions related to education programs that are or will be administered by ED that were included in the ARRA under Division A, Title VIII, Department of Education and under Title XIV, State Fiscal Stabilization Fund. It also includes a discussion of relevant provisions that were included in the House and Senate versions of H.R. 1 . Education-related tax provisions, as well as Vocational Rehabilitation programs administered by ED, are beyond the scope of this report. The report begins with a discussion of provisions related to elementary and secondary education. The next section of the report examines provisions related to higher education, followed by a discussion of provisions related to the Institute for Education Sciences. The report concludes with an examination of the State Fiscal Stabilization Fund and a discussion of fiscal accountability issues. The ARRA provides $96.764 billion in discretionary appropriations for education programs that are or will be administered by the U.S. Department of Education (ED). Funds provided for education are considered FY2009 appropriations, and generally, all funds are available for obligation until September 30, 2010. Appropriations provided under the ARRA are in addition to funds provided under regular FY2009 appropriations legislation for ED, enacted subsequent to the ARRA under P.L. 111-8 , the Omnibus Appropriations Act, 2009. Section 807 of the ARRA includes a provision allowing the Secretary to award FY2009 funds appropriated in Title VIII of the bill on the basis of state and LEA eligibility for FY2008 awards and to require states to make "prompt" allocations to LEAs. Of these funds, about $43.164 billion were appropriated for existing education programs, including Title I-A, Education for the Disadvantaged, authorized by the Elementary and Secondary Education Act (ESEA) and the Individuals with Disabilities Education Act (IDEA), Part B Grants to States. Most of the funds for existing elementary education programs have been appropriated for programs that provide formula grants directly to states or local educational agencies (LEAs), while most funds at the postsecondary level were appropriated for Pell Grants, which go directly to students. For some programs, these appropriations provide a substantial increase over the amount of funding provided through the regular appropriations process in recent years. For example, the ARRA provides $10.000 billion for Title I-A Grants to LEAs, authorized by the ESEA, while this program received $13.899 billion in FY2008 and $14.492 billion in regular appropriations for FY2009. Thus, the total appropriation for this program in FY2009 is $24.492 billion, a 76.2% increase over its FY2008 appropriation level. Similarly, the ARRA provides $11.300 billion for IDEA, Part B Grants to States, while the program received $10.948 billion in FY2008 and $11.505 in FY2009 through the regular appropriations process. Thus, the total appropriation for this program in FY2009 is $22.805 billion, a 108.3% increase over its FY2008 appropriation level. At the postsecondary level, the ARRA provides $15.640 billion for Pell Grants, while the program received $14.215 billion in FY2008 and $17.288 billion in FY2009. Thus, the total discretionary appropriation for this program in FY2009 is $32.928 billion, a 131.6% increase over its FY2008 appropriation level. Overall, discretionary programs that existed prior to the enactment of the ARRA received $43.164 billion through the ARRA. These programs received $42.746 billion in FY2008 and $47.134 billion in FY2009. Thus, total FY2009 appropriations for these programs are $90.298 billion, a 111.2% increase over their FY2008 appropriation levels. The remaining $53.600 billion in discretionary funding provided for education programs was appropriated for the State Fiscal Stabilization Fund. This is a new program that is being administered by ED. After making reservations from the appropriation, including a $5 billion reservation for the Secretary of Education to provide State Incentive Grants and establish an Innovation Fund, $48.318 billion will be provided to governors through formula grants to each state that chooses to apply for funding through this program. Table 1 , below, provides appropriations for FY2008, FY2009, and the ARRA for all ED programs that received funding through the ARRA. Note in particular that Table 1 includes Vocational Rehabilitation programs administered by ED, although these programs are not discussed further in this report. The ARRA specifies that the funding provided through the act is considered emergency funding (Section 5). Further, appropriations provided through the ARRA have no effect on the availability of the amount provided under the Continuing Appropriations Resolution, 2009 (Division A of P.L. 110-329 ), and the amounts appropriated or made available under the ARRA are in addition to amounts otherwise appropriated for the fiscal year involved (Section 1601). On April 1, 2009, ED simultaneously released the first round of ARRA funding and issued guidance for several programs receiving funding under the ARRA, including Title I-A; IDEA, Part B; and the State Fiscal Stabilization Fund. Of the $44 billion released, ED provided 50% of the total funds available under Title I-A; IDEA, Part B Grants to States; IDEA, Part B Preschool Grants; IDEA, Part C Grants to Infants and Toddlers; Vocational Rehabilitation State Grants; Independent Living; and Services for Older Individuals who are Blind. The funds were released to states without requiring states to submit applications to receive funds. Remaining funds available under these programs will be released prior to the end of the FY2009, but, in some cases, may only be released contingent upon receiving additional information from states. ED also released 67% ($32.6 billion) of the total funds available under the State Fiscal Stabilization Funds. States are required to submit an application (also made available on April 1) to receive these funds. ED has indicated that it will release funds to states within two weeks of receiving an "approvable application." Generally, states are eligible to receive 67% of their estimated total allocation, but states may apply for up to 90% of their grants under this program if they demonstrate that the amount of funds they would otherwise receive in phase one is "insufficient to prevent the immediate layoff of personnel by LEAs, state educational agencies, or public institutions of higher education." The remainder of states' SFSF grants will be distributed after July 1, 2009, after states submit applications detailing their strategies for meeting performance requirements for the SFSF (discussed below). On April 10, 2009, ED released funding and guidance for the McKinney-Vento Homeless Assistance Program and Impact Aid Construction grants. ED distributed all of the funds for McKinney-Vento that were provided under the ARRA, and distributed $39.6 million of the funds available under Impact Aid. The latter funds were used to make 180 grants by formula. The remaining Impact Aid funds will be distributed through a competitive grant process later this year. The ARRA provides funding for a number of existing education programs, including the two federal education programs that provide the largest amounts of funding for elementary and secondary education—Title I-A Grants to Local Educational Agencies (ESEA) and IDEA, Part B Grants to States. It also provides funding for School Improvement Grants (ESEA Title I-A); Education Technology (ESEA Title II-D); IDEA, Part C (Grants for Infants and Toddlers); IDEA, Part B (Preschool Grants); and the McKinney-Vento Homeless Assistance Act. Both the House and Senate bills would have provided funds for all of these purposes, except that the House bill would not have provided funding for IDEA, Part B (Preschool Grants). The ARRA includes funding for the Fund for the Improvement of Education (FIE, ESEA Title V-D-1) and Impact Aid Section 8007 (Grants for Construction, ESEA Title VIII). Funds for these programs would have been provided only under the House bill. The House bill only also would have provided funding for Credit Enhancement Initiatives to Assist Charter Schools (ESEA Title V-B-2) and a new program to provide school construction funds to LEAs. The ARRA does not provide funds for these specific programs, although funds under the State Fiscal Stabilization Fund (see subsequent discussion) could be used for school modernization, renovation, and repair, and possibly construction as well. Provisions applicable to each of these programs are discussed below. The primary source of federal aid to K-12 education is the Elementary and Secondary Education Act, particularly its Title I, Part A program of Education for the Disadvantaged. The ESEA was initially enacted in 1965 (P.L. 89-10), and was most recently amended and reauthorized by the No Child Left Behind Act of 2001 (NCLB, P.L. 107-110 ). Other major ESEA programs provide grants to support the education of migrant students; recruitment of and professional development for teachers; language instruction for limited English proficient (LEP) students; drug abuse prevention programs; after-school instruction and care; expansion of charter schools and other forms of public school choice; education services for Native American, Native Hawaiian, and Alaska Native students; Impact Aid to compensate local educational agencies for taxes foregone due to certain federal activities; and a wide variety of innovative educational approaches or instruction to meet particular student needs. This section discusses ESEA programs that would receive additional funding through the House and Senate bills and, where appropriate, provides estimates of the amounts that states would receive. Title I, Part A, of the ESEA authorizes federal aid to local educational agencies (LEAs) for the education of disadvantaged children. Title I-A grants provide supplementary educational and related services to low-achieving and other pupils attending pre-kindergarten through grade 12 schools with relatively high concentrations of pupils from low-income families. For FY2008, the program received an annual appropriation of $13.9 billion. Portions of each annual appropriation for Title I-A are allocated under four different formulas—Basic, Concentration, Targeted, and Education Finance Incentive Grants (EFIG)—although funds allocated under all of these formulas are combined and used for the same purposes by recipient LEAs. Although the allocation formulas have several distinctive elements, the primary factors used in all four formulas are estimated numbers of children aged 5-17 in poor families plus a state expenditure factor based on average expenditures per pupil for public K-12 education. Other factors included in one or more formulas include weighting schemes designed to increase aid to LEAs with the highest concentrations of poverty, and a factor to increase grants to states with high levels of expenditure equity among their LEAs. Under three of the formulas—Basic, Concentration, and Targeted Grants—funds are calculated initially at the LEA level, and state total grants are the total of allocations for LEAs in the state, adjusted to apply state minimum grant provisions. Under the fourth formula, Education Finance Incentive Grants, grants are first calculated for each state overall, with state totals subsequently suballocated by LEA using a different formula. A primary rationale for using four different formulas to allocate shares of the funds for a single program is that the formulas have distinct allocation patterns, providing varying shares of allocated funds to different types of LEAs or states (e.g., LEAs with high poverty rates or states with comparatively equal levels of spending per pupil among their LEAs). The House and Senate bills would have provided $11 billion in supplemental appropriations for Title I-A Grants to LEAs. The House bill would have made $5.5 billion available on July 1, 2009, and $5.5 billion available on July 1, 2010. The Senate bill would have made the entire $11 billion available in FY2009. Under both bills, funds would have been allocated through the Targeted Grant and EFIG formulas only. Half of the available funds for a given fiscal year would have been appropriated through each formula. For example, for funds made available under the House bill on July 1, 2009, $2.75 billion would have been appropriated through the Targeted grant formula and $2.75 billion would have been appropriated through the EFIG formula. While both bills would have required funds to be used for the purposes authorized in Title I-A of the ESEA, the Senate bill would also have added requirements for LEAs receiving these funds. First, LEAs would have been required to use at least 15% of the funds received for activities serving children who are not yet at a grade level at which the LEA provides a free public education and to support preschool programs for children. Second, the Senate bill would have required each LEA to file a school-by-school listing of per pupil expenditures from state and local sources for the 2008-2009 school year with the state educational agency (SEA) by December 1, 2009. The ARRA provides $10 billion in supplemental FY2009 appropriations for Title I-A. As with both the House and Senate bills, the funds will be provided equally through the Targeted Grant and EFIG formulas only (i.e., $5 billion through each formula). One feature of these formulas is that LEAs with an estimated school-age child poverty rate of less than 5.0% are not eligible for grants. According to H.Rept. 111-16 , these funds should be available to LEAs during school year 2009-2010 and 2010-2011 to help LEAs "mitigate the effect of the recent reduction in local revenues and state support for education." While the ARRA did not retain the Senate provision that at least 15% of funds received by LEAs had to be used for preschool programs, the ARRA does retain the Senate provision requiring reporting on per-pupil expenditures. More specifically, each LEA is required to file a school-by-school listing of per-pupil expenditures from state and local sources during the 2008-2009 school year by December 1, 2009. Further, the ARRA requires the SEA to report these data to the Secretary of Education (hereafter referred to as the Secretary) by March 31, 2010. School Improvement Grants (authorized under ESEA, Section 1003(g)) provide supplementary funds to states and LEAs for school improvement purposes. States are eligible to apply for these grants, which are allocated in proportion to each state's share of funds received under ESEA Title I, Parts A, C (Migrant Education Program), and D (Neglected and Delinquent Children and Youth). States must use at least 95% of the funds received to make subgrants to LEAs. Subgrants made to LEAs must be between $50,000 and $500,000 for each school, and must be renewable for up to two additional years if schools meet the goals of their school improvement plans. Subgrants must be used by LEAs to support school improvement (ESEA, Sections 1116 and 1117). LEAs with the lowest-achieving schools and the greatest commitment to ensuring that such funds are used to provide "adequate resources" to enable the lowest-achieving schools to meet the goals under school and LEA improvement plans must be given priority in the awarding of subgrants. In FY2008, this program received an annual appropriation of $491 million. In addition to separately appropriated funds, states are generally required to reserve 4% of their Title I-A grants to LEAs for school improvement activities. The House bill would have appropriated $2 billion in supplemental appropriations for School Improvement Grants with $1 billion becoming available on July 1, 2009, and the remaining funds becoming available on July 1, 2010. The Senate bill would have appropriated $1.4 billion in supplemental appropriations for this program and made all funds available in FY2009. In addition, the Senate, but not the House bill, would have required ED to encourage states to use 40% of their allocations for middle and high schools. The ARRA provides $3 billion in supplemental FY2009 appropriations for School Improvement Grants. According to H.Rept. 111-16 , these funds should be available to LEAs during school year 2009-2010 and 2010-2011 to help LEAs "mitigate the effect of the recent reduction in local revenues and state support for education." The ARRA requires each LEA to file a school-by-school listing of per-pupil expenditures from state and local sources during the 2008-2009 school year by December 1, 2009. SEAs are then required to report these data to the Secretary by March 31, 2010. In addition, according to H.Rept. 111-16 , ED is required to encourage states to use 40% of their School Improvement Grants for middle and high schools. The EdTech program provides grants to SEAs and LEAs to increase access to educational technology, support the integration of technology into instruction, enhance technological literacy, and support technology-related professional development of teachers. Funds are allocated to states in proportion to Title I-A grants, with a state minimum grant amount of 0.5% of total funding for state grants. At least 95% of state grants must be allocated to LEAs (and consortia of LEAs and other entities)—50% by formula, in proportion to Title I-A grants, and 50% competitively. In FY2008, this program received an annual appropriation of $267 million. Both the House and Senate bills would have appropriated $1 billion in supplemental appropriations for EdTech. The House bill would have made $500 million available on July 1, 2009, and the remaining funds available on July 1, 2010, while the Senate would have made all funds available in FY2009. The ARRA provides $650 million in supplemental FY2009 appropriations for EdTech. According to H.Rept. 111-16 , these funds should be available to LEAs during school year 2009-2010 and 2010-2011 to help LEAs "mitigate the effect of the recent reduction in local revenues and state support for education." Under the Credit Enhancement program, competitive grants are awarded to enhance the availability of financing for the acquisition, construction, or renovation of public charter school facilities. Grants are made to at least three entities that have been approved by the Secretary as having demonstrated innovative methods of assisting charter schools in addressing the costs of acquiring, constructing, and renovating facilities by enhancing the availability of loans or bond financing. The House bill would have provided a one-time grant of $25 million in supplemental appropriations for this program. The Senate bill would not have appropriated additional funds for this program. The ARRA does not provide funds for the Credit Enhancement program. ESEA Title V-D authorizes a series of competitive grant programs intended to support a variety of innovative K-12 educational activities. It includes both a broad authority for innovative activities selected at the discretion of the Secretary of Education, and a series of required studies, in Subpart 1. It also authorizes a number of specific activities (e.g., Elementary and Secondary School Counseling Programs, Partnerships in Character Education, Smaller Learning Communities) in Subparts 2 through 21. In FY2008, Title V-D-1 received an annual appropriation of $122 million. The House bill, but not the Senate bill, would have provided $200 million in supplemental FY2009 appropriations specifically for Subpart 1 activities to be used for purposes specified in FY2008 appropriations. These funds had to be used to provide competitive grants to LEAs, states, or partnerships of an LEA, state, or both and at least one non-profit organization to develop and implement performance-based teacher and principal compensation systems in high-need schools under the Teacher Incentive Fund (TIF) program. These systems would have had to consider gains in student academic achievement as well as classroom evaluations conducted at multiple times during the school year among other factors and provide educators with incentives to take on leadership roles and additional responsibilities. Up to 5% of the $200 million would have been available for technical assistance, training, peer review of applications, program outreach, and evaluation activities. Further, the House bill specified that a portion of these funds had to be used by the Institute of Education Sciences (IES) to conduct an evaluation of the impact of performance-based teacher and principal compensation systems supported by the competitive grants on teacher and principal recruitment in high-need schools and subjects. The ARRA provides $200 million in supplemental FY2009 appropriations for the same purposes required in the House bill. The ARRA, however, permits the Secretary to reserve up to 1% of the $200 million for management and oversight of the activities supported with the funds appropriated. The Impact Aid program compensates LEAs for "substantial and continuing financial burden" resulting from federal activities. These activities include federal ownership of certain lands, as well as the enrollments in LEAs of children of parents who work or live on federal land (e.g., children of parents in the military and children living on Indian lands). Section 8007 specifically provides funds for construction and facilities upgrading to certain LEAs with high percentages of children living on Indian lands or children of military parents. These funds are used to make formula and competitive grants. In FY2008, $18 million was appropriated for Section 8007 payments. Under the statute, 40% of the funds appropriated under Section 8007 are used to make construction payments by formula to LEAs receiving Impact Aid Section 8003 payments and in which students living on Indian land constitute at least 50% of the LEA's total student enrollment or military students living on or off base constitute at least 50% of the LEA's total student enrollment. The funds available for construction payments are divided equally between these two groups of LEAs (20% of the total Section 8007 appropriation going to each group). The remaining 60% of Section 8007 appropriations are used to make school facility emergency and modernization competitive grants. Emergency repair grants must be used to repair, renovate, or alter a K-12 public school facility to ensure the health and safety of students and staff. Modernization grants may be used to relieve overcrowding or upgrade facilities to support a "contemporary educational program." The House bill would have provided $100 million in supplemental appropriations for Section 8007 in FY2009. The Senate bill would not have appropriated funds for this purpose. The ARRA provides $100 million supplemental FY2009 appropriations for Impact Aid Section 8007. While 40% of the Section 8007 funds will be made available by formula and 60% of the Section 8007 funds will be made available by competitive grant (as is done in current law), the ARRA modifies some of the eligibility and priority criteria for receiving funds. For example, the 40% of funds provided through formula grants will be based on each LEA's proportion of military children and children living on Indian lands. In addition, the ARRA drops the requirements that at least 50% of an LEA's student enrollment must be composed of military children or children living on Indian lands to receive a grant, and that the 40% of funds available be divided equally between LEAs enrolling at least 50% military children and those enrolling at least 50% children living on Indian lands. According to H.Rept. 111-16 , modifications to the current statutory provisions were made to allow for the greater participation of LEAs serving both military students and students living on Indian lands and to allow funding to be better targeted to LEAs with "shovel ready" projects. IDEA is the major federal statute that supports special education and related services for children with disabilities. As a condition of accepting IDEA funding, the act requires that states and LEAs provide a free appropriate public education (FAPE) to each eligible child with a disability. The IDEA is divided into four parts. Part A contains the general provisions, including the purposes of the act and definitions. Part B, the most often discussed part of the act, contains provisions relating to the education of school aged children (grants to states) and a state grant program for preschool children with disabilities (Section 619). Part C authorizes state grants for programs serving infants and toddlers with disabilities, while Part D contains the requirements for various national activities designed to improve the education of children with disabilities. In FY2008, IDEA, Part B Grants to States received an annual appropriation of $10.9 billion; IDEA, Part C received an annual appropriation of $436 million; and IDEA, Part D received an annual appropriation of $225 million. Both the House and Senate bills would have provided supplemental FY2009 appropriations for IDEA, Part B (grants to states) and Part C. For Part B, the House bill would have provided a total of $13 billion with $6 billion made available on July 1, 2009, and $7 billion made available on July 1, 2010. The Senate bill, as detailed in its report ( S.Rept. 111-3 ) would have provided $13 billion for FY2009. Actual and proposed Part B grants to states are often discussed in terms of the percent of the "excess" cost of educating children with disabilities that the federal government will pay. The metric for determining this excess cost is based on the national average per-pupil expenditure (APPE). In 1975, with the enactment of the Education for All Handicapped Children Act ( P.L. 94-142 ), it was determined that the federal government would pay up to 40% of this excess cost. For FY2008, the estimated percentage of APPE provided by the federal government under IDEA, Part B was 17.2%. The estimated percentage for FY2009 based on regular appropriations and funding provided through the House bill would have been 26.3%. For FY2010, based on regular appropriations and funding provided through the House bill, the estimated percentage would have been 26.8%. The estimated percentage based on the Senate bill and regular appropriations for FY2009 would have been 37.6%. For Part C, the House bill would have provided a total of $600 million for Part C with $300 million becoming available on July 1, 2009, and the remaining funds becoming available on July 1, 2010. The Senate bill, as detailed in its report ( S.Rept. 111-3 ), would have provided $500 million for FY2009. Under Part C, the Secretary is required to reserve 15% of any funds appropriated in excess of $460 million for incentive grants to states to continue early intervention services until kindergarten as described in Section 635(c). The Senate bill would have required that each LEA receiving funds for Part B use not less than 15% of the funds for special education and related services for preschool children (Section 619.) The House bill had no comparable provision. The ARRA provides $11.3 billion in supplemental FY2009 appropriations for IDEA Part B, which will be available during school years 2009-2010 and 2010-2011. The estimated percentage of the "excess" cost of educating children with disabilities that the federal government will pay based on the ARRA and regular appropriations for FY2009 is 34.2%. The ARRA also provides $500 million in FY2009 funds for IDEA Part C, which will be available during school years 2009-2010 and 2010-2011. Like both the House and Senate bills, the ARRA specifies that any funds remaining after the incentive grants are awarded are to be allocated to states by formula in accordance with section 643(e). Finally, the ARRA provides $400 million for the IDEA preschool program (Section 619). Special issues have arisen with respect to the share of IDEA funds provided under H.R. 1 that might be allocated to outlying areas or the Bureau of Indian Affairs. This program, also known as the Education for Homeless Children and Youth program, provides assistance to SEAs to ensure that all homeless children and youth have equal access to the same free, appropriate public education, including public preschool education, that is provided to other children and youth. Funds are allocated to states in proportion to ESEA Title I-A grants, with a state minimum of $150,000 or 0.25% of total grants, whichever is greater. In FY2008, $64 million was appropriated for this program. Competitive grants made by SEAs to LEAs under this program must be used to facilitate the enrollment, attendance, and success in school of homeless children and youth. The LEAs may use the funds for activities such as tutoring, supplemental instruction, and referral services for homeless children and youth, as well as providing them with medical, dental, mental, and other health services. In order to receive funds, each state must submit a plan indicating how homeless children and youth will be identified, how assurances will be put in place that homeless children will participate in federal, state, and local food programs if eligible, and how the state will address such problems as transportation, immunization, residency requirements, and the lack of birth certificates or school records. The House bill would have provided a total of $66 million for this program in supplemental FY2009 appropriations, with $33 million becoming available on July 1, 2009, and $33 million becoming available on July 1, 2010. These funds would have been allocated to states using the formula authorized in current statute. States would have made subgrants to LEAs on a competitive basis as is done under current law. The Senate bill would have provided $70 million for this program in supplemental FY2009 appropriations. These funds would not have been allocated to states using the current formula. Rather, funds would have been allocated in proportion to the number of homeless students identified by the state during the 2007-2008 school year relative to the number of homeless students identified nationally during the 2007-2008 school year. States would have made subgrants to LEAs on a competitive basis or using a formula based on the number of homeless students identified by LEAs in the state. The ARRA provides $70 million in supplemental FY2009 appropriations for this program. According to H.Rept. 111-16 , these funds should be available to LEAs during school year 2009-2010 and 2010-2011 to help LEAs "mitigate the effect of the recent reduction in local revenues and state support for education." Grants will be allocated to states in proportion to the number of homeless students identified by the state during the 2007-2008 school year relative to the number of homeless students identified nationally during the 2007-2008 school year, rather than under existing statutory provisions. SEAs will make subgrants to LEAs on a competitive basis or using a formula based on the number of homeless students identified by LEAs in the state. The Secretary is required to make grants to states not later than 60 days after the data of enactment. Subsequently, SEAs must make subgrants to LEAs not later than 120 days after receiving funds from the Secretary. Currently, there are no federal education programs dedicated specifically to providing grants for the modernization, renovation, or repair of elementary and secondary schools (hereafter referred to as funds for school renovation). The House bill, but not the Senate bill, would have provided a dedicated source of funding in FY2009 for these purposes. The House bill would have provided $14 billion in supplemental FY2009 appropriations for school renovation. After a reservation of 1% for the outlying areas and the Secretary of the Interior to provide assistance to Bureau of Indian Affairs schools, and a reservation of $6 million for the Secretary of Education for administration and oversight, the remaining funds would have been allocated to each state in proportion to the amount of FY2008 Title I-A funding received by all the LEAs in the state relative to the total amount received by all the LEAs in every state. States would have been permitted to reserve up to 1% of their allocations for providing technical assistance; developing a database that includes an inventory of public school facilities in the state and their modernization, renovation, and repair needs; and developing a school energy efficiency quality plan. The remaining funds would have been allocated to LEAs in proportion to the amount of FY2008 Title I-A funding received by the LEA relative to the total amount of funding received by all LEAs in the state. The minimum grant amount for LEAs would have been $5,000. Under general provisions (Sec. 1109), the House bill would have prohibited any funds from being used for an aquarium, zoo, golf course, or swimming pool. The ARRA does not include a dedicated source of federal funds for school modernization. However, school modernization, renovation, and repair, and possibly construction as well, are allowable uses of funds under the State Fiscal Stabilization Fund (see subsequent discussion). The ARRA provides supplemental appropriations for several programs authorized under the Higher Education Act (HEA). It provides $16 billion in discretionary appropriations for the Federal Pell Grant program, the Federal Work-Study (FWS) program, and the Teacher Quality Partnership Grant program, and for the administration of federal student aid programs authorized under Title IV of the HEA. The ARRA also provides $1.474 billion in mandatory appropriations for the Federal Pell Grant program. The House bill would have provided $16.276 billion in discretionary funding for the Federal Pell Grant program, the FWS program, and the Teacher Quality Partnership Grant program, and for the administration of federal student aid programs. It would also have provided $1.474 billion in mandatory funding for the Federal Pell Grant program. The House bill would have amended the federal student loan programs by increasing borrowing limits on Stafford Loans made to undergraduate students. In addition, the House bill would have provided $6 billion in discretionary funding for a new program of grants to state higher education agencies (SEAs) for higher education facility modernization, renovation and repair. The Senate bill would have provided $13.980 in discretionary funding for the three HEA programs (the Federal Pell Grant program, the Federal Perkins Loan program, the Teacher Quality Enhancement Grant program), but would not have provided any funding for higher education modernization, renovation, and repair. Funding for higher education as proposed under the House and Senate bills, and as enacted under the ARRA, is briefly discussed below. Under the Federal Pell Grant program, grants are made available to low-income undergraduate students to help offset their costs associated with obtaining a postsecondary education. The Pell Grant program is the largest source of federal grant aid to postsecondary students. Pell Grants are portable, in that the grant aid follows students to the eligible postsecondary education institutions in which they enroll. The Pell Grant award amount is primarily based on the financial resources that a student and the student's family are expected to contribute toward postsecondary education expenses—the student's expected family contribution (EFC). The Pell Grant award is considered to be the foundation of a student's financial aid package because all other forms of federal student aid (e.g., federal student loans) are awarded after the Pell Grant award amount has been determined. Both discretionary and mandatory appropriations fund the Federal Pell Grant program; and in general, annual appropriations measures specify maximum individual Pell Grant award amounts. A mandatory Pell Grant add-on has the effect of increasing the individual Pell Grant award amount above the amount available from funds provided in discretionary appropriation measures. For FY2008, $14.215 billion in discretionary funding, and $2.030 billion in mandatory funding was provided for the Pell Grant program. For the 2008-2009 award year, the maximum appropriated Pell Grant award amount was $4,731. This was comprised of a discretionary maximum award amount of $4,241, and a mandatory add-on of $490. The House bill would have provided $15.636 billion for the Federal Pell Grant program, to be made available through September 30, 2011. These funds would have been in addition to discretionary funds anticipated to be appropriated for the Federal Pell Grant program as part of a separate FY2009 discretionary appropriations measure under which the appropriated maximum Pell Grant award amount would be $4,360. As a result of both appropriations measures, the discretionary maximum Pell Grant award amount for the 2009-2010 award year would have been increased to $4,860. Combined with the mandatory add-on of $490, under the House bill, the maximum Pell Grant award amount for the 2009-2010 award year would have been increased to $5,350. The House bill also would have increased the mandatory appropriations provided for the Federal Pell Grant program for FY2009 by $643 million, from $2.090 billion to $2.733 billion; and for FY2010 by $831 million, from $3.030 billion to $3.861 billion. The Senate bill would have provided $13.869 billion for the Federal Pell Grant program, to be made available through September 30, 2011. These funds would be provided in addition to amounts anticipated to be separately appropriated for FY2009. Funding provided under the Senate bill would have increased the maximum Pell Grant award amount by $281 above the maximum award amount to be provided for the 2009-2010 award year. For the 2010-2011 award year, the Senate bill would have also increased the maximum Pell Grant award amount by $400 above the 2008-2009 award year maximum Pell Grant award amount ($4,731). Finally, the Senate bill specified that funds would have been provided to reduce or eliminate the Pell Grant shortfall. The ARRA provides $15.64 billion in supplemental discretionary appropriations for the Federal Pell Grant program for FY2009. The ARRA also provides $1.474 billion in mandatory appropriations for the Federal Pell Grant program, with $643 million provided for FY2009, and $831 million provided for FY2010. For the 2009-2010 award year, the maximum Pell Grant award will be $5,350. This will consist of a discretionary maximum award amount of $4,860 (funded by the combination of appropriations provided under the ARRA and appropriations anticipated to be provided under a separate FY2009 appropriations measure) and an add-on of $490 (funded by mandatory appropriations). The mandatory appropriations provided for FY2010 are to assure sufficient funding for the statutorily specified mandatory add-on of $690 for the 2010-2011 award year. The FWS program is a need-based federal student aid program that provides undergraduate, graduate, and professional students the opportunity for paid employment in a field related to their course of study or in community service. Students receive FWS aid as compensation for the hours they have worked. FWS aid may be provided to any student demonstrating financial need. Awards typically are based on factors such as each student's financial need, the availability of FWS funds, and whether a student requests FWS employment and is willing to work. Federal funding for the FWS program is provided to institutions of higher education (IHEs) for the purpose of making available need-based federal student aid to students enrolled at those IHEs. Funds are awarded to IHEs according to a complex two-stage procedure, with a portion of funds allocated based on what the IHE received in prior years, and a portion based on an institutional need-based allocation formula. Under the FWS program, students are compensated with a combination of federal funding and a matching amount provided by the student's employer, which may be the IHE or another entity. In most instances, the maximum federal share of compensation is 75%. For FY2008, $980.5 million was provided for the FWS program. The House bill would have provided $490 million in supplemental FY2009 appropriations for the FWS program, with funding to remain through September 30, 2011. Of this amount, $245 million would have been made available on October 1, 2009. The Senate bill would not have provided any supplemental funding for the FWS program. The ARRA provides $200 million in supplemental discretionary appropriations for the FWS program for FY2009. This funding is in addition to any amount that may be provided for the FWS program under a separate FY2009 appropriations measure. The Federal Perkins Loan program operates as an institutional revolving loan fund under which IHEs make available low-interest (5%) federal student loans to undergraduate, graduate, and professional students enrolled in participating institutions. Undergraduate students may borrow up to $5,000 per year; and graduate and professional students may borrow up to $8,000 per year. Borrowers of Perkins Loans who are employed in certain public service jobs may qualify for loan cancellation benefits. Under the Federal Perkins Loan program, federal funding is authorized to be provided for federal capital contributions to the revolving loan funds of participating IHEs. Federal funding for Perkins Loan federal capital contributions is provided to IHEs according to a two-stage formula similar to that used for the FWS program—IHEs are first allocated funds based on what they received in prior years, and any funds remaining from the annual appropriation are subsequently allocated to IHEs according to an institutional need-based allocation formula. (Separately, federal funding is also provided to IHEs to reimburse them for the cost of cancelling loans made to students who become employed in public service jobs.) For FY2008, no funding was provided for Federal Perkins Loan program federal capital contributions, and $64.3 million was provided to reimburse IHEs for Federal Perkins Loan cancellations. The Senate bill would have provided $61 million for the Federal Perkins Loan program to be allocated to participating institutions as federal capital contributions to their revolving loan funds. The House bill would not have provided any funding for the Federal Perkins Loan program. No funding is provided for the Federal Perkins Loan program under the ARRA. The House bill would have provided $50 million in FY2009 supplemental appropriations to the Department of Education for student aid administration of the Federal Pell Grant program, the Academic Competitiveness (AC) grant and National Science and Mathematics Access to Retain Talent (SMART) grant program, the Federal Supplemental Educational Opportunity Grant (FSEOG) program, the Federal Family Education Loan (FFEL) program, the FWS program, the William D. Ford Federal Direct Loan (DL) program, and the Federal Perkins Loan program. (For FY2008, $695.8 million was provided for student aid administration.) The House bill also would have required funds from the supplemental appropriation to be available for an independent audit of the federal student loan purchase programs enacted under the Ensuring Continued Access to Student Loans Act of 2008 (ECASLA; P.L. 110-227 ), and authorized under HEA, § 459A. The Senate bill would not have provided any supplemental funding specifically for student aid administration. The ARRA provides $60 million in FY2009 supplemental appropriations to the Department of Education for student aid administration of the Federal Pell Grant program, the AC/SMART grant program, the FSEOG program, FFEL program, the FWS program, the DL program, and the Federal Perkins Loan program. Title II, Part A of the HEA authorizes Teacher Quality Partnership Grants for improving teacher education programs, strengthening teacher recruitment efforts, and providing training for prospective teachers. For FY2008, $33.7 million was provided for the Title II-A program. The House bill would have provided $100 million in supplemental FY2009 appropriations for Teacher Quality Partnership Grants; and the Senate bill would have provided $50 million. The ARRA provides $100 million in supplemental FY2009 appropriations for Teacher Quality Partnership Grants. For FY2009, the House bill would have provided $6 billion for a new grant program to support higher education facility modernization, renovation, and repair, with $6 million to be reserved for the Secretary of Education for administration and oversight. Grants would have been allocated to SEAs in the 50 states, the District of Columbia, and each of the outlying areas in proportion to the number of full-time equivalent (FTE) undergraduate students enrolled in public and private not-for-profit postsecondary education schools in each jurisdiction. According to the House bill, SEAs would have used grant funds to make subgrants to public and private not-for-profit postsecondary schools to modernize, renovate, or repair facilities that are primarily used for instruction, research, or student housing. SEAs would have been required to give priority in the awarding of subgrants to minority serving institutions (e.g., those eligible for assistance under Title III or Title V of the HEA), to IHEs that have been impacted by a major disaster or emergency declared by the President, and to IHEs that would carry out projects to increase their energy efficiency and that would comply with the United States Green Building Council Leadership in Energy and Environmental Design (LEED) green building rating system. The ARRA does not include a dedicated source of federal funds for higher education facilities modernization. Facilities modernization, however, is an allowable use of funds under the State Fiscal Stabilization Fund (see subsequent discussion). The federal government operates two major student loan programs: the FFEL program, authorized under Title IV, Part B of the Higher Education Act (HEA), and the DL program, authorized under Title IV, Part D of the HEA. These programs make available loans to undergraduate, graduate and professional students, and the parents of undergraduate dependent students, to help them finance the costs of postsecondary education. The loans made through the FFEL and DL programs are low-interest loans, with maximum interest rates for each type of loan established by statute. Subsidized Stafford Loans are need-based loans and are only available to students demonstrating financial need. The Secretary pays the interest that accrues on Subsidized Stafford Loans while borrowers are in school, during a six-month grace period, and during authorized periods of deferment. Unsubsidized Stafford Loans and PLUS Loans are non-need-based loans and are available to borrowers without regard to their financial need. Borrowers are fully responsible for paying the interest that accrues on these loans. The amounts students may borrow in need-based Subsidized Stafford Loans and non-need-based Unsubsidized Stafford Loans are constrained by statutory loan limits. One set of limits applies to the annual and aggregate amounts students may borrow in Subsidized Stafford Loans. Another set of limits applies to the total annual and aggregate amounts students may borrow in combined Subsidized Stafford Loans and Unsubsidized Stafford Loans (hereafter, referred to as total Stafford Loans). The terms and conditions for Subsidized Stafford Loans are more favorable to students than for Unsubsidized Stafford Loans. Until the enactment of the ECASLA, the same annual Subsidized Stafford Loan limits and total Stafford Loan limits applied to dependent undergraduate students for each comparable educational level. However, annual total Stafford Loan limits that were higher than annual Subsidized Stafford Loan limits applied to independent undergraduate students, graduate and professional students, and dependent undergraduate students whose parents are unable to obtain PLUS Loans, for each comparable educational level. The ECASLA increased annual and aggregate borrowing limits for total Stafford Loans for dependent undergraduate students, independent undergraduate students, and dependent undergraduate students whose parents are unable to obtain a PLUS Loan, effective for loans first disbursed on or after July 1, 2008. Technical changes to these amended loan limits were made under the Higher Education Opportunity Act (HEOA; P.L. 110-315 ). In general, the ECASLA increased annual total Stafford Loan limits by $2,000 for most undergraduate student borrowers. The ECASLA also increased aggregate borrowing limits by $8,000 for dependent undergraduate students; and by $11,500 for independent undergraduate students. The House bill would have further increased annual and aggregate total Stafford Loan limits for undergraduate student borrowers for loans first disbursed on or after January 1, 2009. In general, annual total Stafford Loan limits would have been increased by an additional $2,000 for most undergraduate student borrowers. Also, aggregate total Stafford Loan borrowing limits would have been increased by an additional $8,000 for all undergraduate student borrowers. The Senate bill would not have made any changes to loan limits. Under the ARRA, no changes are made to Stafford Loan limits. Under the FFEL program, lenders receive a federal subsidy on the loans they make when the interest rate paid by borrowers does not provide them a statutorily specified level of return. This is called the special allowance payment (SAP). The SAP amount is determined quarterly under a statutory formula. The special allowance paid for each loan is dependent on the formula in effect when the loan was disbursed. The federal government pays any special allowance due lenders from the time the loan is disbursed through the entire repayment period. On loans for which the first disbursement was made on or after January 1, 2000, the SAP is determined through the use of a series of special allowance payment formulas indexed to three-month Commercial Paper (CP) rates. The House bill would have made a technical amendment to the SAP formula by temporarily changing the index used from the three-month CP rate to the three-month London Inter-Bank Offered Rate (LIBOR) for United States dollars. This change would have been applicable to loans first disbursed on or after January 1, 2000 and would have been effective for the quarter beginning October 1, 2008, and ending December 31, 2008. The Senate bill would not have made any changes to the SAP formula. Under the ARRA, no changes are made to the SAP formula. IES is charged with conducting research, evaluation, and dissemination activities in areas of demonstrated national need. Its activities are designed to inform education practice and policy. Only the House bill would have provided $250 million in FY2009 to carry out Section 208 of the Educational Technical Assistance Act (ETTA; P.L. 107-279 ). Section 208 authorizes a competitive grant program for SEAs to support the design, development, and implementation of statewide longitudinal data systems to enable states to use, manage, and analyze individual student data in ways consistent with the ESEA. The House bill specified that these statewide data systems could include data systems that contain postsecondary and workforce information. Up to $5 million of the funds could have been used for state data coordinators or for awards to public or private organizations to improve data collection. The ARRA includes $250 million for IES to carry out Section 208 of the ETTA. Similar to the House bill, the ARRA allows statewide data systems to include postsecondary education and workforce information and allows up to $5 million of the funds appropriated to be used for state data coordinators and for awards to public or private organizations to improve data collection. Both the House and Senate bills would have provided supplemental FY2009 appropriations for a State Fiscal Stabilization Fund. The total amount provided would have been $79 billion under the House bill and $39 billion under the Senate bill. The House bill would have made $39.5 billion available on July 1, 2009, and another $39.5 billion available on July 1, 2010, while the Senate bill would have made $39 billion available in FY2009. Both the House and Senate bills would have made reservations from these funds prior to making grants to states. Under the House bill, from the total annual appropriation, up to 0.5% would have been reserved for the outlying areas. The Secretary could have reserved up to $12.5 million each year for administration and oversight, including program evaluation. In addition, the Secretary would have been required to reserve $7.5 billion annually to provide State Incentive Grants and establish an Innovation Fund. The Senate bill would also have reserved up to 0.5% of the total appropriation for the outlying areas. It also would have allowed the Secretary to reserve $25 million for administration and oversight—the same level that the House bill would have allowed over the two-year period during which funds would have been made available. Finally, the Senate bill would have required the Secretary to reserve $7.5 billion to provide State Incentive Grants and establish an Innovation Fund. After making these reservations, $31.790 billion would have been made available on July 1, 2009, and on July 1, 2010, under the House bill for grants to states, while $31.280 billion would have remained for grants to states in FY2009 under the Senate bill. Under both bills, these funds would have been allocated to states using two population measures: 61% of each state's grant would have been based on the state's relative population of individuals ages 5 to 24, and 39% of each state's grant would have been based on the state's relative total population. Under the House bill, once funds were received at the state level, the state's governor would have been required to use at least 61% of the state's allocation to support elementary, secondary, and postsecondary education, while under the Senate bill all funds would have been used for this purpose as well as for early childhood education programs. Under both bills, the governor would have been required to use these funds to provide the amount of funds, through the state's principal elementary and secondary education funding formula, that was needed to restore state funding for elementary and secondary education to its FY2008 level. The Senate bill also would have allowed funds to be used to pay for state formula increases for FY2009-FY2011, as well as funding state equity and adequacy adjustments that were enacted before July 1, 2008. In addition, under both bills the governor would have been required to use these funds to provide the amount of funds to public institutions of higher education in the state needed to restore state support for postsecondary education (not including support for capital projects or for research and development) to the FY2008 level. If the amount of funds provided through the State Fiscal Stabilization Fund was insufficient to restore state support for elementary, secondary, and postsecondary education to the FY2008 levels, plus formula increases and equity/adequacy adjustments for elementary and secondary education under the Senate bill, the governor would have been required to allocate funds between elementary and secondary education and postsecondary education in proportion to the relative shortfall in state support at each level of education. If, however, funds remained after restoring funds to the FY2008 level, the governor would have been required to use the remainder of the 61% of the state allocation (House bill) or all remaining funds (Senate bill) to provide grants to LEAs based on their share of Title I-A funding for the most recent year for which data were available. Under the House bill, the governor would have been able to use up to 39% of the state funds for public safety and government services. These funds, however, could have been used to provide additional assistance for elementary and secondary education and for public institutions of higher education. As noted earlier, under the Senate bill, all funds provided to states under the State Fiscal Stabilization Fund would have been used for education. In applying for funds from the State Fiscal Stabilization Fund, both bills would have required states to provide four assurances to ED. It is unclear how many states would have been able to provide all of the required assurances. Both the House and Senate bills would have required that the state agree to maintain support for elementary and secondary education at least at the level provided in FY2006, for FY2009 and FY2010; and the state agree to maintain support for public institutions of higher education at least at the FY2006 level, for FY2009 and FY2010. They both also would have required that the state establish a longitudinal data system as described in Section 6401(e)(2)(D) of the America COMPETES Act. Both bills would have required states to provide assurances related to the equitable distribution of teachers between high- and low-poverty schools, but they approached this assurance in different ways. Under the House bill, the state would have been required to take actions to comply with requirements in ESEA, Section 1111(b)(8)(C) related to the provision of highly qualified teachers in schools receiving Title I-A funding to eliminate inequities in the distribution of teachers between high- and low-poverty schools and ensure that low-income and minority children are not taught at higher rates than other students by inexperienced, unqualified, or out-of field teachers. Under the Senate bill, states would have been required to take action, including implementing activities authorized in ESEA, Section 2113(c), such as reforming teacher and principal certification and establishing alternative routes for teacher state certification, to increase the number and improve the distribution of "effective" teachers and principals in high-poverty schools and LEAs. Finally, under both the House and Senate bills, the state would have had to agree to enhance the quality of its state assessments used to measure student achievement in reading, mathematics, and science through activities described in ESEA, Section 6112(a), including collaborating with institutions of higher education or other organizations to improve the quality, validity, and reliability of state assessments. Second, the state would have been required to agree to comply with requirements in the ESEA and IDEA related to the inclusion of children with disabilities and limited English proficient students in state assessments, the development of valid and reliable assessments for those students, and the provision of accommodations to facilitate their participation in state assessments. The Senate bill only would have required states to improve state academic content standards and student academic achievement standards consistent with requirements in the America COMPETES Act. The applicable requirements in the America COMPETES Act focus on identifying and making changes to a state's secondary school academic content and academic achievement standards in order to align these standards with the knowledge and skills necessary for success in credit-bearing postsecondary education coursework, the 21 st century workforce, and the Armed Forces without the need for remediation. Further, the Senate bill would have required states to ensure compliance with requirements related to schools identified for corrective actions and restructuring under ESEA Title I-A. As noted earlier, each bill would have required the Secretary to reserve $7.5 billion to provide State Incentive Grants and, at his or her discretion, establish an Innovation Fund. State Incentive Grants would have been awarded by the Secretary to states that made significant progress in meeting the requirements described in the preceding paragraph. At least 50% of each state grant would have been allocated to LEAs in proportion to their ESEA Title I-A grants for the most recent year. If the Secretary choose to establish an Innovation Fund, up to $325 million of the funds made available on July 1, 2009, and on July 1, 2010, (House bill) or $650 million for FY2009 (Senate bill) could have been reserved for discretionary grants to eligible entities (states, LEAs or schools under the House bill; LEAs or partnerships between nonprofit organizations and LEAs or schools under the Senate bill). Grants would have been made by the Secretary to eligible grantees demonstrating significant gains in closing academic achievement gaps between pupil groups, and grantees would use these funds to expand their activities and serve as models for best practices. Both the House and Senate bills included comparable provisions regarding the authorized uses of funds by educational agencies, schools, and institutions of higher education (IHEs) under the proposed State Fiscal Stabilization program. Funds for elementary and secondary education could have been used for any purpose authorized under the ESEA, IDEA, or the Carl. D. Perkins Career and Technical Education Act (Perkins Act). Together, these acts cover a very wide range of K-12 educational activities, including the hiring of teachers and paraprofessionals. Funds could not have been used for capital expenditures except those authorized under those acts (such uses are highly limited). No funds could have been used to provide financial assistance for pupils to attend private schools except (under the Senate bill) to provide special education and related services to pupils with disabilities as authorized by the IDEA. Under both the House and Senate bills, funds for higher education could have been used by public IHEs for educational and general expenditures, including expenditures "to mitigate the need to raise tuition and fees for in-State students." Funds could not have been used by IHEs to raise their endowments or for construction, renovation, or repair of facilities. The ARRA provides $53.6 billion in supplemental FY2009 appropriations for a State Fiscal Stabilization Fund (SFSF). The specific provisions associated with this fund include provisions from both the House and Senate bills. This section provides a summary of the key aspects of the State Fiscal Stabilization Fund under P.L. 111-5 . From the $53.6 billion appropriated for the State Fiscal Stabilization Fund, the Secretary may reserve up to 0.5% for the outlying areas (i.e., maximum reservation of $268 million). These funds are to be distributed to the outlying areas based on their respective needs as determined by the Secretary of Education in consultation with the Secretary of the Interior. Outlying areas are required to use these funds for activities consistent with those authorized under the State Fiscal Stabilization Fund under such terms and conditions as determined by the Secretary of Education. The Secretary is also permitted or required to make two additional reservations of funds. First, the Secretary may reserve up to $14 million for administration, oversight, and evaluation of the State Fiscal Stabilization Fund. Second, the Secretary must reserve $5 billion to provide State Incentive Grants and establish an Innovation Fund. Assuming that each of these reservations are made at the maximum level, $48.318 billion will be available for grants to states. These funds will be allocated to states using two population measures: 61% of each state's grant will be based on the state's relative population of individuals ages 5 to 24, and 39% of each state's grant will be based on the state's relative total population. Once funds are received at the state level, the state's governor must use 81.8% of the state's allocation to support elementary, secondary, and postsecondary education, and, as applicable, early childhood education programs and services. The governor must use these funds to provide the amount of funds, through the state's principal elementary and secondary education funding formula, needed to restore state funding for elementary and secondary education in FY2009, FY2010, and FY2011 through the formula to the greater of the FY2008 or FY2009 level, and, if applicable, to allow state formula increases to support elementary and secondary education for FY2010 and FY2011 to be implemented and to fund the phasing in of state equity and adequacy adjustments if these increases were enacted in state law prior to October 1, 2008. According to guidance published by ED on April 7, 2009, in providing funds through the state's funding formula, funds must be provided directly to LEAs. The governor is also required to use these funds to provide the amount of funds needed to restore state support for public IHEs (excluding tuition and fees paid by students) to the greater of FY2008 or FY2009 level for FY2009, FY2010, and FY2011. If the amount of funds provided through the State Fiscal Stabilization Fund is insufficient to restore state support for elementary, secondary, and postsecondary education to the greater of the FY2008 or FY2009 level, plus support formula increases and equity/adequacy adjustments, if applicable, for FY2009, FY2010, and FY2011, the governor is required to allocate funds between elementary and secondary education and postsecondary education in proportion to the relative shortfall in state support at each level of education. If, however, funds remained after restoring state support for education, the governor is required to use the remainder of the 81.8% of the state allocation to provide grants to LEAs based on their share of Title I-A funding for the most recent year for which data are available. The governor is required to use the remaining 18.2% of the state allocation for "public safety and other government services," which may include assistance for elementary and secondary education and public IHEs, and for modernization, renovation, and repair of public school facilities and IHEs' facilities. Funds used for the latter purposes may be, but are not required to be, consistent with a recognized green building rating system. If the governor chooses to use these funds for IHEs, the governor shall not consider type or mission of an IHE and shall consider any IHE in the state for facility modernization, renovation, or repair funding if the IHE meets the Higher Education Act (HEA), Section 101 definition of an IHE and is eligible to participate in the federal student aid programs authorized by Title IV of the HEA. The ARRA includes specific provisions related to the use of funds by LEAs and IHEs. Funds for elementary and secondary education can be used for any activity authorized under the ESEA, IDEA, the Adult and Family Literacy Act, or the Carl. D. Perkins Career and Technical Education Act (Perkins Act), or for the modernization, renovation, and repair of school facilities, including modernization, renovation, and repairs that are consistent with a recognized green building system. LEAs are prohibited from engaging in any school modernization, renovation, or repair that is inconsistent with state law. This language implicitly allows LEAs to use funds under the SFSF for an exceptionally wide array of activities and purposes. In particular, the ESEA includes the Impact Aid programs (Title VIII), under which funds can be used for any purpose or activity authorized under state and local law for LEAs. Through the Impact Aid program, funds are provided to LEAs to compensate them for the activities of the federal government, such as the education of children living on a military base. The federal government provides payments to LEAs to make up for this lost tax revenue. According to ED policy guidance: School districts use Impact Aid for a wide variety of expenses, including the salaries of teachers and teacher aides; purchasing textbooks, computers, and other equipment; after school programs and remedial tutoring; advanced placement classes; and special enrichment programs. Most Impact Aid funds are considered general aid to the recipient school districts and may be used in whatever manner they choose, in accordance with state and local requirements. Although most school districts use Impact Aid for current expenditures, funds may also be used for capital expenditures. In guidance released April 1, 2009, ED explicitly states that LEAs may use funds provided through the State Fiscal Stabilization Fund for any purpose or activity authorized under the ESEA, including those authorized by the Impact Aid program. An LEA does not have to receive Impact Aid funds through the regular appropriations process to be able to use funds provided under the State Fiscal Stabilization Funds for these purposes. Thus, LEAs will be able to use funds provided through the State Fiscal Stabilization Fund for any purpose or activity authorized under state and local law , including new construction , except purposes specifically prohibited by the SFSF (such as those in the following paragraph) . No funds may be used to provide financial assistance for pupils to attend private schools, except (according to H.Rept. 111-16 ) as authorized by ESEA, IDEA, the Adult and Family Literacy Act, or the Perkins Act. LEAs are prohibited from using State Fiscal Stabilization Funds for: (1) maintenance costs; (2) stadiums or other facilities used primarily for athletic contests or other exhibitions or other events for which admission is charged to the general public; (3) the purchase or upgrade of vehicles; or (4) the improvement of stand-alone facilities whose purpose is not the education of children. Public IHEs that receive State Fiscal Stabilization Funds must use the funds for: (1) education and general expenditures, and in such a way "to mitigate the need to raise tuition and fees for in-State students," or (2) modernization, renovation, or repair of IHE facilities that are primarily used for instruction, research, or student housing, including modernization, renovation, or repairs that are consistent with a recognized green building rating system. It should be noted that these required uses of funds appear to apply only to public IHEs. Non-public IHEs meeting the aforementioned criteria may receive funds from the 18.2% of state funds available for public safety and other government services, so it is unclear how these IHEs may use any funds received. The ARRA includes several prohibitions on the use of funds by IHEs that apply to all IHEs. Funds may not be used to increase an IHE's endowment. In addition, funds may not be sued for: (1) the maintenance of systems, equipment, or facilities; (2) modernization, renovation, or repair of stadiums or other facilities primarily used for athletic contests or other exhibitions or other events for which admission is charged to the general public; or (3) modernization, renovation, or repair of facilities used for sectarian or religious instruction or in which a substantial portion of the functions of the facilities are religious in nature. In applying for funds from the State Fiscal Stabilization Fund, the ARRA requires states to submit an application to the Secretary that provides information required by the Secretary as well as five assurances (discussed below), baseline data demonstrating states' current status with respect to each of the five assurances, and a discussion of how the State Fiscal Stabilization Funds will be used, including whether the state will use funds to meet maintenance of effort requirements under ESEA and IDEA. The four assurances that the state must provide focus on state support for education, equity in teacher distribution, data collection, standards and assessments, and support for struggling schools. Each of the five assurances is discussed below. 1. Maintenance of effort: The state must agree to maintain support for elementary and secondary education and for public institutions of higher education (not including support for capital projects or for research or development or tuition and fees paid by students) at least at the level of support provided in FY2006 for FY2009, FY2010, and FY2011. 2. Achieving equity in teacher distribution: The state must provide an assurance related to the equitable distribution of teachers between high- and low-poverty schools. The state must take actions to comply with requirements in ESEA, Section 1111(b)(8)(C) related to the provision of highly qualified teachers in schools receiving Title I-A funding to eliminate inequities in the distribution of teachers between high- and low-poverty schools and ensure that low-income and minority children are not taught at higher rates than other students by inexperienced, unqualified, or out-of field teachers. 3. Improving collection and use of data: The state is required to establish a longitudinal data system as described in Section 6401(e)(2)(D) of the America COMPETES Act. 4. Standards and assessments: The state must agree to enhance the quality of its state assessments used to measure student achievement in reading, mathematics, and science through activities described in ESEA, Section 6112(a), including collaborating with institutions of higher education or other organizations to improve the quality, validity, and reliability of state assessments. Second, the state must agree to comply with requirements in the ESEA and IDEA related to the inclusion of children with disabilities and limited English proficient students in state assessments, the development of valid and reliable assessments for those students, and the provision of accommodations to facilitate their participation in state assessments. Third, the state must agree to improve state academic content standards and student academic achievement standards consistent with requirements in the America COMPETES Act. The applicable requirements in the America COMPETES Act focus on identifying and making changes to a state's secondary school academic content and academic achievement standards in order to align these standards with the knowledge and skills necessary for success in credit-bearing postsecondary education coursework, the 21 st century workforce, and the Armed Forces without the need for remediation. 5. Supporting struggling schools: The state must ensure compliance with requirements related to schools identified for corrective actions and restructuring under ESEA Title I-A. As noted earlier, the ARRA requires the Secretary to reserve $5 billion to provide State Incentive Grants and, at his or her discretion, establish an Innovation Fund. The Secretary may reserve 1% of the funds not being used for Innovation Fund to provide technical assistance to states in meeting the aforementioned assurances. The remaining funds will be used to provide State Incentive Grants in FY2010 to states that have made "significant progress" in meeting last four assurances discussed above. By historical standards, this is an unusually large amount of funding to be allocated at the Secretary's discretion. In order to receive a State Incentive Grant, states must submit an application to the Secretary. The application must describe (1) the state's progress in meeting the last four assurances discussed above; (2) strategies the state is using to ensure that economically disadvantaged students, students from major racial and ethnic groups, students with disabilities, and students with limited English proficiency (hereafter referred to as subgroups of students) are making progress toward meeting state student academic achievement standards; (3) the achievement and graduation rates of public elementary and secondary education students and strategies being employed to ensure the aforementioned subgroups of students are making progress toward meeting state student academic achievement standards; (4) how the state would use its grant funding to improve student academic achievement; (5) and the state plan for evaluating state progress in closing achievement gaps. The Secretary will determine which states receive grants and the amount of those grants based on information provided in the state application and other such criteria determined by the Secretary, which may include a state's need for assistance in meeting the last four assurances discussed above. Each state that receives a State Incentive Grant must use at least 50% of the grant to provide subgrants to LEAs based on each LEAs relative share of funding under Title I-A for the most recent year. The Secretary is permitted to use up to $650 million of the $5 billion reserved for additional programs to establish an Innovation Fund. The Innovation Fund will be used to provide academic achievement awards to LEAs or partnerships between a nonprofit organization and one or more LEAs or a consortium of schools (hereafter referred to as eligible entities). To be eligible to receive an award, an eligible entity must: (1) have "significantly closed" the achievement gaps among the aforementioned subgroups of students and students overall; (2) have exceeded the state's annual measurable objectives for two or more consecutive years or demonstrated success in "significantly" increasing student achievement based on another measure; (3) have made "significant improvement" in other areas (e.g., graduation rates, recruitment of high-quality teachers) that can be demonstrated with "meaningful" data; and (4) demonstrate that they have established partnerships with the private sector and that the private sector is contributing matching funds to help bring "results to scale." Funds received by eligible entities will be used to allow eligible entities to expand their work and serve as best practice models, work in partnership with the private sector and philanthropic community, and identify and document best practices that can be shared and replicated. States receiving funds under the State Fiscal Stabilization Fund are required to submit a report to the Secretary based on a timetable established by the Secretary that discusses how funds were used, how funds were distributed, the estimated number of jobs saved or created using the State Fiscal Stabilization Fund, tax increases that were averted, the state's progress in meeting the aforementioned assurances, increases in tuition and fees at public IHEs, changes in enrollment in public IHEs, and each modernization, renovation, and repair project funded. The Secretary is required to submit a report to the relevant authorizing and appropriating committees no later than six months following the submission of the state reports that evaluates the information contained in the state reports and the uses of funds that states included in their application for funds. In addition, the Government Accountability Office (GAO) is required to evaluate the State Incentive Grants and Innovation Fund, if applicable, programs. In its consideration of education-related provisions in economic stimulus funding proposals, some of the debate in Congress has centered on the extent to which states and LEAs should be given added flexibility with respect to certain fiscal accountability requirements that current statutes place on states and/or LEAs with respect to the use of federal education funds. A related issue is whether funds provided under the State Fiscal Stabilization Fund could be treated in some cases as "non-federal" funds in determining whether states and LEAs meet certain fiscal accountability requirements. A long-standing principle of federal aid to elementary and secondary education is that federal funding should add to, not substitute for, state and local education funding – i.e., that federal funds should provide a net increase in financial resources for specific types of educational services (such as the education of disadvantaged pupils or pupils with disabilities), rather than effectively providing general subsidies to state and local governments. All of the fiscal accountability requirements included in federal elementary and secondary education programs are intended to provide that all federal funds represent a net increase in the level of financial resources available to serve eligible pupils, and that they do not ultimately replace funds that states or LEAs would provide in the absence of federal aid. One or more of three types of fiscal accountability requirements are applicable to major federal K-12 education aid programs. The first two of these are common to many federal assistance programs, while the third is unique to ESEA Title I-A. To meet the first requirement, maintenance of effort (MOE) , recipient LEAs must provide, from state and local sources, a level of funding (either aggregate or per pupil) in the preceding year that is at least a specified percentage of the amount in the second preceding year. A second fiscal accountability requirement provides that federal funds must be used to supplement, and not supplant (SNS) , state and local funds that would otherwise be available for the education of pupils eligible to be served under the federal program in question. SNS provisions prohibit states and/or LEAs from using federal funds: (1) to provide services that state and/or local funds have provided or purchased in the past, (2) to provide services that are required to be provided under federal, state, or local law, or (3) to provide services for some pupils (e.g., those eligible under specific federal programs) that are provided to other pupils with non-federal funds. The third, distinctive, fiscal requirement under ESEA Title I-A is comparability —services provided with state and local funds in schools participating in ESEA Title I-A must be comparable to those in non-Title I-A schools of the same LEA. (If all of an LEA's schools participate in Title I-A, then services funded from state and local revenues must be "substantially comparable" in each school of the LEA.) Since the comparability requirement only applies to ESEA Title I-A, and is not currently a subject of debate or proposed waiver authority with respect to the ARRA, it will not be discussed further in this report. With respect to current major federal K-12 education programs, for MOE , the requirement is that in order to be eligible to receive ESEA Title I-A grants, LEAs must spend, from state and local sources, in the preceding year an amount equal to at least 90% of the amount in the second preceding year, on either an aggregate or per pupil basis (whichever is more beneficial to the LEA). The ESEA provision is based on total state and local funding for public K-12 education, not funding for specific purposes. If the requirement is not met, the LEA still receives a grant that is reduced by the proportion to which the requirement is not met. The MOE requirement for Title I-A and other ESEA programs may be waived by the Secretary in cases of "exceptional or uncontrollable circumstances" or a "precipitous decline in the financial resources" (ESEA Section 9521). In the case of IDEA, MOE applies to both SEAs and LEAs, and in general is based on 100%, not 90%, of previous spending levels. However, the IDEA includes a provision allowing LEAs, and possibly some states, to reduce funding by an amount of up to 50% of annual increases in IDEA allocations, if these funds are used for specified purposes. In addition, the MOE provision under IDEA is based on spending for special education services for pupils with disabilities, not total state and local spending. As under the ESEA, if the MOE requirement is not met, the SEA or LEA still receives a grant that is reduced by the proportion to which the requirement is not met. In addition, the state MOE requirement under IDEA may be waived by the Secretary in cases of "exceptional or uncontrollable circumstances such as a natural disaster or a precipitous and unforeseen decline in the financial resources of the State" (IDEA, Section 612(a)(18)(C)(i)). Further, the state SNS requirements under IDEA may be waived only if "the State provides clear and convincing evidence that all children with disabilities have available to them a free appropriate public education" (FAPE) and the Secretary of Education concurs with this evidence (IDEA Section 612(a)(17)(C)). Beyond this, it might be argued that IDEA incorporates an effective MOE at the level of services to individual pupils, with its requirement that FAPE be provided to pupils with disabilities in participating states. In contrast to MOE, SNS is applied to both SEAs and LEAs under Title I-A, and there is generally no authority for the Secretary of Education to waive SNS under ESEA, and only a very restrictive authority to do so under IDEA, as it contingent upon the requirement in the previous sentence. Authority to waive SNS, as well as MOE, under ESEA programs was granted to areas affected by the 2005 Gulf Coast hurricanes for FY2006 and 2007. In particular, the broad waiver authorities included in ESEA Title IX, Part D, and the Education Flexibility Partnership Act of 1999 ( P.L. 106-25 , as amended) specifically exempt all three fiscal accountability provisions from authority to be waived (beyond the specific MOE waiver authority noted above). The ARRA implicitly applies current statutory provisions regarding MOE and SNS to increased appropriations for ESEA Title I-A and the IDEA. For the State Fiscal Stabilization program, a MOE based on state-source revenues for public K-12 education and higher education in FY2006 would apply to states, but there is no SNS requirement at any level and no MOE requirement for LEAs with respect to funds provided under this program. The MOE requirement for the Fiscal Stabilization program could be waived or modified by the Secretary of Education for any of FY2009-FY2011 if the Secretary determines that the state receiving the waiver will not provide a lower percentage of the total funds available for elementary and secondary education than in the preceding fiscal year. In addition, under the ARRA, states or LEAs may, with prior approval of the Secretary, treat State Fiscal Stabilization Fund grants used for education as "non-federal funds" for purposes of meeting MOE requirements under any ED program, including ESEA Title I-A and the IDEA, for FY2009, FY2010, or FY2011. In determining whether to provide approval to allow states and LEAs to use State Fiscal Stabilization Funds as non-federal funds to meet MOE requirements, ED has indicated that it will be "concerned" if a state has reduced the proportion of total state revenues that are spent on education. If this proportion has been reduced, the Secretary will consider whether the reductions were due to exceptional or uncontrollable circumstances, the extent to which available financial resources have declined, and whether there have been changes in the demand for services. Required levels of state and local funding in subsequent years will not be reduced as a result of this provision. This might allow approved states to reduce their level of spending for K-12 education without jeopardizing their eligibility for funding under the IDEA or Title I-A and other ESEA programs. However, the potential impact of this authority is not fully clear, particularly since SNS requirements would continue to apply to ESEA Title I-A, IDEA, and similar programs. Earlier versions of this report included estimated state grants for various education programs. CRS prepared those state grant estimates to support congressional decision-making by providing comparisons of the relative impact of alternative formulas or funding levels on the legislative process. These estimates were also provided to inform Members of Congress seeking information on legislation being considered for a vote. After a measure is enacted, however, it is the responsibility of the executive branch (e.g., U.S. Department of Education) to develop allocations and implement the law. CRS estimates produced during legislative consideration of a bill may differ from actual allocations due to differences in data used (e.g., actual allocations calculated by executive branch agencies may be based on data that are not yet available or have recently become available) or differences in interpretation of statutory language. Once executive branch agencies develop state allocations for formula grants (e.g., Title I-A Grants to LEAs), the executive branch agencies are the authoritative sources on grant amounts. CRS estimates are no longer included in this report because ED has released estimated state grants under the ARRA. The House-passed version of H.R. 1 would have provided about $145.005 billion for education programs that are or would have been administered by ED, while the Senate bill would have provided $79.964 billion for such programs. While funds generally would have been appropriated in FY2009, the House bill would have made some funding available in FY2009 and some funding available in FY2010. The Senate bill would have appropriated and made funds available in FY2009. Table A-1 provides an overview of the specific funding provided by the ARRA, and the funding that would have been provided under the House and Senate bills. | The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law by President Obama on February 17, 2009 (P.L. 111-5). The primary purposes of the ARRA focus on promoting economic recovery, assisting those most affected by the recession, improving economic efficiency by "spurring technological advances in science and health," investing in infrastructure, and stabilizing state and local government budgets. The ARRA provides funds to several existing education programs administered by the U.S. Department of Education (ED), including programs authorized by the Elementary and Secondary Education Act (ESEA), the Individuals with Disabilities Education Act (IDEA), and the Higher Education Act (HEA). It also provides general state fiscal stabilization grants to support education at the elementary, secondary, and postsecondary levels, as well as "public safety and other government services." Funds made available through the State Fiscal Stabilization Fund may be used for modernization, renovation, or repair of public school or higher education facilities. Under the House and Senate versions of H.R. 1, funds also would have been provided to several existing education programs administered by the U.S. Department of Education (ED), including programs authorized by the ESEA, IDEA, and HEA. The House bill, but not the Senate bill, would have created new programs to support school modernization, renovation, and repair at the elementary, secondary, and postsecondary education levels. Both the House bill and the Senate bill would have provided general funds for education to support state fiscal stabilization. This report provides a brief overview of the key provisions related to education programs that are or will be administered by ED that were included in the ARRA under Division A, Title VIII, Department of Education, and under Title XIV, State Fiscal Stabilization Fund. It also includes a discussion of relevant provisions that were included in the House and Senate bills. Education-related tax provisions, as well as Vocational Rehabilitation programs administered by ED, are beyond the scope of this report. The report will be updated as warranted by legislative or administrative action. |
The failure of the U.S. Intelligence Community to provide better warning of the September 11, 2001, attacks has been widely attributed to the existence of "walls" between intelligence and law enforcement agencies. The walls arguably kept analysts from talking to each other and from sharing pieces of information that, if they had been viewed in close relationship, might have yielded a coherent picture of the emerging plot. This theory cannot of course be fully proven—the overall plot might not have been discerned even if the best analysts had had access to all available information in every agency. Nevertheless, the fact that available data had not in fact been shared focused public and congressional attention on the real or perceived walls that inhibited the exchange of information among agencies. A consensus emerged that the walls should be torn down. In December 2002, the Joint Inquiry into Intelligence Community Activities Before and After the Terrorist Attacks of September 11, 2001, established by the two congressional intelligence committees, made a factual finding that the "important point is that the Intelligence Community, for a variety of reasons, did not bring together and fully appreciate a range of information that could have greatly enhanced its chances of uncovering and preventing Usama Bin Ladin's plan to attack the United States on September 11, 2001." The Inquiry also made a systemic finding that: Within the Intelligence Community, agencies did not adequately share relevant counterterrorism information, prior to September 11. This breakdown in communications was the result of a number of factors, including differences in the agencies' missions, legal authorities and cultures. Information was not sufficiently shared, not only between different Intelligence Community agencies, but also within individual agencies, and between the intelligence and law enforcement agencies. Similar conclusions were reached in July 2004 by the 9/11 Commission (the National Commission on Terrorist Attacks Upon the United States) carefully documented the failures of pre-9/11 information sharing among agencies and within different offices of the Justice Department and recommended a number of initiatives to encourage unity of effort in sharing information. The failure to share information prior to 9/11 had not occurred by happenstance. Law enforcement and intelligence information was not routinely shared and collectors and analysts were walled off from one another through a complex arrangement of constitutional principles, statutes, policies, and practices. These regulations had their origin in longstanding divisions of labor that reached back far into pre-World War II practices and in the provision of the National Security Act of 1947 requiring that the Central Intelligence Agency (CIA) "have no police, subpoena, or law enforcement powers or internal security functions." The regulations were significantly strengthened in the 1970s when, in reaction to domestic intelligence gathering activities during the Vietnam War era, Congress undertook extensive investigations of intelligence activities and enacted legislation regulating domestic surveillance activities. Ultimately, in response to recommendations derived from this investigation, in 1978 Congress passed and President Jimmy Carter signed the Foreign Intelligence Surveillance Act (FISA), P.L. 95-511 . FISA provides a statutory framework for electronic surveillance in foreign intelligence investigations while electronic surveillance in criminal investigations continues to be governed by Title III of the Omnibus Crime Control Act of 1968 (usually referred to as Title III). The implementation of FISA came to have an important influence on the relationship between law enforcement and intelligence. FISA required that "the purpose" of domestic electronic surveillance (or a physical search) had to be the gathering of foreign intelligence information. FISA permitted the dissemination to the law enforcement community of information relating to criminal activity incidentally acquired during a FISA electronic surveillance or physical search. When such dissemination was challenged by defense attorneys as running afoul of the Fourth Amendment, a number of federal courts of appeals had upheld the government's contention in several cases that the "primary purpose" of an electronic surveillance or physical search had been the collection of foreign intelligence information. Thus, this use of FISA was held to be not inconsistent with Fourth Amendment requirements for criminal cases. Before 9/11 a considerable body of government practice and Justice Department policy increasingly reflected an understanding that adhering to the primary purpose standard effectively precluded Fourth Amendment challenges. The concern was to avoid letting aggressive criminal investigators obtain FISA court orders when they were interested in obtaining evidence of criminal activities. There was a pervasive concern within the Justice Department that a court in a criminal trial would suppress information obtained through a FISA investigation on the grounds that it was primarily being used, not to collect foreign intelligence, but to gather criminal evidence or even that FISA itself would be overturned. In practice, information collected by intelligence agencies (including the parts of the Federal Bureau of Investigation (FBI) dealing with counterterrorism and counterintelligence) was kept apart from information collected for the use of prosecutors. FISA's requirements appear not to have posed major problems until the mid-1990s, but law enforcement and intelligence agencies tended to function in separate worlds. Concern about these divisions did exist and there had been major initiatives largely as a result of concerns about the development of barriers between law enforcement and intelligence agencies in the aftermath of the controversy surrounding the illegal activities of the Banca Nazionale del Lavoro (BNL) and the Bank of Credit and Commerce International (BCCI) in the early 1990s. The controversy involved complex banking fraud and other criminal activities undertaken by the two foreign banks. Congressional investigators developed information that the CIA had obtained information indicating suspicious activities by the two banks that had not been passed to prosecutors in large measure because channels of communications had not been established between intelligence and law enforcement agencies. The Senate Intelligence Committee investigators concluded that: The fundamental policy governing the relationship between law enforcement and intelligence needs to be addressed by the Attorney General and the DCI [Director of Central Intelligence], in conjunction with the congressional oversight committees. Confusion is apparent on both sides as to what the proper role (and authority) of intelligence agencies is in circumstances like those presented in the BNL case. The reaction to the BNL/BCCI affairs reflected a shift away from emphasis on a strict separation of law enforcement and intelligence efforts to an appreciation by Congress of the need for closer cooperation. As a result of congressional concerns, the DCI and the Attorney General directed that a review of the intelligence-law enforcement relationship be conducted. The review, undertaken by a group of senior executive branch officials known as the Joint Task Force on Intelligence and Law Enforcement, submitted a report in August 1994. The Task Force described the failure by intelligence and law enforcement agencies to make use of all available information on the activities of the two foreign banks. It called for a number of bureaucratic mechanisms to ensure greater information exchanges in the future, but argued that no statutory changes were called for: What is required is not new legislation radically altering the relationship [between intelligence and law enforcement agencies], but rather a different approach to the existing relationship—one that is more interactive on a number of fronts, yet maintains the important distinctions between these two communities based on law, culture, and mission. The Joint Task Force Report led to the establishment of a series of interagency coordinative mechanisms—the Intelligence-Law Enforcement Policy Board, the Joint Intelligence-Law Enforcement Working Group (JICLE)—at various levels to encourage information exchanges and resolve difficulties. Although the Task Force provided a perceptive analysis of the difficulties that then existed and officials assigned to the resultant interagency bodies worked diligently at overcoming obstacles, progress was limited. By the 1990s, the threat of new forms of international terrorism was becoming apparent. Middle Eastern terrorists were operating against U.S. forces overseas and, occasionally, within the U.S. (as in the 1993 World Trade Center attacks). Observers believed that both intelligence and law enforcement agencies were collecting relevant information on international terrorism. Members of Congress began to seek administrative and statutory changes that could facilitate information sharing in this area. Pursuant to P.L. 105-277 , a supplemental appropriations act passed in 1998, the National Commission on Terrorism, headed by former Ambassador L. Paul Bremer, was established to review the laws, regulations, directives, policies and practices for preventing and punishing international terrorism. The Bremer Commission's June 2000 report highlighted concerns about the inadequate sharing of terrorism-related information. It recommended the elimination of barriers to the aggressive collection of information on terrorists and suggested that the FBI suffered from bureaucratic and cultural obstacles to gathering terrorism information. It found that the "Department of Justice applies the statute governing electronic surveillance and physical searches of international terrorists in a cumbersome and overly cautious manner." Although it noted that the FISA application process had been recently streamlined, it recommended that the Justice Department's Office of Intelligence Policy Review (OIPR) should not require the inclusion of information in excess of that which was actually mandated by FISA. It also recommended that OIPR be substantially expanded and that it be directed to cooperate with the FBI. The Commission further concluded: Law enforcement agencies are traditionally reluctant to share information outside of their circles so as not to jeopardize any potential prosecution. The FBI does promptly share information warning about specific terrorist threats with the CIA and other agencies. But the FBI is far less likely to disseminate terrorist information that may not relate to an immediate threat even though this could be of immense long-term or cumulative value to the intelligence community. . . . Moreover, certain laws limit the sharing of law enforcement information, such as grand jury or criminal wiretap information, with the intelligence community. These laws are subject to different interpretations, so that in some cases it is unclear whether the restrictions apply." The Commission did not indicate a need for immediate statutory changes, but recommended that the "Attorney General should clarify what information can be shared and direct maximum dissemination of terrorist-related information to policymakers and intelligence analysts consistent with the law." Members of Congress did propose various approaches to address the lack of information sharing. S. 2089 as introduced in February 2000 by Senator Specter, would have required that the Attorney General prescribe in regulations the circumstances under which information acquired pursuant to FISA "shall be disclosed for law enforcement purposes." The bill would also have required two reports addressing issues of information sharing. First, it would have tasked the Director of the FBI to submit a report on "the feasibility of establishing within the Bureau a comprehensive intelligence reporting function having the responsibility for disseminating among the elements of the intelligence community information collected and assembled by the Bureau on international terrorism and other national security matters." Secondly, the bill would have required the President to submit a report on the legal authorities that govern the sharing of criminal wiretap information with intelligence agencies and with recommendations to improve the capability of the Justice Department to share "foreign intelligence information or counterintelligence information with elements of the United States intelligence community on matters such as counterterrorism." In its report on the bill, the Senate Intelligence Committee argued: For the intelligence mission of the United States to be successful, there must be a cooperative and concerted effort among intelligence agencies. Any information collected by one agency under foreign intelligence authorities that could assist another agency in executing its lawful mission should be shared fully and promptly.... The Committee has been briefed on the recent efforts by the Federal Bureau of Investigation and the Central Intelligence Agency to enhance their ability to share valuable information collected under FISA orders. The Committee commends these efforts and expects them to continue and to be broadened to include all areas of the foreign intelligence mission. As reported to the Senate in July 2000, S. 2089 was modified to include only a request for reports from the Attorney General on mechanisms for determinations of disclosure of FISA-derived information for law enforcement purposes and on actions taken by the Department of Justice (DOJ) to coordinate the dissemination of intelligence information within DOJ. Congressional concern about the growing threat of terrorism was also demonstrated in S. 3205 , introduced in October 2000 and known as the Kyl-Feinstein Counterterrorism Act of 2000, which was based directly on recommendations of the Bremer Commission that had been released in August. The bill took notice of the attack on the U.S.S. Cole , which had occurred on October 12, 2000, and aimed to discourage financial support of terrorist organizations. This bill also addressed information sharing issues; section 9 would have required a report on the feasibility of assigning the FBI responsibility for disseminating among the elements of the Intelligence Community information collected and assembled by the FBI on international terrorism and other national security matters. Section 10 of the bill would have required a report on the legal authorities that govern the sharing of criminal wiretap information with various law enforcement agencies and intelligence agencies and "recommendations, if any," for legislative language that would improve the Justice Department's capabilities to share information on matters such as counterterrorism with intelligence agencies "with elements of the United States intelligence community on matters such as counterterrorism." Consideration of the legislation reflected many of the same privacy and civil liberties concerns that had influenced existing procedures in the Justice Department. Criticisms of the approach taken by the legislation were voiced by some civil libertarians. One group opposed the sharing of information obtained by electronic surveillance conducted under Title III authorities with intelligence agencies. Such an effort, it was argued, "breaches the well-established and constitutionally vital line between law enforcement and intelligence activities." Concern was also expressed about the potential use of such information by the CIA and other intelligence agencies: "The secretive data gathering, storage and retention practices of the intelligence agencies are appropriate only when conducted overseas for national defense and foreign policy purposes and only when directed against people who are not U.S. citizens or permanent residents." Further concern was directed at the potential use of information gathered under counterintelligence authorities (presumably FISA) in criminal proceedings: Since the period of ... the Church committee, it has been recognized that the rights of Americans are better protected (and the FBI may be more effective) when international terrorism and national security investigations are conducted under the rules for criminal investigations. Such views reflected a continuing distrust of intelligence agencies and a fear that past practices might be revived. In floor debate, Senator Leahy noted that initial drafts of S. 3205 had posed "serious constitutional problems and risks to important civil liberties we hold dear." After modifications, however, "no longer does the bill require a change in the wiretap statute allowing the permissive disclosure of information obtained in a Title III wiretap to the intelligence agencies." The Clinton Administration Justice Department took a different approach, arguing that then-current statutes and regulations provided law enforcement agencies with "authority under current law to share Title III information regarding terrorism with intelligence agencies when the information is of over-riding importance to the national security." Any change "must accommodate legal constraints such as Criminal Rule 6(e) and the need to protect equities relating to ongoing criminal investigations." Accordingly, the Justice Department specifically opposed the provision in the bill that would permit the sharing of foreign intelligence or counterintelligence information collected under Title III by investigative or law enforcement officer with intelligence agencies. The Kyl-Feinstein bill would not have changed statutory language, but only asked for reports on the issue of information. Even so, according to Senator Leahy, the initial proposal to mandate such changes "prompted a firestorm of controversy from civil liberties and human rights organizations, as well as the Department of Justice." Even though the House took no action on this bill, passage of the legislation by the Senate reflected concerns at the end of 2000 regarding the possible need to adjust information sharing mechanisms, coupled with a determination to move cautiously before implementing changes that could affect civil liberties. Ultimately, the legislation was adopted by the Senate on November 14, 2000, but it was not sent to the House before the adjournment of the 106 th Congress. The FY2001 Intelligence Authorization Act, P.L. 106-567 , signed on December 27, 2000, reflected the concerns that had inspired both S. 2089 and S. 3205 . It included a requirement for a report from the Attorney General on "the authorities and procedures utilized by the Department of Justice for determining whether or not to disclose information acquired under the Foreign Intelligence Surveillance Act of 1978 (50 U.S.C. 1801 et seq.) for law enforcement purposes." This Act also formalized procedures for authorizing FISA surveillance, expanded grounds for establishing probable cause, established new procedures for physical searches within FISA, and specified mechanisms to facilitate the use of intelligence in counterintelligence investigations. It provided increased funding for OIPR subsequent to the submission of a report indicating efforts taken to streamline and improve the FISA application process. It included a provision (in section 606) derived from S. 2089 requiring a report from the Attorney General on actions taken to "coordinate the dissemination of intelligence information within the appropriate components of the [Justice] Department and the formulation of policy on national security issues." It did not, however, address the question of making information from law enforcement sources available to the Intelligence Community. Clearly, the problems created by the existence of the "wall" had not been unrecognized prior to 9/11. The Justice Department's opposition in 2000 to legislative proposals to remove barriers has been noted. On the other hand, some argue that the primary factor in preventing statutory changes was, as one observer has claimed, that "in most instances both the Department of Justice and The White House turned down the requests because it was firmly believed by senior members of the Executive Branch that the United States Congress would not allow the IC [Intelligence Community] to have broader surveillance powers." This view would be expressed by former Attorney General William Barr in testimony to the 9/11 Commission: For three decades leading up to 9/11, Congress was at the fore of a steady campaign to curtail the Bureau's domestic intelligence activities and impose on all its activities the standards and process of the criminal justice system. These concerns made it extremely difficult for the Bureau to pursue domestic security matters outside the strictures of the criminal justice process. Prohibitions on sharing grand jury information with intelligence agencies and with using intelligence information in criminal investigations created a 'wall of separation.' It is clear in retrospect that there were those in both the Executive Branch and Congress who realized the need to lower barriers to sharing law enforcement and intelligence information, but their views did not, prior to 9/11, reflect a consensus in either branch. Those opposed to greater information sharing did so in large measure because of their awareness of the past history of domestic surveillance and a distrust of intelligence organizations. The result was a number of very tentative steps that, in the event, proved wholly inadequate to task of gathering information about al Qaeda's plot. The FY2001 Intelligence Authorization Act included some minimalist provisions, but the wall was left in place. Neither the Clinton Administration or the Bush Administration, in the first eight months of 2001, sought to amend the relevant laws. The problem was recognized but proposed solutions faced strong opposition. The attacks of September 11, 2001, destroyed the World Trade Center and a portion of the Pentagon; they also demolished the wall between U.S. law enforcement and intelligence. After 9/11, it was almost immediately accepted that counterterrorism would have to involve all parts of the U.S. Government, including law enforcement agencies and the Intelligence Community. It was agreed that the counterterrorism effort must be based on sharing information from whatever source. The problem for both Congress and the executive branch was to establish appropriate mechanisms for information sharing with adequate safeguards for using the information in future criminal trials. Congress immediately set about to consider the most appropriate legislative response that could be quickly enacted. Former Attorney General John Ashcroft writes, "The 9/11 attacks occurred on a Tuesday. By Saturday, we had a full-blown legislative proposal. Part of the reasons we were able to move so quickly was that a number of the provisions had been proposed to Congress in 1996, and Congress had rejected them." Attention focused on various proposals and recommendations of commissions that had looked at international terrorism and related issues and to earlier legislative proposals that had not been adopted. A wide number of proposals came together as the USA PATRIOT Act ( P.L. 107-56 ) that would be debated in the final weeks of September and early October 2001. The USA PATRIOT Act changed the requirement that "the purpose" of a FISA surveillance be to collect foreign intelligence information, to require that collecting such information be "a significant purpose" of FISA electronic surveillance or physical search. This provided latitude to use FISA authority for electronic surveillance or physical searches where the primary purpose was criminal investigation, as long as a significant foreign intelligence purpose was also present. The USA PATRIOT Act also addressed concerns about sharing intelligence and law enforcement information. Although a discussion of all the complex provisions that were included in the USA PATRIOT Act lies beyond the scope of this Report, several provisions address the sharing of law enforcement and intelligence information. Section 203 of the Act removed some of the restrictions on federal government attorneys sharing grand jury information. Subsection 203(a) authorized federal government attorneys to share matters occurring before the grand jury involving foreign intelligence, counterintelligence, or foreign intelligence information with a federal law enforcement, intelligence, protective, immigration, national defense, or national security official to assist that official in the performance of his or her duties. Subsection (a) authorized the sharing of grand jury information "when the matters involve foreign intelligence or counterintelligence." Subsection 203(b) permitted investigative and law enforcement officers and Government attorneys to share information acquired under or derived from the interception of a wire, oral, or electronic communication under Title III with any other federal law enforcement, intelligence, protective, immigration, national defense or national security official for use in his or her official duties to the extent that the contents of that communication include foreign intelligence or counterintelligence information. Subsection (c) provides authority for the Attorney General to establish implementing procedures. Subsection 203(d) permitted the disclosure of foreign intelligence, counterintelligence, or foreign intelligence information obtained as part of a federal criminal investigation, notwithstanding any other provision of law, to any federal law enforcement, intelligence, protective, immigrations, national defense, or national security official in order to assist that official in carrying out his or her official duties, subject to any limitations on the unauthorized disclosure of that information. Section 504 permitted federal officers conducting electronic surveillance or physical searches under FISA to consult with federal law enforcement officers or state or local law enforcement personnel to coordinate against actual or potential attacks or other grave hostile acts of a foreign power or its agent; sabotage or international terrorism by a foreign power or its agent, or clandestine intelligence activities by an intelligence service or network of a foreign power or its agent. Section 905 requires the Attorney General or heads of other Federal agencies with law enforcement responsibilities to disclose expeditiously to the DCI (later replaced by the Director of National Intelligence (DNI)), under relevant guidelines, foreign intelligence acquired in the course of a criminal investigation. Exceptions could be made where the disclosure of such foreign intelligence would jeopardize an ongoing law enforcement investigation or impair other significant law enforcement interests. In addition, Section 905 required the Attorney General, in consultation with the DCI (now the DNI), to develop procedures to give the Director timely notice of the Attorney General's decision to begin or decline to begin a criminal investigation based on information from an element of the intelligence community regarding possible criminal activity of a foreign intelligence source or potential source. The provisions included in the USA PATRIOT Act and DOJ's effort to implement them were far-reaching and to some extent were not welcomed by the FISA Court. In particular, the FISA Court in In re all Matters Submitted to the Foreign Intelligence Court found that proposed 2002 procedures issued by the Attorney General "eliminate[d] the bright line in the 1995 procedures prohibiting direction and control by prosecutors on which the Court has relied to moderate the broad acquisition[,] retention, and dissemination of FISA information in overlapping intelligence and criminal investigations." The FISA Court thus attempted to "reinstate the bright line used in the 1995 procedures, on which the Court has relied." Concerned that its proposed procedures were rejected, the Justice Department appealed the Foreign Intelligence Surveillance Court's granting of a request modified in accordance with its earlier ruling in In re All Matters Submitted to the Foreign Intelligence Surveillance Court . The appeal went to the Foreign Intelligence Surveillance Court of Review and was the first appeal to that court. In a sweeping decision, the Court of Review overruled the limitations imposed by the FISA Court, along with a considerable amount of customary FISA practice. The Court of Review expressed concern that the FISA Court had overstepped its role by prescribing the internal procedures for handling surveillances within the Justice Department. The Court of Review maintained that the FISA Court "determined an investigation became primarily criminal when the Criminal Division played a lead role. This approach has led, over time, to the quite intrusive organizational and personnel tasking the FISA [C]ourt adopted. Putting aside the impropriety of an Article III court imposing such organizational strictures ... [the wall] was unstable because it generates dangerous confusion and creates perverse organizational incentives." The Court of Review thereby gave the final blow to the legal structure supporting the wall between law enforcement and intelligence information. Implementation of the information-sharing provisions of the USA PATRIOT Act and other legislation is underway. The Homeland Security Act of 2002 ( P.L. 107-296 ) and the Intelligence Reform and Terrorism Prevention Act of 2004 ( P.L. 108-458 ) required that procedures be established under which federal agencies can share intelligence and law enforcement information about international terrorism. The Intelligence Reform Act mandated the creation of an Information Sharing Environment (ISE) that combines policies, procedures, and technologies to link information collections and users. In November 2006 the Administration released a lengthy implementation plan for the ISE. The plan sets forth procedures for sharing information among agencies at federal, state, and local levels and seeks to promote a culture of information sharing. It also provides procedures for protecting information privacy and civil liberties. Congress may choose to review the implementation of the ISE during coming months. A fundamental issue that faces both Congress and the U.S. public remains the need to balance the advantages to be gained by sharing information from all sources with the possibility that the availability of data accumulations could be used to undermine lawful political or religious activities. An unstable balance between these two separate goals—often portrayed as competing—greatly complicated the counterterrorism and counterintelligence effort prior to 9/11. The fact that public opinion appeared deeply ambivalent made procedural changes difficult and contributed to the luxuriant growth of complex regulations adopted by DOJ and endorsed by the FISA Court. After 9/11, public opinion shifted dramatically, resulting in the rapid passage of the USA PATRIOT Act and other legislation. The need to encourage the sharing of information and the connection of dots is now unquestioned, but there are lingering concerns about the risks that widespread information sharing may jeopardize civil liberties. Congress will undoubtedly seek to determine whether the new statutes, regulations, and procedures that have been adopted will prove both effective and sensitive to individual rights. The importance of sharing intelligence and law enforcement information is not limited to issues relating to international terrorism but extends to banking fraud, narcotics smuggling, and a variety of international concerns. Narcotics smuggling, for instance, can be addressed by encouraging other countries to halt the cultivation of opium poppies or coca, as well as by law enforcement in the U.S. Terrorism, of course, is uniquely threatening and in combating terrorists more vigorous non-law enforcement approaches are considered more legitimate than is the case with drug smugglers or embezzlers. What is advantageous in all cases is assembling the full range of information about the activity and subjecting it to rigorous analysis. There is, however, the possibility that the current consensus may unravel. The political controversy surrounding NSA's electronic surveillance efforts and other data mining programs may come to focus on the sharing of information that some argue was not lawfully obtained, and this concern could lead to efforts to restrict information sharing across the boards. There is also a possibility that the use of information obtained by surveillance in accordance with FISA might ultimately not be allowed in court cases out of concern that the Fourth Amendment has been bypassed. Despite the widespread acceptance of the need for information sharing, concerns that sharing information could lead to governmental abuses persists across the political spectrum. These concerns are tenaciously held, and have in the past made legislating very controversial. There is no reason to believe that they will not resurface should the threat from international terrorism seem less menacing. The potential threat to civil liberties does not, of course, represent the full extent of the issues raised by increased information sharing. Sharing sensitive information inevitably raises the danger that intelligence sources and methods may be compromised either accidentally or purposefully. For intelligence professionals, in particular, the danger to valuable sources that may have taken years to develop is a fundamental concern. Moreover, when a human source is compromised there is not only a danger to a particular individual, but also a potential loss of confidence in U.S. intelligence agencies by other actual or potential sources. The role of Congress in dealing with information sharing issues is especially important. There are delicate questions of liberty and security involved and a sensitive balance is crucial. Air Force General Michael V. Hayden, who now serves as CIA Director, in the past argued that Members of Congress are in close touch with their constituents and "What I really need you to do is talk to your constituents and find out where the American people want that line between security and liberty to be." Congress also can provide the ongoing oversight to ensure that the sorts of abuses that occurred in the 1960s and 1970s do not recur. Ultimately, an information sharing policy that is largely consistent with public opinion and is held to account by rigorous oversight should enhance the chances that the dots can be connected without jeopardizing the rights of Americans. Observers see a danger, however, that gridlock in both the Executive and Legislative Branches might inhibit the government's ability to find effective and sensible ways to acquire and analyze information on new threats to the national security. | Almost all assessments of the attacks of September 11, 2001, have concluded that U.S. intelligence and law enforcement agencies had failed to share information that might have provided advance warning of the plot. This realization led Congress to approve provisions in the USA PATRIOT Act (P.L. 107-56) and subsequent legislation that removed barriers to information sharing between intelligence and law enforcement agencies, and mandated exchanges of information relating to terrorist threats. Most experts agreed that statutory changes, albeit difficult to enact, were essential to change the approaches taken by executive branch agencies. The barriers that existed prior to September 2001 had a long history based on a determination to prevent government spying on U.S. persons. This had led to the establishment of high statutory barriers to the sharing of law enforcement and intelligence information. The statutes laid the foundation of the so-called "wall" between intelligence and law enforcement that was buttressed by regulations, Justice Department policies, and guidance from the judicial branch. Despite the widespread acceptance of a barrier between law enforcement and intelligence, by the early 1990s it had become apparent to some that the two communities could mutually support efforts to combat international criminal activities including narcotics smuggling. Later in the decade dangerous threats to the U.S. posed by international terrorists came into sharper focus. Nevertheless, efforts to adjust laws, regulations, and practices did not succeed, drawing strong opposition from civil libertarians. Only the tragedy of the 9/11 attacks overcame earlier concerns and led Congress and the executive branch to remove most statutory barriers to information sharing. Laws and regulations have changed significantly since September 2001 and an Information Sharing Executive (ISE) has been established within the Office of the Director of National Intelligence to design and implement information sharing procedures. It is clear, however, that sustaining the exchange of law enforcement and intelligence information remains a challenge. In particular, there is continued concern about sharing of information that might in some way jeopardize the rights of free speech or association of U.S. persons. This opposition has contributed to the difficulty Congress has had in addressing legislation in this area and can be expected to continue. Some argue that, given the extent of legislation enacted in recent years, extensive oversight of information sharing efforts may be an appropriate way to ensure that the balance between ensuring domestic security and protecting civil liberties can be maintained. This report will be updated as additional information becomes available. |
The elderly nutrition services program, authorized under Title III of the Older Americans Act (OAA), provides grants to state agencies on aging to support congregate and home-delivered meals to people aged 60 and older. The program is the largest component of the act, accounting for $814.7 million, over 44%, of the act's total FY2014 funding of $1.871 billion. The program is designed to address problems of food insecurity, promote socialization, and promote the health and well-being of older persons through nutrition and nutrition-related services. It evolved from demonstration projects first funded in 1968. In 1972, Congress authorized the program as a separate title of the act and, in 1978, incorporated it into Title III. In 2006, Congress enacted P.L. 109-365 , which extended the act's authorizations of appropriations through FY2011. However, Congress has continued to appropriate funding for OAA activities. The 113 th Congress may consider reauthorization of the OAA and as a result may modify existing authorities, including those related to the nutrition services program. This report describes the nutrition services program authorized under Title III of the Older Americans Act. Other federal and state programs, such as the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) and the Seniors Farmers' Market Nutrition Program, may provide similar nutrition services to older adults who meet certain income and other requirements. These programs, administered by the U.S. Department of Agriculture (USDA), are not the focus of this report. For further information on the range of domestic food assistance programs, see CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed]. The Older Americans Act Amendments of 2006, P.L. 109-365 , added a new purpose statement for the nutrition services program emphasizing its nutritional and socialization aspects, as well as its importance in promoting the health of older people. The purposes of the program as stipulated in the law are to (1) reduce hunger and food insecurity, (2) promote socialization of older individuals, and (3) promote the health and well-being of older individuals by assisting them to access nutrition and other disease prevention and health promotion services to delay the onset of adverse health conditions resulting from poor nutritional health or sedentary behavior. According to USDA analysis of Current Population Survey (CPS) data, 8.8% of U.S. households with one elderly member were food insecure in 2012, defined as households reporting low or very low food security. Households in which elderly lived alone reported a slightly higher rate of food insecurity, at 9.1% in 2012. The Administration on Aging (AOA) in the Administration for Community Living (ACL) within the Department of Health and Human Services (HHS) administers the nutrition services program, which includes (1) the Congregate Nutrition Services Program, (2) the Home-Delivered Nutrition Services Program, (3) and the Nutrition Services Incentive Program (NSIP). For the Congregate and Home-Delivered Programs, services must be targeted at persons with the greatest social and economic need, with particular attention to low-income older persons, including low-income minority older persons, older persons with limited English proficiency, older persons residing in rural areas, and older persons at risk for institutionalization. Means tests for program participation are prohibited, but older persons are encouraged to contribute to the costs of nutrition services, including meals. Older individuals may not be denied services for failure to contribute. The following describes these programs in greater detail. Congregate nutrition services provide meals and related nutrition services to older individuals at a variety of sites, such as senior centers, community centers, schools, and adult day care centers. Congregate nutrition service providers can also offer a variety of nutrition related services at meal sites, such as nutrition education and screening, nutrition assessment, and counseling as appropriate. The program also provides seniors with opportunities for social engagement and volunteer opportunities. Individuals aged 60 or older and their spouses of any age may participate in the congregate nutrition program. The following groups may also receive meals: persons under age 60 with disabilities who reside in housing facilities occupied primarily by the elderly where congregate meals are served; persons with disabilities who reside at home with, and accompany, older persons to meals; and volunteers who provide services during the meal hours. In FY2011, the most recent year for which data are available, almost 4 in 10 meals (39%) were served in congregate settings. These meals were served to two-thirds of all OAA nutrition program participants. A total of 85.9 million congregate meals were served to more than 1.6 million meal participants (see Figure 1 ). Home-delivered nutrition services (commonly referred to as "meals on wheels") provide meals and related nutrition services to older individuals with priority to homebound older individuals. According to AOA, home-delivered meals are often the first in-home service that an older adult receives, and the program is a primary access point for other home and community-based services. Like congregate nutrition service providers, home-delivered service providers can offer services such as nutrition screening and education, nutrition assessment, and counseling as appropriate. Home-delivered meals are also an important service for many family caregivers as they may assist family members with their caregiving responsibilities and, for some, help them maintain their own health and personal well-being. Individuals aged 60 or older and their spouses of any age may participate in the home-delivered nutrition program. Services may be available to individuals who are under age 60 with disabilities if they reside at home with the older individual. In FY2011, approximately 6 in 10 meals (61%) were home-delivered. These meals were delivered to one-third of all OAA nutrition program participants. A total of 137.2 million home-delivered meals were provided to just under 847,000 meal participants (see Figure 1 ). Congregate meal participants represent a larger proportion of all meal participants but a smaller proportion of total meals served. On the other hand, home-delivered meal participants are relatively fewer but likely to receive more meals. Many home-delivered meals participants receive more than one meal delivered during a week. Congregate meal settings are designed to serve many participants but may serve meals less frequently. In addition, congregate meal participants may partake in meals on a less than frequent basis, compared to home-delivered meals participants. The Nutrition Services Incentive Program (NSIP) provides funds to states, territories, and Indian tribal organizations to purchase food or to cover the costs of food commodities provided by the USDA for the congregate and home-delivered nutrition programs. Originally established by the OAA in 1974 as the Nutrition Program for the Elderly and administered by USDA, Congress transferred the administration of NSIP from USDA to AOA in 2003. However, states and other entities may still choose to receive all or part of their NSIP allotments in the form of commodities. Obligations for commodity procurement for NSIP are funded under an agreement between USDA and HHS. The AOA awards separate allotments of funds for the congregate nutrition services program and home-delivered nutrition services program to states and U.S. territories. State agencies or State Units on Aging (SUAs), in turn, award nutrition services funds to the 618 Area Agencies on Aging (AAAs) that administer the program in their respective planning and service areas. The AOA also awards a separate allotment to states, territories, and Indian tribal organizations for NSIP funds. Funds for congregate and home-delivered nutrition services are allotted to states and U.S. territories according to a formula based on each entity's relative share of the population aged 60 and over; however, the law stipulates that no entity is to receive less than it received in FY2006. States are required to provide a matching share of 15% in order to receive funds for congregate and home-delivered nutrition programs. NSIP funds are allotted to states and other entities based on each state's share of total meals served by the nutrition services program (both congregate and home-delivered meals) in all states, U.S. territories, and tribes during the prior year. As previously mentioned, entities receive their share of NSIP funds in cash, but may elect to use some or all of their funds to purchase commodities through the USDA. Most entities choose to receive their share of funds in cash, rather than commodities. There is no matching requirement for NSIP funds. In FY2014, of the total $814.7 million appropriated for the Title III nutrition services program, $438.2 million was for congregate nutrition (54%), $216.4 million for home-delivered nutrition (27%), and $160.1 million for nutrition services incentive grants (19%) ( Table 1 ). Funding for nutrition services represents 64% of FY2014 funding for Title III ($1.281 billion); Title III also funds a wide array of social services, family caregiver support activities, and disease prevention and health promotion services for older individuals. When adjusted for inflation, the total amount of funding appropriated for OAA nutrition services has decreased substantially over the past two decades ($814.7 million for FY2014 compared to $1,052.4 million in FY1990). This decline in relative funding has been experienced by the congregate meals and NSIP programs, while funding levels for the home-delivered meals programs have increased over the same time period. In constant 2014 dollars, the total appropriation for congregate meals, home-delivered meals, and NSIP fell from $1,052.4 million in 1990 to $814.7 million in 2014, a decline of $237.7 million, or 23%. The amount appropriated for congregate meals fell from $644.7 million to $438.2 million, a decline of $206.5 million, or 32%. The amount appropriated for NSIP fell from $262.9 million to $160.1 million, a decline of $102.8 million, or 39%. Only the amount appropriated for home-delivered meals increased in real terms from 1990 to 2014, rising from $144.7 million to $216.4 million, an increase of $71.7 million, or 50%. Overall, this reduction in purchasing power has affected the number of meals served, which declined by 21.1 million meals (or 8.6%) from FY1990 to FY2011, the most recent year for which data are available. Over this same time period, the number of individuals age 60 and older has increased substantially from just under 42 million in1990 to about 62 million in 2013, an increase of almost 50%. Another way to look at the decline in purchasing power compared to the potential increase in demand for services is to compare per person spending in constant 2013 dollars, which has declined by about half during this time period. In 1990, total federal funding for nutrition services was about $25 per older individual, as compared to just over $12 per older individual in 2013. It is important to note that OAA funding is not the only source of funding that state agencies use to provide nutrition services to older individuals. States rely on other funding sources, such as funding from other federal programs (e.g., Social Services Block Grant, Medicaid home- and community-based services), state and local governments, private sources, and clients. GAO found that OAA funds comprised an estimated 42% of local AAA's Title III program budgets for FY2009. In FY2011, more than 223 million meals were provided to older adults (see Table 2 ). While overall the number of meals served has declined over the past two decades, proportionately the number of home-delivered meals served has increased. In FY1990, home-delivered meals represented 42% of total meals served, but by FY2011, the share had climbed to 62% of total meals. From 1990 to 2011, the number of home-delivered meals served grew by 35%, while the number of congregate meals served actually declined by 40%. A number of reasons account for this, including the trend by states to transfer funds from their congregate services allotments to home-delivered services; greater growth in federal funding for home-delivered services relative to the congregate nutrition program funds; state initiatives to expand home care services for frail older persons; and successful leveraging of non-federal funds for home-delivered services. With respect to state transfer of funds, as previously mentioned, states receive separate allotments for congregate and home-delivered nutrition services, as well as for supportive services. However, they are allowed to transfer allotted funds among these three programs (up to 40% of funds between congregate and home-delivered nutrition services allotments with waivers for higher amounts if approved by the Assistant Secretary for Aging; and up to 30% among supportive services and congregate and home-delivered nutrition services allotments). States may not transfer NSIP allotted funds among these programs. In recent years, state funding transfers have resulted in a decrease of funds available for congregate nutrition services. In FY2012, states transferred $82.3 million out of their congregate nutrition services allotments to either the home-delivered nutrition or supportive services allotments. These funding transfers resulted in a decrease of 18.8% in funds that were originally allotted to states for the congregate program. As a result of funding transfers, available funds for home-delivered meals and supportive services increased by 14.7% and 13.8%, respectively. State initiatives to respond to the demand for home-based services by frail homebound older persons are an important factor in their decisions to transfer funds. According to GAO, state and local officials reportedly moved funds out of congregate meals because of a greater need for home-delivered meals and supportive services. AOA data show that for FY2011, the U.S. average expenditure for congregate meals was $7.31, ranging from $1.56 in Puerto Rico to $18.81 in Alaska. The average expenditure for home-delivered meals in 2011 was $5.61, ranging from $1.66 in Puerto Rico to $12.61 in Alaska. Congregate and home-delivered nutrition services providers are required to offer at least one meal per day, five or more days per week (except in rural areas where less frequency is allowed). Meals provided must comply with the Dietary Guidelines for Americans published by the Secretary of HHS and the Secretary of Agriculture. Providers must serve meals that meet certain dietary requirements based on the number of meals served by the project each day. Providers that serve one meal per day must provide to each participant a minimum of one-third of the daily recommended dietary reference intakes (DRIs) established by the Food and Nutrition Board of the Institute of Medicine (IOM). Providers that serve two meals per day must provide a minimum of two-thirds of the DRIs, and those that serve three meals per day must provide 100% of the DRIs. Providers must provide meals that comply with state or local laws regarding safe and sanitary handling of food, equipment, and supplies that are used to store, prepare and deliver meals, and must carry out meal programs using the advice of dietitians and meal participants. The law requires providers to offer nutrition screening and education to participants, and where appropriate, nutrition assessment and counseling. Providers are encouraged to make arrangements with schools and other facilities serving meals to children in order to promote intergenerational meals programs. P.L. 109-365 noted that while diet is the preferred source of nutrition, evidence suggests that the use of a single daily multivitamin-mineral supplement may be an effective way to address poor nutrition among older people. Also, it noted that Title III nutrition service providers should consider whether congregate and home-delivered participants would benefit from a multivitamin-mineral supplement that is in compliance with government quality standards and that provides at least two-thirds of essential vitamins and minerals at 100% of daily value levels as determined by the Commissioner of Food and Drugs. The act, however, did not authorize Title III providers to actually provide a daily vitamin to meals participants. A National Survey of OAA participants shows that in 2012, 53% of congregate nutrition survey respondents were age 75 and older; 46% lived alone; 11% had annual income of $10,000 or less; more than half (51%) reported that the congregate meals program provided one-half or more of their daily food intake. Furthermore, many congregate nutrition recipients reported these meals have fostered greater socialization, with 81% saying that they see friends more often due to meals. This 2012 survey found that 70% of home-delivered respondents were age 75 and older; 58% lived alone; 22% had annual income of $10,000 or less; and 54% said that the home-delivered meals program provided at least one-half of their daily food intake. According to the survey, home-delivered meals recipients are particularly frail and are at risk for institutionalization, in part due to the requirement that participants be homebound. Almost four out of ten recipients (38%) reported needing assistance with one or more activities of daily living (ADLs, such as bathing, dressing, eating, and using the toilet); 11% of these recipients needed assistance with three or more ADLs. In addition, 83% reported needing assistance with one or more instrumental activities of daily living (IADLs, such as shopping, telephoning, housework, and getting around inside the home). The last major national evaluation of the nutrition program was completed in 1996. It showed that, compared to the total elderly population, nutrition program participants were older and more likely to be poor, to live alone, and to be members of minority groups. Almost half of home-delivered meal recipients and more than one-third of congregate meal recipients had income below the federal poverty level, compared to about 15% of the total U.S. population age 60 and over (at the time of the evaluation). Recipients were also more likely to have health and functional limitations that place them at nutritional risk. The report found the program plays an important role in participants' overall nutrition and that meals consumed by participants are their primary source of daily nutrients. The evaluation also found that the program leverages a fairly significant amount of nonfederal dollars: for every federal dollar spent, the program leveraged (at that time) on average $1.70 for congregate meals, and $3.35 for home-delivered meals from a variety of sources, including state, local, and private funds as well as participant contributions toward the cost of meals. The 2006 reauthorization legislation stipulated that the Institute of Medicine (IOM) conduct an evidence-based study of the program. The study is to include (1) an evaluation of the effect of nutrition projects on the health and nutrition status of participants, prevention of hunger and food insecurity, and ability of participants to remain living independently; (2) a cost-benefit analysis of nutrition projects, including their potential to affect Medicaid costs; and (3) recommendations on how nutrition projects may be modified to improve outcomes, and the nutritional quality of meals. To date, AOA has not conducted this study. However, prior to the 2006 reauthorization AOA had begun the process to conduct a new evaluation of the Title III nutrition services program. According to AOA, this evaluation will contain (1) an evaluation of program impacts on participants' nutrition, health and well-being, socialization, and food insecurity; (2) a cost analysis that describes the cost per meal by cost categories and method of meal production; and (3) a process evaluation that examines the implementation of the program at the state and local levels and includes an assessment of the nutritional quality of the program meals. The participant outcomes component will involve a matched comparison group and similar survey methods as those used in the National Health and Nutrition Examination Study (NHANES) to allow for comparison of research results to the previous evaluation, a matched comparison group, and national estimates from NHANES and other national data. As the nation prepares for a growing older population and potential increase in demand for health and social services that can promote the well-being of older persons to assist them in living independently in the community, ensuring access to home- and community-based long-term services and supports will likely be an issue for federal policymakers. The OAA Amendments of 2006 ( P.L. 109-365 ) authorized appropriations for OAA-funded activities, including the Title III nutrition programs, through FY2011. The 113 th Congress may choose to reauthorize the act. In doing so, federal policymakers may consider amending or deleting existing authorities under the act or establishing new authorities, including those related to nutrition services. In addition, Congress will likely consider annual appropriations for these activities. The following sections discuss several issues for congressional consideration, such as measuring unmet need for nutrition services, additional funding flexibility, and increased cost-sharing. These issues were among those discussed by GAO in its February 11, 2011 report, Older Americans Act: More Should Be Done to Measure the Extent of Unmet Need for Services (GAO-11-23711), and in GAO testimony before the Subcommittee on Primary Health and Aging, Senate Committee on Health, Education, Labor, and Pensions on June 21, 2011 (GAO-11-782T). According to a national analysis by GAO, meals services provided in 2008 served some, but not most, low-income older adults who are likely in need of such services. State agency officials identified several reasons why an older adult may need but not receive meals services, including (1) greater demand for home-delivered meals than available funds can provide, (2) lack of knowledge or awareness among eligible older adults that meals services exist, and (3) lack of appeal with the meals served or the time of day meals are provided in congregate settings. Overall, GAO found that the lack of federal guidance and data make it difficult for states to estimate the full extent of need and unmet need for OAA Title III services, including nutrition services. The OAA requires that AOA design and implement uniform data collection procedures for states to assess receipt of services, as well as need and unmet need for Title III services. Although AOA does provide uniform procedures for states to measure receipt of services, the agency does not provide standardized definitions or measurement for states to use in measuring need or unmet need for services. As a result, states use a variety of approaches that are often limited in their ability to fully estimate need and unmet need among older adults. These approaches include maintaining waitlists, obtaining information and data from service providers, and surveying current recipients. GAO recommends that HHS partner with governmental agencies that provide services to older Americans and convene researchers and agency officials to develop consistent definitions of need and unmet needs for uniform data collection purposes. Most states and a number of AAAs use the statutory flexibilities under current law to transfer funding among Title III programs. According to GAO, some states recommended consolidating funding for nutrition services programs into one single funding stream. However, other state officials did not see the need to alter the current process for transferring Title III funds. The AOA also identifies consolidating nutrition program funding between home-delivered and congregate nutrition programs as a targeted change for the next OAA reauthorization, so as to allow "states more flexibility to direct services to identified needs, and allow more local input into funding allocations." Congress may consider whether additional flexibilities are necessary, possibly consolidating Title III funding streams or increasing the proportion of funds available for states and AAAs to transfer, affording those entities that choose to transfer funds greater latitude to do so. Conversely, Congress may be concerned that funding transfers provide states and AAAs the ability to reallocate funding to services at a level different than otherwise appropriated. As a result, Congress may seek to further specify or limit funding flexibility. Congress may also decide that funding flexibilities under current law are sufficient for states and AAAs current needs and choose to maintain the status quo. Clients can, and some do, contribute to the cost of their meals. GAO found that almost all local AAAs permit voluntary contributions for Title III services, including the nutrition services program. For FY2009, voluntary contributions comprised 4% of AAA budgets. Some AAAs indicated to GAO that voluntary contributions make up a significant portion of their nutrition services program budget. Although the OAA authorizes states to implement cost-sharing as a requirement for some Title III services, the act does not permit cost-sharing as a requirement for participation in congregate and home-delivered meals programs. According to GAO, additional cost-sharing arrangements could provide additional funding for Title III programs. GAO also recommends that the HHS Secretary study the implementation of cost-sharing for OAA services with respect to "the real and perceived burdens to implementing cost sharing for OAA services," which could include recommending legislative changes to the act. The AOA also identifies expanding consumer contributions as a targeted change for the next OAA reauthorization. Under this proposal, states could request a waiver to test either cost-sharing for nutrition and case management services, or to deny service to an individual for failure to make cost-sharing payments. Prior to waiver approval, states would be required to demonstrate no negative results from cost-sharing implementation. Furthermore, low-income individuals would continue to be excluded from these cost-sharing arrangements. | The elderly nutrition services program, authorized under Title III of the Older Americans Act (OAA), provides grants to state agencies on aging to support congregate and home-delivered meals (commonly referred to as "meals on wheels") programs for people aged 60 and older. The program is designed to address problems of food insecurity, promote socialization, and promote the health and well-being of older persons through nutrition and nutrition-related services. In 2012, a reported 8.8% of U.S. households with one elderly member were food insecure, defined as households reporting low or very low food security. As the largest Older Americans Act program, the Title III nutrition services program received $814.7 million in FY2014, accounting for 44% of the act's total funding ($1.871 billion). In 2006, Congress enacted the Older Americans Act Amendments of 2006 (P.L. 109-365), which extended the act's authorizations of appropriations through FY2011. However, Congress has continued to appropriate funding for OAA activities. The 113th Congress may consider comprehensive reauthorization of the OAA and as a result may modify existing authorities, including those related to nutrition services. The Administration on Aging (AOA) within the Administration for Community Living (ACL) in the Department of Health and Human Services (HHS) administers the nutrition services program, which includes (1) the Congregate Nutrition Services Program, (2) the Home-Delivered Nutrition Services Program, (3) and the Nutrition Services Incentive Program (NSIP). For the congregate and home-delivered programs, services must be targeted at older persons with the greatest social and economic need. Particular attention is paid to low-income older persons, including low-income minority older persons, older persons with limited English proficiency, older persons residing in rural areas, and those at risk for institutionalization. In FY2011, the most recent year for which data are available, more than 223 million meals were served to just under 2.5 million people; 61% were served to frail older people living at home, and 39% were served in congregate settings. Of the total $814.7 million appropriated for the nutrition services program in FY2014, $438.2 million was for congregate nutrition (54%), $216.4 million for home-delivered nutrition (27%), and $160.1 million for nutrition services incentive grants (19%). When adjusted for inflation, the total amount of funding appropriated for OAA nutrition services has decreased substantially over the past two decades ($814.7 million in FY2014 compared to $1,052.4 million in FY1990). This decline in relative funding has been experienced by the congregate nutrition and NSIP programs, while funding levels for the home-delivered nutrition programs have increased over the same time period. As a result, the number of home-delivered meals served has outpaced congregate meals, growing by 35% from FY1990 to FY2011; the number of congregate meals served declined by 40%. The faster growth in home-delivered meals is partially due to relatively higher growth in federal funding for home-delivered meals over that time period, as well as state decisions to focus funds on frail older people living at home. This report describes the nutrition services program authorized under OAA Title III, including the program's legislative history, purpose, and FY2014 funding level. It also provides information on service delivery requirements and program data regarding the number of meals served and program participation. The report briefly discusses former and more recent efforts to evaluate these programs. Finally, the report identifies selected issues for federal policymakers, including the status of Older Americans Act reauthorization, measuring unmet need for nutrition services, additional funding flexibility, and increased cost-sharing. |
The United States Capitol is home to extensive art collections. These collections are considered by Congress as "an integral part of the history of this renowned building." Perhaps the most prominent collection is the National Statuary Hall Collection, which contains statues of notable citizens provided by each state. The collection was authorized in 1864, when Congress designated the large, two-story, semicircular former chamber of the House of Representatives—the Old Hall of the House—as National Statuary Hall. The first statue in the collection, depicting Nathanael Greene, was provided by Rhode Island in 1870. As the Union grew, the number of statues in the collection increased; by 1933,the hall held 65 statues, some of which stood three deep. Aesthetic and structural concerns necessitated the relocation of some statues throughout the Capitol. The collection reached 100 statues in 2005 when New Mexico, which became a state in 1912, added the statue of Po'pay. Today, 34 statues are displayed in National Statuary Hall, with the rest in the House and Senate wings of the Capitol, the Rotunda, the Crypt, and the Capitol Visitor Center (CVC). Collection statues—chosen by the states to honor prominent citizens—are furnished to Congress for display in the Capitol. In the 106 th Congress (1999-2000), for the first time, states were allowed to replace a statue previously donated to the National Statuary Hall Collection. In past congresses, legislation has been introduced to alter the size of the collection by allowing each state to contribute three statues instead of two or allow the District of Columbia, Puerto Rico, and the U.S. territories to provide one statue each. This report discusses the creation of the National Statuary Hall Collection and the redesignation of the Old Hall of the House as the National Statuary Hall. It examines the creation, design, placement, and replacement of statues in the National Statuary Hall Collection. The report then discusses recent legislative proposals to increase the size of the National Statuary Hall Collection. Finally, the report discusses potential issues for congressional consideration. On January 6, 1864, Representative Justin Morrill introduced a resolution, which was agreed to by voice vote, requesting that the House Committee on Public Buildings examine the possibility of using the Old Hall of the House of Representatives to display statues. Resolved, That the Committee on Public Buildings be requested to examine and report as to the expediency of setting apart the old hall of the House of Representatives as a hall for statuary; and also as to the cost of a new flooring and bronze railing on each side of the passage-way through the hall, preparatory to the reception of such works of arts. On April 19, 1864, Representative John Hovey Rice introduced, on behalf of the House Committee on Public Buildings, which he chaired, a joint resolution to create a statuary hall in the Old Hall of the House and to authorize existing appropriations to repair the old House chamber. The resolution called for the President to "invite each of the states to provide and furnish statues in marble or bronze, not exceeding two in number each, of men who have been citizens thereof, illustrious in their historical renown or distinguished for their civic or military services, such as each State shall determine are worthy of national remembrance.... " The joint resolution passed the House by a vote of 87 to 20 and was referred in the Senate to the Committee on Public Buildings and Grounds, where it was reported without amendment and with the recommendation that it "ought not to pass." The Senate took no further action on the joint resolution. Subsequently, in June 1864, during House consideration of a civil appropriations bill, Representative Thaddeus Stevens offered an amendment similar to the joint resolution previously passed by the House. The amendment was agreed to in the House, but was removed from the bill when it was considered in the Senate. The proposed language, however, was restored in conference committee, which stated, Sec. 2. And be it further enacted , That a marble floor, similar to that of the Congressional Library or the Senate vestibule, shall be constructed in the old Hall of the House of Representatives, using such marble as may be now on hand and not otherwise required, and that suitable structures and railings shall be therein erected for the reception and protection of statuary, and the same shall be under the supervision and direction of the Commissioner of Public Buildings; and so much of the moneys now or heretofore appropriated for the capitol extension as may be necessary, not exceeding the sum of fifteen thousand dollars, is hereby set apart and shall be disbursed for the porse [purposes] hereinbefore mentioned. And the President is hereby authorized to invite each and all the States to provide and furnish statues, in marble or bronze, not exceeding two in number for each state, of deceased persons who have been citizens thereof, and illustrious for their historic renown or from distinguished civic or military services, such as each state shall determine to be worthy of this national commemoration; and when so furnished the same shall be placed in the old hall of the House of Representatives, in the capitol of the United States, which is hereby set apart, or so much thereof as may be necessary, as a national statuary hall, for the purposes herein indicated. Pursuant to the July 1864 civil appropriations bill, each state may donate up to two statues for inclusion in the National Statuary Hall Collection. Statues donated to the collection are to be made of "... marble or bronze, not exceeding two in number for each State, of deceased persons who have been citizens thereof, and illustrious for their historic renown or for distinguished civic or military service.... " In 2005, Congress enacted a requirement that an individual depicted on a statue displayed in National Statuary Hall must be deceased for at least 10 years. Exceptions to the restrictions were provided for the two statues allowed per state pursuant to the July 1864 law, including any potential replacement statues, as well as a statue of Rosa Parks from the U.S. Capitol Art Collection that was placed in National Statuary Hall in 2013. Statues donated to the collection must be formally accepted by the Joint Committee on the Library. To assist states, the AOC has published guidelines, which are subject to modification by the Joint Committee, for creating statues for the collection. The guidelines address numerous aspects of statuary design, including subject, material, pedestal, inscriptions, size and weight, patina and coating, and other considerations. Additionally, the Architect of the Capitol (AOC), upon the approval of the Joint Committee on the Library, with the advice of the Commission of Fine Arts as requested, is authorized and directed to locate or relocate collection statues within the Capitol. The AOC, under the guidance of the Joint Committee, established a nine-step process for the acceptance of a new or replacement statute. This process is part of the statue design and placement guidelines. Since 2000, states have been allowed to replace statues donated to the collection. Regulations for the replacement of statues were established by the Consolidated Appropriations Act of 2001. To replace a statue, a state must request—through the approval of a resolution adopted by the state legislature and signed by the governor—in writing, approval from the Joint Committee; and ensure that the statue to be replaced has been displayed in the collection for at least 10 years. Upon the Joint Committee's approval of the replacement request, the AOC is authorized to enter into an agreement with the state, subject to any conditions imposed by the Joint Committee. Once accepted, the state is responsible for paying all related costs, including the design, construction, transportation, and placement of the new statue, the removal and transportation of the statue being replaced (back to the state or other location determined by the state legislature), and any unveiling ceremony. Since the authorization of replacements within the collection in 2000, Alabama, California, Iowa, Kansas, Michigan, and Ohio have sent a replacement statue. A list of statues replaced in the collection can be found in Appendix B . Legislation to increase the size of the collection might fall into two categories. The first would increase the number of statues that states are permitted to donate, from a maximum of two per state to three per state. The second would permit the District of Columbia and the U.S. territories to contribute one or more statues to the collection. Since the redesignation of the Old Hall of the House as National Statuary Hall in 1864, each state has been allowed to place two statues in the collection. Supporters of providing a third statue per state argue that additional statues could provide an opportunity to increase the diversity of the collection, which currently includes 16 statues of women or minorities. A proposal to add a third statue per state was first introduced in the 103 rd Congress (1993-1994) by Representative Douglas (Pete) Peterson. The bill ( H.R. 3368 ) would have provided a third statue to each state and restricted the ability of states to furnish an additional statue or replace an existing statue for "100 years after the date on which it furnishes its third statue.... " H.R. 3368 was referred to the Committee on House Administration but did not receive further action. Most recently, legislation was introduced in the 112 th Congress (2011-2012) by Representative Stephen Cohen ( H.R. 1289 , the Share America's Diverse History in the Capitol Act) to expand the National Statuary Hall Collection from two statues per state to three. H.R. 1289 was referred to the Committee on House Administration on March 31, 2011, and did not receive further action. If Congress were to authorize an additional statue per state, states would have the ability, but not be required, to add statues to the collection. Increasing the collection by up to 50 statues may take some time, as states debate who might be honored, raise funds, and commission artists to create new statues. Should the National Statuary Hall Collection expand to more than 100 statues, space for the additional statues in the Capitol complex could become an issue. Currently, collection statues are located in the Rotunda, the Crypt, the House wing of the Capitol in National Statuary Hall, the Hall of Columns, and adjacent to the House chamber, the Senate wing of the Capitol, and the CVC. When the CVC opened in 2008, collection statues were moved to Emancipation Hall and other CVC locations to reduce the number of statues in National Statuary Hall and other Capitol locations. The addition of 50 or more statues might require the AOC to place statues closer together in those locations. If more statues are placed in National Statuary Hall itself, some display and structural concerns that have arisen in the past may be revisited. Measures to authorize the District of Columbia and the territories to provide statues for the National Statuary Hall Collection have been introduced since at least the 93 rd Congress (1973-1974). In both the 93 rd and 94 th (1975-1976) Congresses, Senator Hubert Humphrey introduced legislation to "provide authority for the District of Columbia to place two statues in Statuary Hall of the Capitol." Both bills were referred to the Senate Committee on Rules and Administration and neither received further action. In the 111 th Congress (2009-2010), for the first time, legislation to allow statues from the District of Columbia and the territories passed the House. These bills were H.R. 5493 , introduced by Delegate Eleanor Holmes Norton to provide for statues from the District of Columbia; and H.R. 5711 , introduced by Delegate Faleomavaega to provide statues for the U.S. territories. In July 2010, the Committee on House Administration held a markup on both bills. After an amendment to merge the bills was offered by Representative Dan Lungren, then-ranking Member of the panel, was defeated, the committee reported both bills. Between the reporting of H.R. 5493 and H.R. 5711 by the Committee on House Administration and the consideration of these bills in the House, Representative Robert Brady, then-chair of the panel, helped negotiate a merger of the bills. Subsequently, H.R. 5493 was debated in the House with an amendment that would permit the District of Columbia and the U.S. territories to place statues in the collection. The bill passed the House, as amended, under suspension of the rules. In the Senate, the bill was referred to the Senate Committee on Rules and Administration, and no further action was taken. In the 112 th Congress (2011-2012), Representative Dan Lungren, then-chair of the Committee on House Administration, reintroduced a bill that is nearly identical in language to H.R. 5493 in the 111 th Congress. His bill, H.R. 3106 , would permit the District of Columbia and the territories to place statues in the National Statuary Hall Collection. Upon introduction, H.R. 3106 was referred to the Committee on House Administration. No further action was taken. While not part of the National Statuary Hall collection, in the 112 th Congress, the placement of a statue of Frederick Douglass, was donated by the District of Columbia government and accepted by Congress for placement in Emancipation Hall of the Capital Visitor Center. The statue was officially unveiled on June 19, 2013. Over the past four decades, Congress has considered several proposals to increase the number of statues in the National Statuary Hall Collection. One group of legislative proposals involves adding additional statues for each state; another would expand the collection by allowing the District of Columbia and the U.S. territories to provide statues to the collection. If either or both options were adopted, proponents argue that states could donate statues that better represent various aspects of the state's history. Increasing the number of statues in the collection, however, could result in further space issues for statue display in the Capitol. When the CVC opened, the Architect, under the direction of the Joint Committee on the Library, reduced the number of collection statues on display in National Statuary Hall as well as in the House and Senate wings of the Capitol by moving them to Emancipation Hall and other locations within the CVC. Adding additional statues to the collection might necessitate relocating existing statues. Any changes to the collection would likely be weighed against the potential costs to states, or if approved, the District of Columbia and U.S. territories, who might provide new statues. In the case of expanding the number of statues that might be added to the collection, a further concern is whether the larger collection could be displayed in the Capitol in an appropriate manner. Other considerations include structural, traffic management, and life safety constraints of the physical environment. Appendix A. National Statuary Hall Collection Statues Since 2005, when New Mexico provided its second statue—Po'Pay—the National Statuary Hall Collection has contained 100 statues. Table A -1 provides a list of statues currently in the collection, by state, with the name of the statue and the year it was placed in the collection. Appendix B. Statues Replaced in the National Statuary Hall Collection Since 2000, states have been allowed to replace statues donated to the collection. Regulations for the replacement of statues were established by the Consolidated Appropriations Act of 2001. Table B -1 provides a list of states that have replaced statues, the year of the replacement, the original statue, and the replacement statue. | The National Statuary Hall Collection, located in the United States Capitol, comprises 100 statues provided by individual states to honor persons notable for their historic renown or for distinguished services. The collection was authorized in 1864, at the same time that Congress redesignated the hall where the House of Representatives formerly met as National Statuary Hall. The first statue, depicting Nathanael Greene, was provided in 1870 by Rhode Island. The collection has consisted of 100 statues—two statues per state—since 2005, when New Mexico sent a statue of Po'pay. At various times, aesthetic and structural concerns necessitated the relocation of some statues throughout the Capitol. Today, some of the 100 individual statues in the National Statuary Hall Collection are located in the House and Senate wings of the Capitol, the Rotunda, the Crypt, and the Capitol Visitor Center. Legislation to increase the size of the National Statuary Hall Collection was introduced in several Congresses. These measures would permit states to furnish more than two statues or allow the District of Columbia and the U.S. territories to provide statues to the collection. None of these proposals were enacted. Should Congress choose to expand the number of statues in the National Statuary Hall Collection, the Joint Committee on the Library and the Architect of the Capitol (AOC) may need to address statue location to address aesthetic, structural, and safety concerns in National Statuary Hall, the Capitol Visitor Center, and other areas of the Capitol. This report provides historical information on the National Statuary Hall Collection and National Statuary Hall. It examines the creation, design, placement, and replacement of statues in the National Statuary Hall Collection. The report then discusses recent legislative proposals to increase the size of the National Statuary Hall Collection. Finally, the report discusses potential issues for congressional consideration. |
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